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Transcript of srm-m1
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Service and Relationship Marketing
Module:1
Chapter:1 – Basics of Service Marketing
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• What are services?
The word service originally associated with the work
performed by servants for their masters.
“ the action of serving, helping or benefiting; conduct tending
to the welfare or advantage of another”
Services are acts, deeds, performance or efforts.
The aim of service is to provide solution to the customers
problem.
SRM/M1/SS
Service and Relationship Marketing
Module:1
Chapter:1 – Basics of Service Marketing
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Services is an activity or series of activities take place by
interaction between customer and service employees
It’s an economic activity which is consumed at a time it is
produced and provide added value in forms of Convenience,
amusement, timeliness , comfort or health
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Services Defined…
“Activities, Benefits or Satisfactions
which are offered for sale
or
provided in connection with the sale of goods”
American Marketing Association
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Services Defined…
“Separately identifiable, intangible activities whichprovide want satisfaction
when marketed to consumers and/or industrial users
and which are not necessarily tied to the sale of aproduct or another service”
William J. Stanton
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Services Defined…
“Any activity or benefit that one party can offer to
another that is essentially intangible and does not
result in the ownership of anything.Its production may or may not be tied to a physical
product”
Philip Kotler and Bloom
SRM/M1/SS
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Goods Vs. Services
• Goods are tangible
• Goods are homogeneous
• Goods are produced in thefactory
• Production, distribution andconsumption are separate andindependent functions in goods
• Services are intangible
• Services are heterogeneous
• Services are produced in buyer-seller interactions
• Production, distribution andconsumption take placesimultaneously in the case of services
Why Services Marketing ???
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Goods Vs. Services
• Consumers do not generally
participate in the
production of goods
• Goods can be stored
• In sale of goods, transfer of
ownership takes place
• Consumers are co-
producers in services
•
Services can not be stored
• In the sale of services,
transfer of ownership will
not take place
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Characteristics of Services…
• Intangibility
• Inseparability
•
Variability• Perishability
• Customer participation
• No ownership
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Intangibility…
• Challenges :
- Cannot be communicatedeasily
- Consumer suspects due to
absence of concreteevidences
- Design of total servicepackage not possible
- Comparative presentation isnot possible
• Strategic Options :
- Making the service process
tangible to the maximum
possible extent
- Managing and promoting
word-of-mouth
communication
- Strengthening internal and
external marketing
- Use of Relationship
Marketing
SRM/M1/SS
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Inseparability…
• Challenges :
- Problems of market
expansion
- Maintenance of servicequality
- Compulsory presence of
consumer
- Limited production capacity- Operation at limited
capacity
• Strategic Options :
- Minimization of customer
interactions
- Innovating techniques of indirect interaction
- Standardization to the
maximum possible extent
- Developing distributionnetwork with quality control
mechanisms
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Variability…
• Challenges :
- Limited scope for
standardization
- Not possible tocommunicate exactly what
the consumer is going to
receive
- Quality can be determined
only after the service is
consumed
• Strategic Options :
- More focus on
standardization
- Internal marketing andemployee training
- Positioning variation as a
strength of innovation
- Promote research andinnovation
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Perishability…
• Challenges :
- Storage of service is not
possible
- Sales volumecontinuously in relation
to the capacity
- Time pressure in sales
• Strategic Options :
- Demand management
- Capacity management
- Tactical approaches
- Continuous study on
demand patterns and
competitive parameters
SRM/M1/SS
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Customer Participation…
• Challenges :
- Customers are not
controllable
- Production quality alsodepends upon customer’s
knowledge and ability to
participate
- Customers are evaluating at
every stage of service
production
• Strategic Options:
- Effective external marketing
- Customer education and
training- Effective interactive
marketing
- Management of
movements of truth- Effective internal marketing
SRM/M1/SS
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No ownership…
• Challenges:
- Nothing remains after
consumption
- Very less time to theconsumer to evaluate the
product
- High consumer dissonance
• Strategic Options:
- Making communication
tangible
- Customer relationshipmarketing
- Managing high level of
company image
SRM/M1/SS
