Services Marketing Objectives for Chapter 1: - PowerPoint Presentation

1. Services Marketing

2. Objectives for Chapter 1:Introduction to ServicesExplain what services are and identify service trendsExplain the need for special services marketing concepts and practicesOutline the basic differences between goods and services and the resulting challenges for service businessesIntroduce the service marketing triangleIntroduce the expanded services marketing mixIntroduce the gaps model of service quality

3. IntroductionServices are deeds,processes and performanceIntangible, but may have a tangible componentGenerally produced and consumed at the same timeNeed to distinguish between SERVICE and CUSTOMER SERVICE

4. Challenges for ServicesDefining and improving qualityCommunicating and testing new servicesCommunicating and maintaining a consistent imageMotivating and sustaining employee commitmentCoordinating marketing, operations and human resource effortsSetting pricesStandardization versus personalization

5. Examples of Service IndustriesHealth Carehospital, medical practice, dentistry, eye careProfessional Servicesaccounting, legal, architecturalFinancial Servicesbanking, investment advising, insuranceHospitalityrestaurant, hotel/motel, bed & breakfast, ski resort, raftingTravelairlines, travel agencies, theme parkOthers:hair styling, pest control, plumbing, lawn maintenance, counseling services, health club

6. Figure 1-1Tangibility SpectrumTangibleDominantIntangibleDominantSaltSoft DrinksDetergentsAutomobilesCosmeticsAdvertisingAgenciesAirlinesInvestmentManagementConsultingTeachingFast-foodOutletsFast-foodOutlets

7. Figure 1-2 Percent of U.S. Labor Force by Industry01020304050607080192919481969197719841996Percent of GDPSource: 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. Year Services Manufacturing Mining & Agriculture

8. Differences Between Goods and ServicesIntangibilityPerishabilitySimultaneousProductionandConsumptionHeterogeneity

9. Implications of IntangibilityServices cannot be inventoriedServices cannot be patentedServices cannot be readily displayed or communicatedPricing is difficult

10. Implications of HeterogeneityService delivery and customer satisfaction depend on employee actionsService quality depends on many uncontrollable factorsThere is no sure knowledge that the service delivered matches what was planned and promoted

11. Implications of Simultaneous Production and ConsumptionCustomers participate in and affect the transactionCustomers affect each otherEmployees affect the service outcomeDecentralization may be essentialMass production is difficult

12. Implications of PerishabilityIt is difficult to synchronize supply and demand with servicesServices cannot be returned or resold

13. Table 1-2 Services are DifferentSource: 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.

14. Figure 1-5The Services Marketing TriangleInternal MarketingInteractive MarketingExternal MarketingCompany(Management)CustomersEmployees“enabling thepromise”“delivering the promise”“setting thepromise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

15. Ways to Use the Services Marketing TriangleOverall Strategic AssessmentHow is the service organization doing on all three sides of the triangle?Where are the weaknesses?What are the strengths?Specific Service ImplementationWhat is being promoted and by whom?How will it be delivered and by whom?Are the supporting systems in place to deliver the promised service?

16. Source: Adapted from A. ParasuramanCompanyCustomersProvidersTechnologyFigure 1-6 The Services Triangle and Technology

17. Services Marketing Mix:7 Ps for ServicesTraditional Marketing MixExpanded Mix for Services: 7 PsBuilding Customer Relationships Through People, Processes, and Physical EvidenceWays to Use the 7 Ps

18. 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

19. Expanded Mix for Services --the 7 PsProductPricePlacePromotionPeopleProcessPhysical Evidence

20. Table 1-3Expanded Marketing Mix for Services

21. Table 1-3 (Continued)Expanded Marketing Mix for Services

22. Ways to Use the 7 PsOverall Strategic AssessmentHow 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 ImplementationWho 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?

23. Services Marketing Triangle Applications ExerciseFocus 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?

24. SMPart 1 FOCUS ON THE CUSTOMER

25. PerceivedServiceExpected ServiceCUSTOMERCOMPANYCustomerGapGAP 1GAP 2Gaps Model of Service QualityGAP 3External Communications to CustomersGAP 4Service DeliveryCustomer-Driven Service Designs and StandardsCompany Perceptions of Consumer ExpectationsPart 1 Opener

26. Gaps Model of Service QualityCustomer Gap:difference between expectations and perceptionsProvider Gap 1:not knowing what customers expectProvider Gap 2:not having the right service designs and standardsProvider Gap 3:not delivering to service standardsProvider Gap 4:not matching performance to promisesPart 1 Opener

27. The Customer GapExpectedServicePerceivedServiceGAPPart 1 Opener

28. SMChapter 2CONSUMER BEHAVIOR IN SERVICES

29. Objectives for Chapter 2:Consumer Behavior in ServicesOverview the generic differences in consumer behavior between services and goodsIntroduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior:Information searchEvaluation of service alternativesService purchase and consumptionPostpurchase evaluationRole of culture

30. Consumer Evaluation Processes for ServicesSearch Qualitiesattributes a consumer can determine prior to purchase of a productExperience Qualitiesattributes a consumer can determine after purchase (or during consumption) of a productCredence Qualitiescharacteristics that may be impossible to evaluate even after purchase and consumption

31. Figure 2-1Continuum of Evaluation for Different Types of ProductsClothingJewelryFurnitureHousesAutomobilesRestaurant mealsVacationsHaircutsChild careTelevision repairLegal servicesRoot canalsAuto repairMedical diagnosisDifficult to evaluateEasy to evaluate{High in searchqualitiesHigh in experiencequalitiesHigh in credencequalities{{MostGoodsMostServices

