Transcript Slide 1

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CHAPTER 4
Services Marketing
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Learning Objectives:
After studying this chapter, you should
be able to:
• Understand the nature of services
• Understand marketing strategies for service firms
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Introduction
• Services are deeds, processes and
performance
• Intangible, but may have a tangible
component
• Generally produced and consumed at the
same time
• Need to distinguish between SERVICE and
CUSTOMER SERVICE
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Define the services
Any act or performance that one party can
offer to another that is essentially intangible
and does not result in the ownership of
anything.
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Types of Service
• Government Sector
– Courts, employment services, hospitals, loan agencies, military
services, police and fire departments, postal services,
regulatory agencies and schools.
• Private Non-profit Sector
– Museums, charities, mosques, colleges, foundations and
hospitals.
• Business Sector
– Airlines, banks, hotels, insurance companies, law firms,
management consulting firms, medical practices, motionpicture companies, plumbing-repair companies and real estate
firms.
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Types of Service
• Manufacturing Sector
– Computer operators, accountants and legal staff.
• Retail Sector
– Cashiers, clerks, salespeople and customer service
representatives.
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Scope of Services Marketing
• Service as an organization
• Services as core product
• Service as product augmentation
• Service as product support
• Services as an act
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Figure 1-1
Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics Fast-food
 Outlets

Tangible
Dominant

Fast-food
Outlets
Intangible
Dominant


Advertising
Agencies
Airlines
Investment
Management
Consulting



Teaching
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Characteristics of services
marketing
Intangibility
Variability
or
Heterogeneity
Inseparability
Perishability
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Intangibility
 Services cannot be inventoried
 Services cannot be patented
 Services cannot be readily displayed
or communicated
 Pricing is difficult
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Variability or Heterogeneity
Service delivery and customer satisfaction
depend on employee actions
Service quality depends on many
uncontrollable factors
There is no sure knowledge that the service
delivered matches what was planned and
promoted
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Inseparability
Customers participate in and affect the
transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult
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Perishability
 It is difficult to synchronize supply and
demand with services
 Services cannot be returned or resold
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Table 1-2
Services are Different
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
Nonperishable Perishable
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.
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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Categories of Services
Marketing
• Pure tangible good
– The offering consists primarily of a tangible good
– Example: soap, toothpaste, salt
– No services accompany the product
• Tangible good with accompanying services
– The offering consists of a tangible good accompanied by one
or more services.
• Hybrid
– The offering consists of equal parts of goods and services.
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Categories of Services
Marketing
• Major service with accompanying minor goods and services
– The offering consists of a major service along with additional
services or supporting goods.
• Pure Service
– The offering consists primarily of a service.
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Figure 1-5
The Services Marketing Triangle
Company
(Management)
Internal
Marketing
External
Marketing
“enabling the
promise”
Employees
“setting the
promise”
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
Services Marketing Triangle
Overall Strategic
Assessment
Specific Service
Implementation
• How is the service
organization doing
on all three sides of
the triangle?
• What is being promoted
and by whom?
• Where are the
weaknesses?
• Are the supporting
systems in place to
deliver the promised
service?
• What are the
strengths?
• How will it be delivered
and by whom?
Figure 1-6
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The Services Triangle
and Technology
Company
Technology
Providers
Source: Adapted from A. Parasuraman
Customers
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Services Marketing Mix:
7 Ps for Services
• Traditional Marketing Mix
• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through
People, Processes, and Physical Evidence
• Ways to Use the 7 Ps
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•
Traditional Marketing Mix
All elements within the control of the firm that
communicate the firm’s capabilities and image to
customers or that influence customer satisfaction
with the firm’s product and services:
 Product
 Price
 Place
 Promotion
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•
•
•
•
Expanded Mix for Services -the 7 Ps
Product
Price
Place
Promotion
• People
• Process
• Physical Evidence
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Table 1-3
Expanded Marketing Mix for
Services
PRODUCT
PLACE
PROMOTION PRICE
Physical good Channel type
features
Promotion
blend
Flexibility
Quality level
Exposure
Salespeople
Price level
Accessories
Intermediaries
Advertising
Terms
Packaging
Warranties
Outlet location Sales
promotion
Transportation Publicity
Product lines
Storage
Branding
Differentiation
Allowances
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Table 1-3 (Continued)
Expanded Marketing Mix for
Services
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
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Ways to Use the 7 Ps
Overall Strategic
Assessment
• How effective is a firm’s
services marketing mix?
• Is the mix well-aligned
with overall vision and
strategy?
• What are the strengths and
weaknesses in terms of the
7 Ps?
Specific Service
Implementation
• Who is the customer?
• What is the service?
• How effectively does the
services marketing mix for a
service communicate its
benefits and quality?
• What
changes/improvements are
needed?
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Services Marketing Triangle
Applications Exercise
• Focus on a service organization. In the context
you are focusing on, who occupies each of the
three points of the triangle?
• How is each type of marketing being carried out
currently?
• Are the three sides of the triangle well aligned?
• Are there specific challenges or barriers in any of
the three areas?
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Part 1
FOCUS ON THE CUSTOMER
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Gaps Model of Service Quality
Expected
CUSTOMER
Service
Customer
Gap
Service Delivery
COMPANY
GAP 1
Perceived
Service
GAP 3
Customer-Driven Service
Designs and Standards
GAP 2
Part 1 Opener
Company Perceptions of
Consumer Expectations
GAP 4
External
Communications
to Customers
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Part 1 Opener
Gaps Model of Service
Quality
• Customer Gap:
• difference between expectations and
perceptions
• Provider Gap 1:
• not knowing what customers expect
• Provider Gap 2:
• not having the right service designs and
standards
• Provider Gap 3:
• not delivering to service standards
• Provider Gap 4:
• not matching performance to promises
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The Customer Gap
Expected
Service
GAP
Perceived
Service
Part 1 Opener
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Chapter 2
CONSUMER BEHAVIOR
IN SERVICES
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Objectives for Chapter 2:
Consumer Behavior in
Services
• Overview the generic differences in consumer behavior
between services and goods
• Introduce the aspects of consumer behavior that a
marketer must understand in five categories of consumer
behavior:
• Information search
• Evaluation of service alternatives
• Service purchase and consumption
• Postpurchase evaluation
• Role of culture
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Consumer Evaluation
Processes for Services
• Search Qualities
– attributes a consumer can determine prior to
purchase of a product
• Experience Qualities
– attributes a consumer can determine after
purchase (or during consumption) of a product
• Credence Qualities
– characteristics that may be impossible to evaluate
even after purchase and consumption
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Figure 2-1
Continuum of Evaluation for
Different Types of Products
Most
Goods
Easy to evaluate
Most
Services
Difficult to evaluate
High in search
qualities
High in experience High in credence
qualities
qualities
Figure 2-2
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Categories in Consumer
Decision-Making and Evaluation of
Services
Information
Search
 Use of personal sources
 Perceived risk
Purchase and
Consumption
 Service provision as drama
 Service roles and scripts
 Compatibility of customers
Evaluation of
Alternatives
 Evoked set
 Emotion and mood
Post-Purchase
Evaluation
 Attribution of dissatisfaction
 Innovation diffusion
 Brand loyalty
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Figure 2-3
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Categories in Consumer DecisionMaking and Evaluation of Services
Information
Search
Evaluation of
Alternatives
 Evoked set
 Emotion and mood
 Use of personal sources
 Perceived risk
Culture
 Values and attitudes
 Manners and customs
 Material culture
 Aesthetics
 Educational and social
institutions
Purchase and
Consumption
 Service provision as
drama
 Service roles and scripts
 Compatibility of customers
Post-Purchase
Evaluation
 Attribution of dissatisfaction
 Innovation diffusion
 Brand loyalty
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Information search
• In buying services consumers rely more on
personal sources. WHY? Refer p32
• Personal influence becomes pivotal as
product complexity increases
• Word of mouth important in delivery of
services
• With service most evaluation follows
purchase
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Perceived Risk
• More risk would appear to be involved with
purchase of services (no guarantees)
• Many services so specialised and difficult to
evaluate (How do you know whether the
plumber has done a good job?)
• Therefore a firm needs to develop strategies
to reduce this risk, e.g, training of
employees, standardisation of offerings
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Evoked Set
• The evoked set of alternatives likely to be smaller
with services than goods
• If you would go to a shopping centre you may
only find one dry cleaner or “single brand”
• It is also difficult to obtain adequate prepurchase
information about service
• The Internet may widen this potential
• Consumer may choose to do it themselves, e.g.
garden services
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Emotion and Mood
• Emotion and mood are feeling states that
influence people’s perception and
evaluation of their experiences
• Moods are transient
• Emotions more intense, stable and
pervasive
• May have a negative or positive influence
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Service Provision as
Drama
• Need to maintain a desirable impression
• Service “actors” need to perform certain
routines
• Physical setting important, smell, music,
use of space, temperature, cleanliness, etc.
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Global Feature:
Differences in the Service
Experience in the U.S. and Japan

