Services Marketing (SEM001) Services Marketing...

Services Marketing (SEM001)

Services Marketing (SERM)

The copyright of all IMM Graduate School of Marketing material is held by the

IMM GSM. No material may be reproduced without prior written permission

from the IMM GSM.

Revised: September 2010

IMM GSM© of 77 SEM001/SERM

Table of Contents

SECTION A

1. Word of welcome…………………………………………………………….... 3

2. How to use this guide………………………………………………………..... 4

3. Purpose and overall learning outcomes………………………………......... 5

4. National Qualifications Framework specifications………………….………. 6

5. Pre-knowledge……………………………………………………………........ 6

6. Relationship with other modules……………………………………………... 6

7. Prescribed textbook…………………………………………………….……... 7

8. Curriculum……………………………………………………………..….……. 8

9. Specific learning outcomes……………………………………………........... 8

10. Critical cross-field outcomes……………………………………………......... 12

11. Assessment details……………………………………………………........... 13

SECTION B

Study Unit 1..…………………………………………………..……………........... 15

1.1 New perspectives on marketing in the service economy……………....... 16

1.2 Customer behaviour in service encounters……………………………….. 23

1.3 Positioning services in competitive markets…………………………........ 27

Study Unit 2..…………………………………………………………………......... 34

2.1 Developing service concepts………………………………………….......... 35

2.2 Distributing services through physical and electronic channels…...……. 38

2.3 Pricing and revenue management……………………………………......... 41

2.4 Educating customers and the value proposition………………………….. 42

Study Unit 3…………………………………………………………...................... 46

3.1 Designing and managing service processes………………………………. 48

3.2 Balancing demand and productive capacity…………………………......... 50

3.3 Service environment………………………………………………………..… 56

3.4 Managing people for service advantage………………………….….......... 57

Study Unit 4……………………………………………………………………….... 62

4.1 Implementing profitable service strategies .………………….……….......... 64

4.2 Service recovery and obtaining customer feedback…………..…..………. 66

4.3 Improving service quality…………………………………………….............. 70

4.4 Service leadership……………………………………………………….......... 73


SECTION A

1. Word of welcome

Welcome to the fast paced and competitive field of services marketing!

Marketing, and services marketing in particular, is an art as well as a science!

Studying it is the science – practising it is the art. Services marketing is also

an evolving science and it is important that you become aware of the

developments and changes taking place in marketing in today’s dynamic

markets.

Services marketing is a well-established discipline of marketing with its own

theories and body of knowledge. Throughout this module you will be made

aware of the unique challenges of marketing a service that is essentially an

intangible entity within the increasingly competitive environment that

businesses operate in.

The ultimate objective of this module is to equip you to analyse situations and

develop workable services-marketing strategies. By the end, you will have a

good feel for a market-directed system and how to develop it, or assist a

company to perform better.

To reach this objective this module includes aspects such as the quality of the

service, what the customer expects compared to his/her perceptions, the

value created for the customer, building demand, customer relationships and

how to communicate the service to the customer.

The module in services marketing is an excellent foundation for you to

understand the unique challenges of marketing a service. Hopefully you will

enjoy the practical application of the theory within the services industry to

such an extent to actually pursue a career in this sector.


2. How to use this guide

As the global economy has changed focus from agriculture to manufacturing

to service-dominated economies, knowledge of this particular sector has

become imperative.

The textbook provides in-depth material on newer trends, however the

Services Marketing learner guide has been designed to assist you to apply the

material practically. It focuses on the application of the theory rather than the

theoretical depth of services marketing.

The learner guide is especially designed for distance education students. The

guide will provide an overview of the total curriculum and will indicate the

learning outcomes, which are essentially the core of this guide. It will provide

you with each major topic that has to be covered, along with the learning

outcomes for each topic, which are systematically explained. The guide will

also indicate how the learning material must be prepared for examination.

The learner guide should be studied in conjunction with the textbook and does

not replace the textbook.

At the end of each study unit you will find some typical examples of

examination questions which should be used for self-evaluation.

The following icons appear in all of the learning guides of the IMM Graduate

School of Marketing:

indicates learning outcomes


indicates the sections in the prescribed textbook that you

need to study.

indicates the self-evaluation questions.

3. Purpose and overall learning outcomes

The emphasis of this module in services marketing is to introduce you to the

principles and practice of services marketing. You will be exposed to the

philosophies, elements and concepts and, through this, will develop an

understanding of the functions and role of marketing in service businesses in

the world today. It will be reinforced by examining the way in which services

marketing interrelates with other factors, both inside and outside the

marketing organisation.

You will also be made aware of the terminology of services marketing and the

importance of the definitions in the associated context that they are used.

Once you have completed this module you will be able to demonstrate:

An understanding of what is meant by service products, consumers

and markets.

An understanding of how service organisations create value for

consumers.

An ability to distinguish between the 8Ps of services marketing.

An ability to develop a marketing communications strategy for services.

A capability to explain how marketing, operations, human resources

and other functions must be integrated to facilitate service delivery.

An ability to implement service marketing concepts.


4. National Qualifications Framework specifications

This module forms an elective module for the Diploma in Marketing

Management and the BBA in Marketing Management.

In terms of the new National Qualifications Framework (NQF) it is designed as

a 20-credit module offered on NQF level 7.

The IMM Graduate School of Marketing regards Services Marketing as an

elective module in year 2 or 3.

5. Pre-knowledge

Services marketing requires a thorough understanding of the principles and

practice of marketing. You can also apply the knowledge you have gained

from all your studies with the IMM GSM, especially the Marketing

Communications, Business Management and Marketing Research modules.

It is also assumed that you will be sufficiently computer literate and that you

will be able to operate the Internet when attempting this module. It is further

assumed that you have had sufficient experience in producing advanced

assignment reports integrating diverse information in a coherent purposeful

report.

A sound knowledge of the use of the Harvard Referencing System is

compulsory before attempting this module.

6. Relationship with other modules

Services marketing is an elective that supports and augments the core and

fundamental modules offered by the IMM GSM. It enables you to apply

services marketing principles and helps to develop a thorough understanding

of the principles and practices of services marketing. It is therefore a

requirement that you successfully complete principles of marketing before


commencing your studies of services marketing. What is taught in principles

of marketing is applied and expanded upon in this course.

The prescribed textbook focuses on the application of marketing theory in

service businesses and introduces issues unique to service establishments.

This textbook also focuses on the relationship between marketing, operations

and human resources management. You will be confronted with many new

concepts, many of which you would not have generally associated with

marketing management. The scope of services marketing is very wide

indeed, making it a very exciting area of specialisation.

7. Prescribed textbook

The prescribed textbook for this module is:

Lovelock, C., and Wirtz, J. 2011. Services Marketing: People, Technology,

Strategy. 7th edn. Pearson Prentice Hall.

You will find that there is a substantial overlap between the curriculum of the

IMM GSM and the content of the textbook, but you must be aware of the fact

that the learner guide is the most authoritative document about the scope,

nature and content of the curriculum.

The textbook is written in a clear and systematic manner. Always start your

studies by consulting the learner guide and then study the relevant sections in

the prescribed textbook. It is unlikely that you will pass this module if you have

only consulted the learner guide without studying the content of the textbook.

The following textbook is also recommended:

Boshoff, C. and du Plessis, F. 2009. Services Marketing: a Contemporary

Approach. 1st edn. Cape Town: Juta.


8. Curriculum

This section addresses the overall content of the module. The Services

Marketing curriculum is divided into four study units. The four study units with

the corresponding chapters in the prescribed textbook (Lovelock & Wirtz

2011) are as follows:

Study

Unit Description Relevant chapters

1 Understanding service products,

consumers and markets

Lovelock & Wirtz 2011 –

Chapters 1, 2, 3 and 12

2 The key elements of services

marketing

Lovelock & Wirtz 2011 –

Chapters 4-7

3 Managing the customer interface Lovelock & Wirtz 2011 –

Chapters 8-11

4 Implementing services marketing Lovelock & Wirtz 2011 –

Chapters 12-15

9. Specific learning outcomes

There are a number of specific learning outcomes for this module, as

indicated per study unit in the table below.

Unit Description Learning Outcomes

1 Understanding

service products,

consumers and

markets

After studying this unit, you should be able to:

Explain why services dominate the modern

economy.

Identify the key driver of service innovation.

Define a service.

Distinguish between goods and services.

Explain why service businesses need to

integrate marketing, operations, human


resources and other functions and how this is

achieved in different types of service

businesses.

Use a flow chart and describe how customers

are involved in the service process.

Identify and describe the steps involved in the

process of acquiring a service.

Discuss the service business with special

reference to the following three elements:

service operations, service delivery and service

marketing.

Describe the basic focus strategies for services.

Explain your understanding of the use of

marketing segmentation as the basis for focused

strategies.

Conduct internal, market and competitive

analysis.

Use positioning maps to plot competitive

strategy.

2 The key elements

of services

marketing


Define the nature of service offerings.

Illustrate ‘the flower of service’.

Discuss the different supplementary services as

illustrated by ‘the flower of service’.

Explain the planning and branding of services.

List and practically explain the hierarchy of new

services.

Discuss the role of communication when

marketing a service.

Use examples to illustrate the many challenges

in communicating services.

Draw up a checklist that can be used to set

communication objectives.


Identify and discuss the elements of the

communication mix.

3 Managing the

customer interface


Design a service blueprint and reflect on its

complexity and divergence.

Discuss the re-engineering of service processes.

Evaluate the customer’s role in the service

delivery as being passive or active.

Describe the levels of customer participation

across various services.

Evaluate the saying: ‘Customer is King’ by

referring to customer misbehaviour.

