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Services marketing

  1. 1. Contact: +923006641921 Usman Waheed 1 SM Services MarketingServices Marketing
  2. 2. Contact: +923006641921 Usman Waheed 2 SM If You want these slides then send me at E-mail at or call me at +923006641921
  3. 3. Contact: +923006641921 Usman Waheed 3 SMSM Contact: +923006641921 Usman Waheed Chapter 1 INTRODUCTION TO SERVICES
  4. 4. Contact: +923006641921 Usman Waheed 4 SM Objectives for Chapter 1:Objectives for Chapter 1: Introduction to ServicesIntroduction to Services • Explain what services are and identify service trends • Explain the need for special services marketing concepts and practices • Outline the basic differences between goods and services and the resulting challenges for service businesses • Introduce the service marketing triangle • Introduce the expanded services marketing mix • Introduce the gaps model of service quality
  5. 5. Contact: +923006641921 Usman Waheed 5 SM IntroductionIntroduction • Services are deeds,processes and performance • Intangible, but may have a tangible component • Generally produced and consumed at the same time • Need to distinguish between SERVICE and CUSTOMER SERVICE
  6. 6. Contact: +923006641921 Usman Waheed 6 SM Challenges for ServicesChallenges for Services • Defining and improving quality • Communicating and testing new services • Communicating and maintaining a consistent image • Motivating and sustaining employee commitment • Coordinating marketing, operations and human resource efforts • Setting prices • Standardization versus personalization
  7. 7. Contact: +923006641921 Usman Waheed 7 SM Examples of ServiceExamples of Service IndustriesIndustries • Health Care – hospital, medical practice, dentistry, eye care • Professional Services – accounting, legal, architectural • Financial Services – banking, investment advising, insurance • Hospitality – restaurant, hotel/motel, bed & breakfast, – ski resort, rafting • Travel – airlines, travel agencies, theme park • Others: – hair styling, pest control, plumbing, lawn maintenance, counseling services, health club
  8. 8. Contact: +923006641921 Usman Waheed 8 SM Figure 1-1Figure 1-1 Tangibility SpectrumTangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets            
  9. 9. Contact: +923006641921 Usman Waheed 9 SM Figure 1-2Figure 1-2 Percent ofPercent of U.S. Labor Force by IndustryU.S. Labor Force by Industry 0 10 20 30 40 50 60 70 80 1929 1948 1969 1977 1984 1996 PercentofGDP Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39. Yea r  Services  Manufacturing  Mining & Agriculture
  10. 10. Contact: +923006641921 Usman Waheed 10 SM 0 10 20 30 40 50 60 70 80 1948 1959 1967 1977 1987 1996 Figure 1-3Figure 1-3 Percent of U.S. Gross DomesticPercent of U.S. Gross Domestic Product by IndustryProduct by IndustryPercentofGDP Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.  Services  Manufacturing  Mining & Agriculture
  11. 11. Contact: +923006641921 Usman Waheed 11 SM Differences BetweenDifferences Between Goods and ServicesGoods and Services Intangibility Perishability Simultaneous Production and Consumption Heterogeneity
  12. 12. Contact: +923006641921 Usman Waheed 12 SM Implications of IntangibilityImplications of Intangibility  Services cannot be inventoried  Services cannot be patented  Services cannot be readily displayed or communicated  Pricing is difficult
  13. 13. Contact: +923006641921 Usman Waheed 13 SM Implications of HeterogeneityImplications of Heterogeneity Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted
  14. 14. Contact: +923006641921 Usman Waheed 14 SM Implications of SimultaneousImplications of Simultaneous Production and ConsumptionProduction and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult
  15. 15. Contact: +923006641921 Usman Waheed 15 SM Implications of PerishabilityImplications of Perishability  It is difficult to synchronize supply and demand with services  Services cannot be returned or resold
  16. 16. Contact: +923006641921 Usman Waheed 16 SM Table 1-2Table 1-2 Services are DifferentServices are Different Goods Services Resulting Implications Tangible Intangible Services cannot be inventoried. Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult. Standardized Heterogeneous Service delivery and customer satisfaction depend on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what was planned and promoted. Production separate from consumption Simultaneous production and consumption Customers participate in and affect the transaction. Customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult. Nonperishable Perishable It is difficult to synchronize supply and demand with services. Services cannot be returned or resold. Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.
  17. 17. Contact: +923006641921 Usman Waheed 17 SM Figure 1-5Figure 1-5 The Services Marketing TriangleThe Services Marketing Triangle Internal Marketing Interactive Marketing External Marketing Company (Management) CustomersEmployees “enabling the promise” “delivering the promise” “setting the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
  18. 18. Contact: +923006641921 Usman Waheed 18 SM Ways to Use theWays to Use the Services Marketing TriangleServices Marketing Triangle Overall Strategic Assessment • How is the service organization doing on all three sides of the triangle? • Where are the weaknesses? • What are the strengths? Specific Service Implementation • What is being promoted and by whom? • How will it be delivered and by whom? • Are the supporting systems in place to deliver the promised service?
  19. 19. Contact: +923006641921 Usman Waheed 19 SM Source: Adapted from A. Parasuraman Company CustomersProviders Technology Figure 1-6Figure 1-6 The Services TriangleThe Services Triangle and Technologyand Technology
  20. 20. Contact: +923006641921 Usman Waheed 20 SM Services Marketing Mix:Services Marketing Mix: 7 Ps for Services7 Ps for Services • Traditional Marketing Mix • Expanded Mix for Services: 7 Ps • Building Customer Relationships Through People, Processes, and Physical Evidence • Ways to Use the 7 Ps
  21. 21. Contact: +923006641921 Usman Waheed 21 SM Traditional Marketing MixTraditional Marketing Mix • All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:  Product  Price  Place  Promotion
  22. 22. Contact: +923006641921 Usman Waheed 22 SM Expanded Mix for Services --Expanded Mix for Services -- the 7 Psthe 7 Ps • Product • Price • Place • Promotion • People • Process • Physical Evidence
  23. 23. Contact: +923006641921 Usman Waheed 23 SM Table 1-3Table 1-3 Expanded Marketing Mix forExpanded Marketing Mix for ServicesServices PRODUCT PLACE PROMOTION PRICE Physical good features Channel type Promotion blend Flexibility Quality level Exposure Salespeople Price level Accessories Intermediaries Advertising Terms Packaging Outlet location Sales promotion Differentiation Warranties Transportation Publicity Allowances Product lines Storage Branding
  24. 24. Contact: +923006641921 Usman Waheed 24 SM PEOPLE PHYSICAL EVIDENCE PROCESS Employees Facility design Flow of activities Customers Equipment Number of steps Communicating culture and values Signage Level of customer involvement Employee research Employee dress Other tangibles Table 1-3 (Continued)Table 1-3 (Continued) Expanded Marketing Mix forExpanded Marketing Mix for ServicesServices
  25. 25. Contact: +923006641921 Usman Waheed 25 SM Ways to Use the 7 PsWays to Use the 7 Ps Overall Strategic Assessment • How effective is a firm’s services marketing mix? • Is the mix well-aligned with overall vision and strategy? • What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation • Who is the customer? • What is the service? • How effectively does the services marketing mix for a service communicate its benefits and quality? • What changes/improvements are needed?
  26. 26. Contact: +923006641921 Usman Waheed 26 SM Services Marketing TriangleServices Marketing Triangle Applications ExerciseApplications Exercise • Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle? • How is each type of marketing being carried out currently? • Are the three sides of the triangle well aligned? • Are there specific challenges or barriers in any of the three areas?