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Authenticity
Caring
Control Courtesy
Formality
Friendliness
Personalization
Promptness
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Chapter 3
CUSTOMER
EXPECTATIONS OF
SERVICES
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Objectives for Chapter 3:
Customer Expectations of
Service
• Recognize that customers hold different types of
expectations for service performance
• Discuss controllable and uncontrollable sources of
customer expectations
• Distinguish between customers’ global expectations of
their relationships and their expectations of the service
encounter
• Acknowledge that expectations are similar for many
different types of customers
• Delineate the most important current issues surrounding
customer expectations
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DEFINITIONS
• Customers have different expectations re
services – or expected service
• Desired service – customer hopes to receive
• Adequate service – the level of service the
customer may accept
• DO YOUR EXPECTATIONS DIFFER RE
SPUR and CAPTAIN DOREGO?
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Figure 3-1
Dual Customer
Expectation Levels
(Two levels of expectations)
Desired Service
Zone of
Tolerance
Adequate Service
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Figure 3-2
The Zone of Tolerance
Desired Service
Zone of
Tolerance
Adequate Service
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Figure 3-3
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Zones of Tolerance VARY for
Different Service Dimensions
Desired Service
Level
of
Expectation
Zone of
Tolerance
Desired
Desired Service
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
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Zones of Tolerance VARY for
First-Time and Recovery Service
First-Time Service
Outcome
Process
Recovery Service
Outcome
Process
LOW
Source: Parasuraman, Berry and Zeithaml (1991)
Expectations
HIGH
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Figure 3-5
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Factors that Influence
Desired Service
Enduring Service
Intensifiers
Desired
Service
Personal Needs
Zone
of
Tolerance
Adequate
Service
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• Personal needs include physical, social,
psychological categories
• Enduring service intensifiers are individual, stable
factors that lead to heightened sensitivity to
service
This can further divided into Derived Service
Expectations and Personal service Philosophies
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Figure 3-6
Factors that Influence
Adequate Service
Transitory Service
Intensifiers
Perceived Service
Alternatives
Self-Perceived
Service Role
Situational
Factors
Desired
Service
Zone
of
Tolerance
Adequate
Service
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• Transitory service intensifiers – temporary –
a computer breakdown will be less tolerated
at financial year-ends
• Perceived service alternatives
• Perceived service role of customer
• Situational factors
Figure 3-7
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Factors that Influence
Desired and Predicted Service
Explicit Service
Promises
Implicit Service
Promises
Word-of-Mouth
Desired
Service
Zone
of
Tolerance
Adequate
Service
Past Experience
Predicted
Service
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Chapter 4
CUSTOMER
PERCEPTIONS OF
SERVICE
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Objectives for Chapter 4:
Customer Perceptions of
Service
• Provide you with definitions and
understanding of customer satisfaction and
service quality
• Show that service encounters or the
“moments of truth” are the building blocks of
customer perceptions
• Highlight strategies for managing customer
perceptions of service
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Figure 4-1
Customer Perceptions of
Service Quality and
Customer Satisfaction
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Reliability
Responsiveness
Service
Quality
Situational
Factors
Assurance
Empathy
Tangibles
Product
Quality
Price
Customer
Satisfaction
Personal
Factors
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•
•
•
•
Factors Influencing
Customer Satisfaction
Product/service quality
Product/service attributes or features
Consumer Emotions
Attributions for product/service success or
failure
• Equity or fairness evaluations
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Outcomes of
Customer Satisfaction
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues
Figure 4-3
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Relationship between Customer
Satisfaction and Loyalty in
Competitive Industries
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Loyalty (retention)
100%
80%
60%
40%
20%
0%
Very
dissatisfied
Dissatisfied
Neither
satisfied nor
dissatisfied
Satisfied
Very
satisfied
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.
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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.
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Reliability
The Five Dimensions of
Service Quality
Ability to perform the promised
service dependably and accurately.
Knowledge and courtesy of
Assurance
employees and their ability to
convey trust and confidence.
Physical facilities, equipment, and
Tangibles
appearance of personnel.
Caring, individualized attention the
Empathy
firm provides its customers.
Responsiveness Willingness to help customers and
provide prompt service.
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Exercise to
Identify Service Attributes
In groups of five, choose a services industry and spend 10 minutes
brainstorming specific requirements of customers in each of the five
service quality dimensions. Be certain the requirements reflect the
customer’s point of view.
Reliability:
Assurance:
Tangibles:
Empathy:
Responsiveness:
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SERVQUAL Attributes
ASSURANCE
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RELIABILITY
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