Discuss the implications of variations in demand

relative to capacity using a diagram.

Discuss organisation capacity constraints.

Explain how demand levels can be managed.

Explain why waiting lines occur.

Use drawings to configure different queue

alternatives.

Discuss propositions on the psychology of

waiting lines.

Describe the service environment or

servicescape.

Indicate how the service environment and

atmosphere impacts on buying behaviour.

Briefly describe how environmental psychology

studies can be linked to the servicescape.

Describe the dimensions of the service

environment.

Design a guide (questions) that can be used as

a tool when designing the servicescape.

Discuss the importance of frontline staff in a

service organisation.


Describe the stressors in the service industry

that could affect frontline staff negatively.

Discuss the important role of human resources

management to hire, motivate and retain

frontline staff.

Evaluate the importance of culture in a service

organisation.

4 Implementing

services marketing

Illustrate the importance of customer loyalty.

Describe the customer/organisation relationship

using distinct types of marketing.

Identify the correct customers for the service

organisation.

Describe the customer pyramid.

Discuss the wheel of loyalty.

Describe relationship management systems.

Identify the customer response categories to

service failure.

Describe how customers react to service

recovery.

Discuss the components of an effective service

recovery system.

Define a service guarantee.

List the reasons for promoting service

guarantees.

Identify and give examples of service

guarantees.

Evaluate the importance of customer feedback.

Define service quality.

Illustrate the Gap model.

Summarise how service quality can be

measured and improved.

Discuss how marketing operations and human

resources should be integrated.


Identify and discuss the four levels of service

performance.

Differentiate between management and

leadership.

You are encouraged to use the above information for the planning of your

studies and to avoid ‘cramming’. It is always wise to set up your own study

timetable so that you can manage your time effectively. When planning your

studies, please keep the submission date for the assignment in mind.

10. Critical cross-field outcomes

The critical cross-field outcomes, also known as transferable skills as

identified by the South African Qualifications Authority (SAQA), are essential

for your development as a student within the education and training system,

regardless of the specific area of learning. It is these outcomes that are

deemed critical for your development in the capacity of life-long learning.

The critical cross-field outcomes adopted by SAQA are as follows:

(1) Identify and solve problems in which responses display that

responsible decisions using critical and creative thinking have been

made.

(2) Work effectively with others as a member of a team, group,

organisation and community.

(3) Organise and manage oneself and one’s activities responsibly and

effectively.

(4) Collect, analyse, organise and critically evaluate information.

(5) Communicate effectively using visual, mathematical and/or language

skills in the modes of oral and/or written presentation.

(6) Use science and technology effectively and critically, showing

responsibility towards the environment and health of others.

(7) Demonstrate an understanding of the world as a set of related systems

by realising that problem-solving contexts do not exist in isolation.


(8) Reflecting on and exploring a variety of strategies to learn more

effectively.

(9) Participating as responsible citizens in the life of local, national and

global communities.

(10) Being culturally and aesthetically sensitive across a range of social

contexts.

(11) Exploring education and career opportunities.

(12) Developing entrepreneurial opportunities.

The transferable skills identified in this module are as follows:

Taught Practised Assessed

Problem solving X X X

Working in teams X

Self-management X

Information gathering/research

skills

X X X

Communication skills X X X

Analytical skills X X X

Learning strategies X X X

Responsible citizenship X X

Cultural sensitivity X

Career development X

Entrepreneurship X

11. Assessment details

There are two assessments involved in terms of the Services Marketing

module:

Assignment: The assignment contributes 20% to the overall mark for

the module. Assignments will focus on selected chapters, and need to

be typed. Please ensure that you adhere to the general rules of the

IMM Graduate School of Marketing pertaining to the style and format of

assignments. You will be issued with a separate brief in this regard.


Examination: The exam incorporates all content covered in the learner

guide and constitutes 80% of the final mark for the Services Marketing

module. The duration of the examination is three hours and the paper

will count 100 marks. The examination paper will consist mainly of

paragraph and essay type answers. Examination results are usually

released within six weeks of sitting the examination.

The final mark, consisting of an assignment mark and an examination mark, is

released in the form of a final percentage (mark out of 100). The grading

system is as follows:

Percentage Scale Description

75% or more Pass with Distinction

50% - 74% Pass

0% - 49% Fail

A timetable of the assessment programme for the semester, including dates

for the assignment to be submitted during the course of the year, is available

in the Calendar of Events for that year. Please refer to the current issue of the

IMM GSM Prospectus. This document and the Student Yearbook provide

details of the IMM GSM assessment policy.


SECTION B: Study Units

Study Unit 1: Introduction to services marketing

In Study Unit 1 you will deal with the nature of services marketing, the

challenges for services businesses, the characteristics of services, its

marketing implications and customer behaviour. It is absolutely essential that

you have a clear idea of all of these topics as they form the foundation for the

rest of the course.

Lovelock & Wirtz (2011), define a service as:

Economic activities between two parties.

Services are performances that are time-based.

Purchasers are buying services because they want certain desired

results.

Buyers expect to obtain value in exchange for money, time and effort.

Value is created through value-creating elements rather than transfer of

ownership.

In basic language, this means that an intangible (can’t be touched) product is

given by one person and received by another, and once the service is

received, it brings a change to the receiver of the service who wanted it to

begin with. Because there is no tangible product, there is no physical object

that is owned by the receiver.

You need to have an understanding of what services marketing is and what

the marketing and management implications are within a services marketing

environment.


Specific learning outcomes

1.1 New perspectives on marketing in the service economy

Study reference: Lovelock & Wirtz 2011: Chapter 1.

After studying this unit, you will be able to:

Explain why services dominate the modern

economy.

Identify the key driver of service innovation.

Define a service.

Distinguish between goods and services.

Explain why service businesses need to integrate

marketing, operations, human resources and other

functions and how this is achieved in different types

of service businesses.

Use a flow chart and describe how customers are

involved in the service process.

Identify and describe the steps involved in the

process of acquiring a service.

Discuss the service business with special reference

to the following three elements: service operations,

service delivery and service marketing.

Describe the basic focus strategies for services.

Explain your understanding of the use of marketing

segmentation as the basis for focused strategies.

Conduct internal, market and competitive analysis.

Use positioning maps to plot competitive strategy.


Services form part of our everyday lives, from watching television to

using a cell phone and banking our money. The quality of service

varies from one service provider to another and we, as customers of

these various services, have become very critical and have come to

expect a high standard of service delivery. Some customers are

prepared to pay a higher price for better service.

On the one hand you have the customer always complaining and

demanding better and more, and on the other hand you have the

service provider trying to save costs in order to make a profit. The two

are clearly in conflict. Finding the balance is what will make a

successful service business.

As customers’ needs demand more service, more manufacturers are

adding value to their products through enhanced services. For this

reason, the distinction between services and manufacturing is

becoming blurred. Theodore Levitt, one of the world’s best-known

marketing experts, commented: “There are not such things as service

industries. There are only industries whose service components are

greater than those of other industries. Everybody is in service.”

This may be true, as we move towards an era driven by service

excellence, no matter what the product offering. However, you need to

understand the difference between an organisation that offers a

service as its core product and one that offers a manufactured product

with service strategies to better market its physical goods.

Services dominating modern economies

Change has become a constant in the world of trade and

business. Innovation is the norm and a means to business survival.

Everyday we see new service companies emerging and long-standing

companies closing down. You are required to know the facts of this

section and specifically why services dominate the modern economy.


Here are a few facts to get you started. Be sure to read up on each of

these in Lovelock & Wirtz (2011) and try to associate each with a real

life example in South Africa.

Services make up the bulk of today’s economy.

The service sector is very diverse with a wide array of industries

supplying businesses, governments, non-profit organisations

and the man on the street.

In most economies across the world, growth or value added is

as a direct result of services.

Services account for most of the growth in new jobs.

The dominance of the service sector is not limited to highly

developed nations.

Significant service output is created by undocumented work in

domestic jobs and small cash based businesses.

Services organisations range in size from huge internationals to

small locally owned operations.

Governments and non-profit organisations are also in the

service business.

There is a hidden service sector – those services found

internally within an organisation. With the trend to outsource

these services (accounting, payroll, legal, garden, cleaning),

they are becoming part of the competitive market-place and

therefore contribute to the services component of the economy.

The evolving environment of services

Service innovation becomes a topic for discussion in this

section. The services environment is constantly innovating and

evolving itself. You will need to explain this phenomenon and give

examples of such innovations. Several factors have contributed to and

stimulated the transformation of the service economy:


Changes in regulations, privatisation of previous government

services, new rules that protect customers, employees and the

environment and new agreements on trade in services have led to

accelerated change. Barriers to competition have been removed and

new entrants, big and small, have emerged into the arena.

Social changes, such as rising customer expectations, increased

affluence, shortage of time, desire for buying experiences and a rising

ownership of technology, have produced a more sophisticated

customer.

In turn, business trends have changed dramatically to meet the

increased demands of customers. We have seen an increase in

strategic alliances, an emphasis on quality, added value through

service, marketing, productivity and cost savings and a general

relaxation of professional association standards. Franchising has

increased and organisations have become more innovative in their

hiring practices.

Advances in information technology, such as increased bandwidth,

miniaturisation, wireless networking, faster and more powerful

software, increased awareness and usage of the Internet, digitalisation

of text, graphics, audio and video and the convergence of computers

and telecommunications have radically altered the way in which

service organisations conduct business. Technological advancement

results in cost savings, re-engineered processes for better efficiencies

and increased speed of execution, all in the name of ‘customer

service’.

Internationalisation and globalisation are making our world smaller.