32. Figure 2-2Categories in Consumer Decision-Making and Evaluation of ServicesInformation SearchEvaluation of AlternativesPurchase and ConsumptionPost-Purchase Evaluation Use of personal sources Perceived risk Evoked set Emotion and mood Service provision as drama Service roles and scripts Compatibility of customers Attribution of dissatisfaction Innovation diffusion Brand loyalty

33. Figure 2-3 Categories in Consumer Decision-Making and Evaluation of ServicesInformation SearchEvaluation of AlternativesPurchase and ConsumptionPost-Purchase Evaluation Use of personal sources Perceived risk Evoked set Emotion and mood Service provision as drama Service roles and scripts Compatibility of customers Attribution of dissatisfaction Innovation diffusion Brand loyaltyCulture Values and attitudes Manners and customs Material culture Aesthetics Educational and social institutions

34. Information searchIn buying services consumers rely more on personal sources. Personal influence becomes pivotal as product complexity increasesWord of mouth important in delivery of servicesWith service most evaluation follows purchase

35. Perceived RiskMore 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

36. Evoked SetThe evoked set of alternatives likely to be smaller with services than goodsIf 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 serviceThe Internet may widen this potentialConsumer may choose to do it themselves, e.g. garden services

37. Emotion and MoodEmotion and mood are feeling states that influence people’s perception and evaluation of their experiencesMoods are transientEmotions more intense, stable and pervasiveMay have a negative or positive influence

38. Service Provision as DramaNeed to maintain a desirable impressionService “actors” need to perform certain routinesPhysical setting important, smell, music, use of space, temperature, cleanliness, etc.

39. Global Feature:Differences in the Service Experience in the U.S. and Japan Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness

40. SMChapter 3CUSTOMER EXPECTATIONS OF SERVICES

41. Objectives for Chapter 3:Customer Expectations of ServiceRecognize that customers hold different types of expectations for service performanceDiscuss controllable and uncontrollable sources of customer expectations Distinguish between customers’ global expectations of their relationships and their expectations of the service encounterAcknowledge that expectations are similar for many different types of customersDelineate the most important current issues surrounding customer expectations

42. DEFINITIONSCustomers have different expectations re services – or expected serviceDesired service – customer hopes to receiveAdequate service – the level of service the customer may acceptDO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?

43. Figure 3-1Dual Customer Expectation Levels(Two levels of expectations)Adequate ServiceDesired ServiceZone ofTolerance

44. Figure 3-2 The Zone of Tolerance Adequate ServiceDesired ServiceZone ofTolerance

45. Figure 3-3 Zones of Tolerance VARY forDifferent Service DimensionsMost Important FactorsLeast Important FactorsLevel of ExpectationSource: Berry, Parasuraman, and Zeithaml (1993)Adequate ServiceDesired ServiceZone ofToleranceDesiredServiceAdequateServiceZone of ToleranceDesired ServiceAdequate Service

46. Figure 3-4 Zones of Tolerance VARY forFirst-Time and Recovery ServiceFirst-Time ServiceOutcomeProcessOutcomeProcessRecovery ServiceExpectationsLOWHIGHSource: Parasuraman, Berry and Zeithaml (1991)

47. Figure 3-5 Factors that InfluenceDesired ServiceDesiredServiceAdequateServiceZone of ToleranceEnduring ServiceIntensifiersPersonal Needs

48. Personal needs include physical, social, psychological categoriesEnduring 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

49. Figure 3-6 Factors that InfluenceAdequate ServiceDesiredServiceAdequateServiceZone of ToleranceSelf-PerceivedService RoleSituational FactorsPerceived ServiceAlternativesTransitory ServiceIntensifiers

50. Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-endsPerceived service alternativesPerceived service role of customerSituational factors

51. Figure 3-7 Factors that InfluenceDesired and Predicted ServiceDesiredServiceAdequateServiceZone of TolerancePredicted ServiceExplicit ServicePromisesImplicit ServicePromisesWord-of-MouthPast Experience

52. SMChapter 4CUSTOMER PERCEPTIONS OF SERVICE

53. Objectives for Chapter 4:Customer Perceptions of Service Provide you with definitions and understanding of customer satisfaction and service qualityShow that service encounters or the “moments of truth” are the building blocks of customer perceptionsHighlight strategies for managing customer perceptions of service

54. Figure 4-1Customer Perceptions of Service Quality and Customer Satisfaction ServiceQualityReliabilityResponsivenessAssuranceEmpathyTangiblesProductQualityPricePersonalFactorsCustomerSatisfactionSituationalFactors

55. Factors Influencing Customer SatisfactionProduct/service qualityProduct/service attributes or featuresConsumer EmotionsAttributions for product/service success or failureEquity or fairness evaluations

56. Outcomes of Customer SatisfactionIncreased customer retentionPositive word-of-mouth communicationsIncreased revenues

57. Figure 4-3 Relationship between Customer Satisfaction and Loyalty in Competitive IndustriesSource: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

58. Service QualityThe 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.

59. The Five Dimensions of Service Quality Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service.TangiblesReliabilityResponsivenessAssuranceEmpathy

60. Exercise to Identify Service AttributesIn 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:

61. SERVQUAL AttributesProviding service as promisedDependability in handling customers’ service problemsPerforming services right the first timeProviding services at the promised timeMaintaining error-free recordsKeeping customers informed as to when services will be performedPrompt service to customersWillingness to help customersReadiness to respond to customers’ requestsRELIABILITYRESPONSIVENESSEmployees who instill confidence in customersMaking customers feel safe in their transactionsEmployees who are consistently courteousEmployees who have the knowledge to answer customer questionsASSURANCEGiving customers individual attentionEmployees who deal with customers in a caring fashionHaving the customer’s best interest at heartEmployees who understand the needs of their customersConvenient business hoursEMPATHYModern equipmentVisually appealing facilitiesEmployees who have a neat, professional appearanceVisually appealing materials associated with the serviceTANGIBLES