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
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

Keeping customers informed as to
when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers’
requests
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
EMPATHY



RESPONSIVENESS
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

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
TANGIBLES
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

Modern equipment
Visually appealing facilities
Employees who have a neat,
professional appearance
Visually appealing materials
associated with the service
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The Service Encounter
• is the “moment of truth”
• occurs any time the customer interacts with the firm
• can potentially be critical in determining customer satisfaction and
loyalty
• types of encounters:
– remote encounters
– phone encounters
– face-to-face encounters
• is an opportunity to:
– build trust
– reinforce quality
– build brand identity
– increase loyalty
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Figure 4-4
A Service Encounter
Cascade for a Hotel Visit
Check-In
Bellboy Takes to Room
Restaurant Meal
Request Wake-Up Call
Checkout
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Figure 4-5
A Service Encounter
Cascade for an Industrial
Purchase
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Sales Call
Delivery and Installation
Servicing
Ordering Supplies
Billing
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Critical Service Encounters
Research
• GOAL - understanding actual events and
behaviors that cause customer dis/satisfaction
in service encounters
• METHOD - Critical Incident Technique
• DATA - stories from customers and employees
• OUTPUT - identification of themes underlying
satisfaction and dissatisfaction with service
encounters
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Sample Questions for Critical
Incidents Technique Study
• Think of a time when, as a customer, you had a
particularly satisfying (dissatisfying) interaction
with an employee of
.
• When did the incident happen?
• What specific circumstances led up to this
situation?
• Exactly what was said and done?
• What resulted that made you feel the interaction
was satisfying (dissatisfying)?
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Common Themes in Critical
Service Encounters Research
Recovery:
Adaptability:
Employee Response
to Service Delivery
System Failure
Employee Response
to Customer Needs
and Requests
Coping:
Employee Response
to Problem Customers
Spontaneity:
Unprompted and
Unsolicited Employee
Actions and Attitudes
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Recovery
DO
• Acknowledge
problem
• Explain causes
• Apologize
• Compensate/upgrade
• Lay out options
• Take responsibility
DON’T
• Ignore customer
• Blame customer
• Leave customer to
fend for him/herself
• Downgrade
• Act as if nothing is
wrong
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Adaptability
DO
• Recognize the
seriousness of the need
• Acknowledge
• Anticipate
• Attempt to
accommodate
• Explain rules/policies
• Take responsibility
• Exert effort to
accommodate
DON’T
• Promise, then fail to
follow through
• Ignore
• Show unwillingness to
try
• Embarrass the customer
• Laugh at the customer
• Avoid responsibility
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Spontaneity
DON’T
DO
•
•
•
•
•
Take time
Be attentive
Anticipate needs
Listen
Provide information
(even if not asked)
• Treat customers fairly
• Show empathy
• Acknowledge by name
•
•
•
•
Exhibit impatience
Ignore
Yell/laugh/swear
Steal from or cheat a
customer
• Discriminate
• Treat impersonally
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Coping
DO
•
•
•
•
Listen
Try to accommodate
Explain
Let go of the
customer
DON’T
• Take customer’s
dissatisfaction
personally
• Let customer’s
dissatisfaction affect
others
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Figure 4-6
Evidence of Service from the
Customer’s Point of View