  27. 27. 27 SMSM Part 1 FOCUS ON THE CUSTOMER
  28. 28. 28 SM Perceived Service Expected Service CUSTOMER COMPANY Customer Gap GAP 1 GAP 2 Gaps Model of Service QualityGaps Model of Service Quality GAP 3 External Communications to CustomersGAP 4 Service Delivery Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Part 1 Opener
  29. 29. 29 SM Gaps Model of ServiceGaps Model of Service QualityQuality • Customer Gap: • difference between expectations and perceptions • Provider Gap 1: • not knowing what customers expect • Provider Gap 2: • not having the right service designs and standards • Provider Gap 3: • not delivering to service standards • Provider Gap 4: • not matching performance to promisesPart 1 Opener
  30. 30. 30 SM The Customer GapThe Customer Gap Expected Service Perceived Service GAP Part 1 Opener
  32. 32. 32 SM Objectives for Chapter 2:Objectives for Chapter 2: Consumer Behavior inConsumer Behavior in ServicesServices • Overview the generic differences in consumer behavior between services and goods • Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior: • Information search • Evaluation of service alternatives • Service purchase and consumption • Postpurchase evaluation • Role of culture
  33. 33. 33 SM Consumer EvaluationConsumer Evaluation Processes for ServicesProcesses for Services • Search Qualities – attributes a consumer can determine prior to purchase of a product • Experience Qualities – attributes a consumer can determine after purchase (or during consumption) of a product • Credence Qualities – characteristics that may be impossible to evaluate even after purchase and consumption
  34. 34. 34 SM Figure 2-1Figure 2-1 Continuum of Evaluation forContinuum of Evaluation for Different Types of ProductsDifferent Types of Products Clothing Jewelry Furniture Houses Automobiles Restaurantmeals Vacations Haircuts Childcare Televisionrepair Legalservices Rootcanals Autorepair Medicaldiagnosis Difficult to evaluate Easy to evaluate {High in search qualities High in experience qualities High in credence qualities { {Most Goods Most Services
  35. 35. 35 SM Figure 2-2Figure 2-2 Categories in ConsumerCategories in Consumer Decision-Making and Evaluation ofDecision-Making and Evaluation of ServicesServices Information Search Evaluation of Alternatives Purchase and Consumption Post-Purchase Evaluation  Use of personal sources  Perceived risk  Evoked set  Emotion and mood  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty
  36. 36. 36 SM Figure 2-3Figure 2-3 Categories in Consumer Decision-Categories in Consumer Decision- Making and Evaluation of ServicesMaking and Evaluation of Services Information Search Evaluation of Alternatives Purchase and Consumption Post-Purchase Evaluation  Use of personal sources  Perceived risk  Evoked set  Emotion and mood  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty Culture  Values and attitudes  Manners and customs  Material culture  Aesthetics  Educational and social institutions
  37. 37. 37 SM Information searchInformation search • In buying services consumers rely more on personal sources. WHY? Refer p32 • Personal influence becomes pivotal as product complexity increases • Word of mouth important in delivery of services • With service most evaluation follows purchase
  38. 38. 38 SM Perceived RiskPerceived Risk • More risk would appear to be involved with purchase of services (no guarantees) • Many services so specialised and difficult to evaluate (How do you know whether the plumber has done a good job?) • Therefore a firm needs to develop strategies to reduce this risk, e.g, training of employees, standardisation of offerings
  39. 39. 39 SM Evoked SetEvoked Set • The evoked set of alternatives likely to be smaller with services than goods • If you would go to a shopping centre you may only find one dry cleaner or “single brand” • It is also difficult to obtain adequate prepurchase information about service • The Internet may widen this potential • Consumer may choose to do it themselves, e.g. garden services
  40. 40. 40 SM Emotion and MoodEmotion and Mood • Emotion and mood are feeling states that influence people’s perception and evaluation of their experiences • Moods are transient • Emotions more intense, stable and pervasive • May have a negative or positive influence
  41. 41. 41 SM Service Provision asService Provision as DramaDrama • Need to maintain a desirable impression • Service “actors” need to perform certain routines • Physical setting important, smell, music, use of space, temperature, cleanliness, etc.
  42. 42. 42 SM Global Feature:Global Feature: Differences in the ServiceDifferences in the Service Experience in the U.S. and JapanExperience in the U.S. and Japan  Authenticity  Caring  Control Courtesy  Formality  Friendliness  Personalization  Promptness
  43. 43. Contact: +923006641921 Usman Waheed 43 SMSM Chapter 3 CUSTOMER EXPECTATIONS OF SERVICES
  44. 44. Contact: +923006641921 Usman Waheed 44 SM Objectives for Chapter 3:Objectives for Chapter 3: Customer Expectations ofCustomer Expectations of ServiceService • Recognize that customers hold different types of expectations for service performance • Discuss controllable and uncontrollable sources of customer expectations • Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter • Acknowledge that expectations are similar for many different types of customers • Delineate the most important current issues surrounding customer expectations
  45. 45. Contact: +923006641921 Usman Waheed 45 SM DEFINITIONSDEFINITIONS • Customers have different expectations re services – or expected service • Desired service – customer hopes to receive • Adequate service – the level of service the customer may accept • DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?
  46. 46. Contact: +923006641921 Usman Waheed 46 SM Figure 3-1Figure 3-1 Dual CustomerDual Customer Expectation LevelsExpectation Levels (Two levels of expectations)(Two levels of expectations) Adequate Service Desired Service Zone of Tolerance
  47. 47. Contact: +923006641921 Usman Waheed 47 SM Figure 3-2Figure 3-2 The Zone of ToleranceThe Zone of Tolerance Adequate Service Desired Service Zone of Tolerance
  48. 48. Contact: +923006641921 Usman Waheed 48 SM Figure 3-3Figure 3-3 Zones of ToleranceZones of Tolerance VARYVARY forfor Different Service DimensionsDifferent Service Dimensions Most Important Factors Least Important Factors Level of Expectation Source: Berry, Parasuraman, and Zeithaml (1993) Adequate Service Desired Service Zone of Tolerance Desired Service Adequate Service Zone of Tolerance Desired Service Adequate Service
  49. 49. Contact: +923006641921 Usman Waheed 49 SM Figure 3-4Figure 3-4 Zones of ToleranceZones of Tolerance VARYVARY forfor First-Time and Recovery ServiceFirst-Time and Recovery Service First-Time Service Outcome Process Outcome Process Recovery Service Expectations LOW HIGH Source: Parasuraman, Berry and Zeithaml (1991)
  50. 50. Contact: +923006641921 Usman Waheed 50 SM Figure 3-5Figure 3-5 Factors that InfluenceFactors that Influence Desired ServiceDesired Service Desired Service Adequate Service Zone of Tolerance Enduring Service Intensifiers Personal Needs
  51. 51. Contact: +923006641921 Usman Waheed 51 SM • Personal needs include physical, social, psychological categories • Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service This can further divided into Derived Service Expectations and Personal service Philosophies
  52. 52. Contact: +923006641921 Usman Waheed 52 SM Figure 3-6Figure 3-6 Factors that InfluenceFactors that Influence Adequate ServiceAdequate Service Desired Service Adequate Service Zone of Tolerance Self-Perceived Service Role Situational Factors Perceived Service Alternatives Transitory Service Intensifiers
  53. 53. Contact: +923006641921 Usman Waheed 53 SM • Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends • Perceived service alternatives • Perceived service role of customer • Situational factors
  54. 54. Contact: +923006641921 Usman Waheed 54 SM Figure 3-7Figure 3-7 Factors that InfluenceFactors that Influence Desired and Predicted ServiceDesired and Predicted Service Desired Service Adequate Service Zone of Tolerance Predicted Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Past Experience
  56. 56. 56 SM Objectives for Chapter 4:Objectives for Chapter 4: Customer Perceptions ofCustomer Perceptions of ServiceService • Provide you with definitions and understanding of customer satisfaction and service quality • Show that service encounters or the “moments of truth” are the building blocks of customer perceptions • Highlight strategies for managing customer perceptions of service
  57. 57. 57 SM Figure 4-1Figure 4-1 Customer Perceptions ofCustomer Perceptions of Service Quality andService Quality and Customer SatisfactionCustomer Satisfaction Service Quality Reliability Responsiveness Assurance Empathy Tangibles Product Quality Price Personal Factors Customer Satisfaction Situational Factors
  58. 58. 58 SM Factors InfluencingFactors Influencing Customer SatisfactionCustomer Satisfaction • Product/service quality • Product/service attributes or features • Consumer Emotions • Attributions for product/service success or failure • Equity or fairness evaluations
  59. 59. 59 SM Outcomes ofOutcomes of Customer SatisfactionCustomer Satisfaction • Increased customer retention • Positive word-of-mouth communications • Increased revenues
  60. 60. 60 SM Figure 4-3Figure 4-3 Relationship between CustomerRelationship between Customer Satisfaction and Loyalty inSatisfaction and Loyalty in Competitive IndustriesCompetitive Industries 0% 20% 40% 60% 80% 100% Very dissatisfied Dissatisfied Neither satisfied nor dissatisfied Satisfied Very satisfied Satisfaction measure Loyalty(retention) Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.