62. The Service Encounteris the “moment of truth”occurs any time the customer interacts with the firmcan potentially be critical in determining customer satisfaction and loyaltytypes of encounters:remote encountersphone encountersface-to-face encounters is an opportunity to:build trustreinforce qualitybuild brand identityincrease loyalty

63. Check-InRequest Wake-Up CallCheckoutBellboy Takes to Room Restaurant MealFigure 4-4 A Service Encounter Cascade for a Hotel Visit

64. Sales CallOrdering SuppliesBillingDelivery and Installation ServicingFigure 4-5 A Service Encounter Cascade for an Industrial Purchase

65. Critical Service Encounters ResearchGOAL - understanding actual events and behaviors that cause customer dis/satisfaction in service encountersMETHOD - Critical Incident TechniqueDATA - stories from customers and employeesOUTPUT - identification of themes underlying satisfaction and dissatisfaction with service encounters

66. Sample Questions for Critical Incidents Technique StudyThink 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)?

67. Common Themes in CriticalService Encounters ResearchRecovery:Adaptability:Spontaneity:Coping:Employee Responseto Service DeliverySystem FailureEmployee Responseto Customer Needsand RequestsEmployee Responseto Problem CustomersUnprompted andUnsolicited EmployeeActions and Attitudes

68. RecoveryAcknowledge problemExplain causesApologizeCompensate/upgradeLay out optionsTake responsibilityIgnore customerBlame customerLeave customer to fend for him/herselfDowngradeAct as if nothing is wrongDO DON’T

69. AdaptabilityRecognize the seriousness of the needAcknowledgeAnticipateAttempt to accommodateExplain rules/policiesTake responsibilityExert effort to accommodatePromise, then fail to follow throughIgnoreShow unwillingness to tryEmbarrass the customerLaugh at the customerAvoid responsibilityDO DON’T

70. SpontaneityTake timeBe attentiveAnticipate needsListenProvide information (even if not asked)Treat customers fairlyShow empathyAcknowledge by nameExhibit impatienceIgnoreYell/laugh/swearSteal from or cheat a customerDiscriminateTreat impersonallyDO DON’T

71. CopingListenTry to accommodateExplainLet go of the customerTake customer’s dissatisfaction personallyLet customer’s dissatisfaction affect othersDO DON’T

72. Figure 4-6 Evidence of Service from theCustomer’s Point of ViewPeopleProcessPhysicalEvidence Contact employees Customer him/herself Other customers Operational flow of activities Steps in process Flexibility vs. standard Technology vs. human Tangible communication Servicescape Guarantees Technology

73. SMPart 2LISTENING TO CUSTOMER REQUIREMENTS

74. Provider GAP 1Company Perceptions of Consumer ExpectationsExpected ServiceCUSTOMERCOMPANYGAP 1Part 2 Opener

75. SMChapter 5UNDERSTANDING CUSTOMER EXPECTATIONS AND PERCEPTIONS THROUGH MARKETING RESEARCH

76. Objectives for Chapter 5:Understanding Customer Expectations and Perceptions through Marketing ResearchPresent the types of and guidelines for marketing research in servicesShow the ways that marketing research information can and should be used for servicesDescribe the strategies by which companies can facilitate interaction and communication between management and customersPresent ways that companies can and do facilitate interaction between contact people and management

77. Common Research Objectives for Services To identify dissatisfied customersTo discover customer requirements or expectationsTo monitor and track service performanceTo assess overall company performance compared to competitionTo assess gaps between customer expectations and perceptionsTo gauge effectiveness of changes in serviceTo appraise service performance of individuals and teams for rewardsTo determine expectations for a new serviceTo monitor changing expectations in an industryTo forecast future expectations

78. Figure 5-1Criteria for An Effective Services Research ProgramResearchObjectivesIncludesQualitativeResearchIncludesQuantitativeResearchIncludesPerceptions and Expectations of CustomersIncludesMeasures ofLoyalty orBehavioralIntentionsBalances Costand Value ofInformationIncludesStatisticalValidityWhen NecessaryMeasures Prioritiesor ImportanceOccurswithAppropriateFrequency

79. Portfolio of Services ResearchCustomer Complaint Solicitation “Relationship” Surveys Post-Transaction Surveys Customer Focus Groups “Mystery Shopping” of Service Providers Employee Surveys Lost Customer Research Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial actionObtain customer feedback while service experience is still fresh; act on feedback quickly if negative patterns developUse as input for quantitative surveys; provide a forum for customers to suggest service-improvement ideasAssess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over timeMeasure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; identify systemic strengths and weaknesses in serviceMeasure internal service quality; identify employee-perceived obstacles to improve service; track employee morale and attitudesDetermine the reasons why customers defectResearch ObjectiveType of ResearchFuture Expectations ResearchTo forecast future expectations of customersTo develop and test new service ideas

80. Stages in the Research ProcessStage 1 : Define ProblemStage 2 : Develop Measurement StrategyStage 3 : Implement Research ProgramStage 4 : Collect and Tabulate DataStage 5 : Interpret and Analyze FindingsStage 6 : Report Findings

81. Figure 5-5Service Quality Perceptions Relative to Zones of Tolerance by DimensionsRetail Chain 9 8 7 6 5 4 3 2 1 0Reliability Responsiveness Assurance Empathy TangiblesOOOOZone of Tolerance S.Q. PerceptionOO