 Operational flow of
activities
Contact employees
Customer him/herself
Other customers
People
 Steps in process
 Flexibility vs.
standard
 Technology vs.
human
Process
Physical
Evidence
 Tangible
communication
 Servicescape
 Guarantees
 Technology
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Part 2
LISTENING TO
CUSTOMER
REQUIREMENTS
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Provider GAP 1
CUSTOMER
Expected
Service
GAP 1
COMPANY
Part 2 Opener
Company
Perceptions of
Consumer
Expectations
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Chapter 5
UNDERSTANDING
CUSTOMER
EXPECTATIONS AND
PERCEPTIONS THROUGH
MARKETING RESEARCH
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Objectives for Chapter 5:
Understanding Customer Expectations
and Perceptions through
Marketing Research
• Present the types of and guidelines for marketing
research in services
• Show the ways that marketing research information
can and should be used for services
• Describe the strategies by which companies can
facilitate interaction and communication between
management and customers
• Present ways that companies can and do facilitate
interaction between contact people and management
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•
•
•
•
•
•
•
•
•
•
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
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Figure 5-1
Criteria for An Effective
Services Research Program
Occurs
with
Appropriate
Frequency
Includes
Perceptions
and
Expectations
of
Customers
Research
Objectives
Measures
Priorities
or
Importance
Includes
Statistical
Validity
When Necessary
Includes
Measures
of
Loyalty or
Behavioral
Intentions
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Portfolio of Services Research
Research Objective
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure for
remedial action
Type of Research
Customer Complaint
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
Measure individual employee service behaviors for use in
coaching, training, performance evaluation, recognition and
rewards; identify systemic strengths and weaknesses in
service
Measure internal service quality; identify employeeperceived obstacles to improve service; track
employee morale and attitudes
Determine the reasons why customers defect
To forecast future expectations of customers
To develop and test new service ideas
Customer Focus Groups
“Mystery Shopping” of
Service Providers
Employee Surveys
Lost Customer Research
Future Expectations Research
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Stages in the Research
Process
•
•
•
•
•
•
Define Problem
Develop Measurement Strategy
Implement Research Program
Collect and Tabulate Data
Interpret and Analyze Findings
Report Findings
Stage 1 :
Stage 2 :
Stage 3 :
Stage 4 :
Stage 5 :
Stage 6 :
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Figure 5-5
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Service Quality Perceptions
Relative to Zones of Tolerance
by Dimensions
9
8
7
6
O
O
O
O
O
5
4
3
2
1
0
Reliability
Retail Chain
Responsiveness
Assurance
Empathy
Tangibles
Zone of Tolerance O S.Q. Perception
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Service Quality Perceptions
Relative to Zones of Tolerance by
Dimensions
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10
8
O
O
O
O
O
6
4
2
0
Reliability
Responsiveness
Computer
Manufacturer
Assurance
Zone of Tolerance
Empathy
O
Tangibles
S.Q. Perception
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Figure 5-6
Importance/Performance Matrix
HIGH
High
Leverage