More companies are able to operate on a transnational basis, resulting

in increased international travel and increased international mergers

and acquisitions. The drive for innovation and new markets is


increasing competition globally. Organisations are seeking

international best practices and synergies.

With all of the above factors stimulating change in the services sector,

it is no wonder that service organisations have to continuously

innovate and adapt themselves in order to survive.

Important differences amongst services

There are some key differences amongst services. You will

need to gain a clear understanding of these differences and must be

able to explain these differences. In addition to this, you will need to

identify the differences between goods and services and be able to

clearly define a service. There are eight basic differences between

goods and services (Lovelock & Wirtz 2011: table 1.2), namely:

Service products cannot be inventoried.

Service products are intangible performances.

Many services are difficult for customers to evaluate and

understand.

With services, there is greater involvement of customers in the

production process.

With services, people may form part of the product.

With services, there is more variability in operational inputs and

outputs.

With services, the time factor is relatively more important.

With services, delivery systems may involve non-physical

channels.

Although these differences do not apply equally to all services, they

should give you a good understanding of the key managerial

implications of marketing a service compared to a product.


Categories of services

As a marketer, it is vital to understand that there are different ways to

market different types of goods and services. We therefore should

classify services into market-relevant groups. Be sure to understand

and be able to distinguish the difference between core products and

supplementary services. Most core services have a number of

supplementary services attached to them. For example, you stop at a

petrol station for petrol. You receive the core service of getting your

car tank filled up, but in addition, you receive supplementary services

such as window cleaning, tyre pressure checks and battery water top

ups.

Different services require different service processes and different

service processes directly affect the role of employees and the

experience of customers. Understand the following ways in which

services can be grouped or classified:

People processing

Possession processing

Mental processing

Information processing.

The service classifications above will help you, as a marketing

manager, to better understand what your service operation actually

does, what types of processes are actually involved in creating the

core product for your customers and how customers fit into your

organisation.

The expanded marketing mix for services

Essentially, there are eight components to integrated

service management, known as “The Eight Ps Model of Integrated

Service Management”. This model highlights the strategic decision

variables facing managers of service organisations including:


Product elements

Place, cyberspace, and time

Process

Productivity and quality

People

Promotion and education

Physical evidence

Price and other user costs.

Once you have an understanding of how a successful service business

is able to synergise and integrate each of the eight Ps, you will realise

that marketing cannot operate successfully in isolation from other

functions in a service business. The three functions that play central

and interrelated roles in meeting customer needs are marketing,

operations and human resources.

Integration with other functions

Services marketing is much broader than activities and

outputs of a traditional marketing department as there is a close

relationship required between operations, human resources and

marketing. In this section, you will begin to understand how marketing

interacts with these other functions. You must understand why these

interactions are important and should be able to describe how

marketing contributes or adds value to these various functions.

It’s no longer good enough to run a slick and efficient operation. It has

become essential to adapt service products to customer needs, have

employees that are customer service-focused and concerned with

efficient operations. Customers have come to expect realistic pricing,

convenient distribution and active promotion. Instead of being all

things to all people, many new market entrants are positioning


themselves exclusively to a select market segment, with specific and

tailored pricing, promotion and delivery strategies.

1.2 Customer behaviour in service encounters


Customer needs, expectations and involvement

As discussed above, classifying services will help you, as a marketer,

to tailor your marketing actions so as to aim at satisfying customer

needs, demands and preferences. Just as when you are marketing a

product, you will need to appreciate what your customer wants;

otherwise, you will create opportunities for your competitors. Once you

know what category your service belongs to, you will be able to design

a service process that is suitable to the organisation and your

customer. Of course, you will be interested in whether the experience

of receiving the service and its benefits has met the customer’s

expectations. These expectations are based on what the customer

expects to receive in return for his/her purchase, which he/she

undertook to meet his/her specific needs. You must know this section

well enough to apply the principles of customer needs and

expectations using examples.

Maslow identified five categories of human needs; physiological,

safety, love, esteem and self-actualisation. He proposed that basic

needs, such as food and shelter had to be fulfilled first before any other

needs can be fulfilled. Needs are deeply rooted in our subconscious

minds and when people feel a need, they react by taking some kind of

action to fulfil that need.

Expectations of customers will differ from one service in the same

industry to another, from one industry to another and even from one


country to another. Expectations usually reflect a customer’s past

experiences and reputations formed from word-of-mouth, news articles

and marketing messages. Customer expectations touch on several

different elements as discussed in Lovelock & Wirtz (2011).

Desired service levels related to the type of service that customers

hope to receive. It’s based on a customer’s belief that a certain level of

service could and should be delivered.

Adequate service levels are lower than the desired service levels, but

are tolerated because customers are realistic about an organisation’s

ability to deliver excellent customer service all of the time. This is the

minimum level that customers are prepared to accept before feeling

unsatisfied.

Predicted service is an anticipated service. These customer

predictions are situation-specific and, depending on the predicted level

of service, the adequate level will either be higher or lower.

Zone of tolerance refers to the extent to which customers are

prepared to tolerate variations in service levels within an organisation.

The zone of tolerance can increase or decrease, depending on factors

such as price, competition and service attributes.

The model of service consumption

There are three stages to service consumption that a

customer goes through when deciding to purchase a service; the pre-

purchase stage, the service encounter stage and the post-purchase

stage. Lovelock & Wirtz (2011), illustrate these three stages of the

service consumption process and the steps within each stage.

The pre-purchase stage is when the decision to buy is made.

Customers are influenced by their own needs and expectations. For


routine, low risk purchases, customers usually choose a service

provider quite quickly. On the other hand, more risky purchases will

result in customers undertaking an information search until they are

satisfied with the service provider. In these instances, purchases take

longer, especially for first time users of a particular service. Customers

naturally seek to reduce their discomfort with risks in several ways.

Refer to the Lovelock & Wirtz (2011) for a list of reduction strategies.

The service encounter stage takes place once the customer has

selected his/her preferred service provider. A series of service

encounters will take place between the customer and the service

provider. These could be personal exchanges between people or

impersonal interactions with machines or computers. Out of these

encounters, the customer will create his/her own perceptions of the

level of service quality provided by his/her chosen service provider.

There are a few important elements to read about and take note of

during this stage; the service environment, service personnel and

support services. Make sure you understand the importance of

contingency plans, especially with reference to people-processing

services, where customers find themselves in close proximity to other

customers.

The post-purchase stage is a continuation of a process that began in

the service encounter stage. Here the customer will evaluate his/her

experience and encounter with the service received, which will

ultimately influence any future buying behaviour. A customer

measures the service received against his/her expectations in the pre-

purchase stage. If the customer is dissatisfied with the service, he/she

may choose to switch to a different service provider.


Customer involvement

In this section, the service operation relates to the core

product. You need to know this section well enough to be able to use

a flow chart to describe how customers are involved in the service

process. Lovelock & Wirtz (2011), define a process as “a particular

method of operation or a series of actions, typically involving multiple

steps that often need to take place in a defined sequence.”

In simple language, a process is a number of step-by-step

actions done in a particular order. It requires inputs that get turned into

outputs. Two things get processed in services; people and objects.

Sometimes a customer is the input (e.g. a manicure) and other times

an object is the input (e.g. a PC that requires repairing). Understand

the differences between tangible actions and intangible actions, as

each one requires a different process, which impacts on marketing,

human resources and operations. Refer to figure 2.1, four categories

of services, to gain more clarity on this topic.

Once you have gained an understanding of the four service

processes – people processing, possession processing, mental

stimulus processing and information processing – you will begin to

realise how each type of process has distinctive implications for

marketing, human resources and operations strategies. In addition to

this, the customer’s involvement with the service varies according to

each process. Lovelock & Wirtz (2011: figure 2.11) use a script to

illustrate a customer’s involvement for teeth cleaning and a simple

dental exam. Make sure that you can create a similar script to show

the examiner that you understand the various ways in which a

customer can become involved in different service processes.


How a service business can be seen as a system

The service system of a service organisation can only be

defined once the required level of contact with the customer has been

determined. A service system includes three sub-systems, i.e. service

operations, service delivery and service marketing. These cover all

points of contact with the customer. Some parts of this system are

visible (front stage) to the customer while other parts are invisible

(backstage).

Service delivery refers to where, when and how the service product is

delivered to the customer.

Service operations can be divided into those that are visible to the

customer and those that are invisible to the customer. If the backstage

(invisible) operations are not performing well, it will impact the front

stage (visible) operations that the customer encounters.

Other contact points contribute to the customer’s overall view of the

service business through advertising, communication efforts, sales,

telephone calls, letters, invoices and other random exposures.

You need to know this section well enough to discuss the service

business with special reference to the three service elements

mentioned above.

1.3 Positioning services in competitive markets


Four distinct types of marketing

Mass marketing is no longer a popular term. Today,

marketing is about focus and targeting the right, potential customers. It


is important to know then what type of customer is desired by the

business looking to market its services. The key is to not only attract

the right customers, but also to retain them. This is where relationship

building and customer loyalty come in. As a marketer of a service

business, you will need to concern yourself with the following:

Who your customers are.

How to obtain the most desirable customers.

Which customers offer the organisation the most value in terms

of frequency and spend on premium services.

How to keep your customers loyal.

There is a distinct difference between marketing strategies that intend

to bring about a single transaction and those that are designed to

create extended relationships with customers. Research by Coviello,

Brodie and Munro suggests that there are four distinct types of

marketing. These include transactional, database, interaction and

network marketing (Lovelock & Wirtz 2011: Chapter 12). Be sure to

understand these four marketing strategies with specific relevance to a

services business as discussed.