82. Service Quality Perceptions Relative to Zones of Tolerance by DimensionsComputer Manufacturer10 8 6 4 2 0Reliability Responsiveness Assurance Empathy Tangibles OOOOOZone of Tolerance S.Q. PerceptionO

83. Figure 5-6 Importance/Performance MatrixHIGHHIGHLOWPerformanceImportanceAttributes to ImproveAttributes to MaintainHighLeverageAttributes to De-emphasizeAttributes to MaintainLowLeverage

84. SMChapter 6BUILDING CUSTOMER RELATIONSHIPS

85. Objectives for Chapter 6:Building Customer RelationshipsExplain relationship marketing, its goals, and the benefits of long-term relationships for firms and customersExplain why and how to estimate customer lifetime valueSpecify the foundations for successful relationship marketing--quality core services and careful market segmentationProvide you with examples of successful customer retention strategiesIntroduce the idea that “the customer isn’t always right”

86. Relationship Marketingis a philosophy of doing business that focuses on keeping and improving current customersdoes not necessarily emphasize acquiring new customersis 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 organizationthus, the focus is on the attraction, retention, and enhancement of customer relationships

87. Lifetime Value of a CustomerAssumptionsIncomeExpected Customer LifetimeAverage Revenue (month/year)Other Customers convinced via WOMEmployee Loyalty?? ExpensesCosts of Serving Customer Increase??

88. A Loyal Customer is One Who...Shows Behavioral Commitmentbuys from only one supplier, even though other options existincreasingly buys more and more from a particular supplierprovides constructive feedback/suggestionsExhibits Psychological Commitmentwouldn’t consider terminating the relationship--psychological commitmenthas a positive attitude about the suppliersays good things about the supplier

89. Customer Loyalty ExerciseThink 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?

90. Benefits to the Organization of Customer Loyaltyloyal customers tend to spend more with the organization over timeon average costs of relationship maintenance are lower than new customer costsemployee retention is more likely with a stable customer baselifetime value of a customer can be very high

91. Benefits to the Customerinherent benefits in getting good valueeconomic, social, and continuity benefitscontribution to sense of well-being and quality of life and other psychological benefitsavoidance of changesimplified decision making social support and friendshipsspecial deals

92. “The Customer Isn’t Always Right”Not all customers are good relationship customers:wrong segmentnot profitable in the long termdifficult customers

93. Strategies for Building RelationshipsFoundations: Excellent Quality/ValueCareful SegmentationBonding Strategies:Financial BondsSocial & Psychological BondsStructural BondsCustomization BondsRelationship Strategies Wheel

94. GettingSatisfyingRetainingEnhancingFigure 6-1 Customer Goals of Relationship Marketing

95. Figure 6-3Underlying Logic of Customer Retention Benefits to the OrganizationCustomer Retention &Increased ProfitsEmployee LoyaltyQualityServiceCustomer Satisfaction

96. Figure 6-5Steps in Market Segmentation and Targeting for Services IdentifyBases forSegmentingthe MarketSTEP 1:DevelopProfiles ofResultingSegmentsSTEP 2: DevelopMeasuresof SegmentAttractive-nessSTEP 3:Select theTargetSegmentsSTEP4:Ensure thatSegmentsAre CompatibleSTEP 5:

97. ExcellentQualityandValueFigure 6-6 Levels of Retention StrategiesI. Financial BondsII. Social BondsIV. Structural BondsIII. CustomizationBondsVolume and Frequency RewardsBundling and Cross SellingStable PricingSocial Bonds Among CustomersPersonal RelationshipsContinuous RelationshipsCustomer IntimacyMass CustomizationAnticipation/ InnovationSharedProcesses and EquipmentJoint InvestmentsIntegrated Information Systems

98. SMChapter 7 SERVICE RECOVERY

99. Objectives for Chapter 7:Service RecoveryIllustrate the importance of recovery from service failures in building loyaltyDiscuss the nature of consumer complaints and why people do and do not complainProvide evidence of what customers expect and the kind of responses they want when they complainProvide strategies for effective service recoveryDiscuss service guarantees

100. Figure 7-1Unhappy Customers’ Repurchase Intentions95%70%46%37%82%54%19%9%Complaints Resolved QuicklyComplaints ResolvedComplaints Not ResolvedMinor complaints ($1-$5 losses)Major complaints (over $100 losses)Unhappy Customers Who Don’t Complain Unhappy Customers Who Do ComplainPercent of Customers Who Will Buy AgainSource: Adapted from data reported by the Technical Assistance Research Program.

101. Figure 7-3 Customer Response Following Service FailureService FailureDo NothingTake ActionStay with ProviderSwitch ProvidersComplain to ProviderComplain to Family & FriendsComplain to Third PartyStay with ProviderSwitch Providers

102. Figure 7-5Service Recovery StrategiesLearn fromRecovery ExperiencesTreat Customers FairlyLearn fromLost CustomersWelcome and Encourage ComplaintsFail Safe the ServiceAct QuicklyService Recovery Strategies

103. Figure 7-6Causes Behind Service SwitchingService Switching BehaviorHigh PricePrice IncreasesUnfair PricingDeceptive PricingPricingLocation/HoursWait for AppointmentWait for ServiceInconvenienceService MistakesBilling ErrorsService CatastropheCore Service FailureUncaringImpoliteUnresponsiveUnknowledgeableService Encounter FailuresNegative ResponseNo ResponseReluctant ResponseResponse to Service FailureFound Better ServiceCompetitionCheatHard SellUnsafeConflict of InterestEthical ProblemsCustomer MovedProvider ClosedInvoluntary SwitchingSource: Sue Keaveney

104. Service Guaranteesguarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary)for products, guarantee often done in the form of a warrantyservices are often not guaranteedcannot return the serviceservice experience is intangible(so what do you guarantee?)