Importance
Attributes to Improve

Attributes to Maintain




Low
Leverage




Attributes to Maintain
LOW
Performance
Attributes to De-emphasize
HIGH
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Chapter 6
BUILDING
CUSTOMER
RELATIONSHIPS
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Objectives for Chapter 6:
Building Customer
Relationships
• Explain relationship marketing, its goals, and the benefits
of long-term relationships for firms and customers
• Explain why and how to estimate customer lifetime value
• Specify the foundations for successful relationship
marketing--quality core services and careful market
segmentation
• Provide you with examples of successful customer
retention strategies
• Introduce the idea that “the customer isn’t always right”
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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
SM
Benefits to the Organization
of Customer Loyalty
• loyal customers tend to spend more with the
organization over time
• on average costs of relationship maintenance are
lower than new customer costs
• employee retention is more likely with a stable
customer base
• lifetime value of a customer can be very high
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
SM
“The Customer Isn’t Always
Right”
• Not all customers are good relationship
customers:
– wrong segment
– not profitable in the long term
– difficult customers
96
SM
Strategies for Building
Relationships
• Foundations:
– Excellent Quality/Value
– Careful Segmentation
• Bonding Strategies:
– Financial Bonds
– Social & Psychological Bonds
– Structural Bonds
– Customization Bonds
• Relationship Strategies Wheel
Figure 6-1
SM
Customer Goals of
Relationship Marketing
Enhancing
Retaining
Satisfying
Getting
97
98
Figure 6-3
SM
Underlying Logic of Customer
Retention Benefits to the
Organization
Customer Satisfaction
Customer Retention &
Increased Profits
Employee Loyalty
Quality
Service
99
SM
STEP 1:
Identify
Bases for
Segmenting
the Market
Figure 6-5
Steps in Market Segmentation
and
Targeting for Services
STEP 2:
Develop
Profiles of
Resulting
Segments
STEP 3:
STEP4:
STEP 5:
Develop
Measures
of Segment
Attractiveness
Select the
Target
Segments
Ensure that
Segments
Are
Compatible
100
Figure 6-6
SM
Levels of Retention Strategies
Volume and
Frequency
Rewards
Bundling and
Cross Selling
Continuous
Relationships
I. Financial
Bonds
Integrated
Information
Systems
Joint
Investments
Stable
Pricing
IV.
Structural
Bonds
Shared
Processes
and
Equipment
Excellent
Quality
and
Value
II.
Social
Bonds
III. Customization
Bonds
Anticipation
/ Innovation
Personal
Relationships
Social Bonds
Among
Customers
Customer
Intimacy
Mass
Customization
101
SM
Chapter 7
SERVICE RECOVERY
SM
Objectives for Chapter 7:
Service Recovery
• Illustrate the importance of recovery from service
failures in building loyalty
• Discuss the nature of consumer complaints and
why people do and do not complain
• Provide evidence of what customers expect and
the kind of responses they want when they
complain
• Provide strategies for effective service recovery
• Discuss service guarantees
102
SM
103
Figure 7-1
Unhappy Customers’
Repurchase Intentions
Unhappy Customers Who Don’t Complain
9%
37%
Unhappy Customers Who Do Complain
Complaints Not Resolved
19%
46%
54%
Complaints Resolved
70%
82%
Complaints Resolved Quickly
95%
Percent of Customers Who Will Buy Again
Minor complaints ($1-$5 losses)
Major complaints (over $100 losses)
Source: Adapted from data reported by the Technical Assistance Research Program.
104
Figure 7-3
SM
Customer Response
Following Service Failure
Service Failure
Take Action
Do Nothing
Switch Providers
Complain to
Provider
Complain to
Family & Friends
Switch Providers
Complain to
Third Party
Stay with Provider
Stay with Provider
SM
Figure 7-5
Service Recovery Strategies
Service
Recovery
Strategies
105
Pricing
•
•
•
•
High Price
Price Increases
Unfair Pricing
Deceptive Pricing
SM
Inconvenience
• Location/Hours
• Wait for Appointment
• Wait for Service
Figure 7-6
Causes Behind Service
Switching
Core Service Failure
• Service Mistakes
• Billing Errors
• Service Catastrophe
Service Encounter Failures
•
•
•
•
Uncaring
Impolite
Unresponsive
Unknowledgeable
Response to Service Failure
• Negative Response
• No Response
• Reluctant Response
Service
Switching
Behavior
Competition
• Found Better Service
Ethical Problems
•
•
•
•
Cheat
Hard Sell
Unsafe
Conflict of Interest
Involuntary Switching
• Customer Moved
• Provider Closed
106
Source: Sue Keaveney
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?)
SM
Table 7-7
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.
108
109
SM
Why a Good Guarantee
Works
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”
110
SM
Service Guarantees
• Does everyone need a guarantee?
• Reasons companies do NOT offer guarantees:
– guarantee would be at odds with company’s
image
– too many uncontrollable external variables
– fears of cheating by customers
– costs of the guarantee are too high
111
SM
Service Guarantees
• service guarantees work for companies who are
already customer-focused
• effective guarantees can be BIG deals - they put the
company at risk in the eyes of the customer
• customers should be involved in the design of
service guarantees
• the guarantee should be so stunning that it comes as
a surprise -- a WOW!! factor
• “it’s the icing on the cake, not the cake”
112
SM
Part 3
ALIGNING STRATEGY,
SERVICE DESIGN
AND STANDARDS
113
SM
Provider GAP 2
CUSTOMER
Customer-Driven
Service Designs and
Standards
COMPANY
GAP 2
Company
Perceptions of
Consumer
Expectations
Part 3 Opener
114
SM
Chapter 8
SERVICE DEVELOPMENT
AND DESIGN
SM
Objectives for Chapter 8:
Service Development and
Design
• Describe the challenges inherent in service design
• Present steps in the new service development
process
• Show the value of service blueprinting and quality
function deployment (QFD) in new service design
and service improvement
• Present lessons learned in choosing and
implementing high-performance service
innovations
115
Figure 8-1
SM
Risks of Relying on Words
Alone to
Describe Services
 Oversimplification
 Incompleteness
 Subjectivity
 Biased Interpretation
116
Figure 8-2
SM
117
New Service Development Process
 Business Strategy Development or Review