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Sources for service sector growth
Innovation
-: Push Theory of Innovation-: Pull theory of Innovation
Social Trends
SRM/M1/SS
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Reasons for Growth in Services Sector…
Growth in intermediate demand from firmGrowth in final demand from customers
• Increase in affluence
• More leisure time
•
Working woman• Growth in population of DINKS
• Greater life expectancy
• Greater complexity of products
• Greater complexity in life
• Greater concern for resource scarcity and ecology• Increasing number of new products
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Reasons for growth of Services in India… •
Economic Affluence• Changing Role of Women
• Cultural Changes
• IT Revolution
• Development of Markets
• Unbundling Corporations
• Increasing Consciousness of Health Care
• Economic Liberalization
• Migration
• Export Potential
• Service Tax
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Factors Stimulation the transformation of the
Service Economy
Government Policies Change in regulation
Privatization
New rules to protect customer, employees and the environment
New agreements on trade in services
Social Changes
Rising consumer Expectation
More affluence
More people short of time
Increased desire for buying experience vs things
Rising consumer ownership of computer, cell phones, and high tech
equipments
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Rising consumer ownership of computer, cell phones, and high tech
equipments
Easier access to more information
Immigration
Gewoning but aging population
Business Trends Push to increase shareholders value
Emphasis on productivity and cost saving
Manufacturera add value through service service and sell services
More strategic alliances and outsourcing
Focus on quality and customer satisfaction
Growth of franchising
Marketing emphasis by nonprofits
SRM/M1/SS
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Advance in Information Technology Growth of Internet
Greater bandwidth
Compact Mobile Equipment
Wireless networking
Faster, more powerful software
Digitization of text, graphics, audio and video
Globalization More companies operation on transnational basis
Increased international Travel
International merger and acquisitions, JV’s
‘Off shoring’ of customer service
Foreign competitors invade domestic markets
SRM/M1/SS
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Role (Type) of Services in Economy
Value Added Services
Financing, Leasing, Insurance
Infrastructure service
Communications, Transportation, Utilities, Banking
Manufacturing Services inside company
Finance, Accounting, Legal , R&D and design
Distribution service
Wholesaling, Retailing, Repairing
Personal Service
Health care, Restaurants, Hotels
Business Service supporting Manufacturing
Consulting, Auditing, Advertising, Waste Disposal
Governments Service
Military, Education, Judicial, Police and fire protectionSRM/M1/SS
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Service Classification :Service process Matrix
SRM/M1/SS
LOW High
LOW
High
Mass services •Retailing
•Wholesaling
•School
•Retail aspect of commercial Banking
Service factory • Airlines
•Trucking
•Hotels
•Resorts & Recreation
Service Shop •Hospitals
• Auto Repair
•Other repair
services
Professional Services •Physicians
•Lawyers
• Accountants
• Architects D e g
r e e o f L a b o r i n t e n s i t y
Degree of Interaction and Customization
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How to win customer in Service
Business(USP’s)
• Availability
How accessible is the service?
(ATM’s – service beyond the traditional banker’s hours)
• Convenience
(The location of service where customer must travel to that service-Fast
food restaurants)
• Dependability
Hoe reliable is the service?(Airlines- on time departure & arrival performance will build huge trust)
• Personalization
need for Customization -Are you treated as an individual?
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• Price
The price is viewed as being a surrogate for quality.
• Quality
Quality is judged by both the process of services delivery and the put
comes of the service. It is difference between service expectation &
service experience
• Reputation
Unlike a product, a poor service experience can note exchanged orreturned for a different model. Positive word-of-mouth is the most
effective form of advertising.
• Safety
In air travel and medicine, the customers are putting their lives in thehands of the service provider
• Speed
How long must I wait for service? For emergency service such as fire or police
protection, response time is the major criterion of performance.SRM/M1/SS
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Technology in Services
The introduction of technology often empowers the customer to perform
the service unassisted.
For, example ,
the credit card reader at the pump facilitates the purchase of a gasoline
without help and
Internet allows customer to book their own flights
SRM/M1/SS
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• Technology in Service Encounter
Advances in communication and information technology are having
profound effect on ways customers interface with service providers.
There are five modes of technology’s contribution to the service
encounter.
(A) Technology free service encounter
where the customer is in physical proximity to and interacts with a
human service provider.
