service merketing

1. SERVICES MARKETING:
People, Technology, Strategy 5/e
Christopher Lovelock and Jochen Wirtz
PRENTICE HALL, 2004
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 1

2. 20 Years of “Services Marketing”
1984 – Lovelock, 1st edition
1991 – Lovelock, 2nd edition
1996 - Lovelock, 3rd edition
2001 - Lovelock, 4th edition
2002 - Lovelock, Wirtz, and Keh, Services Marketing in Asia
2004 - Lovelock & Wirtz, 5th edition
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 2

3. What’s New?
New co-author – Jochen Wirtz
New streamlined structure – slimmed down from 18
chapters to 15, more tightly written
Coverage of latest research and developments in
management practice (check the references!)
New examples
New readings – 6 of 8 are new
New cases – 12 of 15 are new, balance all updated
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 3

4. Jochen Wirtz, PhD
Associate Professor, National University of Singapore
Born in Germany
PhD in services marketing, London
Business School (chair: John Bateson)
Winner of six best paper awards,
including (with Patricia Chew) most
outstanding article of 2002 in
International Journal of Service
Industry, 2002
Co-author, Services Marketing in Asia
(Prentice Hall 2001)
Six awards for outstanding teaching,
including university-wide award, 2003
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 4

5. Jochen and family at Awards Banquet for
NUS Outstanding Educator Award, 2003
NUS Outstanding
Educator Award,
(university-wide)
2003
(Only two awards
each year among
2,700 NUS faculty)
Previous teaching
Awards at NUS
Business School,
1996, 1998, 1999,
2001, 2002
T
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 5

6. Target Markets for SM5
Primary targets
MBA courses in services marketing, service management
Upper division undergraduate courses (same)
Secondary targets (with supplementary readings and cases)
MBA courses in public and nonprofit marketing
Courses in tourism, hotel and restaurant marketing
Courses in marketing at other professional schools
(e.g., architecture, public health)
Can also be used in executive education courses that
emphasize services marketing/management
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 6

7. Services Marketing 5/e: A Simple, Intuitive
Structure Students Understand Right Away
Part I
Part I
Understanding Service Products, Consumers & Markets
Understanding Services, Consumers & Markets
Understanding Services, Consumers & Markets
Introduction to Services Marketing
Introduction to Services Marketing
Consumer Behavior and Service Encounters
Consumer Behavior and Service Encounters
Positioning Services in Competitive Markets
Positioning Services in Competitive Markets
Part IIII
Part Part III
Part III
Key Elements of Services Marketing
Key Elements of Services Marketing Managing the Service Delivery Process
Managing the Service Delivery Process
Creating the Service Product
Creating the Service Product Designing and Managing Service Processes
Designing and Managing Service Processes
Designing the Service Communications Mix
Designing the Service Communications Mix Balancing Demand and Capacity
Balancing Demand and Capacity
Pricing and Revenue Management
Pricing and Revenue Management Planning the Service Environment
Planning the Service Environment
Distributing Services
Distributing Services Managing People for Service Advantage
Managing People for Service Advantage
Part IV
Part IV
Implementing Services Marketing
Implementing Services Marketing
Managing Relationships and Building Loyalty
Managing Relationships and Building Loyalty
Customer Feedback and Service Recovery
Customer Feedback and Service Recovery
Improving Service Quality and Productivity
Improving Service Quality and Productivity
Organizing for Service Leadership
Organizing for Service Leadership
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 7

8. Implementation in a Course
SM5 offers an integrative package:
15 chapters of text (with lots of examples)
8 readings
15 cases
Not built around a central conceptual framework that must be built
through a pre-defined sequence of chapters
Instead, offers a “toolbox” of important concepts and theoretical
constructs that have practical application to management
Very flexible—after Part 1, chapters can be taught in multiple
sequences; certain topics can be omitted in short courses
Links research findings to good managerial practice
End-chapter questions, cases study questions, and suggested student
papers/projects get students to work through concepts, come up with
detailed analysis and practical solutions
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 8

9. SM5 CONTENT HIGHLIGHTS
Chapters, Readings, Cases,
Pedagogical Aids
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 9