  61. 61. 61 SM Service QualityService Quality • The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected. • Process and outcome quality are both important.
  62. 62. 62 SM The Five Dimensions ofThe Five Dimensions of Service QualityService Quality Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey trust and confidence. Physical facilities, equipment, and appearance of personnel. Caring, individualized attention the firm provides its customers. Willingness to help customers and provide prompt service. Tangibles Reliability Responsiveness Assurance Empathy
  63. 63. 63 SM Exercise toExercise to Identify Service AttributesIdentify Service Attributes In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view. Reliability: Assurance: Tangibles: Empathy: Responsiveness:
  64. 64. 64 SM SERVQUAL AttributesSERVQUAL Attributes Providing service as promised Dependability in handling customers’ service problems Performing services right the first time Providing services at the promised time Maintaining error-free records Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests RELIABILITY RESPONSIVENESS Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions ASSURANCE Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their customers Convenient business hours EMPATHY Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service TANGIBLES
  65. 65. 65 SM The Service EncounterThe Service Encounter • is the “moment of truth” • occurs any time the customer interacts with the firm • can potentially be critical in determining customer satisfaction and loyalty • types of encounters: – remote encounters – phone encounters – face-to-face encounters • is an opportunity to: – build trust – reinforce quality – build brand identity – increase loyalty
  66. 66. 66 SM Check-InCheck-In Request Wake-Up Call Request Wake-Up Call CheckoutCheckout Bellboy Takes to Room Bellboy Takes to Room Restaurant Meal Restaurant Meal Figure 4-4Figure 4-4 A Service EncounterA Service Encounter Cascade for a Hotel VisitCascade for a Hotel Visit
  67. 67. 67 SM Sales CallSales Call Ordering SuppliesOrdering Supplies BillingBilling Delivery and InstallationDelivery and Installation ServicingServicing Figure 4-5Figure 4-5 A Service EncounterA Service Encounter Cascade for an IndustrialCascade for an Industrial PurchasePurchase
  68. 68. 68 SM Critical Service EncountersCritical Service Encounters ResearchResearch • GOAL - understanding actual events and behaviors that cause customer dis/satisfaction in service encounters • METHOD - Critical Incident Technique • DATA - stories from customers and employees • OUTPUT - identification of themes underlying satisfaction and dissatisfaction with service encounters
  69. 69. 69 SM Sample Questions for CriticalSample Questions for Critical Incidents Technique StudyIncidents Technique Study • Think of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of . • When did the incident happen? • What specific circumstances led up to this situation? • Exactly what was said and done? • What resulted that made you feel the interaction was satisfying (dissatisfying)?
  70. 70. 70 SM Common Themes in CriticalCommon Themes in Critical Service EncountersService Encounters ResearchResearch Recovery: Adaptability: Spontaneity:Coping: Employee Response to Service Delivery System Failure Employee Response to Customer Needs and Requests Employee Response to Problem Customers Unprompted and Unsolicited Employee Actions and Attitudes
  71. 71. 71 SM RecoveryRecovery • Acknowledge problem • Explain causes • Apologize • Compensate/upgrade • Lay out options • Take responsibility • Ignore customer • Blame customer • Leave customer to fend for him/herself • Downgrade • Act as if nothing is wrong DO DON’T
  72. 72. 72 SM AdaptabilityAdaptability • Recognize the seriousness of the need • Acknowledge • Anticipate • Attempt to accommodate • Explain rules/policies • Take responsibility • Exert effort to accommodate • Promise, then fail to follow through • Ignore • Show unwillingness to try • Embarrass the customer • Laugh at the customer • Avoid responsibility DO DON’T
  73. 73. 73 SM SpontaneitySpontaneity • Take time • Be attentive • Anticipate needs • Listen • Provide information (even if not asked) • Treat customers fairly • Show empathy • Acknowledge by name • Exhibit impatience • Ignore • Yell/laugh/swear • Steal from or cheat a customer • Discriminate • Treat impersonally DO DON’T
  74. 74. 74 SM CopingCoping • Listen • Try to accommodate • Explain • Let go of the customer • Take customer’s dissatisfaction personally • Let customer’s dissatisfaction affect others DO DON’T
  75. 75. 75 SM Figure 4-6Figure 4-6 Evidence of Service from theEvidence of Service from the Customer’s Point of ViewCustomer’s Point of View People Process Physical Evidence  Contact employees  Customer him/herself  Other customers  Operational flow of activities  Steps in process  Flexibility vs. standard  Technology vs. human  Tangible communication  Servicescape  Guarantees  Technology
  77. 77. 77 SM Provider GAP 1Provider GAP 1 Company Perceptions of Consumer Expectations Expected Service CUSTOMER COMPANY GAP 1 Part 2 Opener
  79. 79. 79 SM Objectives for Chapter 5:Objectives for Chapter 5: Understanding Customer ExpectationsUnderstanding Customer Expectations and Perceptions throughand Perceptions through Marketing ResearchMarketing Research • Present the types of and guidelines for marketing research in services • Show the ways that marketing research information can and should be used for services • Describe the strategies by which companies can facilitate interaction and communication between management and customers • Present ways that companies can and do facilitate interaction between contact people and management
  80. 80. 80 SM Common Research ObjectivesCommon Research Objectives for Servicesfor Services • To identify dissatisfied customers • To discover customer requirements or expectations • To monitor and track service performance • To assess overall company performance compared to competition • To assess gaps between customer expectations and perceptions • To gauge effectiveness of changes in service • To appraise service performance of individuals and teams for rewards • To determine expectations for a new service • To monitor changing expectations in an industry • To forecast future expectations
  81. 81. 81 SM Figure 5-1Figure 5-1 Criteria for An EffectiveCriteria for An Effective Services Research ProgramServices Research Program Research Objectives Includes Qualitative Research Includes Quantitative Research Includes Perceptions and Expectations of Customers Includes Measures of Loyalty or Behavioral Intentions Balances Cost and Value of InformationIncludes Statistical Validity When Necessary Measures Priorities or Importance Occurs with Appropriate Frequency