This mode represents the traditional high-touch service in which
technology does not pay a direct role. Such as Saloon, hair dresser, tailor
SRM/M1/SS
CUSTOMER SERVER
TECHNOLOGY
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(B)Technology-assisted service encounter
Here only the service provider has access to the technology to improve
the quality of face to face service.A health care service performed by technology which is operated by only
professionals
SRM/M1/SS
CUSTOMER SERVER
TECHNOLOGY
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(C)Technology- facilitated service encounterHere both the customer and service provider have access to the same
technology.For example
a financial planner in consultation with a client can refer to a financial
model on a personal computer to illustrate projected returns for different
risk profiles
SRM/M1/SS
CUSTOMER SERVER
TECHNOLOGY
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(D)Technology-meditated service encounter
The customer and human service provider are not physically together and
thus the service encounter no longer is the traditional face to face contact.
Its about Getting technical help on a distance call .
Example
GPS services or services provided by Just dial .
SRM/M1/SS
CUSTOMER SERVER
TECHNOLOGY
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(E)Technology-generated service encounter
Human service provider is replaced entirely with technology that allows
the customer to self-service.
It reduces the cost of service delivery
For Example
bank ATM’s, website based information, e-commerce
SRM/M1/SS
CUSTOMER SERVER
TECHNOLOGY
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The Emergence of Self Service
Elimination of labor costs for nonproductive activity is the principle driver
for the service provider.
Customer acceptance results from increased opportunity for
customization, accuracy, convenience and speed.
Cost saving and place & Time has lead the buisiness to become Self
Service by customer him/herself.
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Evolution of Self Service
SRM/M1/SS
Service Industry Human Contact Machine-Assisted
Service
Electronic Service
Banking Teller ATM Online Banking
Grocery Checkout Clerk Self-check out
station
Online order/pick
up
Airlines Ticket Agent Check in kiosks Print boarding
passRestaurants Wait person Vending machine Online
order/delivery
Movie theater Ticket sale Kiosk Ticketing Pay-for-view
Book store Information clerk Stock-availability
terminal
Online shopping
Education Teacher Computer
Tutorial
Distance Learning
Gambling Poker dealer Computer Poker Online poker
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Automation in Services
Automation means replacing human manual activity by the machine.
for Example:-
-an automatic lawn sprinkler system a hotel
-automated answering systems that route callers by means of Touch -Tone pones
like Toll free or customer care services of the service provider
David A Collier has suggested following automation categories
1. Fixed sequence (F)
A machine that repetitively performs successive steps in a given operation
according to a predetermined sequence, condition and position and whose set
information cannot be changed easily. E.g. automatic parking lot gate
2. Variable sequence(V)
A machine same as fixed sequence robot but whose set information can be
changed easily. E.g. automated teller machine
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3. Playback(P)
A machine that can produce operation from memory that were
originally executed under human control. E.g. telephone answering
machine
4. Numerical Controlled(N)
A machine that can perform task according to sequence as
command by stored information tat can be reprogrammed easily. E.g.
animated character at an amusement park.
5. Intelligent(I)
A machine with sensory perception devices, such as visual or tactile
receptors, that can detect changes in the work environment or task byitself and has its own decision-making abilities. E.g. autopilot for a
commercial airplane
SRM/M1/SS
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6. Expert system(E)
A computer program that uses an inference engine (e.g. decision rules)
and a knowledge base (i.e. information on a particular subject) to
diagnose problem
ex- maintenance trouble shooting for elevator repair
7. Totally automated system(T)
A system of machine and computers that performs all the physical andintellectual tasks that are required to produce or deliver a service.
ex- electronic fund transfer
SRM/M1/SS
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Internet Services
Websites can be used in many different ways
As a channel to sell a product or service (amazone.com, wine.com)
As a supplemental channel (online booking of order)
For technical support (dell.com, nike.com)
To Embellish existing service (HBR cases & Research paper)
To convey information (Dr. Koop, wikipedia)
To communicate with Membership
To play Games
Internet Models
Internet Access Provider
Portal
Information content
Online Retailer
Transaction Enablers
Market Makers
SRM/M1/SS
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Comparison of Electronic and Traditional Services
SRM/M1/SS
Features Electronic Service Traditional ServiceService Encounter Screen to face Face to Face
Availability Anytime Standard Working
Hour
Access From home Travel to location
Market Area Worldwide Local
Ambiance Electronic Interface Physical
Environment
Competitive
Differentiation
Convenience Personalization
Privacy Anonymity Social interaction
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E-Business Models
Peter Weill and Michael Vitale have described eight generic e-
business models.Content Provider
Provides content such as information, digital products and services. Ex-
Reuters, a British news agencyDirect to customer
Provides goods & services directly to the customer, often bypassing
traditional retail channel memebers. Ex-Dell computer
Full service ProviderProvide full range of service in one domain directly. E.g. financial, health,
indusyrial chemicals. Ex – General Electric Supply
I
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Intermediary
Brings together buyers and sellers by concentrating information. Ex-eBay
Shared Infrastructure
Brings together multiple competitors to cooperate by sharing common IT
infrastructure. An example is SABRE reservation system for airlines.