 New Service Strategy Development
Front End
Planning
 Idea Generation
Screen ideas against new service strategy
 Concept Development and Evaluation
Test concept with customers and employees
 Business Analysis
Test for profitability and feasibility
 Service Development and Testing
Conduct service prototype test
Implementation
 Market Testing
Test service and other marketing-mix elements
 Commercialization
 Postintroduction Evaluation
Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.
118
Figure 8-3
SM
New Service Strategy Matrix
for Identifying Growth
Opportunities
Markets
Offerings
Existing
Services
New
Services
Current Customers
New Customers
SHARE BUILDING
MARKET
DEVELOPMENT
SERVICE
DEVELOPMENT
DIVERSIFICATION
Figure 8-4
Service Mapping/Blueprinting
A tool for simultaneously depicting the service
process, the points of customer contact, and the
evidence of service from the customer’s point of
view.
Process
Service
Mapping
Points of Contact
Evidence
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
Express Mail Delivery Service
CONTACT PERSON CUSTOME PHYSICAL
EVIDENCE
(Back Stage) (On Stage) R
SM
Customer
Calls
Customer
Gives
Package
Receive
Package
Driver
Picks
Up Pkg.
Deliver
Package
Customer
Service
Order
Dispatch
Driver
SUPPORT
PROCESS
Truck
Packaging
Forms
Hand-held
Computer
Uniform
Truck
Packaging
Forms
Hand-held
Computer
Uniform
Airport
Receives
& Loads
Fly to
Sort
Center
Load on
Airplane
Sort
Packages
Fly to
Destinatio
n
Unload
&
Sort
Load
On
Truck
121
122
Overnight Hotel Stay
CONTACT PERSON
SUPPORT PROCESS (Back Stage) (On Stage)
CUSTOMER PHYSICAL
EVIDENCE
SM
Hotel
Exterior
Parking
Arrive
at
Hotel
Cart for
Bags
Desk
Elevators Cart for
Registration Hallways Bags
Papers
Room
Lobby
Key
Give Bags
Check in
to
Bellperson
Go to
Room
Greet and
Process
Take
Registration
Bags
Receive
Bags
Room
Menu
Amenities
Bath
Sleep
Shower
Call
Room
Service
Deliver
Bags
Take Bags
to Room
Registration
System
Delivery
Food
Tray
Food
Appearance
Receive
Food
Deliver
Food
Eat
Bill
Desk
Lobby
Hotel
Exterior
Parking
Check out
and
Leave
Process
Check Out
Take
Food
Order
Prepare
Food
Registration
System
123
SM
Figure 8-8
Building a Service Blueprint
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Identify the
process to
be blueprinted.
Identify the
customer
or
customer
segment.
Map the
process
from the
customer’s
point of
view.
Map
contact
employee
actions,
onstage
and backstage.
Link
customer
and contact
person
activities to
needed
support
functions.
Add
evidence
of service
at each
customer
action
step.
124
SM
Application of Service
Blueprints
• New Service Development
• concept development
• market testing
• Supporting a “Zero Defects” Culture
• managing reliability
• identifying empowerment issues
• Service Recovery Strategies
• identifying service problems
• conducting root cause analysis
• modifying processes
125
SM
Blueprints Can Be Used By:
• Service Marketers
– creating realistic customer
expectations
• service system design
• promotion
• Human Resources
– empowering the human
element
• job descriptions
• selection criteria
• appraisal systems
• Operations Management
– rendering the service as
promised
• managing fail points
• training systems
• quality control
• System Technology
– providing necessary tools:
• system specifications
• personal preference databases
126
SM
Chapter 9
CUSTOMER-DEFINED
SERVICE STANDARDS
SM
Objectives for Chapter 9:
Customer-defined Service
Standards
• Differentiate between company-defined and
customer-defined service standards
• Distinguish among one-time service fixes and
“hard” and “soft” customer-defined standards
• Explain the critical role of the service encounter
sequence in developing customer-defined
standards
• Illustrate how to translate customer expectations
into behaviors and actions that are definable,
repeatable, and actionable
127
Figure 9-1
SM
128
AT&T’s Process Map for Measurements
Business Process
30% Product
30% Sales
Total
Quality 10% Installation
15% Repair
15% Billing
Source: AT&T General Business Systems
Internal Metric
Customer Need
Reliability
Easy To Use
Features / Functions
(40%)
(20%)
(40%)
% Repair Call
% Calls for Help
Knowledge
Responsive
Follow-Up
(30%)
(25%)
(10%)
Supervisor Observations
% Proposal Made on Time
% Follow Up Made
Functional Performance Test
Delivery Interval Meets Needs (30%)
Does Not Break
(25%)
Installed When Promised
(10%)
Average Order Interval
% Repair Reports
% Installed On Due Date
No Repeat Trouble
Fixed Fast
(30%)
(25%)
Kept Informed
(10%)
% Repeat Reports
Average Speed Of Repair
% Customers Informed
Accuracy, No Surprise
Resolve On First Call
Easy To Understand
(45%)
(35%)
(10%)
% Billing Inquiries
% Resolved First Call
% Billing Inquiries
SM
Exercise for Creating
Customer-Defined Service
Standards
• Form a group of four people
• Use your school’s undergraduate or graduate
program, or an approved alternative
• Complete the customer-driven service standards
importance chart
• Establish standards for the most important and
lowest-performed behaviors and actions
• Be prepared to present your findings to the class
129
SM
Customer-Driven Standards and
Measurements Exercise
Service Encounter
Service
Quality
Customer Requirements
Measurements
130
131
Figure 9-2
SM
Getting to Actionable Steps
Requirements: Diagnosticity:
Satisfaction Value
Relationship
Solution Provider
Dig
Deeper
Abstract
General Concepts
Reliability
Empathy
Assurance
Tangibles
Responsiveness Price
Dig
Deeper
Dig
Deeper
Low
Dimensions
Delivers on Time
Returns Calls Quickly
Knows My Industry
Delivers by Weds 11/4
Returns Calls in 2 Hrs
Knows Strengths of
My Competitors
Attributes
Behaviors
and Actions
Concrete
High
Figure 9-3
132
Process for Setting
Customer-Defined Standards
SM
1. Identify Existing or Desired Service Encounter Sequence
2. Translate Customer Expectations Into Behaviors/Actions
3. Select Behaviors/Actions for Standards
4. Set Hard or Soft Standards
Measure by
Audits or
Operating Data
Hard
5. Develop Feedback
Mechanisms
Soft
6. Establish Measures and Target Levels
7. Track Measures Against Standards
8. Update Target Levels and Measures
Measure by
TransactionBased Surveys
133
SM
HIGH
Importance/Performance Matrix
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)