105. Table 7-7 Characteristics of an Effective Service GuaranteeSource: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

106. Why a Good Guarantee Worksforces company to focus on customerssets clear standardsgenerates feedbackforces company to understand why it failedbuilds “marketing muscle”

107. Service GuaranteesDoes everyone need a guarantee?Reasons companies do NOT offer guarantees:guarantee would be at odds with company’s imagetoo many uncontrollable external variablesfears of cheating by customerscosts of the guarantee are too high

108. Service Guaranteesservice guarantees work for companies who are already customer-focusedeffective guarantees can be BIG deals - they put the company at risk in the eyes of the customercustomers should be involved in the design of service guaranteesthe guarantee should be so stunning that it comes as a surprise -- a WOW!! factor“it’s the icing on the cake, not the cake”

109. SMPart 3 ALIGNING STRATEGY, SERVICE DESIGN AND STANDARDS

110. CUSTOMERCOMPANYGAP 2Customer-Driven Service Designs and StandardsCompany Perceptions of Consumer Expectations Provider GAP 2Part 3 Opener

111. SMChapter 8SERVICE DEVELOPMENT AND DESIGN

112. Objectives for Chapter 8:Service Development and DesignDescribe the challenges inherent in service designPresent steps in the new service development processShow the value of service blueprinting and quality function deployment (QFD) in new service design and service improvementPresent lessons learned in choosing and implementing high-performance service innovations

113. Figure 8-1Risks of Relying on Words Alone to Describe Services Oversimplification Incompleteness Subjectivity Biased Interpretation

114. Figure 8-2 New Service Development ProcessSource: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.Business Strategy Development or ReviewNew Service Strategy DevelopmentIdea GenerationConcept Development and EvaluationBusiness AnalysisService Development and TestingPostintroduction EvaluationCommercializationMarket TestingScreen ideas against new service strategyTest concept with customers and employeesTest for profitability and feasibilityConduct service prototype testTest service and other marketing-mix elementsFront End PlanningImplementation

115. Figure 8-3New Service Strategy Matrix for Identifying Growth OpportunitiesMarketsOfferingsExistingServicesNewServices Current CustomersNew CustomersSHARE BUILDINGDIVERSIFICATIONMARKETDEVELOPMENTSERVICEDEVELOPMENT

116. Figure 8-4Service Mapping/BlueprintingA tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view.ServiceMappingProcessPoints of ContactEvidence

117. Service Blueprint ComponentsCUSTOMER ACTIONSline of interaction“ONSTAGE” CONTACT EMPLOYEE ACTIONSline of visibility“BACKSTAGE” CONTACT EMPLOYEE ACTIONSline of internal interactionSUPPORT PROCESSES

118. DriverPicksUp Pkg.DispatchDriverAirportReceives& LoadsSortPackagesLoad onAirplaneFly toDestinationUnload&SortLoadOnTruckExpress Mail Delivery ServiceSUPPORT PROCESSCONTACT PERSON(Back Stage)(On Stage)CUSTOMERPHYSICALEVIDENCECustomerCallsCustomerGives PackageTruckPackagingFormsHand-held ComputerUniformReceivePackageTruckPackagingFormsHand-held ComputerUniformDeliverPackageCustomerServiceOrderFly toSortCenter

119. Overnight Hotel StaySUPPORT PROCESSCONTACT PERSON(Back Stage)(On Stage)CUSTOMERHotelExteriorParkingCart for BagsDeskRegistrationPapersLobbyKeyElevatorsHallwaysRoomCart for BagsRoomAmenitiesBathMenuDeliveryTrayFoodAppearanceFoodBillDeskLobbyHotelExteriorParkingArriveatHotelGive BagstoBellpersonCheck inGo toRoomReceiveBagsSleepShowerCallRoomServiceReceiveFoodEatCheck outandLeaveGreet andTakeBagsProcessRegistrationDeliverBagsDeliverFoodProcessCheck OutTake Bagsto RoomTakeFoodOrderRegistrationSystemPrepareFoodRegistrationSystemPHYSICALEVIDENCE

120. Figure 8-8 Building a Service BlueprintStep 1Identify the process to be blue-printed.Step 2Identify the customer or customer segment.Step 3Map the process from the customer’s point of view.Step 4Map contact employee actions, onstage and back-stage.Step 5Link customerand contact person activities to needed support functions.Step 6Add evidence of service at each customer action step.

121. Application of Service BlueprintsNew Service Developmentconcept developmentmarket testingSupporting a “Zero Defects” Culturemanaging reliabilityidentifying empowerment issuesService Recovery Strategiesidentifying service problemsconducting root cause analysismodifying processes

122. Blueprints Can Be Used By:Service Marketerscreating realistic customer expectationsservice system designpromotionOperations Managementrendering the service as promisedmanaging fail pointstraining systemsquality controlHuman Resourcesempowering the human elementjob descriptionsselection criteriaappraisal systemsSystem Technologyproviding necessary tools:system specificationspersonal preference databases

123. SMChapter 9CUSTOMER-DEFINED SERVICE STANDARDS

124. Objectives for Chapter 9:Customer-defined Service StandardsDifferentiate between company-defined and customer-defined service standardsDistinguish among one-time service fixes and “hard” and “soft” customer-defined standardsExplain the critical role of the service encounter sequence in developing customer-defined standardsIllustrate how to translate customer expectations into behaviors and actions that are definable, repeatable, and actionable