10. Part 1: Understanding Service Products,
Consumers and Markets
1. Introduction to Services Marketing
Differences among services are as important as differences
between goods and services
Service success requires focus on both customers and competitive
markets
2. Consumer Behavior in Service Encounters
3. Positioning Services in Competitive Markets
Positioning distinguishes a service brand from its competitors
Using positioning maps to plot competitive strategy
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 10

11. Four Categories of Services
Employing Different Underlying Processes (Fig. 1.5)
What is the Who or What is the Direct Recipient of the Service?
Nature of the
DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS
Service Act?
TANGIBLE People Processing Possession Processing
ACTS
e.g., airlines, hospitals, e.g., freight, repair,
haircutting, restaurants cleaning, landscaping,
hotels, fitness centers retailing, recycling
INTANGIBLE Mental Stimulus Information Processing
ACTS (directed at intangible assets)
Processing
e.g., broadcasting, consulting, e.g., accounting, banking,
education, psychotherapy insurance, legal, research
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 11

12. Positioning after New Hotel Construction:
Price vs. Service Level (Fig. 3.6)
Expensive
Mandarin
New Grand Heritage
Marriott
Continental
Action?
Regency PALACE
Shangri-La
High No action? Moderate
Service Service
Atlantic
Sheraton
Italia
Castle
Alexander IV
Less Expensive Airport Plaza
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 12

13. Part 2: Key Elements of Services Marketing
4. Creating the Service Product
Flower of Service model of core and supplementary services
5. Designing the Communications Mix for Services
6. Pricing and Revenue Management
Activity based costing (ABC)
Revenue management (+ Kimes & Chase reading + 2 cases)
Ethical concerns and perceived fairness in pricing policies
7. Distributing Services
Place, cyberspace, and time
Role of intermediaries, franchising (Aussie Pooch case)
International distribution of services
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 13

14. The Flower of Service:
Categorizing Supplementary Services (Fig. 4-5)
Information
Payment Consultation
Billing Core Order-Taking
Exceptions Hospitality
KEY:
Facilitating elements Safekeeping
Enhancing elements
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 14

15. Splitting Responsibilities for Delivering
Supplementary Services (Fig. 7.2)
As created by As enhanced As experienced
originating firm by distributor by customer
Core + = Core
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 15

16. Part 3: Managing the Service Delivery Process
8. Designing and Managing Service Processes
Detailed review and example of blueprinting
The customer as productive co-producer vs. the “Jaycustomer” as
abusive threat to profitability, quality, and safety
9. Balancing Demand and Capacity
10. Planning the Service Environment
Designing and managing the servicecape: role of music, scents,
and colors (+ Haeckel, Carbone, and Berry reading)
Role of architecture and other visual design elements, illustrated by
photos
11. Managing People for Service Advantage
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 16

17. Simplified Example: Blueprinting a Hotel Visit
(extract only)
Physical Hotel exterior, lobby, Elevator, corridor,
Evidence employees, key room, bellhop
Stage
Make Arrive, Check-in Go to
Customer reservation valet park at reception room
Line of
Actions
Interaction
Employee Doorman Receptionist
Front
Actions greets, valet verifies, gives
Face-to-face takes car key to room
Phone
Contact Rep.
records,
confirms
Line of
Visibility
Valet Make up
Backstage
Parks Car Room
Enter Register
data guest data
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 17

18. Comparison of Hotel Lobbies
(Figure 10.1)
The servicescape is part of the value proposition!
Orbit Hotel and Hostel, Los Angeles
Four Seasons Hotel, New York
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 18

19. Part 4: Implementing Services Marketing
12. Managing Relationships and Building Loyalty
How to calculate customer lifetime value (+ Mass Audubon case)
Customer relationship management systems
13. Customer Feedback and Service Recovery
14. Improving Service Quality and Productivity
15. Organizing for Service Leadership
Integrating marketing, operations, and human resources
Moving up the service leadership ladder – losers, nonentities,
professionals, leaders
Individual leadership qualities, culture and climate
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 19

20. The Wheel of Loyalty (Fig. 12.7)
3. Reduce 1. Build a
Churn Drivers Foundation
for Loyalty
Conduct churn diagnostic
Segment the market
Address key churn drivers
Be selective in acquisition
Enabled through: Implement complaint
handling & service Use effective tiering
Frontline staff of service.
Account
recovery Customer
managers Increase switching Loyalty Deliver quality
Membership costs service.
programs
CRM
Systems 2. Create Loyalty
Bonds
Build higher Deepen the
level bonds relationship
Give loyalty
rewards
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 20