Gets price we originally agreed upon (9.21, 8.64)
 

Tells me cost ahead of time (9.06, 8.46)
 

Provides equipment that operates as vendor said it would (9.24, 8.14)
Completes projects
correctly, on time (9.29, 7.68)
9.0
Gets back to me when
promised (9.04, 7.63)
Importance
Takes responsibility for their mistakes (9.18, 8.01)
Delivers or installs on
promised date (9.02, 7.84)
8.0
LOW
7.0
8.0
Performance
9.0
10.0
HIGH
134
Figure 9-5
SM
Linkage between Soft Measures and
Hard Measures for Speed of
Complaint Handling
S
A 10
T 9
I
8
S
7
F
6
A
5
C
4
T
3
I
2
O 1
N 0
Large Customers
Small Customers
2
4
6
8
WORKING
12
16
HOURS
20
24
135
Figure 9-6
SM
Aligning Company Processes with
Customer Expectations
Customer Expectations
Customer
Process
Blueprint
Company
Process
Blueprint
A
B
Lost Card
Reported
48 Hours
Report Lost
Card
Receive New
Card
Company Sequential Processes
C
D
E
40 Days
F
G
H
New Card
Mailed
136
SM
Chapter 10
PHYSICAL EVIDENCE
AND THE SERVICESCAPE
SM
Objectives for Chapter 10:
Physical Evidence and the
Servicescape
• Explain the impact on customer perceptions of physical
evidence, particularly the servicescape
• Illustrate differences in types and roles of servicescapes
and their implications for strategy
• Explain why the servicescape affects employee and
customer behavior
• Analyze four different approaches for understanding the
effects of physical environment
• Present elements of an effective physical evidence
strategy
137
Table 10-1
SM
Elements of Physical
Evidence
Servicescape
Other tangibles
Facility exterior
Business cards
Stationery
Billing statements
Reports
Employee dress
Uniforms
Brochures
Internet/Web pages
Exterior design
Signage
Parking
Landscape
Surrounding environment
Facility interior
Interior design
Equipment
Signage
Layout
Air quality/temperature
138
Table 10-2
SM
139
Examples of Physical Evidence from the
Customer’s Point of View
Service
Physical evidence
Servicescape
Other tangibles
Insurance
Not applicable
Hospital
Building exterior
Parking
Signs
Waiting areas
Admissions office
Patient care room
Medical equipment
Recovery room
Airline gate area
Airplane exterior
Airplane interior (décor, seats, air
quality)
Not applicable
Airline
Express mail
Sporting
event
Parking, Seating, Restrooms
Stadium exterior
Ticketing area, Concession Areas
Entrance, Playiing Field
Policy itself
Billing statements
Periodic updates
Company brochure
Letters/cards
Uniforms
Reports/stationery
Billing statements
Tickets
Food
Uniforms
Packaging
Trucks
Uniforms
Computers
Signs
Tickets
Program
Uniforms
140
Table 10-3
SM
Typology of Service Organizations
Based on Variations in Form
and Use of the Servicescape
Complexity of the servicescape evidence
Servicescape
usage
Elaborate
Lean
Self-service
(customer only)
Golf Land
Surf 'n' Splash
ATM
Ticketron
Post office kiosk
Internet services
Express mail drop-off
Interpersonal
services
(both customer and
employeee)
Hotel
Restaurants
Health clinic
Hospital
Bank
Airline
School
Dry cleaner
Hot dog stand
Hair salon
Remote service
(employee only)
Telephone company
Insurance company
Utility
Many professional services
Telephone mail-order desk
Automated voice-messagingbased services
Figure 10-3
SM
141
A Framework for Understanding
Environment-user Relationships
in Service Organizations
PHYSICAL
ENVIRONMENTAL
DIMENSIONS
HOLISTIC
ENVIRONMENT
INTERNAL
RESPONSES
BEHAVIOR
Cognitive
Emotional
Physiological
Employee
Responses
Ambient
Conditions
Space/Function
Individual
Behaviors
Social
Interactions
between and
among
customer and
employees
Perceived
Servicescape
Signs, Symbols,
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
SM
Objectives for Chapter 11:
Employees’ Roles in
Service Delivery
• Illustrate the critical importance of service
employees in creating customer satisfaction and
service quality
• Demonstrate the challenges inherent in boundaryspanning 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
145
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
SM
Boundary Spanners Interact
with Both Internal
and External Constituents
External Environment
Internal Environment
148
149
SM
Figure 11-4
Sources of Conflict for
Boundary-Spanning Workers
• Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity
150
Figure 11-5
Hire for
Service
Competencies
and Service
Inclination
Hire the
Right People
Retain the
Best
People
Customeroriented
Service
Delivery
Provide
Needed Support
Systems
Provide
Supportive
Technology
and
Equipment
Develop
People to
Deliver
Service
Quality
Empower
Employees
Treat
Employees
as
Customers
SM
Human Resource Strategies for Closing GAP 3
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
SM
Objectives for Chapter 12:
Customers’ Roles in Service
Delivery
• Illustrate the importance of customers in
successful service delivery
• Enumerate the variety of roles that service
customers play
• Productive resources
• Contributors to quality and satisfaction
• Competitors
• Explain strategies for involving service customers
effectively to increase both quality and
productivity
154
SM
Importance of Other
Customers in Service
Delivery
• Other customers can detract from
satisfaction
• disruptive behaviors
• excessive crowding
• incompatible needs
• Other customers can enhance satisfaction
• mere presence
• socialization/friendships
• roles: assistants, teachers, supporters
155
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
SM
Customer Roles in Service
Delivery
Productive Resources
Contributors to
Quality and
Satisfaction
Competitors
157
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?
SM
Customers as Contributors
to Service Quality and
Satisfaction
• Customers can contribute to
– their own satisfaction with the service
• by performing their role effectively
• by working with the service provider
– the quality of the service they receive
• by asking questions
• by taking responsibility for their own satisfaction
• by complaining when there is a service failure
159
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
SM
Technology Spotlight:
Services Production Continuum
Customer Production
1
2
Joint Production
3
4
Firm Production
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
162
Figure 12-3
SM
Strategies for Enhancing
Customer Participation
Define Customer
Jobs
Effective
Customer
Participation
Manage the
Customer
Mix
Recruit, Educate,
and Reward
Customers
163
SM
Strategies for Enhancing
Customer Participation
1. Define customers’ jobs
- helping himself
- helping others
- promoting the company
2. Individual differences: not everyone wants
to participate
SM
Strategies for Recruiting,
Educating and Rewarding
Customers
1. Recruit the right customers
2. Educate and train customers to perform
effectively
3. Reward customers for their contribution
4. Avoid negative outcomes of inappropriate
customer participation
Manage the Customer Mix
164
165
SM
Chapter 14
MANAGING DEMAND
AND CAPACITY
SM
Objectives for Chapter 14:
Managing Demand and
Capacity
• Explain:
• the underlying issue for capacity-constrained services
• the implications of capacity constraints
• the implications of different types of demand patterns
on matching supply and demand
• Lay out strategies for matching supply and demand
through:
• shifting demand to match capacity or
• flexing capacity to meet demand
• Demonstrate the benefits and risks of yield management
strategies
• Provide strategies for managing waiting lines
166
SM
Understanding Capacity
Constraints and Demand
Patterns
Capacity Constraints
• Time, labor,
equipment and
facilities
• Optimal versus
maximal use of
capacity
Demand Patterns
• Charting demand
patterns
• Predictable cycles
• Random demand
fluctuations
• Demand patterns by
market segment
167
Figure 14-3
SM
Strategies for Shifting Demand
to Match Capacity
Demand Too High
Shift Demand
• Use signage to communicate
busy days and times
• Offer incentives to customers
for usage during non-peak times
• Take care of loyal or regular
customers first
• Advertise peak usage times and