  82. 82. 82 SM Portfolio of Services ResearchPortfolio of Services Research Customer Complaint Solicitation “Relationship” Surveys Post-Transaction Surveys Customer Focus Groups “Mystery Shopping” of Service Providers Employee Surveys Lost Customer Research Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action Obtain customer feedback while service experience is still fresh; act on feedback quickly if negative patterns develop Use as input for quantitative surveys; provide a forum for customers to suggest service-improvement ideas Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time Measure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; identify systemic strengths and weaknesses in service Measure internal service quality; identify employee- perceived obstacles to improve service; track employee morale and attitudes Determine the reasons why customers defect Research Objective Type of Research Future Expectations Research To forecast future expectations of customers To develop and test new service ideas
  83. 83. 83 SM Stages in the ResearchStages in the Research ProcessProcess • Stage 1 : Define Problem • Stage 2 : Develop Measurement Strategy • Stage 3 : Implement Research Program • Stage 4 : Collect and Tabulate Data • Stage 5 : Interpret and Analyze Findings • Stage 6 : Report Findings
  84. 84. 84 SM Figure 5-5Figure 5-5 Service Quality PerceptionsService Quality Perceptions Relative to Zones of ToleranceRelative to Zones of Tolerance by Dimensionsby Dimensions Retail Chain 9 8 7 6 5 4 3 2 1 0 Reliability Responsiveness Assurance Empathy Tangibles OO O O Zone of Tolerance S.Q. PerceptionO O
  85. 85. 85 SM Service Quality PerceptionsService Quality Perceptions Relative to Zones of Tolerance byRelative to Zones of Tolerance by DimensionsDimensions Computer Manufacturer 10 8 6 4 2 0 Reliability Responsiveness Assurance Empathy Tangibles OO O O O Zone of Tolerance S.Q. PerceptionO
  86. 86. 86 SM Figure 5-6Figure 5-6 Importance/Performance MatrixImportance/Performance Matrix HIGH HIGH LOW Performance Importance           Attributes to Improve Attributes to Maintain High Leverage Attributes to De-emphasizeAttributes to Maintain Low Leverage
  88. 88. 88 SM Objectives for Chapter 6:Objectives for Chapter 6: Building CustomerBuilding Customer RelationshipsRelationships • Explain relationship marketing, its goals, and the benefits of long-term relationships for firms and customers • Explain why and how to estimate customer lifetime value • Specify the foundations for successful relationship marketing--quality core services and careful market segmentation • Provide you with examples of successful customer retention strategies • Introduce the idea that “the customer isn’t always right”
  89. 89. 89 SM Relationship MarketingRelationship Marketing • is a philosophy of doing business that focuses on keeping and improving current customers • does not necessarily emphasize acquiring new customers • is usually cheaper (for the firm)--to keep a current customer costs less than to attract a new one • goal = to build and maintain a base of committed customers who are profitable for the organization • thus, the focus is on the attraction, retention, and enhancement of customer relationships
  90. 90. 90 SM Lifetime Value of a CustomerLifetime Value of a Customer • Assumptions • Income – Expected Customer Lifetime – Average Revenue (month/year) – Other Customers convinced via WOM – Employee Loyalty?? • Expenses – Costs of Serving Customer Increase??
  91. 91. 91 SM A Loyal Customer is One Who...A Loyal Customer is One Who... • Shows Behavioral Commitment – buys from only one supplier, even though other options exist – increasingly buys more and more from a particular supplier – provides constructive feedback/suggestions • Exhibits Psychological Commitment – wouldn’t consider terminating the relationship-- psychological commitment – has a positive attitude about the supplier – says good things about the supplier
  92. 92. 92 SM Customer Loyalty ExerciseCustomer Loyalty Exercise • Think of a service provider you are loyal to. • What do you do (your behaviors, actions, feelings) that indicates you are loyal? • Why are you loyal to this provider?
  93. 93. 93 SM Benefits to the OrganizationBenefits to the Organization of Customer Loyaltyof Customer Loyalty • loyal customers tend to spend more with the organization over time • on average costs of relationship maintenance are lower than new customer costs • employee retention is more likely with a stable customer base • lifetime value of a customer can be very high
  94. 94. 94 SM Benefits to the CustomerBenefits to the Customer • inherent benefits in getting good value • economic, social, and continuity benefits – contribution to sense of well-being and quality of life and other psychological benefits – avoidance of change – simplified decision making – social support and friendships – special deals
  95. 95. 95 SM ““The Customer Isn’t AlwaysThe Customer Isn’t Always Right”Right” • Not all customers are good relationship customers: – wrong segment – not profitable in the long term – difficult customers
  96. 96. 96 SM Strategies for BuildingStrategies for Building RelationshipsRelationships • Foundations: – Excellent Quality/Value – Careful Segmentation • Bonding Strategies: – Financial Bonds – Social & Psychological Bonds – Structural Bonds – Customization Bonds • Relationship Strategies Wheel
  97. 97. 97 SM Getting Satisfying Retaining Enhancing Figure 6-1Figure 6-1 Customer Goals ofCustomer Goals of Relationship MarketingRelationship Marketing
  98. 98. 98 SM Figure 6-3Figure 6-3 Underlying Logic of CustomerUnderlying Logic of Customer Retention Benefits to theRetention Benefits to the OrganizationOrganization Customer Retention & Increased Profits Employee Loyalty Quality Service Customer Satisfaction
  99. 99. 99 SM Figure 6-5Figure 6-5 Steps in Market SegmentationSteps in Market Segmentation andand Targeting for ServicesTargeting for Services Identify Bases for Segmenting the Market STEP 1: Develop Profiles of Resulting Segments STEP 2: Develop Measures of Segment Attractive- ness STEP 3: Select the Target Segments STEP4: Ensure that Segments Are Compatible STEP 5:
  100. 100. 100 SM Excellent Quality and Value Figure 6-6Figure 6-6 Levels of Retention StrategiesLevels of Retention Strategies I. Financial Bonds II. Social Bonds IV. Structural Bonds III. Customization Bonds Volume and Frequency Rewards Bundling and Cross Selling Stable Pricing Social Bonds Among Customers Personal Relationships Continuous Relationships Customer Intimacy Mass Customization Anticipation / Innovation Shared Processes and Equipment Joint Investments Integrated Information Systems
  101. 101. 101 SMSM Chapter 7 SERVICE RECOVERY
  102. 102. 102 SM Objectives for Chapter 7:Objectives for Chapter 7: Service RecoveryService Recovery • Illustrate the importance of recovery from service failures in building loyalty • Discuss the nature of consumer complaints and why people do and do not complain • Provide evidence of what customers expect and the kind of responses they want when they complain • Provide strategies for effective service recovery • Discuss service guarantees
  103. 103. 103 SM Figure 7-1Figure 7-1 Unhappy Customers’Unhappy Customers’ Repurchase IntentionsRepurchase Intentions 95% 70% 46% 37% 82% 54% 19% 9% Complaints Resolved Quickly Complaints Resolved Complaints Not Resolved Minor complaints ($1-$5 losses) Major complaints (over $100 losses) Unhappy Customers Who Don’t Complain Unhappy Customers Who Do Complain Percent of Customers Who Will Buy Again Source: Adapted from data reported by the Technical Assistance Research Program.