Value Net Integrator
Coordinates activities across the value net by gathering, synthesizing, and
distributing information. Ex 7-eleven Japan
Virtual Community
Created & facilitates online community of people with Monster.com, the
job-placement service firm.
Whole-of-Enterprise
Provides a firm wide single point of contact, consolidating all services
provides by a large multiunit organization. An example is the U S federal
government
SRM/M1/SS
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Managing the New Technology Adoption Process
SRM/M1/SS
Orientation
& Education
Technology
opportunityAnalysis
Implementation
Equipment
selection and
contract
commitments
Implementation
Planning
Design
specification
Functional
specification
Application
requirementsanalysis
Testing of
technology
Review of
Results
Managing theNew
Technology
Adoption
’ f k
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8p’s of Services Marketing Mix
Product elements - the core and periphery service elements at the
centre of the company's marketing strategy;
Place and Time - delivering product elements to customers can be
done physically and/or electronically, depending upon the service. Speed
and convenience are essential to the customer and are important value-
adds;
Price and Other User Outlays - pricing is only a part of what
customers may part with when purchasing a service; one must also
consider time and convenience;
Promotion and Education - speaks for itself, but the marketer must
make sure communications not only provide information, but also
persuade the customer of the service's relevance to the customer's
particular 'problem';
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Process - the means by which the firm delivers product elements;
People - front-line staff will have a direct impact on perceptions; and
Physical Environment - the appearance of the place where the
services are delivered may have a significant impact upon whether the
service was satisfactory;
Productivity and Quality - improving productivity is a requisite in
cost management; but quality, as defined by the customer, is essential for
a service to differentiate itself from other providers.
SRM/M1/SS
S i d R l ti hi M k ti
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Service and Relationship Marketing
Module:1
Chapter:2 – Customer Behavior in Service Encounter
Four Broad Categories of Service- A Process Perspective
In service, people, physical objects, and data can be processed , and the
nature of the processing can be tangible or intangible.
Tangible actions are performed on people’s bodies or to their physical
possession. Intangible actions are performed on people’s minds or to theirintangible assets.
This gives rise to classification of services into four broad categories.
They are
People processing
Possession processing
Mental stimulus processing
Information processing
SRM/M1/SS
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Who or What is the Direct Recipient of the service ?
Nature of the Service Act People Possessions
Tangible Actions People-processing
(services directed to
people’s bodies):
Passenger
Transportation,
Lodging
Health care
Possession-processing
(Services directed at
physical possessions)
Freight transportation
Repair and Maintenance
Laundry and dry cleaning
Intangible Actions Mental Stimulus
processing
(service directed at
people’s mind):
EducationAdvertising/PR
Psychotherapy
Information Processing
(services directed at
intangible assets)
Accounting
BankingLegal services
SRM/M1/SS
The Three Stage Model of Service Consumption/
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The Three Stage Model of Service Consumption/
Customer Decision Making
SRM/M1/SS
Pre-purchase Stage
Post-encounter Stage
Service Encounter Stage
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Pre-purchase Stage
Pre-purchase Stage -
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Pre purchase Stage
Overview
• Customers seek solutions toaroused needs
• Evaluating a service may bedifficult
•
Uncertainty about outcomesIncreases perceived risk
• What risk reduction strategies canservice suppliers develop?
