S M Chapter 1 INTRODUCTION TO SERVICES Explain what services are and identify service trends ...

SMChapter 1

INTRODUCTION

TO

SERVICES

Explain what services are and identify service trends

Explain the need for special services marketing concepts and practices

Outline the basic differences between goods and services and the resulting challenges for service businesses

Introduce the service marketing triangle Introduce the expanded services marketing

mix Introduce the gaps model of service quality

Services are deeds,processes and performance

Intangible, but may have a tangible component

Generally produced and consumed at the same time

Need to distinguish between SERVICE and CUSTOMER SERVICE

Defining and improving quality Communicating and testing new services Communicating and maintaining a

consistent image Motivating and sustaining employee

commitment Coordinating marketing, operations and

human resource efforts Setting prices Standardization versus personalization

Health Care hospital, medical practice, dentistry, eye

care Professional Services

accounting, legal, architectural Financial Services

banking, investment advising, insurance Hospitality

restaurant, hotel/motel, bed & breakfast, ski resort, rafting

Travel airlines, travel agencies, theme park

Others: hair styling, pest control, plumbing, lawn

maintenance, counseling services, health club

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity

Services cannot be inventoried Services cannot be patented Services cannot be readily

displayed or communicated Pricing is difficult

Service delivery and customer satisfaction depend on employee actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

Customers participate in and affect the transaction

Customers affect each other Employees affect the service

outcome Decentralization may be essential Mass production is difficult

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

Goods Services Resulting Implications Tangible Intangible Services cannot be inventoried.

Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted.

Production separate from consumption

Simultaneous production and consumption

Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand with services. Services cannot be returned or resold.

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“enabling thepromise”

“delivering the promise”

“setting thepromise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Overall Strategic Assessment

• How is the service organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Specific Service Implementation• What is being promoted

and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?

Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology

Figure 1-6 Figure 1-6

The Services Triangle The Services Triangle and Technologyand Technology

Traditional Marketing Mix

Expanded Mix for Services: 7 Ps

Building Customer Relationships Through People, Processes, and Physical Evidence

Ways to Use the 7 Ps

All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:

Product Price Place Promotion

Product Price Place Promotion

People Process Physical Evidence

PRODUCT PLACE PROMOTION PRICE

Physical good features

Channel type Promotion blend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Sales promotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding

PEOPLE PHYSICAL EVIDENCE

PROCESS

Employees

Facility design Flow of activities

Customers Equipment Number of steps

Communicating culture and values

Signage Level of customer involvement

Employee research Employee dress

Other tangibles

Overall Strategic Assessment

How effective is a firm’s services marketing mix?

Is the mix well-aligned with overall vision and strategy?

What are the strengths and weaknesses in terms of the 7 Ps?

Specific Service Implementation

Who is the customer? What is the service? How effectively does

the services marketing mix for a service communicate its benefits and quality?

What changes/improvements are needed?

Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle?

How is each type of marketing being carried out currently?

Are the three sides of the triangle well aligned?

Are there specific challenges or barriers in any of the three areas?

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SMSMPart 1

FOCUS ON THE CUSTOMER

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SM

PerceivedService

Expected Service

CUSTOMER

COMPANY

CustomerGap

GAP 1

GAP 2

Gaps Model of Service QualityGaps Model of Service Quality

GAP 3

External Communications

to CustomersGAP 4Service Delivery

Customer-Driven Service Designs and Standards

Company Perceptions of Consumer Expectations

Part 1 Opener

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SMGaps Model of Service Gaps Model of Service

QualityQuality

• Customer Gap:• difference between expectations and

perceptions• Provider Gap 1:

• not knowing what customers expect• Provider Gap 2:

• not having the right service designs and standards

• Provider Gap 3:• not delivering to service standards

• Provider Gap 4:• not matching performance to promises

Part 1 Opener

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SM The Customer GapThe Customer Gap

ExpectedService

PerceivedService

GAP

Part 1 Opener

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SMSMChapter 2

CONSUMER BEHAVIOR IN SERVICES

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SM

Objectives for Chapter 2:Objectives for Chapter 2:Consumer Behavior in Consumer Behavior in