Transactional marketing refers to a discrete exchange of value that

does not result in or constitute a meaningful marketing relationship.

There is no long-term record kept of the customer’s purchasing history.

Database marketing involves the exchange of information. Through

technology, marketers are able to form relationships with targeted

customers. The aim is to retain patronage over an extended period of

time. This type of relationship is not a close one, as most

communications are automated through technology.

Interaction marketing involves face-to-face or ear-to-ear (over the

phone) encounters with customers. In these situations, closer


relationships exist and value is added through social experiences and

people.

Network marketing occurs mainly in a business-to-business context,

where companies commit resources to develop positions in a network

of relationships with customers, distributors, suppliers, the media,

consultants, trade associations, government agencies, competitors and

even customers of their customers.

Segmentation strategies

One of the challenges when running a services business is

finding enough customers to use the service offered at any given time

or place. It is not advisable to fill capacity with just any willing and able

customer. Attracting the wrong customers that are not in the right

place at the right time could cause conflicts and chaos. All businesses

have patterns where demand fluctuates. In off-peak times, it becomes

tempting to attract any customer segment. Often, the wrong customer

is attracted and is damaging to the company’s image.

On the other hand, restricting service to customers who do not fit the

market position is not always possible. While there are ways to

discourage unwanted people from purchasing services, this is not

always ethical.

Searching for a competitive advantage

Every service business is trying to compete for market share. As a

marketer, you need to be asking yourself what it is exactly that makes

customers select and remain loyal to one service provider. In order to

develop a competitive strategy, there are a few fundamentals that you

will need to understand. Differentiation from competitors is critical in

today’s highly competitive service environment. In certain economies,

the only way to show corporate growth is to take market share away


from domestic competitors. Alternatively, service companies can

expand their service offerings internationally. Either way, they need to

know and understand who their customers are and who they want their

customers to be.

There are essentially four focus strategies available to

marketers seeking competitive advantage. In marketing terms, focus

means providing a relatively narrow product mix for a particular market

segment that shares common characteristics, needs, purchasing

behaviour or consumption patterns.

Figure 3.1 in Lovelock & Wirtz (2011), illustrates the four

basic strategies for services; namely, focused, unfocused (everything

for everyone), fully focused (service and market focused) and market

focused. For your exam you need to be able to describe these four

basic strategies for service.

Positioning a service in relation to competitors

Positioning is the process of establishing and maintaining a

distinctive place in the market for an organisation and its individual

product offerings.

The four principles of positioning (Trout) include:

Establishing a position in the minds of targeted customers.

A position that is singular, providing one simple and consistent

message.

A positioning that sets the company apart from competitors.

A company cannot be all things to all people – it must focus its

efforts.


Internal, market and competitive analysis

Positioning links market and competitive analysis to internal

corporate analysis. Resulting from these three, a positioning

statement can be developed that clearly states what the product of the

service business is, as well as what the business wants to become and

how it is going to get there.

When analysing competitors, it is important to not only focus on direct

competitors, but also those that offer generic services that could

impact your business. You need to know and be able to apply these

basic steps involved in developing a competitive strategy:

Market analysis

Here the overall level and trend of demand and the geographical

location of such demand is determined.

Internal corporate analysis

This type of analysis requires the organisation to identify its resources,

any limitations or constraints and the values and goals of its

management.

Competitive analysis

Through this process, competitors are identified and analysed in order

to identify the business’s strengths and weaknesses, which may later

translate into opportunities for differentiation.

By gaining an understanding of these three steps you should be able

to conduct a market, internal corporate and competitive analysis on a

services business.


Positioning maps for competitive strategy

Positioning maps, also referred to as perceptual mapping,

are used to locate competitors in a market, according to consumer

perceptions. Competitors and their products are usually plotted on

graphs and their positions are related to two or three features that are

important and relevant to specific target customers. From this type of

mapping, managers can decide if they want to maintain their current

positioning, or if they want to reposition the business. As a services

marketer and for your exam, you need to know how to plot a

positioning map to determine competitive strategy.

Self-assessment exercise

The following are some of the typical questions from Study Unit 1 that you

can expect in the assignments and examination. For your convenience the

mark allocation is also indicated at the end of each question.

1. In your own words define services marketing and explain the key words

in the definition. (5)

2. List the characteristics of goods and services. Use this list and identify

the difficulties of marketing services compared to products. (15)

3. Identify the forces that influence an organisation, such as kulula.com.

Use EBSCOHost and research this company to ensure that you consider

all relevant information. (20)

4. Use your own script to describe how customers are involved in the

services process. (15)

5. Choose a services organisation of your choice.

5.1 Explain the different ways in which a customer can interact with the

specific service organisation. (10)


5.2 Write a brief report on how the 8Ps are implemented in the

specific organisation. (20)

5.3 Explain the relevance of internal, market and competitive analysis

when the company develops a competitive strategy. (18)

6. Draw a positioning map of the telecommunications industry in South

Africa, using cost and age as an axis. (10)


Study Unit 2: The key elements of services marketing

This section focuses on four key elements: the nature of the service product,

marketing communications, pricing of the service product, and delivering the

service. The nature of service consumption is considered with special

reference to how value can be added as well as designing the service

product. We also address the issues of pricing the service product and

guidelines to develop effective pricing strategies. Later, we focus on the

scope of marketing communications and modern technology available for

effective communication and the role of delivering services, and the influence

of technology and globalisation.



Reading reference

2.1 Developing service concepts


Core and supplementary elements

A service product is not a physical object and is intangible.

Sometimes, there is a small part of the service that is a physical,

tangible item, such as this learner guide when you registered for the

Services Marketing module with the IMM Graduate School of


Define the nature of service offerings.

Illustrate ‘the flower of service’.

Discuss the different supplementary

services as illustrated by ‘the flower of

service’.

Explain the planning and branding of

services.

List and practically explain the

hierarchy of new services.

Discuss the role of communication

when marketing a service.

Use examples to illustrate the many

challenges in communicating services.

Draw up a checklist that can be used

to set communication objectives.

Identify and discuss the elements of

the communication mix.


Marketing. However, this is usually a small portion of the price paid by

customers. The customer has to remain the most important focus

when planning a service product. Far too often, operational

convenience is allowed to dominate and take preference to what is

best for the customer.

The best case scenario is to develop a partnership type relationship

between marketing, operations and human resources. In this way,

marketers won’t be working in isolation from the rest of the business.

There are several steps in creating and planning a service.

Planning and creating services

There are three components or parts to any service offering.

These are the core product, the core delivery process, and

supplementary processes. Below is a brief description of each, using

the service of a hairdresser as an example.

Core product is the part of the service offering that the customer is

really purchasing. This would be the haircut and colour treatment.

Core delivery process is the ‘how’ of the way in which the service is

delivered to the customer, how long it lasts. This would be the

consultation about the haircut required, the type of hair colour to be

used, shampoo and the advice given on what would best suit the

customer.

Supplementary services are the extra things that are offered to the

customer to make the experience more fulfilling. These extras

facilitate the delivery of the service and add value. Examples would be

a neck massage, hair wash, tea or coffee and magazines to read.


Lovelock & Wirtz (2011: figure 4.3) refer to an example of

the service offerings of an overnight hotel stay. Flowcharting service

delivery could clarify product elements as illustrated.

Supplementary services

Most services have much in common when we take a closer

look at their supplementary services. For this reason, they have been

classified into eight clusters, each falling under either facilitating or

enhancing supplementary services. These eight clusters make up the

‘flower of service’. Refer to Lovelock & Wirtz (2011: figure 4.4) that

clearly displays these eight clusters in the form of a flower with eight

petals. The middle of the flower represents the core product.

Important to note, however, is that not all core products are

supplemented by all eight supplementary services. In fact, high-

contact services tend to have more supplementary services than low-

contact services. You must be able to illustrate ‘the flower of service’

and discuss the different supplementary services in your exam.

Branding service products

Most service businesses have tried to broaden their product range and

market coverage by offering a line of service products, rather than just

a single product. Each of these will no doubt differ substantially from

the others. In some instances, products are differentiated by different

positioning strategies. An example of this in South Africa would be

British Airways and Kulula. Both brands are owned by the same

company, yet each offers its own unique positioning, pricing and

service offering, thus attracting different customer segments. The

brand of a service business must be well-recognised and understood

by both employees and customers alike. Sub-brands should reflect the

values of the corporate brand. The brand must translate into every


touch point with customers. A customer’s experience of a service is

actually an experience of the brand delivering the service.

New service development

Innovation is the key to the ongoing success of any service

business today. Customers are becoming more and more educated.

With this come greater customer needs and demands on service

providers. There are seven categories of new service innovations.

You will need to be able to list and practically explain these seven

categories, commonly referred to as the hierarchy of new services.

2.2 Distributing services through physical and electronic

channels


Distribution in a service context

The distribution strategy for a service business is by no means generic.

The type of service will have a great influence on the delivery system.

Often, when contact with customers is high, the service and the

delivery become completely entwined and the customer views them as

one and the same thing. On the other hand, customers engaging with

a service at a distance are mainly concerned with speedy delivery to a

suitable and convenient place.

Innovation is often driven through delivery processes. An example

would be new Internet businesses and retailers looking to e-commerce

for additional sales channels. Now is the age of automated logistics,

bar-codes, same day deliveries, home shopping and wireless

communication. All this has had a massive impact on the way services

are delivered.


You will recall the ‘service flower’, where we separated the core

product out from the supplementary products. In this same way, you

need to plan your delivery system, starting with your core product and

then extending it to your supplementary products. Using the

hairdresser example referred to earlier, it is all fine and well offering tea

as a supplementary service, but no good if there is nobody to make the

tea and serve it to your customers.