125. Figure 9-1 AT&T’s Process Map for MeasurementsReliability (40%)Easy To Use (20%)Features / Functions (40%)Knowledge (30%)Responsive (25%)Follow-Up (10%)Delivery Interval Meets Needs (30%)Does Not Break (25%)Installed When Promised (10%)No Repeat Trouble (30%)Fixed Fast (25%)Kept Informed (10%)Accuracy, No Surprise (45%)Resolve On First Call (35%)Easy To Understand (10%)Business ProcessCustomer NeedInternal Metric30% Product30% Sales10% Installation15% Repair15% Billing% Repair Call% Calls for HelpFunctional Performance TestSupervisor Observations% Proposal Made on Time% Follow Up MadeAverage Order Interval% Repair Reports% Installed On Due Date% Repeat ReportsAverage Speed Of Repair% Customers Informed% Billing Inquiries% Resolved First Call% Billing InquiriesTotalQualitySource: AT&T General Business Systems

126. Exercise for Creating Customer-Defined Service StandardsForm a group of four peopleUse your school’s undergraduate or graduate program, or an approved alternativeComplete the customer-driven service standards importance chartEstablish standards for the most important and lowest-performed behaviors and actionsBe prepared to present your findings to the class

127. Service EncounterCustomer RequirementsMeasurementsServiceQuality Customer-Driven Standards and Measurements Exercise

128. Figure 9-2Getting to Actionable Steps Satisfaction ValueRelationship Solution ProviderReliability EmpathyAssurance Tangibles Responsiveness PriceDelivers on TimeReturns Calls QuicklyKnows My Industry Delivers by Weds 11/4Returns Calls in 2 HrsKnows Strengths of My CompetitorsRequirements:AbstractConcrete Dig DeeperDig DeeperDig DeeperDiagnosticity:LowHighGeneral ConceptsDimensionsBehaviors and ActionsAttributes

129. Figure 9-3 Process for Setting Customer-Defined Standards 1. Identify Existing or Desired Service Encounter Sequence2. Translate Customer Expectations Into Behaviors/Actions4. Set Hard or Soft Standards5. Develop FeedbackMechanisms7. Track Measures Against StandardsMeasure byAudits orOperating DataHardSoftMeasure byTransaction-Based Surveys 3. Select Behaviors/Actions for Standards 6. Establish Measures and Target Levels 8. Update Target Levels and Measures

130. Importance/Performance MatrixHIGHHIGHPerformance10.0 8.0 7.0 9.0LOW 8.0 9.010.0ImportanceImproveMaintainDelivers 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)Does whatever it takes to correct problems (9.26, 7.96)Provides equipment that operates as vendor said it would (9.24, 8.14)Gets price we originally agreed upon (9.21, 8.64)Takes responsibility for their mistakes (9.18, 8.01)Delivers or installs on promised date (9.02, 7.84)Tells me cost ahead of time (9.06, 8.46)Gets back to me whenpromised (9.04, 7.63)

131. Figure 9-5 Linkage between Soft Measures and Hard Measures for Speed of Complaint HandlingSATISFACTION2 4 6 8 12 16 20 24 W O R K I N G H O U R SLarge CustomersSmall Customers109876543210

132. Figure 9-6 Aligning Company Processes with Customer ExpectationsCustomer ExpectationsCustomer Process BlueprintCompany Process BlueprintCompany Sequential ProcessesABCDEFGH40 DaysNew Card MailedLost Card ReportedReport Lost CardReceive New Card48 Hours

133. SMChapter 10PHYSICAL EVIDENCE AND THE SERVICESCAPE

134. Objectives for Chapter 10:Physical Evidence and the ServicescapeExplain the impact on customer perceptions of physical evidence, particularly the servicescapeIllustrate differences in types and roles of servicescapes and their implications for strategyExplain why the servicescape affects employee and customer behavior Analyze four different approaches for understanding the effects of physical environmentPresent elements of an effective physical evidence strategy

135. Table 10-1Elements of Physical Evidence

136. Table 10-2 Examples of Physical Evidence from the Customer’s Point of View

137. Table 10-3 Typology of Service Organizations Based on Variations in Form and Use of the Servicescape

138. Figure 10-3 A Framework for UnderstandingEnvironment-user Relationships in Service OrganizationsSource: Adapted from Mary Jo Bitner, “Servicescapes.”PHYSICALENVIRONMENTALDIMENSIONSHOLISTICENVIRONMENTINTERNALRESPONSESBEHAVIORAmbient ConditionsSpace/FunctionSigns, Symbols, and ArtifactsPerceivedServicescapeCognitiveEmotionalPhysiologicalCognitiveEmotionalPhysiologicalEmployee ResponsesCustomer ResponsesIndividual BehaviorsSocial Interactions between and among customer and employeesIndividual Behaviors

139. SMPart 4DELIVERING AND PERFORMING SERVICE

140. CUSTOMERCOMPANY Provider GAP 3Service DeliveryGAP 3Customer-Driven Service Designs and StandardsPart 4 Opener

141. SMChapter 11EMPLOYEES’ ROLES IN SERVICE DELIVERY

142. Objectives for Chapter 11:Employees’ Roles in Service DeliveryIllustrate the critical importance of service employees in creating customer satisfaction and service qualityDemonstrate the challenges inherent in boundary-spanning rolesProvide examples of strategies for creating customer-oriented service deliveryShow how the strategies can support a service culture where providing excellent service is a way of life

143. Service EmployeesThey are the serviceThey are the firm in the customer’s eyesThey are marketersImportance is evident inThe Services Marketing Mix (People)The Service-Profit ChainThe Services Triangle