ServicesServices

• Overview the generic differences in consumer behavior between services and goods

• Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior:• Information search• Evaluation of service alternatives• Service purchase and consumption• Postpurchase evaluation• Role of culture

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SM Consumer Evaluation Consumer Evaluation Processes for ServicesProcesses for Services

• Search Qualities– attributes a consumer can determine prior to

purchase of a product• Experience Qualities

– attributes a consumer can determine after purchase (or during consumption) of a product

• Credence Qualities– characteristics that may be impossible to evaluate

even after purchase and consumption

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SMFigure 2-1Figure 2-1

Continuum of Evaluation for Continuum of Evaluation for Different Types of ProductsDifferent Types of Products

Clo

t hin

g

Jew

elry

Fur

n itu

re

Hou

ses

Aut

omob

iles

Res

tau

rant

mea

ls

Vac

a tio

ns

Ha i

r cut

s

Ch i

ld c

a re

Tel

evis

ion

repa

ir

Leg

a l s

ervi

ces

Roo

t c a

nals

Aut

o re

pair

Med

ical

dia

gno

sis

Difficult to evaluateEasy to evaluate

{High in search

qualitiesHigh in experience

qualitiesHigh in credence

qualities

{{Most

GoodsMost

Services

35

SM

Figure 2-2Figure 2-2

Categories in Consumer Categories in Consumer Decision-Making and Evaluation of Decision-Making and Evaluation of

ServicesServicesInformation Search

Evaluation of Alternatives

Purchase and Consumption

Post-Purchase Evaluation

Use of personal sources Perceived risk

Evoked set Emotion and mood

Service provision as drama Service roles and scripts Compatibility of customers

Attribution of dissatisfaction Innovation diffusion Brand loyalty

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SM


Categories in Consumer Decision-Categories in Consumer Decision-Making and Evaluation of ServicesMaking and Evaluation of Services

Information Search

Evaluation of Alternatives

Purchase and Consumption

Post-Purchase Evaluation

Use of personal sources Perceived risk

Evoked set Emotion and mood

Service provision as drama Service roles and scripts Compatibility of customers

Attribution of dissatisfaction Innovation diffusion Brand loyalty

Culture Values and attitudes Manners and customs Material culture Aesthetics Educational and social

institutions

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SM Information searchInformation search

• In buying services consumers rely more on personal sources. WHY? Refer p32

• Personal influence becomes pivotal as product complexity increases

• Word of mouth important in delivery of services

• With service most evaluation follows purchase

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SM Perceived RiskPerceived Risk

• More risk would appear to be involved with purchase of services (no guarantees)

• Many services so specialised and difficult to evaluate (How do you know whether the plumber has done a good job?)

• Therefore a firm needs to develop strategies to reduce this risk, e.g, training of employees, standardisation of offerings

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SM Evoked SetEvoked Set

• The evoked set of alternatives likely to be smaller with services than goods

• If you would go to a shopping centre you may only find one dry cleaner or “single brand”

• It is also difficult to obtain adequate prepurchase information about service

• The Internet may widen this potential• Consumer may choose to do it themselves, e.g.

garden services

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SM Emotion and MoodEmotion and Mood

• Emotion and mood are feeling states that influence people’s perception and evaluation of their experiences

• Moods are transient

• Emotions more intense, stable and pervasive

• May have a negative or positive influence

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SMService Provision as Service Provision as

DramaDrama

• Need to maintain a desirable impression

• Service “actors” need to perform certain routines

• Physical setting important, smell, music, use of space, temperature, cleanliness, etc.

