Services Marketing

Contact: +923006641921 Usman Waheed Chapter 1 INTRODUCTION TO SERVICES S M

Figure 1-1 Tangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets            

Differences Between Goods and Services Intangibility Perishability Simultaneous Production and Consumption Heterogeneity

Table 1-2 Services are Different 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.

Figure 1-5 The Services Marketing Triangle Internal Marketing Interactive Marketing External Marketing Company (Management) Customers Employees “ enabling the promise” “ delivering the promise” “ setting the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Source: Adapted from A. Parasuraman Company Customers Providers Technology Figure 1-6 The Services Triangle and Technology

Table 1-3 Expanded Marketing Mix for Services

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

Part 1 FOCUS ON THE CUSTOMER S M

Perceived Service Expected Service CUSTOMER COMPANY Customer Gap GAP 1 GAP 2 Gaps Model of Service Quality GAP 3 External Communications to Customers GAP 4 Service Delivery Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Part 1 Opener

The Customer Gap Expected Service Perceived Service GAP Part 1 Opener

Chapter 2 CONSUMER BEHAVIOR IN SERVICES S M

Figure 2-1 Continuum of Evaluation for Different Types of Products Clothing Jewelry Furniture Houses Automobiles Restaurant meals Vacations Haircuts Child care Television repair Legal services Root canals Auto repair Medical diagnosis Difficult to evaluate Easy to evaluate { High in search qualities High in experience qualities High in credence qualities { { Most Goods Most Services

Figure 2-2 Categories in Consumer Decision-Making 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

Chapter 3 CUSTOMER EXPECTATIONS OF SERVICES S M

Figure 3-1 Dual Customer Expectation Levels (Two levels of expectations) Adequate Service Desired Service Zone of Tolerance

Figure 3-2 The Zone of Tolerance Adequate Service Desired Service Zone of Tolerance

Figure 3-3 Zones of Tolerance VARY for Different 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 Desired Service Adequate Service Zone of Tolerance

Figure 3-4 Zones of Tolerance VARY for First-Time and Recovery Service First-Time Service Outcome Process Outcome Process Recovery Service Expectations LOW HIGH Source: Parasuraman, Berry and Zeithaml (1991)

Figure 3-5 Factors that Influence Desired Service Desired Service Adequate Service Zone of Tolerance Enduring Service Intensifiers Personal Needs

Figure 3-6 Factors that Influence Adequate Service Desired Service Adequate Service Zone of Tolerance Self-Perceived Service Role Situational Factors Perceived Service Alternatives Transitory Service Intensifiers

Figure 3-7 Factors that Influence Desired and Predicted Service Desired Service Adequate Service Zone of Tolerance Predicted Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Past Experience

Chapter 4 CUSTOMER PERCEPTIONS OF SERVICE S M

Figure 4-1 Customer Perceptions of Service Quality and Customer Satisfaction Service Quality Reliability Responsiveness Assurance Empathy Tangibles Product Quality Price Personal Factors Customer Satisfaction Situational Factors

Figure 4-3 Relationship between Customer Satisfaction and Loyalty in Competitive Industries 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.

Exercise to Identify 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:

Figure 4-4 A Service Encounter Cascade for a Hotel Visit Check-In Request Wake-Up Call Checkout Bellboy Takes to Room Restaurant Meal

Sales Call Ordering Supplies Billing Delivery and Installation Servicing Figure 4-5 A Service Encounter Cascade for an Industrial Purchase

Common Themes in Critical Service Encounters Research 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

Part 2 LISTENING TO CUSTOMER REQUIREMENTS S M

Provider GAP 1 Company Perceptions of Consumer Expectations Expected Service CUSTOMER COMPANY GAP 1 Part 2 Opener

Chapter 5 UNDERSTANDING CUSTOMER EXPECTATIONS AND PERCEPTIONS THROUGH MARKETING RESEARCH S M

Figure 5-1 Criteria for An Effective Services 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 Information Includes Statistical Validity When Necessary Measures Priorities or Importance Occurs with Appropriate Frequency