Options for service delivery

There are numerous options available to service businesses

to deliver services to customers. Face-to-face contact, technology

available, types of transactions required and other factors all play a

role in determining the best delivery solution. Lovelock & Wirtz (2011:

Table 4.1) look at the possible options, combining both face-to-face

and arm’s length types of contact and the number of sites. Make sure

you are familiar with this table for your exam as you may be required to

discuss the various options available for service delivery, based on the

type of contact.

Place and time decisions

Clearly, the time and place decisions of service delivery

should take into consideration customer needs and wants. In addition,

the type of service, as we have already established, will also influence

time and place decisions. Cost, access to labour, accessibility and

location all become extremely important in deciding where a service

should be delivered. Refer to Lovelock & Wirtz (2011), to gain a clearer

understanding of place and time decisions and the many factors

influencing them.


Cyberspace and services delivery

E-commerce brings with it a whole new world of opportunity for

businesses. Over thousands of years people have engaged in

commerce with one another, but they have always been restricted by

the barriers of time, resources and physical location. The fact is that no

one sleeps in cyberspace and the store is always open. The Internet is

the most significant development since the industrial revolution and it

has changed consumer behaviour and disrupted the norms of traditional

business.

It comes as no surprise then that selling goods and services through

the Internet is a major trend. Customers are shopping on the Internet

for convenience (24 hour service), ease of research, better prices and

broader selections.

The role of intermediaries

Intermediaries play an important role in delivering services.

It is often cost-effective for service organisations to delegate certain

tasks. Most often, this relates to the supplementary services rather

than the core service. However, through a franchising model, even the

core product could be delivered through intermediaries. Suppliers of

services form partnerships with other service providers (intermediaries)

to be able to deliver a more complete service package. Lovelock &

Wirtz (2011: figure 4.3) illustrate the splitting of responsibility for

supplementary service elements. Make sure you have a clear

understanding of this section and are able to replicate the splitting

responsibilities for supplementary service elements figure.


Distributing services internationally

Marketing services internationally is a fast growing segment

of international trade. There are various ways that services can be

exported, but this depends on the processes and delivery systems.

Lovelock & Wirtz (2011) discuss various ways that processes influence

international market entry. Ensure that you understand this section.

2.3 Pricing and revenue management


Objectives for setting prices

There are three categories of pricing objectives: revenue-oriented

objectives, user-based objectives, and patronage objectives.

In Chapter 6, Lovelock & Wirtz (2011) have listed the

characteristics and differences between these three alternative

objectives for pricing in table 6.1. Use this table to discuss each of the

three pricing objectives.

Different approaches to pricing a service

When looking into the foundations of pricing strategy, you should

picture a three-legged chair. Each leg represents a piece of the

foundation to a pricing strategy – costs to the provider, competition and

value to the customer.

Costs to the provider represent the costs that need to be recovered

and is therefore the minimum price that a service can be sold for.

Value to the customer represents the customer’s perceived value of

the service and what they would be prepared to pay for the service.


This is then the maximum price that the provider can charge for the

service.

Competition exists in every industry and especially so in the services

arena. The price that competitors charge for a service represents the

approximate pricing level, which will be somewhere between the

minimum (cost to provider) mark and maximum (value to customer)

mark.

Each one of the above legs represents a few possible pricing

strategies for service providers to choose from:

Cost based pricing

Competition based pricing

Value based pricing.

2.4 Educating customers and the value proposition

Study references: Lovelock & Wirtz 2011: Chapter 7.

The role of communication in marketing

Marketing communication takes many forms and is an important part of

the overall marketing strategy, as it facilitates the moving of customers

through the consumption decision process. Marketing communications

reinforces the brand and educates customers about products and

services and their specific features and benefits.

The role of marketing communications, simply put, is to inform and

educate potential customers, persuade target customers, remind

customers, motivate action and to maintain contact with customers.


Challenges in designing marketing communication programmes

for services

Since services differ from products, so should marketing

communication strategies for services differ from that of products.

Lovelock & Wirtz (2011) list five major differences between products

and services, namely:

Intangible nature of services

Customer involvement in production

Services are harder for customers to evaluate

The need to balance supply and demand

The importance of customer contact personnel.

You must be able to list and discuss each of these and use them as

examples to illustrate the challenges involved in designing marketing

communications strategies for services.

Setting marketing communication objectives

Lovelock & Wirtz (2011) refer to the ‘5Ws’ model as a useful

checklist when planning marketing communications. Refer to the 5Ws

and answer the five questions and you should be able to set clear

objectives. It is important to have clear objectives, as these will help

you to plan your messages, communication tools and channels.

The marketing communication mix

Before you can plan your marketing communications mix, you need to

have a clear understanding of the following:

The service product

The extent to which prospective buyers are able to evaluate the

service product’s characteristics in advance of purchase


The target market segments

Awareness of the service product amongst target market

segments

Exposure of different media to the target market segment.

The marketing communication mix for services can broadly

be divided into personal type communication and impersonal type

communication. There are many different elements to the marketing

communication mix for services. In Chapter 7, Lovelock & Wirtz (2011)

have clearly laid out the various elements in figure 7.6. You must be

able to identify and discuss each one of these elements for your exam.



can expect in the assignments and examination. For your convenience

the mark allocation is also indicated at the end of each question.

1. Explain how you would design a service concept considering the

customer experience. (9)

2. Illustrate ‘the flower of service’ and discuss the different

supplementary services, referring to practical examples. (18)

3. Explain the planning and branding of services and the importance of

partnering with operations and human resources. (12)

4. Customer expectations, especially in the service industry, increase

daily. How can a cellular network provider innovate its service

delivery to maintain a competitive advantage? (10)

5. Discuss the nature of service interaction by distinguishing between

the types of contact during service delivery. (10)


8. If you owned a service business, what factors would you need to

consider before making time and place decisions? Use a table to

support your answer. (15)

9. You are the owner of a bed & breakfast. Explain how you would use

computer technology to deliver your service. (10)

10. How has technology impacted the service and, more specifically, the

retail industry? (10)

11. Distinguish between cost-based, competition-based and value-based

pricing. (6)

12. Explain the concept customers’ perception of value. (4)

13. Discuss the different strategies that an organisation can follow to

address the customer’s perception of value. (10)

14. How would you go about setting marketing communication

objectives? Refer in your answer to the ‘5Ws’ model. (10)

15. Consider a specific organisation and research its marketing

communication mix. Comment on the effectiveness of its integrated

marketing mix. (20)

16. Find an advertisement for a service in a magazine or newspaper.

Discuss the following:

- How it attempts to make the service more tangible

- The effectiveness of the marketing communication message.

(8)


Study Unit 3: Managing the customer interface

In this module, we address the concerns of customer misbehaviour and

debate the concept of ‘the customer is King’. We also discuss the benefits of

services blueprinting and how it facilitates the coordination of activities

between the various areas of the services business. The role of the customer

in designing the service process is considered, as well as customer

participation across different levels. Later, we look at the importance of how

the service process works and where customers fit into this process.

Balancing demand and capacity is a major challenge for service

organisations, so we will consider this aspect with special reference to the

demand and supply in the service industry. The service environment shapes

the service experience and we explore this important aspect, also referred to

as the servicescape. Finally, we will focus on the people side of service

management, as staff play an important role in the delivery of services.




Design a service blueprint and reflect on its

complexity and divergence.

Discuss the re-engineering of service processes.

Evaluate the customer’s role in the service

delivery as being passive or active.

Describe the levels of customer participation

across various services.

Evaluate the saying: ‘Customer is King’ by

referring to customer misbehaviour.

Discuss the implications of variations in demand

relative to capacity using a diagram.

Discuss organisation capacity constraints.

Explain how demand levels can be managed.

Explain why waiting lines occur.

Use drawings to configure different queue

alternatives.

Discuss ten propositions on the psychology of

waiting lines.

Describe the service environment or

servicescape.

Indicate how the service environment and

atmosphere impact on buying behaviour.

Briefly describe how environmental psychology

studies can be linked to the servicescape.

Describe the dimensions of the service

environment.

Design a guide (questions) that that can be used

as a tool when designing the servicescape.

.


3.1 Designing and managing service processes


Blueprinting services

Blueprinting is a type of flow chart used to design a service. It

identifies all the key activities that are involved in delivering the service

to customers and the links, sequences, relationships and

dependencies between each of these activities. Blueprinting is much

more detailed than a flowchart. Customers are impacted on by what

they can see front-stage and also by what they cannot see backstage.

Blueprinting records activities from both areas, giving managers a clear

line of visibility. Paying too much attention to one or the other will

result in a poor or faulty service delivery and an unhappy customer.

The most important aspect of blueprinting is its ability to

show relationships between employee roles, operational processes,

information technology and customer interactions. Blueprinting

facilitates the integration of marketing, human resources and

operations. You may be required to design a blueprint for a service

business in your exam, showing its complexity and divergence.

Discuss the importance of frontline staff in a

service organisation.

Describe the stressors in the service industry that

could affect frontline staff negatively.

Discuss the important role of human resources

management to hire, motivate and retain frontline

staff.

Evaluate the importance of culture in a service

organisation.

.


Lovelock & Wirtz (2011: Figure 8.4) provide an example of a full-

service restaurant experience.

Service process redesign

All businesses have to monitor costs and seek better ways

of doing things, in order to save costs. In a service business, the cost

in a process is usually measured by the time it takes to complete each

step in the service process. In order to save costs, the overall process

needs to be sped up by shortening it, or simplifying it. The analysing

and redesigning of processes, in order to improve time and cost

efficiencies, is referred to as re-engineering. You need to understand

what re-engineering means, with specific reference to a service

business. Lovelock & Wirtz (2011: Table 8.1) provide examples of

types of service redesign. Remember, re-engineering can impact on

delivery methods for services.