  104. 104. 104 SM Figure 7-3Figure 7-3 Customer ResponseCustomer Response Following Service FailureFollowing Service Failure Service Failure Do NothingTake Action Stay with ProviderSwitch Providers Complain to Provider Complain to Family & Friends Complain to Third Party Stay with ProviderSwitch Providers
  105. 105. 105 SM Figure 7-5Figure 7-5 Service Recovery StrategiesService Recovery Strategies Learn from Recovery Experiences Treat Custom ers Fairly Learnfrom LostCustomers Welcome and Encourage Complaints Fail Safe the Service ActQuickly Service Recovery Strategies
  106. 106. 106 SM Figure 7-6Figure 7-6 Causes Behind ServiceCauses Behind Service SwitchingSwitching Service Switching Behavior • High Price • Price Increases • Unfair Pricing • Deceptive Pricing Pricing • Location/Hours • Wait for Appointment • Wait for Service Inconvenience • Service Mistakes • Billing Errors • Service Catastrophe Core Service Failure • Uncaring • Impolite • Unresponsive • Unknowledgeable Service Encounter Failures • Negative Response • No Response • Reluctant Response Response to Service Failure • Found Better Service Competition • Cheat • Hard Sell • Unsafe • Conflict of Interest Ethical Problems • Customer Moved • Provider Closed Involuntary Switching Source: Sue Keaveney
  107. 107. 107 SM Service GuaranteesService Guarantees • guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary) • for products, guarantee often done in the form of a warranty • services are often not guaranteed –cannot return the service –service experience is intangible –(so what do you guarantee?)
  108. 108. 108 SM Table 7-7Table 7-7 Characteristics of anCharacteristics of an Effective Service GuaranteeEffective Service Guarantee Unconditional • The guarantee should make its promise unconditionally - no strings attached. Meaningful • It should guarantee elements of the service that are important to the customer. • The payout should cover fully the customer's dissatisfaction. Easy to Understand and Communicate • For customers - they need to understand what to expect. • For employees - they need to understand what to do. Easy to Invoke and Collect • There should not be a lot of hoops or red tape in the way of accessing or collecting on the guarantee. Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
  109. 109. 109 SM Why a Good GuaranteeWhy a Good Guarantee WorksWorks • forces company to focus on customers • sets clear standards • generates feedback • forces company to understand why it failed • builds “marketing muscle”
  110. 110. 110 SM Service GuaranteesService Guarantees • Does everyone need a guarantee? • Reasons companies do NOT offer guarantees: – guarantee would be at odds with company’s image – too many uncontrollable external variables – fears of cheating by customers – costs of the guarantee are too high
  111. 111. 111 SM Service GuaranteesService Guarantees • service guarantees work for companies who are already customer-focused • effective guarantees can be BIG deals - they put the company at risk in the eyes of the customer • customers should be involved in the design of service guarantees • the guarantee should be so stunning that it comes as a surprise -- a WOW!! factor • “it’s the icing on the cake, not the cake”
  113. 113. 113 SM CUSTOMER COMPANY GAP 2 Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Provider GAP 2Provider GAP 2 Part 3 Opener
  115. 115. 115 SM Objectives for Chapter 8:Objectives for Chapter 8: Service Development andService Development and DesignDesign • Describe the challenges inherent in service design • Present steps in the new service development process • Show the value of service blueprinting and quality function deployment (QFD) in new service design and service improvement • Present lessons learned in choosing and implementing high-performance service innovations
  116. 116. 116 SM Figure 8-1Figure 8-1 Risks of Relying on WordsRisks of Relying on Words Alone toAlone to Describe ServicesDescribe Services  Oversimplification  Incompleteness  Subjectivity  Biased Interpretation
  117. 117. 117 SM Figure 8-2Figure 8-2 New Service Development ProcessNew Service Development Process Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.  Business Strategy Development or Review  New Service Strategy Development  Idea Generation  Concept Development and Evaluation  Business Analysis  Service Development and Testing  Postintroduction Evaluation  Commercialization  Market Testing Screen ideas against new service strategy Test concept with customers and employees Test for profitability and feasibility Conduct service prototype test Test service and other marketing-mix elements Front End Planning Implementation
  118. 118. 118 SM Figure 8-3Figure 8-3 New Service Strategy MatrixNew Service Strategy Matrix for Identifying Growthfor Identifying Growth OpportunitiesOpportunities Markets Offerings Existing Services New Services Current Customers New Customers SHARE BUILDING DIVERSIFICATION MARKET DEVELOPMENT SERVICE DEVELOPMENT
  119. 119. Figure 8-4Figure 8-4 Service Mapping/BlueprintingService Mapping/Blueprinting A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view. Service Mappin g Process Points of Contact Evidence
  120. 120. 120 SM Service Blueprint ComponentsService Blueprint Components CUSTOMER ACTIONS line of interaction “ONSTAGE” CONTACT EMPLOYEE ACTIONS line of visibility “BACKSTAGE” CONTACT EMPLOYEE ACTIONS line of internal interaction SUPPORT PROCESSES
  121. 121. 121 SM Driver Picks Up Pkg. Dispatch Driver Airport Receives & Loads Sort Packages Load on Airplane Fly to Destinatio n Unload & Sort Load On Truck Express Mail Delivery ServiceExpress Mail Delivery Service SUPPORT PROCESS CONTACTPERSON (BackStage)(OnStage) CUSTOME R PHYSICAL EVIDENCE Customer Calls Customer Gives Package Truck Packaging Forms Hand-held Computer Uniform Receive Package Truck Packaging Forms Hand-held Computer Uniform Deliver Package Customer Service Order Fly to Sort Center
  122. 122. 122 SM Overnight Hotel StayOvernight Hotel StaySUPPORTPROCESS CONTACTPERSON (BackStage)(OnStage) CUSTOMER Hotel Exterior Parking Cart for Bags Desk Registration Papers Lobby Key Elevators Hallways Room Cart for Bags Room Amenities Bath Menu Delivery Tray Food Appearance Food Bill Desk Lobby Hotel Exterior Parking Arrive at Hotel Give Bags to Bellperson Check in Go to Room Receive Bags Sleep Shower Call Room Service Receive Food Eat Check out and Leave Greet and Take Bags Process Registration Deliver Bags Deliver Food Process Check Out Take Bags to Room Take Food Order Registration System Prepare Food Registration System PHYSICAL EVIDENCE
  123. 123. 123 SM Figure 8-8Figure 8-8 Building a Service BlueprintBuilding a Service Blueprint Step 1 Identify the process to be blue- printed. Step 1 Identify the process to be blue- printed. Step 2 Identify the customer or customer segment. Step 2 Identify the customer or customer segment. Step 3 Map the process from the customer’s point of view. Step 3 Map the process from the customer’s point of view. Step 4 Map contact employee actions, onstage and back-stage. Step 4 Map contact employee actions, onstage and back-stage. Step 5 Link customer and contact person activities to needed support functions. Step 5 Link customer and contact person activities to needed support functions. Step 6 Add evidence of service at each customer action step. Step 6 Add evidence of service at each customer action step.