144. Service EmployeesWho are they?“boundary spanners”What are these jobs like?emotional labormany sources of potential conflictperson/roleorganization/clientinterclientquality/productivity

145. Figure 11-3 Boundary Spanners Interact with Both Internal and External ConstituentsInternal EnvironmentExternal Environment

146. Figure 11-4 Sources of Conflict for Boundary-Spanning WorkersPerson vs. RoleOrganization vs. ClientClient vs. ClientQuality vs. Productivity

147. Figure 11-5 Human Resource Strategies for Closing GAP 3Customer-oriented Service DeliveryHire theRight PeopleProvideNeeded SupportSystemsRetain theBestPeopleDevelopPeople toDeliverServiceQualityCompete forthe BestPeopleHire for Service Competencies and Service InclinationProvide Supportive Technology and EquipmentTreat Employees as CustomersEmpower EmployeesBe the Preferred EmployerTrain for Technical and Interactive SkillsPromote TeamworkMeasure Internal Service QualityDevelop Service-oriented Internal ProcessesMeasure and Reward Strong Service ProvidersInclude Employees in the Company’s Vision

148. EmpowermentBenefits:quicker responsesemployees feel more responsibleemployees tend to interact with warmth/enthusiasmempowered employees are a great source of ideaspositive word-of-mouth from customersDrawbacks:greater investments in selection and traininghigher labor costsslower and/or inconsistent deliverymay violate customer perceptions of fair play“giving away the store” (making bad decisions)

149. 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.”

150. SMChapter 12CUSTOMERS’ ROLES IN SERVICE DELIVERY

151. Objectives for Chapter 12:Customers’ Roles in Service DeliveryIllustrate the importance of customers in successful service deliveryEnumerate the variety of roles that service customers playProductive resourcesContributors to quality and satisfactionCompetitorsExplain strategies for involving service customers effectively to increase both quality and productivity

152. Importance of Other Customers in Service DeliveryOther customers can detract from satisfactiondisruptive behaviorsexcessive crowdingincompatible needsOther customers can enhance satisfactionmere presencesocialization/friendshipsroles: assistants, teachers, supporters

153. How Customers Widen Gap 3Lack of understanding of their rolesNot being willing or able to perform their rolesNo rewards for “good performance”Interfering with other customersIncompatible market segments

154. Figure 12-2 Customer Roles in Service DeliveryProductive ResourcesContributors to Quality and SatisfactionCompetitors

155. Customers as Productive Resources“partial employees”contributing effort, time, or other resources to the production processcustomer inputs can affect organization’s productivitykey issue:should customers’ roles be expanded? reduced?

156. Customers as Contributors to Service Quality and SatisfactionCustomers can contribute totheir own satisfaction with the serviceby performing their role effectivelyby working with the service providerthe quality of the service they receiveby asking questionsby taking responsibility for their own satisfactionby complaining when there is a service failure

157. Customers as Competitorscustomers may “compete” with the service provider“internal exchange” vs. “external exchange”internal/external decision often based on: expertiseresourcestimeeconomic rewardspsychic rewardstrustcontrol

158. Technology Spotlight:Services Production Continuum123456Gas Station Illustration1. Customer pumps gas and pays at the pump with automation2. Customer pumps gas and goes inside to pay attendant3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation5. Attendant pumps gas and customer goes inside to pay attendant6. Attendant pumps gas and attendant takes payment at the pumpCustomer Production Joint Production Firm Production

159. Figure 12-3Strategies for Enhancing Customer ParticipationEffectiveCustomerParticipationRecruit, Educate,and Reward CustomersDefine CustomerJobsManage theCustomerMix

160. Strategies for EnhancingCustomer Participation1. Define customers’ jobs - helping himself - helping others - promoting the company2. Individual differences: not everyone wants to participate

161. Strategies for Recruiting,Educating and Rewarding Customers1. Recruit the right customers2. Educate and train customers to perform effectively3. Reward customers for their contribution4. Avoid negative outcomes of inappropriate customer participationManage the Customer Mix

162. SMChapter 14MANAGING DEMAND AND CAPACITY

163. Objectives for Chapter 14:Managing Demand and CapacityExplain:the underlying issue for capacity-constrained servicesthe implications of capacity constraints the implications of different types of demand patterns on matching supply and demandLay out strategies for matching supply and demand through:shifting demand to match capacity orflexing capacity to meet demandDemonstrate the benefits and risks of yield management strategiesProvide strategies for managing waiting lines

164. Understanding Capacity Constraints and Demand PatternsTime, labor, equipment and facilitiesOptimal versus maximal use of capacityCharting demand patternsPredictable cyclesRandom demand fluctuationsDemand patterns by market segmentCapacity ConstraintsDemand Patterns

165. Figure 14-3Strategies for Shifting Demand to Match CapacityUse signage to communicate busy days and timesOffer incentives to customers for usage during non-peak timesTake care of loyal or regular customers firstAdvertise peak usage times and benefits of non-peak useCharge full price for the service--no discountsUse sales and advertising to increase business from current market segmentsModify the service offering to appeal to new market segmentsOffer discounts or price reductionsModify hours of operationBring the service to the customerDemand Too HighDemand Too LowShift Demand

166. Figure 14-4 Strategies for Flexing Capacity to Match DemandStretch time, labor, facilities and equipmentCross-train employeesHire part-time employeesRequest overtime work from employeesRent or share facilitiesRent or share equipmentSubcontract or outsource activitiesPerform maintenance renovationsSchedule vacationsSchedule employee trainingLay off employeesDemand Too HighDemand Too LowFlex Capacity