The customer as co-producer in service delivery

Customers who come into contact with your service

operation will be able to influence the process through their physical

involvement. They will be interacting with employees and could have

an impact on productivity. You must be able to point out the different

ways in which a customer can interact with a service organisation; the

organisation can go to the customer, the customer can come to the

organisation or the organisation can interact with the customer at arm’s

length through electronic channels, such as the Internet and

telephones.

There are essentially three levels of customer contact:

High participation services

Moderate participation services

Low participation services.


Service encounters are measured by the length of time a

customer spends interacting with a service organisation, either through

interaction with service employees, physical service elements, such as

ATMs, or both. Figure 2.9, in Lovelock & Wirtz (2011), very clearly

illustrate the levels of customer contact or interaction with service

organisations. You will need to know these various levels well and

must be able to elaborate on the various levels of interaction between

customers and service organisations.

3.2 Balancing demand and productive capacity


Services are non-tangible and, as such, cannot be placed in stock for

sale at a later stage. Services are delivered over a set time and any

time lost or wasted has a direct impact on cost. So, you may be

wondering how this works. Picture a doctor who has eight hours a day

for consulting. He charges his time out at a set rate and an average

consultation takes about fifteen minutes. If a patient does not arrive for

an appointment, his opportunity to charge for that specific time is lost.

He cannot get the time lost back and even if the patient came the

following day, it would not replace the time that was lost the previous

day.

In the same way, any service business that has no customers at

certain times is losing income and incurring cost. On the other hand, a

service business could attract too many customers and not have the

capacity to manage them. Finding a balance between too little and too

much and resourcing the business accordingly is what makes a service

business successful.


Service productivity influenced by fluctuations in demand

Figure 9.1, in Lovelock & Wirtz (2011), clearly illustrates the

implications of variations in demand, relative to capacity in a service

business. A fixed-capacity business could face one of four conditions:

Excess demand

Demand exceeds optimum capacity

Demand and supply are well-balanced

Excess capacity.

There are two basic solutions to the problem of fluctuating demand:

Adjust the level of capacity to meet variations in demand.

Manage the level of demand by using marketing strategies to

smooth out the peaks and fill in the valleys.

Capacity constraints experienced by organisations

Lovelock & Wirtz (2011) define productive capacity as the

term that refers to the resources or assets that a firm can employ to

create goods and services. In a service context, productive capacity

takes at least five potential forms, each of which has their own unique

capacity constraints.

You need to be able to name these forms of productive capacity and

discuss the constraints that each one may have on an organisation

within a service context.

Patterns of demand and factors that govern demand

By determining what factors govern demand, you can begin to control

variations in demand. To do this, you need to conduct research. Your

research needs to answer these four questions:


Do demand levels follow a predictable cycle?

What are the underlying causes of these cyclical variations?

Do demand levels seem to change randomly? If so, identify the

causes.

Can demand for a particular service over time be disaggregated

by market segment to reflect patterns of use and variations in

net profitability of each completed transaction?

A number of factors could influence demand at the same time. For

example, ice cream sales may increase during summer. More ice

cream is sold in the afternoon, after lunch and on a weekend. So, the

total ice cream sales in the morning, during the week, in winter would

be very different to the total sold on a weekend, after lunch, in summer.

If you keep good records of purchases, it will be easier to analyse

demand patterns in your service business. Once you have identified

patterns, you can very easily match customer segments to these and

then adapt your marketing strategy to target customers more

effectively. In turn, the forecasting of sales and revenue will become

much easier and more accurate.

Managing the levels of demand

Strategically, your service operation should be sufficiently

equipped to meet your demand. This means having the right

equipment, enough employees and a big enough capacity.

Bottlenecks are common in service businesses and can cause

excessive amounts of pressure on employees and discomfort to

customers.

Although there are a number of ways to manage demand levels, no

strategy will succeed unless it is based on one thing – knowing who

your customer is, and why they use the service, when they do. For

example, in South Africa, Thursday is considered pensioner’s day and


retailers offer specials to cater for the large numbers of elderly people

who are transported to shopping centres by old age homes. If these

retailers did not know who their customers were, but knew there was

an increased demand on a Thursday, they could be advertising the

wrong merchandise, such as a special on sporting equipment.

Five basic approaches

There are five basic approaches to managing demand, which you need

to familiarise yourself with:

Taking no action and leaving demand to find its own levels

Taking active steps to reduce demand in peak periods

Increasing demand when there is excess capacity

Storing demand until capacity becomes available

Creating formalised queuing systems.

Table 9.2 of Lovelock & Wirtz 2011, links these five

approaches to managing demand to the three basic situations of

excess demand – namely, sufficient capacity, excess capacity and

excess demand.

Marketing

In addition to the above, marketing strategies can also be

used to shape demand patterns. One of the more common strategies

is reducing price and other user costs during times of excess capacity,

and increasing costs during peak times. By doing this, consumer

behaviour is altered and capacity and demand even out. The difficult

task is to understand the various demand curves of the service

business at different times. It is always important when altering price

and other costs, to maximise revenues of each segment. Ensure that


the most capacity is assigned to the most profitable segments

available at any given time.

Changing product elements

Another way of managing demand is to change the product

elements. For example, an ice cream shop would sell soup in winter.

This strategy is usually adopted when reducing prices has little or no

impact on demand. No matter how cheap, nobody is going to want ice

cream on a freezing, rainy, windy day. These types of changes are not

just based on seasons of the year. Some product elements can

change during a 24-hour day. An example would be the changing of

menus from breakfast to hamburgers at a Wimpy restaurant.

Place and time modifications

Instead of modifying the product, some service businesses

choose to modify the time and place of delivery. Three options exist:

No change – keep offering the product at the same time in the

same place.

Vary times – these changes reflect the customers’ preferences.

Change location – offer the service from new locations to bring

the service to customers instead of waiting for customers to

come to you.

Educating the customer

Through efficient and clear communication, customer

demand can be managed. Tell customers when they can avoid peak

times and delays. Communicate changes in pricing, product

characteristics and distribution clearly. Short-term promotions

combining pricing and communication elements, along with other

incentives, can influence and change customer behaviour

substantially.


Storing demand

Order, predictability and fairness are expectations that customers have

when required to queue. Never leave masses of customers to their

own devices. The formation of queues is an indication of capacity

problems. However, it is not always possible to increase capacity.

There needs to be a balance between customer satisfaction and cost

control. Rather than allow pushing in and chaos, prepare for the event

that you may have queues of people waiting for service. There are two

quick solutions to this:

Ask customers to queue on a first come first served basis.

Offer customers the opportunity to reserve a space in advance.

In the case of queuing, managers of service businesses

should always be evaluating their queuing systems. Processes should

be redesigned to shorten the time of each transaction and customers’

perceptions and expectations need to be managed. Figure 9.7 of

Lovelock & Wirtz (2011), illustrates six alternative queuing

configurations. You should be able to replicate this drawing in your

exam, using it as a basis to explain these various configurations.

Minimising the perception of waiting time

Philosopher, William James, observed: “Boredom results

from being attentive to the passage of time itself”. Davis Maister

formulated eight principles about waiting time. Lovelock & Wirtz (2011)

have examined and reviewed these eight principles and have added

two more. These principles include:

Unoccupied time feels longer than occupied time.

Pre- and post-process waits feel longer than in process waits.

Anxiety makes waits seem longer.

Uncertain waits are longer than known, finite waits.


Unexplained waits are longer than explained waits.

Unfair waits are longer than equitable waits.

The more valuable the service, the longer people will wait.

Solo waits feel longer than group waits.

Physically uncomfortable waits feel longer than comfortable

waits.

Unfamiliar waits seem longer than familiar ones.

3.3 Service environment


The style and appearance of physical surroundings in a service

environment

Firstly, understand what the term servicescape means. Mary Jo

Britner coined this phrase when referring to the style and appearance

of the physical surroundings that customers interact with. This

includes objects, employees, advertising, communications, symbols

and trademarks.

The servicescape can have a positive or negative impact on a

customer’s five senses and, as such, service businesses should pay

careful attention to how the physical environment of their service looks.

Environmental psychological studies

The customer’s feelings and reactions can be shaped

through physical surroundings. The servicescape should enhance the

service offering. A business that is trying to give the impression of low

cost will have a functional environment and will avoid too much

glamour.


Buyer behaviour can be impacted in three ways:

As an attention-creating medium (customers are attracted and

the service stands out from competitors).

As a message-creating medium (symbolic cues communicate

with the customer about service quality and experience).

As an affect-creating medium (increase customer wants through

colour, texture, scent, sound and design).

Integrating the service environment

Marketing cannot operate in isolation from other functions such as

human resources and operations. Any improvements or changes to

the service process should involve all of these functions, as well as,

where possible, the customer. Value, quality and productivity are

equally important to managers of service organisations. Success will

be dependent on management’s focus on these three aspects of the

business. This is a very important section for you to know for your

exam.

Dimensions of the service environment

Clearly the service environment consists of complex and

many design elements. Refer to Lovelock & Wirtz (2011) where the

focus is mainly on the main dimensions of the service environment.

Also refer to Table 10.1 for design elements used in retail stores.

3.4 Managing people for service advantage

Study reference: Lovelock & Wirtz (2011: Chapter 11).