Portfolio 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

Figure 5-5 Service Quality Perceptions Relative to Zones of Tolerance by Dimensions Retail Chain 9 8 7 6 5 4 3 2 1 0 Reliability Responsiveness Assurance Empathy Tangibles O O O O Zone of Tolerance S.Q. Perception O O

Service Quality Perceptions Relative to Zones of Tolerance by Dimensions Computer Manufacturer 10 8 6 4 2 0 Reliability Responsiveness Assurance Empathy Tangibles O O O O O Zone of Tolerance S.Q. Perception O

Figure 5-6 Importance/Performance Matrix HIGH HIGH LOW Performance Importance           Attributes to Improve Attributes to Maintain High Leverage Attributes to De-emphasize Attributes to Maintain Low Leverage

Chapter 6 BUILDING CUSTOMER RELATIONSHIPS S M

Figure 6-1 Customer Goals of Relationship Marketing Getting Satisfying Retaining Enhancing

Figure 6-3 Underlying Logic of Customer Retention Benefits to the Organization Customer Retention & Increased Profits Employee Loyalty Quality Service Customer Satisfaction

Figure 6-5 Steps in Market Segmentation and Targeting 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:

Excellent Quality and Value Figure 6-6 Levels 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

Chapter 7 SERVICE RECOVERY S M

Figure 7-1 Unhappy Customers’ Repurchase 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.

Figure 7-3 Customer Response Following Service Failure Service Failure Do Nothing Take Action Stay with Provider Switch Providers Complain to Provider Complain to Family & Friends Complain to Third Party Stay with Provider Switch Providers

Figure 7-5 Service Recovery Strategies Learn from Recovery Experiences Treat Customers Fairly Learn from Lost Customers Welcome and Encourage Complaints Fail Safe the Service Act Quickly Service Recovery Strategies

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

Part 3 ALIGNING STRATEGY, SERVICE DESIGN AND STANDARDS S M

CUSTOMER COMPANY GAP 2 Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations Provider GAP 2 Part 3 Opener

Chapter 8 SERVICE DEVELOPMENT AND DESIGN S M

Figure 8-3 New Service Strategy Matrix for Identifying Growth Opportunities Markets Offerings Existing Services New Services Current Customers New Customers SHARE BUILDING DIVERSIFICATION MARKET DEVELOPMENT SERVICE DEVELOPMENT

Service Blueprint Components CUSTOMER ACTIONS line of interaction “ ONSTAGE” CONTACT EMPLOYEE ACTIONS line of visibility “ BACKSTAGE” CONTACT EMPLOYEE ACTIONS line of internal interaction SUPPORT PROCESSES

Express Mail Delivery Service Driver Picks Up Pkg. Dispatch Driver Airport Receives & Loads Sort Packages Load on Airplane Fly to Destination Unload & Sort Load On Truck SUPPORT PROCESS CONTACT PERSON (Back Stage) (On Stage) CUSTOMER 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

Overnight Hotel Stay SUPPORT PROCESS CONTACT PERSON (Back Stage) (On Stage) 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

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

Chapter 9 CUSTOMER-DEFINED SERVICE STANDARDS S M

Figure 9-1 AT&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

Customer-Driven Standards and Measurements Exercise Service Encounter Customer Requirements Measurements Service Quality

Figure 9-2 Getting 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

Figure 9-3 Process for Setting Customer-Defined Standards 1. Identify Existing or Desired Service Encounter Sequence 2. Translate Customer Expectations Into Behaviors/Actions 4. Set Hard or Soft Standards 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 Standards 6. Establish Measures and Target Levels 8. Update Target Levels and Measures

Importance/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)

Figure 9-5 Linkage between Soft Measures and Hard Measures for Speed of Complaint 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

Figure 9-6 Aligning Company Processes with Customer Expectations Customer Expectations Customer Process Blueprint Company Process Blueprint Company Sequential Processes A B C D E F G H 40 Days New Card Mailed Lost Card Reported Report Lost Card Receive New Card 48 Hours