167. Table 14-1 What is the Nature of Demand Relative to Supply?Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.

168. Table 14-2 What is the Constraint on Capacity?

169. Waiting Line Issues and Strategiesunoccupied time feels longerpreprocess waits feel longeranxiety makes waits seem longeruncertain waits seem longer than finite waitsunexplained waits seem longerunfair waits feel longerlonger waits are more acceptable for “valuable” servicessolo waits feel longer

170. SMPart 5MANAGING SERVICE PROMISES

171. CUSTOMERCOMPANYExternal Communications to CustomersGAP 4Service Delivery Provider GAP 4Part 5 Opener

172. SMChapter 15INTEGRATED MARKETING COMMUNICATION

173. Objectives for Chapter 15:Integrated Services Marketing CommunicationsIntroduce the concept of Integrated Services Marketing Communication Discuss the key reasons for service communication problemsPresent four key ways to integrate marketing communication in service organizationsPresent specific strategies for managing promises, managing customer expectations, educating customers, and managing internal communicationsProvide perspective on the popular service objective of exceeding customer expectations

174. Figure 15-1Communications and the Services Marketing TriangleInternal Marketing Vertical Communications Horizontal CommunicationsInteractive Marketing Personal Selling Customer Service Center Service Encounters ServicescapesExternal Marketing Communication Advertising Sales Promotion Public Relations Direct MarketingCompanyCustomersEmployeesSource: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

175. Approaches forIntegrating Services Marketing CommunicationGoal:Delivery greater than or equal to promisesImprove CustomerEducationManageService PromisesManageCustomerExpectationsManageInternal MarketingCommunicationFigure 15-3

176. Goal:Delivery greater than or equal to promisesOfferServiceGuaranteesCreate EffectiveServices CommunicationsMANAGING SERVICE PROMISESMakeRealisticPromisesCoordinate ExternalCommunicationFigure 15-4Approaches forManaging Service Promises

177. Communicate Criteria for Service EffectivenessCreate Tiered-ValueOfferingsFigure 15-8Approaches forManaging Customer ExpectationsNegotiateUnrealisticExpectationsGoal:Delivery greater than or equal to promisesOffer Choices

178. Goal:Delivery greater than or equal to promisesPrepare Customers for the Service ProcessClarify Expectationsafter the SaleFigure 15-9Approaches forImproving Customer EducationTeach Customers to Avoid Peak Demand Periods andSeek Slow PeriodsConfirm Performanceto Standards

179. Goal:Delivery greater than or equal to promisesFigure 15-10Approaches for Managing Internal Marketing CommunicationsCreate EffectiveVerticalCommunicationsAlign Back Office Personnelw/ External CustomersCreate EffectiveHorizontalCommunicationsCreateCross-FunctionalTeams

180. SMChapter 17THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY

181. Objectives for Chapter 17:The Financial and Economic Impact of ServiceExamine the direct effects of service on profitsConsider the impact of service on getting new customersEvaluate the role of service in keeping customersExamine the link between perceptions of service and purchase intentionsEmphasize the importance of selecting profitable customersDiscuss what is know about the key service drivers of overall service quality, customer retention and profitabilityDiscuss the balanced performance scorecard to focus on strategic measurement other than financials

182. Figure 17-1The Direct Relationship between Service and ProfitsProfits?ServiceQuality

183. Figure 17-2Offensive Marketing Effects of Service on ProfitsProfitsMarketShareReputationSalesPricePremium ServiceQuality

184. Figure 17-3Defensive Marketing Effects of Service on ProfitMarginsProfitsCustomerRetentionCostsPricePremiumWord ofMouthVolume ofPurchasesServiceQuality

185. Figure 17-5Perceptions of Service, Behavioral Intentions and ProfitsCustomerRetentionCostsPricePremiumWord ofMouthMarginsProfitsVolume ofPurchases ServiceBehavioralIntentionsSales

186. Figure 17-6The “80/20” Customer PyramidMost ProfitableCustomersLeast ProfitableCustomersWhat segment spends more withus over time, costs less to maintain,spreads positive word of mouth?What segment costs us intime, effort and money yetdoes not provide the returnwe want? What segment isdifficult to do business with?OtherCustomersBestCustomers

187. Figure 17-7The Expanded Customer PyramidMost ProfitableCustomersLeast ProfitableCustomersWhat segment spends more withus over time, costs less to maintain,spreads positive word of mouth?What segment costs us intime, effort and money yetdoes not provide the returnwe want? What segment isdifficult to do business with?GoldIronLeadPlatinum

188. Figure 17-8The Key Drivers of Service Quality, Customer Retention, and ProfitsKey DriversServiceQualityServiceEncounterServiceEncounterServiceEncounter Customer RetentionBehavioralIntentionsProfitsServiceEncounterService Encounters

189. Figure 17-9 Sample Measurements for the Balanced ScorecardAdapted from Kaplan and NortonInnovation andLearning PerspectiveCustomerPerspectiveService Perceptions Service ExpectationsPerceived ValueBehavioral Intentions:Operational Perspective:Right first time (% hits)Right on time (% hits)Responsiveness (% on time)Transaction time (hours, days)Throughput timeReduction in wasteProcess qualityFinancial MeasuresPrice PremiumVolume IncreasesValue of Customer ReferralsValue of Cross SalesLong-term Value of Customer % Loyalty % Intent to Switch # Customer Referrals # Cross Sales # of DefectionsNumber of new productsReturn on innovationEmployee skillsTime to marketTime spent talking to customers

190. Figure 17-10 Service Quality Spells ProfitsServiceQualityCustomerRetentionCostsPricePremiumWord ofMouthMarginsProfitsDefensive MarketingVolume ofPurchasesMarketShareReputationSalesPricePremiumOffensive Marketing