The importance of frontline staff in the service organisation

In a service business, frontline staff are most important as they

represent the company and will, through their behaviour, leave the


customer either satisfied or disappointed. Frontline staff are the most

visible and need to have the skills to execute operational tasks

efficiently, while remaining helpful and friendly with clients. Whether

services are delivered face-to-face or ear-to-ear via call centres, the

human resources approach is critical in the successful delivery of

services through frontline staff. In many cases, employees are the

service. The average front-line employee plays several roles – from

advisor to delivery, marketing to teacher.

The stress and demands of front-line work

The multiplicity of roles that frontline staff perform is also

known as boundary spanning. Boundary spanning has its challenges.

Often, because staff are involved in so many roles, there could be role

conflict between employees. The higher the organisation’s service

encounters with customers, the more difficult it is to manage.

Recruiting and training frontline staff is critical and should include

interpersonal skills, personal appearance and grooming, voice, product

knowledge, operational processes, selling capabilities, skills in co-

production, body language and technical skills.

Frontline staff encounter competing demands between management

and customers, long hours, lack of autonomy, insufficient resources,

ongoing demands to meet quotas and goals, burnout and emotional

demands.

Hiring, motivating and retaining front-line staff

Each job is unique and therefore each individual should be

correctly matched to a specific job. You would not, for example, put

someone with a quiet, introverted personality in front of customers. It

is thus important that recruitment criteria reflect the human dimensions

and technical requirements of the job. Although certain skills can be


taught, others are required from day one of an employee starting a job.

Some characteristics and personality traits, however, cannot be taught,

such as having a good sense of humour or maintaining a steady flow

of energy throughout the day. Attracting and hiring the right people

into frontline positions is extremely important. More important though,

is retaining them.

In Chapter 11, Lovelock & Wirtz (2011) explore the

importance of recruiting the right people for the job in more detail. In

addition, recruitment procedures, recruitment criteria, employee

retention and customer retention are discussed. Know these topics

well and remember that effective management of human resources

includes recruitment, selection, training and retention of staff.

Customer satisfaction and customer retention are as a result of good

human resource management.

The importance of culture in a service organisation

A strong service culture should be cultivated to ensure

service excellence. To achieve service excellence, value-driven

leadership is needed to ensure a passion for service delivery is guiding

service providers. Values can be defined as:

Shared perception of what is important

Shared values of why it is important.

Staff in a service organisation should be kept motivated and

challenged, especially if they are in frontline positions. Be on the

lookout for staff burnout. By allowing staff to voice their opinions, you

allow them to highlight areas that may be causing this burnout. Quite

often, burnout is a result of staff feeling ‘helpless’ or ‘powerless’.

Sometimes, it could be boredom or lack of training. Encourage staff to

speak up and try to bring some fun into their work environment. Don’t


be afraid to empower and involve staff. Quite often they have the best

solutions, since they are the ones engaging with customers.



can expect in the assignments and examination. For your convenience

the mark allocation is also indicated at the end of each question.

1. Select a service business and draw a blueprint that reflects both

front-stage and backstage activities. (20)

2. What is re-engineering and when would a service business

redesign service processes? (6)

3. To what extent can banks actively involve customers in the service

creation and delivery process? (8)

4. How can a service business deal effectively with customer

misbehaviour? (10)

5. Draw a diagram to illustrate the implications of variations in demand

relative to capacity. (10)

6. If you were the manager of a service business, how would you

manage demand levels considering capacity constraints? (15)

7. You are a bank manager. Explain the most effective queue

configuration for service delivery. Also indicate how you would deal

with the customers’ perceived concept of waiting time. (10)

8. What is a servicescape and how does it impact on customer buying

behaviour? (5)

9. Visit your local bank. Choose five design elements and evaluate

the service environment of the bank against these elements. (20)

10. Use your evaluation in question 9 and write a report indicating how

the bank can improve its service environment. (20)


11. You have been asked by a service organisation to analyse their

frontline staff and to report back on some of the stresses they

encounter in their jobs. List these and explain to the management

team how these can negatively impact the organisation. (20)

12. Use your report in question 11 and recommend HR strategies to the

management team. (20)

13. Explain the concept ‘service culture’. (4)

14. Identify a service organisation with a strong service culture.

Motivate your choice by referring to aspects that you identified as

important in the reinforcement of their service culture. (10)


Study Unit 4: Implementing services marketing

This study unit explores issues that relate to the delivery of services. Included

are issues such as relationships and loyalty; complaint handling and service

recovery; service failures and the importance of feedback, recovery and

improving services; and leading a market-orientated service business. These

issues are often not seen as the primary responsibilities of marketing, but they

need to be considered by marketers when developing and implementing

marketing strategies.




Describe the customer/organisation relationship

using four distinct types of marketing.

Identify the correct customers for the service

organisation.

Describe the customer pyramid.

Discuss the wheel of loyalty.

Describe relationship management systems.

Identify the customer response categories to service

failure.

Describe how customers react to service recovery.

Discuss the components of an effective service

recovery system.

Define a service guarantee.

List the reasons for promoting service guarantees.

Identify and give examples of service guarantees.

Evaluate the importance of customer feedback.

Define service quality.

Illustrate the Gap model.

Summarise how service quality can be measured

and improved.

Differentiate between management and leadership.

Discuss how marketing operations and human

resources should be integrated.

Identify and discuss the four levels of service.


4.1 Implementing profitable service strategies


The importance of customer loyalty

The days of ‘hit and miss’ marketing are over! Mass marketing, as we

know it, has been replaced by focus, target or customisation marketing

strategies. Customer loyalty, therefore, becomes important. It is far

cheaper to retain a customer than it is to find a new one. Hence, the

desire for organisations is to find the right customer to fit their product

offering. Products are produced and adapted according to customer

needs and customers are becoming brand conscious. A loyal

customer represents future growth for organisations.

Four categories of relationship marketing

There are a number of ways that a service organisation can

stay in contact with its customers, granted of course, that the company

knows who its customers are. Strategies that are designed to build

lasting relationships with customers are different to strategies that are

designed to entice a transaction or purchase. Coviello, Brodi and

Munro suggest that there are four distinct types of relationship

marketing, i.e. database marketing, interaction marketing, relational

marketing and network marketing. In Chapter 12, Lovelock & Wirtz

(2011) elaborate on each of these four types of relationship marketing.

You will need to know and understand these and their differences for

your exam.

Target the right customers

No group of customers is the same. Every so often, all service

organisations should be asking themselves who they are trying to

target. Who is the customer? Customers differ in terms of the value


they can bring to the company. For this reason, customers should be

divided into groups or segments of similarities. No company should try

to be everything to all people. When segmenting the customer base,

you will need to consider the timing of the service use, the level of skill

and experience required to use the service, the preferred language

and how easily customers can access electronic delivery systems.

Ultimately, the customer must have a good ‘fit’ with the service

organisation.

Forget about quantity and focus on quality! The success of your

service business is not measured in terms of how many customers you

have, but rather by the value of your customer base and your ability to

maximise profits from that customer base. Match your customers to

your service businesses capabilities and be sure to meet the

expectations of your customers by employing the right personnel.

In Chapter 12, Lovelock & Wirtz (2011) review the art of

attracting, retaining and upgrading customers and terminating

relationships with customers. In addition, the concept of creating a

portfolio of market segments is discussed, with particular reference to

how it can significantly reduce the risk associated with a cyclic

business. Ensure that you understand and are able to apply these

principles.

Customer loyalty

Loyalty is an old-fashioned word that has traditionally been

used to describe fidelity and enthusiastic devotion to a country, cause,

or individual. In business language, it refers to the willingness of

customers to return to the same company for goods and services over

a long period of time. Loyal customers use goods and services

frequently, sometimes exclusively, and do not hesitate to recommend

their preferences to friends and family. A loyal customer is worth far


more than a once-off customer. Loyal customers add value through

increased purchases, reduced operating expenses, referrals to other

customers and price premiums. Of course, there is the exception to

this rule, when the service offered relies on walk-in customers.

Richard Oliver has argued that customers undergo four stages of

loyalty:

Stage one – loyalty in a cognitive sense

Stage two – affective loyalty

Stage three – conative loyalty

Stage four – action loyalty.

4.2 Service recovery and obtaining customer feedback


Customer complaining behaviour

Not all customers complain. This may be because they do

not believe it will make any difference. Some, however, go out of their

way to get hold of the most senior manager in the business to have

their say. There are a few options available to customers when they

experience what is referred to as a ‘service failure’. These include:

Doing nothing

Complaining, one way or another, to the service company

Taking action through a third party

Never use the service company again and make sure you tell as

many people as possible to do the same.

Bad word-of-mouth is the worst possible outcome that a service

company can experience, due to not providing customers with the

service that they expect. In today’s technologically enabled world,


negative word-of-mouth is easily publicised through the Internet, where

thousands of consumers can view customer complaints.

Learning from customer feedback

When complaining, a customer will automatically assess

what is at stake for them. Their purpose for complaining is either to

recover some kind of monetary loss or to rebuild their self-esteem.

The costs of complaining, be they monetary for phone calls, time for

writing a letter or psychological for having to confront someone, may

cause a customer to rather keep quiet. As a service provider, you

need to create easy and accessible ways for customers to complain.

Make sure you know and understand what problems your customers

face when receiving your services. Use this very important information

to adapt and change your business and to gain competitive advantage.

Customer feedback is extremely important and is likely to be the most

powerful marketing research a business can get.

Customer response to service recovery

If customers are satisfied with the way their complaint was handled,

you will gain their loyalty. Remember, a retained customer is far more

valuable than a new one. The costs associated with obtaining new

customers are much higher than those of retaining old.

Lovelock & Wirtz (2011) define service recovery as an umbrella term

for systematic efforts by a firm to correct a problem following a service

failure and to retain a customer’s goodwill. Also, service recovery

efforts play a crucial role in achieving (or restoring) customer

satisfaction. There are a few challenges to service recovery.