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SM

Global Feature:Global Feature:Differences in the Service Differences in the Service

Experience in the U.S. and JapanExperience in the U.S. and Japan

Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness

Contact: +923006641921 Usman Waheed

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SMSMChapter 3

CUSTOMER EXPECTATIONS OF SERVICES


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SM

Objectives for Chapter 3:Objectives for Chapter 3:Customer Expectations of Customer Expectations of

ServiceService

• Recognize that customers hold different types of expectations for service performance

• Discuss controllable and uncontrollable sources of customer expectations

• Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter

• Acknowledge that expectations are similar for many different types of customers

• Delineate the most important current issues surrounding customer expectations


45

SM DEFINITIONSDEFINITIONS

• Customers have different expectations re services – or expected service

• Desired service – customer hopes to receive• Adequate service – the level of service the

customer may accept

• DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?


46

SM


Dual Customer Dual Customer Expectation LevelsExpectation Levels

(Two levels of expectations)(Two levels of expectations)

Adequate Service

Desired Service

Zone ofTolerance


47

SMFigure 3-2Figure 3-2

The Zone of ToleranceThe Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance


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SM


Zones of Tolerance Zones of Tolerance VARYVARY for forDifferent Service DimensionsDifferent Service Dimensions

Most Important Factors Least Important Factors

Level of

Expectation

Source: Berry, Parasuraman, and Zeithaml (1993)

Adequate Service

Desired Service

Zone ofTolerance

DesiredService

AdequateService

Zone of

Tolerance

Desired Service

Adequate Service


49

SM


Factors that InfluenceFactors that InfluenceDesired ServiceDesired Service

DesiredService

AdequateService

Zone of

Tolerance

Enduring ServiceIntensifiers

Personal Needs


50

SM

• Personal needs include physical, social, psychological categories

• Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service

This can further divided into Derived Service Expectations and Personal service Philosophies


51

SM


Factors that InfluenceFactors that InfluenceAdequate ServiceAdequate Service

DesiredService

AdequateService

Zone of

ToleranceSelf-PerceivedService Role

Situational Factors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers


52

SM

• Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends

• Perceived service alternatives

• Perceived service role of customer

• Situational factors


53

SM


Factors that InfluenceFactors that InfluenceDesired and Predicted ServiceDesired and Predicted Service

DesiredService

AdequateService

Zone of

Tolerance

Predicted Service

Explicit ServicePromises

Implicit ServicePromises

Word-of-Mouth

Past Experience

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SMSMChapter 4

CUSTOMER PERCEPTIONS OF SERVICE

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SM

Objectives for Chapter 4:Objectives for Chapter 4:Customer Perceptions of Customer Perceptions of

ServiceService

• Provide you with definitions and understanding of customer satisfaction and service quality

• Show that service encounters or the “moments of truth” are the building blocks of customer perceptions

• Highlight strategies for managing customer perceptions of service

56

SM


ServiceService

• Perception is what a customer thinks about a service

• Expectation is what a customer desires from a service

• Meeting customer expectations is not enough to retain customers

• Good perception means service has surpassed expectations

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SM

Objectives for Chapter 4:Objectives for Chapter 4:Customer Expectation of Customer Expectation of

ServiceService

• Good quality

• Good price

• Meets goals

• Satisfies customer

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SM

Objectives for Chapter 4: Objectives for Chapter 4: Positive Expectation of Positive Expectation of

ServiceService

• Customer buys a specific model of sony TV from a retail store

• Price offered is very competitive

• TV is offered with manufacture warranty

• Customer is very happy with the TV

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SM

Objectives for Chapter 4:Objectives for Chapter 4:Customer Perception of Customer Perception of

ServiceService

• How easy

• How reliable

• How efficient

• How fast

• How customer friendly (physical environment)

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SM

Objectives for Chapter 4:Objectives for Chapter 4:Positive Expectation of Positive Expectation of

ServiceService

• Customer visits a showroom with a vast display of all sony models

• Knowledgeable salesman explains every sony model in great detail

• Customer makes a decision after seeing the reception quality of each model

• Customer is offered a price that matches the price offered by any other retailer

• TV delivered the same day

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SMWhy is perception Why is perception

important?important?

• In today’s globalising economy competition is getting more and more fierce

• customer behaviour has become more hybrid and unpredictable

• Todays customer is much better informed and has greater expectations

• it becomes ever more difficult to differentiate a product or service by traditional categories like price, quality, functionality etc

62

SM


ServiceService

• Why is Café Coffee day so successful?