benefits of non-peak use
• Charge full price for the
service--no discounts
•
•
•
•
•
Demand Too Low
Use sales and advertising to
increase business from current
market segments
Modify the service offering to
appeal to new market segments
Offer discounts or price
reductions
Modify hours of operation
Bring the service to the
customer
168
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Figure 14-4
Strategies for Flexing Capacity
to Match Demand
Demand Too High
Flex Capacity
• Stretch time, labor, facilities
and equipment
• Cross-train employees
• Hire part-time employees
• Request overtime work from
employees
• Rent or share facilities
• Rent or share equipment
• Subcontract or outsource
activities
•
•
•
•
Demand Too Low
Perform maintenance
renovations
Schedule vacations
Schedule employee training
Lay off employees
169
170
Table 14-1
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What is the Nature of Demand
Relative to Supply?
Extent of demand fluctuations over time
Extent to which
supply is
constrained
Wide
Peak demand can
1
usually be met
Electricity
without a major
Natural gas
delay
Telephone
Hospital maternity unit
Police and fire
emergencies
Peak demand
regularly exceeds
capacity
4
Accounting and tax
preparation
Passenger transportation
Hotels and motels
Restaurants
Theaters
Narrow
2
Insurance
Legal services
Banking
Laundry and dry cleaning
3
Services similar to those in
2 but which have
insufficient capacity for
their base level of business
Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.
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Table 14-2
171
What is the Constraint on 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
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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
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Part 5
MANAGING SERVICE
PROMISES
174
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Provider GAP 4
CUSTOMER
COMPANY
Service Delivery
GAP 4
Part 5 Opener
External
Communications
to Customers
175
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Chapter 15
INTEGRATED
MARKETING
COMMUNICATION
176
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Objectives for Chapter 15:
Integrated Services
Marketing Communications
• Introduce the concept of Integrated Services
Marketing Communication
• Discuss the key reasons for service communication
problems
• Present four key ways to integrate marketing
communication in service organizations
• Present specific strategies for managing promises,
managing customer expectations, educating
customers, and managing internal communications
• Provide perspective on the popular service objective
of exceeding customer expectations
177
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Figure 15-1
Communications and the
Services Marketing Triangle
Company
Internal Marketing
Vertical Communications
Horizontal Communications
Employees
External Marketing
Communication
Advertising
Sales Promotion
Public Relations
Direct Marketing
Interactive Marketing
Personal Selling
Customer Service Center
Service Encounters
Servicescapes
Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler
Customers
Figure 15-3
SM
178
Approaches for
Integrating Services Marketing
Communication
Manage
Customer
Expectations
Manage
Service
Promises
Goal:
Delivery
greater than
or equal to
promises
Manage
Internal
Marketing
Communication
Improve
Customer
Education
179
Figure 15-4
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Approaches for
Managing Service Promises
MANAGING SERVICE PROMISES
Create
Effective
Services
Communications
Coordinate
External
Communicatio
n
Make
Realistic
Promises
Offer
Service
Guarantees
Goal:
Delivery
greater than
or equal to
promises
Figure 15-8
SM
Approaches for
Managing Customer Expectations
Offer Choices
Create Tiered-Value
Offerings
Communicate Criteria for
Service Effectiveness
Negotiate
Unrealistic
Expectations
Goal:
Delivery
greater than
or equal to
promises
180
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Goal:
Delivery
greater than
or equal to
promises
181
Figure 15-9
Approaches for
Improving Customer Education
Prepare
Customers
for the
Service
Process
Confirm
Performance
to Standards
Clarify
Expectations
after the Sale
Teach
Customers
to Avoid
Peak
Demand
Periods
and
Seek Slow
Periods
182
SM
Figure 15-10
Approaches for Managing
Internal Marketing Communications
Goal:
Delivery
greater than
or equal to
promises
Create Effective
Vertical
Communications
Create Effective
Horizontal
Communications
Align Back
Office Personnel
w/ External Customers
Create
Cross-Functional
Teams
183
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Chapter 17
THE FINANCIAL AND
ECONOMIC IMPACT OF
SERVICE QUALITY
SM
Objectives for Chapter 17:
The Financial and Economic
Impact of Service
• Examine the direct effects of service on profits
• Consider the impact of service on getting new
customers
• Evaluate the role of service in keeping customers
• Examine the link between perceptions of service and
purchase intentions
• Emphasize the importance of selecting profitable
customers
• Discuss what is know about the key service drivers of
overall service quality, customer retention and
profitability
• Discuss the balanced performance scorecard to focus
on strategic measurement other than financials
184
185
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Figure 17-1
The Direct Relationship between
Service and Profits
Service
Quality
?
Profits
186
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Figure 17-2
Offensive Marketing Effects of
Service on Profits
Service
Quality
Profits
Market
Share
Reputation
Price
Premium
Sales
187
Figure 17-3
SM
Defensive Marketing Effects of
Service on Profit
Costs
Service
Quality
Customer
Retention
Volume of
Purchases
Margins
Price
Premium
Word of
Mouth
Profits
SM
188
Figure 17-5
Perceptions of Service,
Behavioral
Intentions and Profits
Costs
Customer
Retention
Service
Behavioral
Intentions
Volume of
Purchases
Margins
Price
Premium
Word of
Mouth
Profits
Sales
189
Figure 17-6
SM
The “80/20” Customer Pyramid
Most Profitable
Customers
Best
Customers
Other
Customers
Least Profitable
Customers
What segment spends more with
us over time, costs less to maintain,
spreads positive word of mouth?
What segment costs us in
time, effort and money yet
does not provide the return
we want? What segment is
difficult to do business with?
190
SM
Figure 17-7
The Expanded Customer Pyramid
Most Profitable
Customers
Platinum
What segment spends more with
us over time, costs less to maintain,
spreads positive word of mouth?
Gold
Iron
Lead
Least Profitable
Customers
What segment costs us in
time, effort and money yet
does not provide the return
we want? What segment is
difficult to do business with?
SM
Key Drivers
191
Figure 17-8
The Key Drivers of Service Quality,
Customer Retention, and Profits
Service Encounters
Service
Encounter
Service
Encounter
Service
Quality
Service
Encounter
Service
Encounter
Behavioral
Intentions
Customer
Retention
Profits
Figure 17-9
192
Sample Measurements for the
Balanced Scorecard
SM
Financial Measures
Customer
Perspective
Service Perceptions
Service Expectations
Perceived Value
Behavioral Intentions:
% Loyalty
% Intent to Switch
# Customer
Referrals
# Cross Sales
# of Defections
Price Premium
Volume Increases
Value of Customer
Referrals
Value of Cross Sales
Long-term Value of
Customer
Innovation and
Learning Perspective
Number of new products
Return on innovation
Employee skills
Time to market
Time spent talking to
customers
Adapted from Kaplan and Norton
Operational
Perspective:
Right first time (% hits)
Right on time (% hits)
Responsiveness (% on
time)
Transaction time (hours,
days)
Throughput time
Reduction in waste
Process quality
193
Figure 17-10
SM
Service Quality Spells Profits
Costs
Defensive
Marketing
Volume of
Purchases
Margins
Price
Premium
Service
Quality
Customer
Retention
Word of
Mouth
Profits
Market
Share
Offensive
Marketing
Sales
Reputation
Price
Premium