  124. 124. 124 SM Application of ServiceApplication of Service BlueprintsBlueprints • New Service Development • concept development • market testing • Supporting a “Zero Defects” Culture • managing reliability • identifying empowerment issues • Service Recovery Strategies • identifying service problems • conducting root cause analysis • modifying processes
  125. 125. 125 SM Blueprints Can Be Used By:Blueprints Can Be Used By: • Service Marketers – creating realistic customer expectations • service system design • promotion • Operations Management – rendering the service as promised • managing fail points • training systems • quality control • Human Resources – empowering the human element • job descriptions • selection criteria • appraisal systems • System Technology – providing necessary tools: • system specifications • personal preference databases
  127. 127. 127 SM Objectives for Chapter 9:Objectives for Chapter 9: Customer-defined ServiceCustomer-defined Service StandardsStandards • Differentiate between company-defined and customer-defined service standards • Distinguish among one-time service fixes and “hard” and “soft” customer-defined standards • Explain the critical role of the service encounter sequence in developing customer-defined standards • Illustrate how to translate customer expectations into behaviors and actions that are definable, repeatable, and actionable
  128. 128. 128 SM Figure 9-1Figure 9-1 AT&T’s Process Map for MeasurementsAT&T’s Process Map for Measurements Reliability (40%) Easy To Use (20%) Features / Functions (40%) Knowledge (30%) Responsive (25%) Follow-Up (10%) Delivery Interval Meets Needs (30%) Does Not Break (25%) Installed When Promised (10%) No Repeat Trouble (30%) Fixed Fast (25%) Kept Informed (10%) Accuracy, No Surprise (45%) Resolve On First Call (35%) Easy To Understand (10%) Business Process Customer Need Internal Metric 30% Product 30% Sales 10% Installation 15% Repair 15% Billing % Repair Call % Calls for Help Functional Performance Test Supervisor Observations % Proposal Made on Time % Follow Up Made Average Order Interval % Repair Reports % Installed On Due Date % Repeat Reports Average Speed Of Repair % Customers Informed % Billing Inquiries % Resolved First Call % Billing Inquiries Total Quality Source: AT&T General Business Systems
  129. 129. 129 SM Exercise for CreatingExercise for Creating Customer-Defined ServiceCustomer-Defined Service StandardsStandards • Form a group of four people • Use your school’s undergraduate or graduate program, or an approved alternative • Complete the customer-driven service standards importance chart • Establish standards for the most important and lowest-performed behaviors and actions • Be prepared to present your findings to the class
  130. 130. 130 SM Service Encounter Customer Requirements Measurements Service Quality Customer-Driven Standards andCustomer-Driven Standards and Measurements ExerciseMeasurements Exercise
  131. 131. 131 SM Figure 9-2Figure 9-2 Getting to Actionable StepsGetting to Actionable Steps Satisfaction Value Relationship Solution Provider Reliability Empathy Assurance Tangibles Responsiveness Price Delivers on Time Returns Calls Quickly Knows My Industry Delivers by Weds 11/4 Returns Calls in 2 Hrs Knows Strengths of My Competitors Requirements: Abstract Concrete Dig Deeper Dig Deeper Dig Deeper Diagnosticity: Low High General Concepts Dimensions Behaviors and Actions Attributes
  132. 132. 132 SM Figure 9-3Figure 9-3 Process for SettingProcess for Setting Customer-Defined StandardsCustomer-Defined Standards 1. Identify Existing or Desired Service Encounter Sequence 2. Translate Customer Expectations Into Behaviors/Actions2. Translate Customer Expectations Into Behaviors/Actions 4. Set Hard or Soft Standards 5. Develop Feedback Mechanisms 5. Develop Feedback Mechanisms 7. Track Measures Against Standards Measure by Audits or Operating Data Hard Soft Measure by Transaction- Based Surveys 3. Select Behaviors/Actions for Standards3. Select Behaviors/Actions for Standards 6. Establish Measures and Target Levels6. Establish Measures and Target Levels 8. Update Target Levels and Measures8. Update Target Levels and Measures
  133. 133. 133 SM Importance/Performance MatrixImportance/Performance Matrix HIGH HIGH Performance        10.0 8.0 7.0 9.0 LOW 8.0 9.0 10.0 Importance Improve Maintain Delivers on promises specified in proposal/contract (9.49, 8.51) Gets project within budget, on time (9.31, 7.84) Completes projects correctly, on time (9.29, 7.68) Does whatever it takes to correct problems (9.26, 7.96) Provides equipment that operates as vendor said it would (9.24, 8.14) Gets price we originally agreed upon (9.21, 8.64) Takes responsibility for their mistakes (9.18, 8.01) Delivers or installs on promised date (9.02, 7.84) Tells me cost ahead of time (9.06, 8.46)  Gets back to me when promised (9.04, 7.63)
  134. 134. 134 SM Figure 9-5Figure 9-5 Linkage between Soft Measures andLinkage between Soft Measures and Hard Measures for Speed ofHard Measures for Speed of Complaint HandlingComplaint Handling S A T I S F A C T I O N 2 4 6 8 12 16 20 24 W O R K I N G H O U R S Large Customers Small Customers 10 9 8 7 6 5 4 3 2 1 0
  135. 135. 135 SM Figure 9-6Figure 9-6 Aligning CompanyAligning Company Processes with Customer ExpectationsProcesses with Customer Expectations Customer Expectations Customer Process Blueprint Company Process Blueprint Company Sequential Processes AA BB CC DD EE FF GG HH 40 Days New Card Mailed Lost Card Reported Report Lost Card Receive New Card 48 Hours
  137. 137. 137 SM Objectives for Chapter 10:Objectives for Chapter 10: Physical Evidence and thePhysical Evidence and the ServicescapeServicescape • Explain the impact on customer perceptions of physical evidence, particularly the servicescape • Illustrate differences in types and roles of servicescapes and their implications for strategy • Explain why the servicescape affects employee and customer behavior • Analyze four different approaches for understanding the effects of physical environment • Present elements of an effective physical evidence strategy
  138. 138. 138 SM Table 10-1Table 10-1 Elements of PhysicalElements of Physical EvidenceEvidence Servicescape Other tangibles Facility exterior Exterior design Signage Parking Landscape Surrounding environment Facility interior Interior design Equipment Signage Layout Air quality/temperature Business cards Stationery Billing statements Reports Employee dress Uniforms Brochures Internet/Web pages
  139. 139. 139 SM Table 10-2Table 10-2 Examples of Physical Evidence from theExamples of Physical Evidence from the Customer’s Point of ViewCustomer’s Point of View Service Physical evidence Servicescape Other tangibles Insurance Not applicable Policy itself Billing statements Periodic updates Company brochure Letters/cards Hospital Building exterior Parking Signs Waiting areas Admissions office Patient care room Medical equipment Recovery room Uniforms Reports/stationery Billing statements Airline Airline gate area Airplane exterior Airplane interior (décor, seats, air quality) Tickets Food Uniforms Express mail Not applicable Packaging Trucks Uniforms Computers Sporting event Parking, Seating, Restrooms Stadium exterior Ticketing area, Concession Areas Entrance, Playiing Field Signs Tickets Program Uniforms
  140. 140. 140 SM Table 10-3Table 10-3 Typology of Service OrganizationsTypology of Service Organizations Based on Variations in FormBased on Variations in Form and Use of the Servicescapeand Use of the Servicescape Complexity of the servicescape evidence Servicescape usage Elaborate Lean Self-service (customer only) Golf Land Surf 'n' Splash ATM Ticketron Post office kiosk Internet services Express mail drop-off Interpersonal services (both customer and employeee) Hotel Restaurants Health clinic Hospital Bank Airline School Dry cleaner Hot dog stand Hair salon Remote service (employee only) Telephone company Insurance company Utility Many professional services Telephone mail-order desk Automated voice-messaging- based services
  141. 141. 141 SM Figure 10-3Figure 10-3 A Framework for UnderstandingA Framework for Understanding Environment-user RelationshipsEnvironment-user Relationships in Service Organizationsin Service Organizations Source: Adapted from Mary Jo Bitner, “Servicescapes.” PHYSICAL ENVIRONMENTAL DIMENSIONS HOLISTIC ENVIRONMENT INTERNAL RESPONSES BEHAVIOR Ambient Conditions Space/Function Signs, Symbols, and Artifacts Perceived Servicescape Cognitive Emotional Physiological Cognitive Emotional Physiological Employee Responses Customer Responses Individual Behaviors Social Interactions between and among customer and employees Individual Behaviors
  143. 143. 143 SM CUSTOMER COMPANY Provider GAP 3Provider GAP 3 Service Delivery GAP 3 Customer-Driven Service Designs and Standards Part 4 Opener