• Why is tata the most admired company?

• What makes Orkut so popular?

• Why is IIM more famous compared to XLRI?

• Why is Indian railways the most preferred mode of travel?

• Why do people prefer to go to family doctors instead of hospitals?

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SM


Customer Perceptions of Customer Perceptions of Service Quality and Service Quality and

Customer SatisfactionCustomer Satisfaction

ServiceQuality

Reliability

Responsiveness

Assurance

Empathy

Tangibles

ProductQuality

PricePersonalFactors

CustomerSatisfaction

SituationalFactors

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SM Customer PerceptionsCustomer Perceptions

Perceptions can be

built

Enhanced

Changed

Managed

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SM Customer PerceptionsCustomer Perceptions

Dell has successfully built an positive perception

Starbucks enhanced customer perception by enriching the coffee experience

Netflix changed the dvd rental perception through technology

Amazon has managed service perception

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SM Building PerceptionsBuilding Perceptions

Typically early in the lifecycle when customers are not aware of service

there are few competitors

determine customer need which shapes customer perception of service

continuously build perception to match changing needs

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SM Enhancing PerceptionsEnhancing Perceptions

Typically in a mature market where potential for differentiation is high eg., hotels

there are many competitors

determine customer segment and enhance perceptions according to their needs

Perceptions need to be enhanced in commoditized markets

68

SM Changing PerceptionsChanging Perceptions

Markets where the needs havent been fully understood

there are few competitors

determine needs and change existing perceptions according to their needs

Perceptions can also change due to disruptive technologies

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SM Manage PerceptionsManage Perceptions

Maintain positive perception

Regularly enhance or change perception depending on target segment

Keep operations and marketing synchronized

Amazon does this successfully

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SM

PositioningPositioning

Word of Mouth

Word of Mouth

Customer FeedbackCustomer Feedback

Service Marketing

Service Marketing

Building PerceptionBuilding

Perception

Enhance PerceptionEnhance

Perception

Change Perception

Change Perception

Manage Perception

Manage Perception

Execution/OperationsExecution/Operations

Validate PerceptionValidate

Perception

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SM Information SearchInformation Search

Initial perception is built based on

Marketing collateral

Recommendation from happy customers

Friends and relatives

Positioning

Advertising

Websites (very important for services with credence qualities)

Employees

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SM Service EncounterService Encounter

Initial perception is validated during service encounter

Does the service execution meet the initial perception

Was the customer satisfied, happy or delighted?

Will the customer choose the service over competitors ?

If customer perception was not met why?

Was the marketing message consistent?

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SMEnhance perception Enhance perception

through Viral Marketingthrough Viral Marketing

Will customers be loyal to you?

Would they recommend your service to others?

What is unique about your service ?

Can you charge a premium over competitors?

Can you deliver consistently?

Can you handle a larger customer base?

74

SM Customer IssuesCustomer Issues

Was there a disconnect between initial perception and customer experience?

How many customers felt service was didn’t match initial perception

Could the service have been performed better to meet perception?

Are their resources to execute the service in a better way?

Will this work for all target customers? If not can the service deliver to customers who have different perceptions?

Change marketing message and improve operations

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SMFactors Influencing Factors Influencing

Customer PerceptionCustomer Perception

• Product/service quality

• Product/service attributes or features

• Consumer Emotions

• Attributions for product/service success or failure

• Equity or fairness evaluations

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SM

Outcomes of Outcomes of Positive Customer Positive Customer

PerceptionPerception

• Increased customer retention

• Positive word-of-mouth communications

• Increased revenues

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SM

Figure 4-3 Figure 4-3

Relationship between Customer Relationship between Customer Satisfaction and Loyalty in Satisfaction and Loyalty in

Competitive IndustriesCompetitive Industries

0%

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neithersatisfied nordissatisfied

Satisfied Verysatisfied

Satisfaction measure

Lo

yalt

y (r

eten

tio

n)

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

-ve perception

+ve perception

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SM Service PerceptionService Perception

• The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.