Chapter 10 PHYSICAL EVIDENCE AND THE SERVICESCAPE S M

Table 10-1 Elements of Physical Evidence

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

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

Figure 10-3 A Framework for Understanding Environment-user Relationships in 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

Part 4 DELIVERING AND PERFORMING SERVICE S M

CUSTOMER COMPANY Provider GAP 3 Service Delivery GAP 3 Customer-Driven Service Designs and Standards Part 4 Opener

Chapter 11 EMPLOYEES’ ROLES IN SERVICE DELIVERY S M

Figure 11-3 Boundary Spanners Interact with Both Internal and External Constituents Internal Environment External Environment

Figure 11-5 Human 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 Compete 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 Employer Train for Technical and Interactive Skills Promote Teamwork Measure Internal Service Quality Develop Service- oriented Internal Processes Measure and Reward Strong Service Providers Include Employees in the Company’s Vision

Chapter 12 CUSTOMERS’ ROLES IN SERVICE DELIVERY S M

Figure 12-2 Customer Roles in Service Delivery Productive Resources Contributors to Quality and Satisfaction Competitors

Technology Spotlight: Services 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

Figure 12-3 Strategies for Enhancing Customer Participation Effective Customer Participation Recruit, Educate, and Reward Customers Define Customer Jobs Manage the Customer Mix

Strategies for Enhancing Customer Participation 1. Define customers’ jobs - helping himself - helping others - promoting the company 2. Individual differences: not everyone wants to participate

Strategies for Recruiting, Educating and Rewarding Customers 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

Chapter 14 MANAGING DEMAND AND CAPACITY S M

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

Table 14-2 What is the Constraint on Capacity?

Part 5 MANAGING SERVICE PROMISES S M

CUSTOMER COMPANY External Communications to Customers GAP 4 Service Delivery Provider GAP 4 Part 5 Opener

Chapter 15 INTEGRATED MARKETING COMMUNICATION S M

Figure 15-1 Communications and the Services Marketing Triangle Internal 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 Customers Employees Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

Approaches for Integrating Services Marketing Communication Goal: Delivery greater than or equal to promises Improve Customer Education Manage Service Promises Manage Customer Expectations Manage Internal Marketing Communication Figure 15-3

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 15-4 Approaches for Managing Service Promises

Communicate Criteria for Service Effectiveness Create Tiered-Value Offerings Figure 15-8 Approaches for Managing Customer Expectations Negotiate Unrealistic Expectations Goal: Delivery greater than or equal to promises Offer Choices

Goal: Delivery greater than or equal to promises Prepare Customers for the Service Process Clarify Expectations after the Sale Figure 15-9 Approaches for Improving Customer Education Teach Customers to Avoid Peak Demand Periods and Seek Slow Periods Confirm Performance to Standards

Goal: Delivery greater than or equal to promises Figure 15-10 Approaches for Managing Internal Marketing Communications Create Effective Vertical Communications Align Back Office Personnel w/ External Customers Create Effective Horizontal Communications Create Cross-Functional Teams

Chapter 17 THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY S M

Figure 17-1 The Direct Relationship between Service and Profits Profits ? Service Quality

Figure 17-2 Offensive Marketing Effects of Service on Profits Profits Market Share Reputation Sales Price Premium Service Quality

Figure 17-3 Defensive Marketing Effects of Service on Profit Margins Profits Customer Retention Costs Price Premium Word of Mouth Volume of Purchases Service Quality

Figure 17-5 Perceptions of Service, Behavioral Intentions and Profits Customer Retention Costs Price Premium Word of Mouth Margins Profits Volume of Purchases Service Behavioral Intentions Sales

Figure 17-6 The “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

Figure 17-7 The 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

Figure 17-8 The Key Drivers of Service Quality, Customer Retention, and Profits Key Drivers Service Quality Service Encounter Service Encounter Service Encounter Customer Retention Behavioral Intentions Profits Service Encounter Service Encounters

Figure 17-9 Sample Measurements for the Balanced 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

Figure 17-10 Service 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