  145. 145. 145 SM Objectives for Chapter 11:Objectives for Chapter 11: Employees’ Roles inEmployees’ Roles in Service DeliveryService Delivery • Illustrate the critical importance of service employees in creating customer satisfaction and service quality • Demonstrate the challenges inherent in boundary- spanning roles • Provide examples of strategies for creating customer-oriented service delivery • Show how the strategies can support a service culture where providing excellent service is a way of life
  146. 146. 146 SM Service EmployeesService Employees • They are the service • They are the firm in the customer’s eyes • They are marketers • Importance is evident in – The Services Marketing Mix (People) – The Service-Profit Chain – The Services Triangle
  147. 147. 147 SM Service EmployeesService Employees • Who are they? – “boundary spanners” • What are these jobs like? – emotional labor – many sources of potential conflict • person/role • organization/client • interclient • quality/productivity
  148. 148. 148 SM Figure 11-3Figure 11-3 Boundary Spanners InteractBoundary Spanners Interact with Both Internalwith Both Internal and External Constituentsand External Constituents Internal Environment External Environment
  149. 149. 149 SM Figure 11-4Figure 11-4 Sources of Conflict forSources of Conflict for Boundary-Spanning WorkersBoundary-Spanning Workers • Person vs. Role • Organization vs. Client • Client vs. Client • Quality vs. Productivity
  150. 150. 150 SM Figure 11-5Figure 11-5 Human Resource Strategies for Closing GAP 3Human Resource Strategies for Closing GAP 3 Customer- oriented Service Delivery Hire the Right People Provide Needed Support Systems Retain the Best People Develop People to Deliver Service Quality Com pete for the Best People Hire for Service Competencies and Service Inclination Provide Supportive Technology and Equipment Treat Employees as Customers Empower Employees Be the Preferred Em ployer Train for Technicaland Interactive SkillsProm ote Team work Measure Internal Service Quality Develop Service- oriented Internal Processes Measureand RewardStrongService Providers Include Employeesin the Company’s Vision
  151. 151. 152 SM Service CultureService Culture “A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”
  153. 153. 154 SM Objectives for Chapter 12:Objectives for Chapter 12: Customers’ Roles in ServiceCustomers’ Roles in Service DeliveryDelivery • Illustrate the importance of customers in successful service delivery • Enumerate the variety of roles that service customers play • Productive resources • Contributors to quality and satisfaction • Competitors • Explain strategies for involving service customers effectively to increase both quality and productivity
  154. 154. 155 SM Importance ofImportance of OtherOther Customers in ServiceCustomers in Service DeliveryDelivery • Other customers can detract from satisfaction • disruptive behaviors • excessive crowding • incompatible needs • Other customers can enhance satisfaction • mere presence • socialization/friendships • roles: assistants, teachers, supporters
  155. 155. 156 SM How Customers Widen Gap 3How Customers Widen Gap 3 • Lack of understanding of their roles • Not being willing or able to perform their roles • No rewards for “good performance” • Interfering with other customers • Incompatible market segments
  156. 156. 157 SM Figure 12-2Figure 12-2 Customer Roles in ServiceCustomer Roles in Service DeliveryDelivery Productive Resources Contributors to Quality and Satisfaction Competitors
  157. 157. 158 SM Customers as ProductiveCustomers as Productive ResourcesResources • “partial employees” – contributing effort, time, or other resources to the production process • customer inputs can affect organization’s productivity • key issue: – should customers’ roles be expanded? reduced?
  158. 158. 159 SM Customers as ContributorsCustomers as Contributors to Service Quality andto Service Quality and SatisfactionSatisfaction • Customers can contribute to – their own satisfaction with the service • by performing their role effectively • by working with the service provider – the quality of the service they receive • by asking questions • by taking responsibility for their own satisfaction • by complaining when there is a service failure
  159. 159. 160 SM Customers as CompetitorsCustomers as Competitors • customers may “compete” with the service provider • “internal exchange” vs. “external exchange” • internal/external decision often based on: – expertise – resources – time – economic rewards – psychic rewards – trust – control
  160. 160. 161 SM Technology Spotlight:Technology Spotlight: Services Production ContinuumServices Production Continuum 1 2 3 4 5 6 Gas Station Illustration 1. Customer pumps gas and pays at the pump with automation 2. Customer pumps gas and goes inside to pay attendant 3. Customer pumps gas and attendant takes payment at the pump 4. Attendant pumps gas and customer pays at the pump with automation 5. Attendant pumps gas and customer goes inside to pay attendant 6. Attendant pumps gas and attendant takes payment at the pump Customer Production Joint Production Firm Production
  161. 161. 162 SM Figure 12-3Figure 12-3 Strategies for EnhancingStrategies for Enhancing Customer ParticipationCustomer Participation Effective Customer Participation Recruit, Educate, and Reward Customers Define Customer Jobs Manage the Customer Mix
  162. 162. 163 SM Strategies for EnhancingStrategies for Enhancing Customer ParticipationCustomer Participation 1. Define customers’ jobs - helping himself - helping others - promoting the company 2. Individual differences: not everyone wants to participate
  163. 163. 164 SM Strategies for Recruiting,Strategies for Recruiting, Educating and RewardingEducating and Rewarding CustomersCustomers 1. Recruit the right customers 2. Educate and train customers to perform effectively 3. Reward customers for their contribution 4. Avoid negative outcomes of inappropriate customer participation Manage the Customer Mix
  164. 164. 165 SMSM Chapter 14 MANAGING DEMAND AND CAPACITY
  165. 165. 166 SM Objectives for Chapter 14:Objectives for Chapter 14: Managing Demand andManaging Demand and CapacityCapacity • Explain: • the underlying issue for capacity-constrained services • the implications of capacity constraints • the implications of different types of demand patterns on matching supply and demand • Lay out strategies for matching supply and demand through: • shifting demand to match capacity or • flexing capacity to meet demand • Demonstrate the benefits and risks of yield management strategies • Provide strategies for managing waiting lines
  166. 166. 167 SM Understanding CapacityUnderstanding Capacity Constraints and DemandConstraints and Demand PatternsPatterns • Time, labor, equipment and facilities • Optimal versus maximal use of capacity • Charting demand patterns • Predictable cycles • Random demand fluctuations • Demand patterns by market segment Capacity Constraints Demand Patterns
  167. 167. 168 SM Figure 14-3Figure 14-3 Strategies for Shifting DemandStrategies for Shifting Demand to Match Capacityto Match Capacity • Use signage to communicate busy days and times • Offer incentives to customers for usage during non-peak times • Take care of loyal or regular customers first • Advertise peak usage times and benefits of non-peak use • Charge full price for the service--no discounts • Use sales and advertising to increase business from current market segments • Modify the service offering to appeal to new market segments • Offer discounts or price reductions • Modify hours of operation • Bring the service to the customer Demand Too High Demand Too LowShift Demand
  168. 168. 169 SM Figure 14-4Figure 14-4 Strategies for Flexing CapacityStrategies for Flexing Capacity to Match Demandto Match Demand • Stretch time, labor, facilities and equipment • Cross-train employees • Hire part-time employees • Request overtime work from employees • Rent or share facilities • Rent or share equipment • Subcontract or outsource activities • Perform maintenance renovations • Schedule vacations • Schedule employee training • Lay off employees Demand Too High Demand Too LowFlex Capacity
  169. 169. 170 SM Table 14-1Table 14-1 What is the Nature of DemandWhat is the Nature of Demand Relative to Supply?Relative to Supply? Extent of demand fluctuations over time Extent to which supply is constrained Wide Narrow Peak demand can usually be met without a major delay 1 Electricity Natural gas Telephone Hospital maternity unit Police and fire emergencies 2 Insurance Legal services Banking Laundry and dry cleaning Peak demand regularly exceeds capacity 4 Accounting and tax preparation Passenger transportation Hotels and motels Restaurants Theaters 3 Services similar to those in 2 but which have insufficient capacity for their base level of business Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.