• Understanding customers’ serviceexpectations
• Components of customerexpectations
• Making a service purchasedecision
Pre-purchase Stage
Service EncounterStage
Post-encounter Stage
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Need Arousal
• Decision to buy or use a service is triggered by need arousal
• Triggers of need:
– Unconscious minds (e.g., personal identity and aspirations)
– Physical conditions (e.g., hunger )
– External sources (e.g., a service firm’s marketing activities)
• Consumers are then motivated to find a solution for their need
Courtesy of Masterfile Corporation
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Information Search
• Need arousal leads to attempts to find a solution
• Evoked set – a set of products and brands that a consumer
considers during the decision-making process – that is derived
from past experiences or external sources
• Alternatives then need to be evaluated before a final decision is
made
Evaluating Alternatives –
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Evaluating Alternatives
Service Attributes
• Search attributes help customers evaluate a product before purchase
– E.g., type of food, location, type of restaurant and price
• Experience attributes cannot be evaluated before purchase
– The consumer will not know how much s/he will enjoy the
food, the service, and the atmosphere until the actualexperience
• Credence attributes are those that customers find impossible to evaluate
confidently even after purchase and consumption
– E.g., hygiene conditions of the kitchen and the healthiness of the cooking ingredients
How Product Attributes Affect
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How Product Attributes AffectEase of Evaluation
Most Goods
Difficult
Toevaluate
Easy
ToEvaluate
MostServices
Clothing
Chair
Motor
Vehicle
FoodsHigh InSearch
Attributes
Restaurant
Meals
Lawn Fertilizer
HaircutEntertainment
High InExperienc
eAttributes
Computer
Repair
Education
Legal ServicesComplex
SurgeryHigh InCredenceAttributes
Source: Adapted from Valarie A. Zeithaml , “How Consumer Evaluation Processes Differ Between Goods & Services,” in J.H. Donelly and W. R. George,
Marketing of Services (Chicago: American Marketing Association, 1981)
Perceived Risks of Purchasing and Using
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Perceived Risks of Purchasing and Using
Services
• Functional – unsatisfactory performance outcomes
• Financial – monetary loss, unexpected extra costs
• Temporal – wasted time, delays leading to problems
• Physical – personal injury, damage to possessions
• Psychological – fears and negative emotions
• Social – how others may think and react
• Sensory – unwanted impact on any of five senses
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How Might Consumers Handle Perceived Risk?
• Seek information from respected personal sources
• Compare service offerings and search for independent reviews and
ratings via the Internet
• Relying on a firm with good reputation
• Looking for guarantees and warranties
• Visiting service facilities or going for trials before purchase and
examining tangible cues or other physical evidence
• Asking knowledgeable employees about competing services
Strategic Responses to Managing Customer Perceptions
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Strategic Responses to Managing Customer Perceptions
of Risk
Free trial (forservices with high
experienceattributes)
Advertise (helps tovisualize)
Display credentials
Use evidencemanagement (e.g.,
furnishing,equipment etc.)
Offer guaranteesEncourage visit toservice facilities
Give customersonline access about
order status
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Understanding Customers’ Service Expectations
• Customers evaluate service quality by comparing what they
expect against what they perceive
– Situational and personal factors also considered
• Expectations of good service vary from one business to another,and differently positioned service providers in same industry
• Expectations change over time
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Factors Influencing Customer Expectations of Service
Source: Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, “The Nature and
Determinants of Customer Expectations of Service,” Journal of the Academy of Marketing Science 21, no. 1
(1993): 1-12
f
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Components of Customer Expectations
• wished-for level of service quality that customer believes can andshould be delivered
Desired Service Level
• minimum acceptable level of service
Adequate Service Level
• service level that customer believes firm will actually deliver
Predicted Service Level
• Acceptable range of variations in service delivery
Zone of Tolerance
P h D i i
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Purchase Decision
•
Purchase Decision: Possible alternatives are compared andevaluated, whereby the best option is selected
– Simple if perceived risks are low and alternatives are clear
– Complex when trade-offs increase
• Trade-offs are often involved
• After making a decision, the consumer moves into the service
encounter stage
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Service Encounter Stage
Service Encounter Stage
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Service Encounter Stage
- Overview
Pre-purchase Stage
Service EncounterStage
Post-encounter Stage
● Service encounters range fromhigh- to low-contact
● Understanding the servuctionsystem
● Theater as a metaphor forservice delivery: An integrativeperspective
Service facilities
Personnel
Role and script theories
S i E S
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Service Encounter Stage
• Service encounter – a period of time during which a customer
interacts directly with the service provider – Might be brief or extend over a period of time (e.g., a phone call or visit to
the hospital)
• Models and frameworks:
1. “Moments of Truth” – importance of managing touchpoints
2. High/low contact model – extent and nature of contact points
3. Servuction model – variations of interactions
4. Theater metaphor – “staging” service performances
M t f T th
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Moments of Truth
“[W]e could say that the perceived quality is realized at
the moment of truth, when the service provider and the
service customer confront one another in the arena. At
that moment they are very much on their own… It is the
skill, the motivation, and the tools employed by the firm’s
representative and the expectations and behavior of the
client which together will create the service delivery
process.”