• Process and outcome quality are both important.

79

SM The Five Dimensions of The Five Dimensions of Customer PerceptionCustomer Perception

Ability to perform the promised service dependably and accurately.

Knowledge and courtesy of employees and their ability to convey trust and confidence.

Physical facilities, equipment, and appearance of personnel.

Caring, individualized attention the firm provides its customers.

Willingness to help customers and provide prompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy

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SM Exercise to Exercise to Identify Service AttributesIdentify Service Attributes

In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

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SM

AttributesAttributes

Providing service as promised Dependability in handling customers’

service problems Performing services right the first time Providing services at the promised time Maintaining error-free records

Keeping customers informed as to when services will be performed

Prompt service to customers Willingness to help customers Readiness to respond to customers’

requests

RELIABILITY

RESPONSIVENESS

Employees who instill confidence in customers

Making customers feel safe in their transactions

Employees who are consistently courteous Employees who have the knowledge to

answer customer questions

ASSURANCE

Giving customers individual attention Employees who deal with customers in a

caring fashion Having the customer’s best interest at heart Employees who understand the needs of

their customers Convenient business hours

EMPATHY

Modern equipment Visually appealing facilities Employees who have a

neat, professional appearance

Visually appealing materials associated with the service

TANGIBLES

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SM The Service EncounterThe Service Encounter

• is the “moment of truth”• occurs any time the customer interacts with the firm• can potentially be critical in determining customer satisfaction and

loyalty• types of encounters:

– remote encounters– phone encounters– face-to-face encounters

• is an opportunity to:– build trust– reinforce quality– build brand identity– increase loyalty

83

SM Encounter DesignEncounter Design

• Encounters need to be designed around service positioning

• Encounters serve the purpose of automation, customization and personalization

• They should convey a positive perception of customer relationship management

• Every service typically is a combination of remote, phone and physical encounters

84

SM Service Encounter designService Encounter design

• What are the service steps

• Search qualities, experience qualities or credence qualities?

• Any processes , policies that the service adheres to

• How many segments does the service address

• What is the frequency of customer interactions

• Does the service operate across geographies

• What kind of infrastructure exists

• How different are customer and segment requirements

• What kind of service is this (commodity or premium)

• How price sensitive is the market

• What is the pricing structure (fixed/variable)

• How fast is the market for the service changing

• Is inventory being stocked

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SM Service DesignService Design

ReliabilityReliability

EmpathyEmpathy

TangibleTangible

AssuranceAssurance

ResponsiveResponsive

PerceptionPerceptionService Script / Design

Service Script / Design

Service Execution

Service ExecutionPositionPosition

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SM Ginger HotelsGinger Hotels

Tata BrandTata Brand

TrainingTraining

Neat and modern decor

Neat and modern decor

ReviewsReviews

Professional StaffProfessional Staff

Simple Modern Informal

Simple Modern Informal

Service DesignService Design

Service Execution

Service ExecutionEconomic

HotelsEconomic

Hotels

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Service ReviewsService Reviews

CustomizedCustomized

Site photosSite photos

Website blogsWebsite blogs

GuidesGuides

Enjoyable Insightful Adventure

Enjoyable Insightful Adventure


Service Execution

Service Execution

Offbeat Kodai

Vacations

Offbeat Kodai

Vacations

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Accuracy of reports/Diagnosis

Accuracy of reports/Diagnosis

Personal AttentionPersonal Attention

Ambience & Equipment

Ambience & Equipment

Skilled DoctorsSkilled Doctors

Professional StaffProfessional Staff

Exclusive &

Expensive

Exclusive &

Expensive


Service Execution

Service Execution

Multi-Speciality Hospital

Multi-Speciality Hospital

S M Chapter 1 INTRODUCTION TO SERVICES Explain what services are and identify service trends ...

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Transcript of S M Chapter 1 INTRODUCTION TO SERVICES Explain what services are and identify service trends ...