Sometimes complaints happen during the service. While these are

better, because there is a chance to correct the problem and keep the

customer loyal to the company, there is the risk that customer

complaints could impact service delivery to other customers. On the


other hand, complaints often happen after the event, making it very

difficult to rectify, unless the customer returns to the service

organisation for a better experience. Often, some form of

compensation can be offered to entice repeat business and to prevent

the customer from moving to a competitor.

Components of an effective service recovery system

In figure 13.5, Lovelock & Wirtz (2011) illustrate the

components of an effective service recovery system. Any service

recovery system should bring a good return on investment to a service

organisation. Investing in customer complaint handling will protect the

long-term profits of the business. The formula to increase customer

satisfaction and loyalty is to try to do the job right the first time and then

add an effective complaint handling system for the times that you don’t

get it right. Lovelock & Wirtz (2011) offer guidelines for front-line staff

for effective problem resolution. Refer to these guidelines so that you

can apply these when needed.

Definition of a service guarantee

Lovelock & Wirtz (2011) define a service guarantee as an

unconditional guarantee of satisfaction, promising that if a service

delivery fails to meet predetermined standards, the customer is entitled

to one or more forms of compensation – such as an easy-to-claim

replacement, refund or credit.

Reasons for promoting service guarantees

According to Christopher Hart, these service guarantees are powerful

tools for promoting and achieving service quality. Here are some of

the reasons for this:

Services organisations are forced to focus on what the customer

wants and expects.


What the company stands for becomes clearer to the customer

and its employees.

Systems are put in place to monitor customer feedback.

Reasons for failure are easily identified, giving the organisation

an opportunity to improve.

Services marketers can reduce the risk of purchase decisions

and can build long-term loyalty.

Examples of service guarantees

Almost every service company offers some or other guarantee. To

confirm this, simply pick up a magazine that advertises various

services. For example, browsing through the Homemakers Fair, a

publication of advertisements for the home improvements industry, you

would come across the following guarantees:

Hyper Steel – ’Guaranteed installation within 7 working days of

order’.

Roof Spraying – ‘15 year factory guarantee’.

Multi-Dex – ‘100% waterproof guarantee’.

Access Flooring – ‘Guaranteed, we will beat any written quote’.

The Paving Syndicate – ‘A lifetime guarantee on workmanship

and materials’.

There are challenges for a company to deliver a 100% guarantee,

which require complete buy-in and understanding from staff. Take this

into consideration when designing your guarantee. Make sure that

customers are not able to cheat and use the guarantee to rip the

company off. Make sure your staff won’t just give things away

because it’s the easiest route to customer complaint resolution, and

work out your return on investment, based on the guarantee that you

will be offering. This section on guarantees is very important for you to

know and understand for your exam.


4.3 Improving service quality


The service quality concept

Lovelock & Wirtz (2011) refer to Garvin when defining quality. He

identifies five perspectives, each different, according to the context.

Transcendent view

“Synonymous with innate excellence, a mark of uncompromising

standards and high achievement.”

The product-based approach

“Sees quality as a precise and measurable variable. Differences in

quality reflect differences in the amount of some ingredient or attribute

possessed by the product.”

User-based definitions

“Starts with the premise that quality lies in the eyes of the beholder. It

equates quality with maximum satisfaction.”

The manufacturing-based approach

“Is supply-based and primarily concerned with engineering and

manufacturing practices. It focuses on conformance to internally

developed specifications, which are often driven by productivity and

cost-containment goals.”


Value-based definitions

“Define quality in terms of value and price. By considering the trade-off

between performance and price, quality comes to be defined as

affordable excellence.”

Identifying the gap

If you understand what the customer’s expectation is, and

you know the level at which you are delivering against this expectation,

then the difference is referred to as the gap. Identifying where you are,

followed by where you want to be, will clearly highlight the gap. As a

manager of a services organisation, you will be required to constantly

monitor this gap and bring the expectation and delivery as close

together as possible, i.e. close the gap.

Ziethaml, Berry and Parasuraman have identified five potential service

shortfalls (or gaps):

Not knowing what customers expect.

Specifying service quality standards that do not match believed

customer expectations.

Service performance does not meet specifications.

Not delivering on the promise given to customers through

marketing communication.

What is perceived by customers does not meet what was

expected.

Lovelock & Wirtz (2011) have extended this framework into

seven types of gaps that can occur at different points during the design

and delivery of services. Table 14.4 clearly illustrates these seven

service quality gaps:


The knowledge gap

The standards gap

The delivery gap

The internal communications gap

The perceptions gap

The interpretation gap

The service gap.

Each of these can severely damage the relationship between the

organisation and customers. You must be able to list and discuss

each of these in your exam.

Measuring and improving service quality

Due to the intangible nature of services, it is fairly difficult to measure

its quality. In addition, because people are often involved in service

production, it is necessary to create the distinction between the

process of service delivery and the actual output of the service.

Quality of a service can be measured by reviewing the customer’s

perception of the service in comparison to what was expected.

Research shows that there are five dimensions used by consumers to

evaluate service quality: tangibles, reliability, responsiveness,

assurance and empathy. The SERVQUAL scale (a survey research

instrument) includes these five dimensions. Within each of these

dimensions, 21 items are measured on a seven-point scale. Another

way of measuring service quality is referred to as the walk-through

audit. Developed by Delvin and Dong, this approach involves taking

the customer through each step of their service encounters. Their view

is that the customer’s voice can be heard at each point of the service

encounter.


The objective of any of the above, and any other measurement tool, is

to identify the service gap. Improvements in service quality can only

be achieved if the service quality gap identified is closed.

4.4 Service leadership


The role of marketing in a services organisation is much broader than

that of a traditional marketing department. Service leadership includes

both the human resources of an organisation and the organisation’s

vision for being a front-runner in its particular service industry.

Marketers in services industries are responsible for designing,

constructing and maintaining customer, supplier, intermediaries and

other partner relationships.

Services organisations need to be market-oriented businesses. This

means that they are committed to understanding both the expressed

and latent needs of their customers, as well as the capabilities and

plans of their competitors. A market-led business has a longer-term

focus, which comes from broadly scanning their market.

A service leader, therefore, has to have a marketing function that looks

at the market, the customer and competitors all at the same time.

There needs to be a two way flow of information between these three

areas.

The four levels of service performance

Lovelock & Wirtz (2011: table 15.2) have expanded upon

the framework developed by Richard Chase and Robert Hayes and

have categorised service performers into four levels: loser, nonentity,

professional and leader. At each level, they have given a description


of a typical organisation across 12 dimensions under the marketing,

operations and human resources functions. The 12 dimensions

include:

Marketing

Role of marketing

Competitive appeal

Customer profile

Service quality.

Operations

Role of operations

Service delivery (front-stage)

Backstage operations

Productivity

Introduction of new technology.

Human resources

Role of human resources

Workforce

Frontline management.

By using this framework, marketers can very quickly identify what

needs to be changed in order to perform better and move up the

performance ladder to become a service leader.

Defining a service leader

Lovelock & Wirtz (2011) define a service leader as an organisation that

stands out in its respective market and industry. It does, however, rely

on human leaders to direct it and to set the right strategic priorities.

Leadership versus management

The service industry is fast paced and companies wishing to

compete must be willing to innovate and change on a continuous


basis. Lovelock & Wirtz (2011) state that the primary force behind

successful change is leadership. There are some fundamental

differences between leadership and management:

Leadership

Concerned with the development of vision and strategies

Concerned with the empowerment of people to overcome

obstacles and make the vision happen

Concerned with the emotional and spiritual resources of an

organisation.

Management

Involves keeping the current situation operating through

planning, budgeting, organising, staffing, controlling and

problem solving

Concerned with the physical resources such as raw materials,

technology and capital.

Leadership qualities

Lovelock & Wirtz (2011) list the qualities that are often ascribed to

leaders in general as vision, charisma, persistence, high expectations,

expertise, empathy, persuasiveness and integrity

Leonard Barry argues that service leaders must be able to believe in

the people who work for them, make communicating with employees a

priority and love the business.



The following are some of the typical questions from Study Unit 4 that you can

expect in the assignments and examination. For your convenience the mark

allocation is also indicated at the end of each question.

1. How do loyal customers add value to a service organisation? (5)

2. Describe the four different types of relationship marketing strategies.

(12)

3. Research Woolworths and comment on the services that it offers to its

clients. (10)

4. Evaluate the different methods that Woolworths use to retain customers.

(10)

5. What guarantees are offered to customers by Woolworths?

Evaluate the effectiveness of the guarantees. (10)

6. Indicate the benefits to Woolworths by offering customers

guarantees. (5)

7. Pretend that you are a customer and you are unhappy with the service

delivered to you by a cell phone company. Explain what options you

have available to you to lodge a complaint and what the cost

implications are for you as a customer. (10)

8. Customers might be dissatisfied with a service, however they do not

complain. What could be the reasons? (6)

9. What are the components of an effective service recovery system?

(10) 10. Discuss the importance of customer feedback and how a company

should make use of this information. (10)


11. Explain the meaning of service quality. (4)

12. You are the manager of Cell C, a cellular operator. Explain how you

would measure and improve the services delivered by your company.

(10) 13. The manager of a hotel group asked you to explain the Gap model as

an instrument to measure perceived quality. Write a report explaining

the model and its benefits. (20)

14. Discuss the difference between management and leadership. (6)

15. Visit the website of a world-class organisation with a good service

culture. Comment on its leadership. (10)

16. Discuss the integration of marketing, human resources and operations.

(15)

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