3. The services sector is not only the dominant sector in India’s
GDP, but has also attracted significant foreign investment, has
contributed significantly to export and has provided large-
scale employment. India’s services sector covers a wide
variety of activities such as trade, hotel and restaurants,
transport, storage and communication, financing, insurance,
real estate, business services, community, social and personal
services, and services associated with construction.
As of 2018, 31.45 per cent of India’s employed population is
working in the services sector.
3
4. Market Size
The services sector is a key driver of India’s economic growth. The
sector contributed 55.39 per cent to India’s Gross Value Added at
current price in FY20*. Services sector’s GVA grew at a CAGR of
1.45 per cent to US$ 1,064.8 billion in FY20 from US$ 1,005
billion in FY16. Net export estimate in FY20 from services stood at
US$ 214.14 billion, while import was at US$ 131.41 billion in
FY20.
Nikkei India Services Purchasing Managers' Index (PMI) stood at
14.6 in May 2020, indicating a contraction as COVID-19 led
shutdown impaired businesses.
4
5. Investments
Some of the developments and major investments by companies in
the services sector in the recent past are as follows:
Services sector is the largest recipient of FDI in India with inflow of
US$ 82 billion between April 2000 and March 2020.
In June 2020, Jio Platforms Ltd. sold 22.38 per cent stake worth Rs
1.04 trillion (US$ 14.75 billion) to ten global investors in a span of
eight weeks under separate deals, involving Facebook, Silver Lake,
Vista, General Atlantic, Mubadala, Abu Dhabi Investment Authority
(ADIA), TPG Capital and L. Catterton. This is the largest
continuous fundraise by any company in the world.
5
6. In February 2020, Novartis launched Biome India, a digital
innovation hub, in Hyderabad, its first such centre in Asia and
the fourth globally.
Indian healthcare companies are entering into mergers and
acquisition (M&A) with domestic and foreign companies to
drive growth and gain new markets.
6
7. Government Initiatives
The Government of India recognizes the importance of promoting
growth in services sector and provides several incentives across a
wide variety of sectors like health care, tourism, education,
engineering, communications, transportation, information technology,
banking, finance and management among others.
The Government of India has adopted few initiatives in the recent
past, some of these are as follows:
The Cabinet Committee on Economic Affairs has given its approval
for continuation of the process of recapitalization of Regional Rural
Banks (RRBs) by providing minimum regulatory capital to RRBs for
another year beyond 2019-20.
7
8. Government of India has launched the National
Broadband Mission with an aim to provide Broadband
access to all villages by 2022.
Under the Mid-Term Review of Foreign Trade Policy
(2015-20), the Central Government increased incentives
provided under Services Exports from India Scheme
(SEIS) by two per cent.
Government of India has been working to remove many
trade barriers to services, for which it tabled a draft
legal text on Trade Facilitation in Services to the WTO in
2017.
8
9. Achievements
Following are the achievements of the Government in the past
four years:
India’s rank jumped to 22 in 2019 from 137 in 2014 on World
Bank’s Ease of doing business - Getting Electricity ranking.
Ministry of Tourism sanctioned 18 projects covering all the
Northeast States for Rs 1,456 crore (US$ 211.35 million) for
development and promotion of tourism in the region under
Swadesh Drashan and PRASHAD schemes.
9
10. A total of 11 projects worth Rs 824.80 crore (US$ 127.98 million)
were sanctioned under the Swadesh Darshan scheme. During 2019-20,
an additional fund Rs 1,854.67 crore (US$ 269.22 million) was
sanctioned for new projects under this scheme.
Statue of Sardar Vallabhbhai Patel, also known as ‘Statue of Unity’,
was inaugurated in October 2018 and the total revenue generated till
November 2019 stood at Rs 82.51 crore (US$ 11.81 million).
IT-BPM industry’s revenue was estimated at around US$ 191 billion
in FY20 with a growth rate of 7.7 per cent.
10
11. Road Ahead
Services sector growth is governed by domestic and global factors.
The Indian facilities management market is expected to grow at 17
per cent CAGR between 2015 and 2020 and surpass the US$ 19
billion mark supported by booming real estate, retail, and
hospitality sectors.
By 2023, healthcare industry is expected to reach US$ 132 billion.
India’s digital economy is estimated to reach US$ 1 trillion by
2025. By end of 2023, India’s IT and business services sector is
expected to reach US$ 14.3 billion with 8 per cent growth.
11
12. Road Ahead
The implementation of the Goods and Services Tax (GST)
has created a common national market and reduced the
overall tax burden on goods. It is expected to reduce costs in
the long run on account of availability of GST input credit,
which will result in the reduction in prices of services.
12
14. 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
15. 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
16. 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
17. 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
18. A service is an act or performance offered by one party to
another. They are economic activities that create value and
provide benefits for customers at specific times and places as a
result of bringing desired change. The term service is not
limited to personal services like medical services, beauty
parlors, legal services, etc. According to the marketing experts
and management thinkers the concept of services is a wider one.
The term services are defined in a number of ways but not a
single one is universally accepted.