21. Courses of Action Open to a Dissatisfied
Customer (Figure 13.1)
Complain to the
Complain to the
service firm
service firm
Take some form
Take some form Complain to aa
Complain to
of public action
of public action third party
third party
Take legal action
Take legal action
Service Encounter Take some form
Take some form
Service Encounter to seek redress
to seek redress
is Dissatisfactory of private action
of private action
is Dissatisfactory
Defect (switch
Defect (switch
provider)
provider)
Take no action
Take no action
Negative word-of-
Negative word-of-
mouth
mouth
Any one or aacombination of
Any one or combination of
these responses is possible
these responses is possible
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 21

22. Cause and Effect Chart for
Airline Departure Delays (Fig. 14.3)
Facilities, Frontstage
Front-Stage
Procedure
Procedures
Equipment Personnel
Personnel
Aircraft late to Gate agents Delayed check-in
Arrive late gate cannot process procedure
Oversized bags Mechanical fast enough Acceptance of late
Customers Failures
Customers Late/unavailable passengers
Late pushback airline crew
Delayed
Departures
Late food Late cabin
service cleaners
Other Causes Poor announcement of
Weather Late baggage departures
Air traffic
Late fuel Weight and balance
sheet late
Materials,
Materials,
Supplies
Backstage Information
Supplies Personnel
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 22

23. Eight Readings – Important Insights from
Thoughtful Practitioners and Leading Researchers
Selected for readability and potential to stimulate
classroom discussion
On average, shorter than those in previous edition
Two carried over from 4th edition, six new
Academic authors featured are:
Len Berry, Dick Chase, Marc Epstein, Ray Fisk, Steve Grove, Sherri
Kimes, Kay Lemon, Roland Rust, Tony Simons, Robert Westbrook,
Valarie Zeithaml
Topics: service theater, competing in a weak industry,
service brand equity, yield management, leading the
customer experience, investing to build customer equity,
why service stinks, action-profit linkage model
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 23

24. 15 Terrific Classroom-Tested Cases, Offering
Instructors Lots of Choice and Flexibility
Number of cases has been increased to 15 (including a
3-part case series) – up from 10 in 4th edition
12 cases are new to this edition, 3 carried over from 4th
edition and updated
Students will appreciate an exceptionally up-to-date
selection – all © 2000 or later, most © 2003 or 2004
A mix of lengths and levels of difficulty
Cases drawn from Harvard, Yale, and INSEAD collections,
as well as new cases from Lovelock and Wirtz
A broad cross-section of service industries and situations
Teaching notes provide detailed analysis and teaching
suggestions to help instructors do a great job in class
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 24

25. Most Cases Can Be Used for Class or Written
Assignments; Depict a Wide Array of Situations
Fast food Car sales and repair
High tech Telecommunications
Car insurance Retail banking
e-Service Apparel retailing
Restaurant Hotels
Environmental organization Franchised dog washing
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 25

26. Aussie Pooch Mobile: When the Client is a Dog,
CB means “Canine Behavior”
APM franchisee Elaine Beal
washes Zak the Rottweiler
outside his owner’s home in
suburban Brisbane
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 26

27. Pedagogical Aids in the Book
Introduction to each chapter highlights key issues and
questions
Four types of boxed inserts
Best Practice in Action (application of best practices)
Research Insights (summaries of research findings)
Service Perspectives (in-depth examples illustrating key concepts)
Management Memo (reviews of key concepts)
Review questions and application exercises
Suggested study questions for all cases
Good selection of graphics (many also as PowerPoints)
Occasional cartoons use humor to make a point
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 27

28. Instructor’s Resource Material
Detailed instructors’ manual on course website
Summaries of chapters with teaching hints
Answers to study questions
Sample course outlines
Summaries of readings with teaching hints
16 student exercises and 5 comprehensive projects
Advice on how to succeed in case teaching
Outstanding teaching notes for cases
More than 280 PowerPoint slides, organized into 15
chapter-specific files
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 28