Richard Normann
Service Encounters Range from High-Contact to Low-Contact
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Distinctions between High-Contact and Low-Contact Services
• High-Contact Services
– Customers visit service facility
and remain throughout service
delivery – Active contact
– Includes most people-processing
services
• Low-Contact Services
– Little or no physical contact
– Contact usually at arm’s length
through electronic or physicaldistribution channels
– Facilitated by new technologies
Th S ti S t
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The Servuction System
Source: Adapted and expanded from an original concept by Eric Langeard andPierre Eiglier
The Servuction System:
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y
Service Production and Delivery
• Servuction System: visible front stage and invisible backstage
• Service Operations
– Technical core where inputs are processed and service elements created
– Contact people
– Inanimate environment
• Service Delivery
– Where “final assembly” of service elements takes place and service is
delivered
– Includes customer interactions with operations and other customers
Theater as a Metaphor for
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p
Service Delivery
“All the world’s a stage and all the
men and women merely players.
They have their exits and their
entrances and each man in his time
plays many parts.”
William ShakespeareAs You Like It
Theatrical Metaphor:
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p
an Integrative Perspective
Good metaphor as service delivery is a series of events thatcustomers experience as a performance
Service facilities
• Stage on which drama
unfolds• This may change from one
act to another
Personnel
• Front stage personnel are
like members of a cast• Backstage personnel are
support production team
Roles
• Like actors, employeeshave roles to play andbehave in specific ways
Scripts
• Specifies the sequences of behavior for customersand employees
Implications of Customer Participation in Service Delivery
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Implications of Customer Participation in Service Delivery
• Greater need for information/training
– Help customers to perform well, get desired results
• Customers should be given a realistic servicepreview in advance of service delivery
– This allows them to have a clear idea of their
expected role and their script in this whole
experience
– Manages expectations and emotions
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Post-Encounter Stage
Post-purchase Stage -
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p gOverview
Pre-purchase Stage
Service EncounterStage
Post-encounterStage
●Evaluation of serviceperformance
● Future intentions
Customer Satisfaction with Service Experience
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Customer Satisfaction with Service Experience
• Satisfaction: attitude-like judgment following a service purchaseor series of service interactions
– Whereby customers have expectations prior to consumption, observe
service performance, compare it to expectations
• Satisfaction judgments are based on this comparison
– Positive disconfirmation (better)
– Confirmation (same)
– Negative disconfirmation (worse)
Customer Delight:
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Going Beyond Satisfaction
• Research shows that delight is a function of three components – Unexpectedly high levels of performance
– Arousal (e.g., surprise, excitement)
– Positive affect (e.g., pleasure, joy, or happiness)
• Strategic links exist between customer satisfaction and corporate
performance
– By creating more value for customers (increased satisfaction), the firm
creates more value for the owners
Customer Delight:
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• Best Practice in Action 2.1:
Progressive Insurance Delights
Its Customers
– Provided excellent customer
service which allowed them to
lower costs and also increase
customer satisfaction and
retention
Going Beyond Satisfaction
Summary
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Summary
Pre-purchaseStage
ServiceEncounter Stage
Post-encounterStage
• In evaluating serviceperformance, customers canhave expectations positivelydisconfirmed, confirmed, ornegatively disconfirmed
• Unexpectedly high levels ofperformance, arousal, andpositive affect are likely tolead to delight
• Moments of Truth: importanceof effectively managingtouchpoints
• High/low contact service model – understanding the extent and
nature of contact points
• Servuction model – variationsof interactions
• Theater metaphor – “staging”service performances
• Key Steps1. Need arousal2. Information search3. Evaluation of alternative
solutions4. Purchase decision
• Customers face perceived riskswhich marketers should reducewith some strategic responses
• Zone of tolerance: Adequate todesired. Dissatisfaction ifservice level falls belowadequate level.