  170. 170. 171 SM Table 14-2Table 14-2 What is the Constraint onWhat is the Constraint on Capacity?Capacity? Nature of the constraint Type of service Time Legal Consulting Accounting Medical Labor Law firm Accounting firm Consulting firm Health clinic Equipment Delivery services Telecommunication Utilities Health club Facilities Hotels Restaurants Hospitals Airlines Schools Theaters Churches
  171. 171. 172 SM Waiting Line IssuesWaiting Line Issues and Strategiesand Strategies • unoccupied time feels longer • preprocess waits feel longer • anxiety makes waits seem longer • uncertain waits seem longer than finite waits • unexplained waits seem longer • unfair waits feel longer • longer waits are more acceptable for “valuable” services • solo waits feel longer
  173. 173. 174 SM CUSTOMER COMPANY External Communications to CustomersGAP 4 Service Delivery Provider GAP 4Provider GAP 4 Part 5 Opener
  175. 175. 176 SM Objectives for Chapter 15:Objectives for Chapter 15: Integrated ServicesIntegrated Services Marketing CommunicationsMarketing Communications • Introduce the concept of Integrated Services Marketing Communication • Discuss the key reasons for service communication problems • Present four key ways to integrate marketing communication in service organizations • Present specific strategies for managing promises, managing customer expectations, educating customers, and managing internal communications • Provide perspective on the popular service objective of exceeding customer expectations
  176. 176. 177 SM Figure 15-1Figure 15-1 Communications and theCommunications and the Services Marketing TriangleServices Marketing Triangle Internal MarketingInternal Marketing Vertical Communications Horizontal Communications Interactive Marketing Personal Selling Customer Service Center Service Encounters Servicescapes External Marketing Communication Advertising Sales Promotion Public Relations Direct Marketing Company CustomersEmployees Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler
  177. 177. 178 SM Approaches forApproaches for Integrating Services MarketingIntegrating Services Marketing CommunicationCommunication Goal: Delivery greater than or equal to promises Improve Customer Education Manage Service Promises Manage Customer Expectations Manage Internal Marketing Communication Figure 15-3Figure 15-3
  178. 178. 179 SM Goal: Delivery greater than or equal to promises Offer Service Guarantees Create Effective Services Communications MANAGING SERVICE PROMISES Make Realistic Promises Coordinate External Communication Figure 15-4Figure 15-4 Approaches forApproaches for Managing Service PromisesManaging Service Promises
  179. 179. 180 SM Communicate Criteria for Service Effectiveness Create Tiered-Value Offerings Figure 15-8Figure 15-8 Approaches forApproaches for Managing Customer ExpectationsManaging Customer Expectations Negotiate Unrealistic Expectations Goal: Delivery greater than or equal to promises Offer Choices
  180. 180. 181 SM Goal: Delivery greater than or equal to promises Prepare Customers for the Service Process Clarify Expectations after the Sale Figure 15-9Figure 15-9 Approaches forApproaches for Improving Customer EducationImproving Customer Education Teach Customers to Avoid Peak Demand Periods and Seek Slow Periods Confirm Performance to Standards
  181. 181. 182 SM Goal: Delivery greater than or equal to promises Figure 15-10Figure 15-10 Approaches for ManagingApproaches for Managing Internal Marketing CommunicationsInternal Marketing Communications Create Effective Vertical Communications Align Back Office Personnel w/ External Customers Create Effective Horizontal Communications Create Cross-Functional Teams
  182. 182. Contact: +923006641921 Usman Waheed 183 SMSM Chapter 17 THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY
  183. 183. Contact: +923006641921 Usman Waheed 184 SM Objectives for Chapter 17:Objectives for Chapter 17: The Financial and EconomicThe Financial and Economic Impact of ServiceImpact of Service • Examine the direct effects of service on profits • Consider the impact of service on getting new customers • Evaluate the role of service in keeping customers • Examine the link between perceptions of service and purchase intentions • Emphasize the importance of selecting profitable customers • Discuss what is know about the key service drivers of overall service quality, customer retention and profitability • Discuss the balanced performance scorecard to focus on strategic measurement other than financials
  184. 184. Contact: +923006641921 Usman Waheed 185 SM Figure 17-1Figure 17-1 The Direct Relationship betweenThe Direct Relationship between Service and ProfitsService and Profits Profits ?Service Quality
  185. 185. Contact: +923006641921 Usman Waheed 186 SM Figure 17-2Figure 17-2 Offensive Marketing Effects ofOffensive Marketing Effects of Service on ProfitsService on Profits Profits Market Share Reputation Sales Price Premium Service Quality
  186. 186. Contact: +923006641921 Usman Waheed 187 SM Figure 17-3Figure 17-3 Defensive Marketing Effects ofDefensive Marketing Effects of Service on ProfitService on Profit Margins Profits Customer Retention Costs Price Premium Word of Mouth Volume of PurchasesService Quality
  187. 187. Contact: +923006641921 Usman Waheed 188 SM Figure 17-5Figure 17-5 Perceptions of Service,Perceptions of Service, BehavioralBehavioral Intentions and ProfitsIntentions and Profits Customer Retention Costs Price Premium Word of Mouth Margins Profits Volume of Purchases Service Behavioral Intentions Sales
  188. 188. Contact: +923006641921 Usman Waheed 189 SM Figure 17-6Figure 17-6 The “80/20” Customer PyramidThe “80/20” Customer Pyramid Most Profitable Customers Least Profitable Customers What segment spends more with us over time, costs less to maintain, spreads positive word of mouth? What segment costs us in time, effort and money yet does not provide the return we want? What segment is difficult to do business with? Other Customers Best Customers
  189. 189. Contact: +923006641921 Usman Waheed 190 SM Figure 17-7Figure 17-7 The Expanded Customer PyramidThe Expanded Customer Pyramid Most Profitable Customers Least Profitable Customers What segment spends more with us over time, costs less to maintain, spreads positive word of mouth? What segment costs us in time, effort and money yet does not provide the return we want? What segment is difficult to do business with? Gold Iron Lead Platinum
  190. 190. Contact: +923006641921 Usman Waheed 191 SM Figure 17-8Figure 17-8 The Key Drivers of Service Quality,The Key Drivers of Service Quality, Customer Retention, and ProfitsCustomer Retention, and Profits Key Drivers Service Quality Service Encounter Service Encounter Service Encounter Customer Retention Behavioral Intentions Profits Service Encounter Service Encounters
  191. 191. Contact: +923006641921 Usman Waheed 192 SM Figure 17-9Figure 17-9 Sample Measurements for theSample Measurements for the Balanced ScorecardBalanced Scorecard Adapted from Kaplan and Norton Innovation and Learning Perspective Customer Perspective Service Perceptions Service Expectations Perceived Value Behavioral Intentions: Operational Perspective: Right first time (% hits) Right on time (% hits) Responsiveness (% on time) Transaction time (hours, days) Throughput time Reduction in waste Process quality Financial Measures Price Premium Volume Increases Value of Customer Referrals Value of Cross Sales Long-term Value of Customer % Loyalty % Intent to Switch # Customer Referrals # Cross Sales # of Defections Number of new products Return on innovation Employee skills Time to market Time spent talking to customers
  192. 192. Contact: +923006641921 Usman Waheed 193 SM Figure 17-10Figure 17-10 Service Quality Spells ProfitsService Quality Spells Profits Service Quality Customer Retention Costs Price Premium Word of Mouth Margins Profits Defensive Marketing Volume of Purchases Market Share Reputation Sales Price Premium Offensive Marketing