19. Main characteristics of services are –
• Intangibility
• Perishability
• Inseparability
• Heterogeneity
• Ownership
• Quality Measurement
• Nature of demand
20. Services are intangible we cannot touch them are not physical
objects. According to Carman and Uhl, a consumer feels that he has
the right and opportunity to see, touch, hear, smell or taste the goods
before they buy them. This is not applicable to services. The buyer
does not have any opportunity to touch smell, and taste the services.
While selling or promoting a service one has to concentrate on the
satisfaction and benefit a consumer can derive having spent on these
services.
e.g. An airline sells a flight ticket from A destination to B
destination. Here it is the matter’ of consumer’s perception of
services than smelling it or tasting it.
21. Services too, are perishable like labor; Service has a high degree
of perishability. Here the element of time assumes a significant
position. If we do not use it today, it labor if ever. If labor stops
working, it is a complete waste. It cannot be stored. Utilized or
unutilized services are an economic waste. An unoccupied
building, an unemployed person, credit unutilized, etc. are
economic waste. Services have a high level of perishability.
22. Services are generally created or supplied simultaneously. They are
inseparable. For an e.g., the entertainment industry, health experts
and other professionals create and offer their service at the same
given time. Services and their providers are associated closely and
thus, not separable. Donald Cowell states ‘Goods are produced, sold
and then consumed whereas the services are sold and then produced
and consumed’. Therefore inseparability is an important
characteristic of services which proves challenging to service
management industry.
23. This character of services makes it difficult to set a standard for any
service. The quality of services cannot be standardized. The price
paid for a service may either be too high or too low as is seen in the
case of the entertainment industry and sports. The same type of
services cannot be sold to all the consumers even if they pay the same
price.
Consumers rate these services in different ways. This is due to the
difference in perception of individuals at the level of providers and
users. Heterogeneity makes it difficult to establish standards for the
output of service firm.
24. • In the sale of goods, after the completion of process, the goods
are transferred in the name of the buyer and he becomes the
owner of the goods. But in the case of services, we do not find
this. The users have only an access to services. They cannot own
the service.
e.g. a consumer can use personal care services or medical
services or can use a hotel room or swimming pool, however
the ownership remains with the providers.
25. • A service sector requires another tool for measurement. We can
measure it in terms of service level. It is very difficult to rate or
quantify total purchase. E.g. we can quantify the food served in
a hotel but the way waiter serves the customer or the behavior
of the staff cannot be ignored while rating the total process.
Hence we can determine the level of satisfaction at which
users are satisfied. Thus the firm sells good atmosphere
convenience of customers, consistent quality of services, etc.
26. Generally, the services are fluctuating in nature. During the peak
tourist seasons there is an abnormal increase in the demand of
services. Therefore, while identifying the salient features of
services one cannot ignore the nature of demand. E.g. tourists go
to hill stations during summer season wherein public transport
utilities are used substantially. This indicates that flexibility is the
important feature of service.
29. Services cannot be inventoried
Services cannot be patented
Services cannot be readily displayed or communicated
Pricing is difficult
30. 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
31. Customers participate in and affect the transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult
32. It is difficult to synchronize supply and demand with
services
Services cannot be returned or resold
33. 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.
34. Service can be classified in several ways. Various authors have
tried to classify services on the basis of different features
/aspects such as the market segments, tangibility factor ,skill
type etc. They are enlisted below.
•Market segment
•Degree of tangibility
•Skills of the service provider
35. • Goals of the service provider
• Degree of regulation
• Degree of labor intensiveness
• Degree of customer contact
In India service sector contributes 60 % of the GDP and 35 %
of employment. Around 80 % of India’s total exports are
dominated by high skilled services , such as software
business services and communication services.
36. Market Segment : Service can be classified on the basis of
market segment they are catering to. Thus we can have service
catering to end consumers such as the hair salon and beauty
services , coaching classes and car wash services and services
catering to organizational customers such as management
consulting, repair and maintenance services for machines and
legal services
37. Service can be classified into tangible offerings
• Highly Tangible: Rental Goods ( Hotel Room, Car
etc.)
• Service linked to tangible goods: Owned Goods
(T.VRepair, car repair etc.)
• Highly Intangible: Non –Good (Consulting,
College education etc.)
38. Service can be provided by highly skilled labour and
unskilled labour. Thus service can be classified as
•Professional ( Legal, Medical , management etc. )
•Non professional ( Taxi, security , shoe shining
, laundry , cleaning services etc.)
39. Services are differentiated on the basis of the goals
they pursue-whether they are profit making or non
profit making.
•Profit ( Airlines, Hotels , Insurance etc)
•Non-profit (NGO, Public libraries , Religious
Places etc.)
40. Service are also classified according to the extent of
government regulation on them.
Highly Regulated (Airlines, Railways, Roadways
etc.)
Limited Regulated ( Hospitality sector )
Non Regulated ( Barber and Beauty Service, Personal
services etc.)
41. Services can be equipment based or people based.
Equipment based services –
•completely automated services (ATMs, Coffee
Vending Machines etc.)
•Relatively Unskilled Operators (Movie theatre, Taxis,
Dry cleaning etc)
•Skilled operator (Airlines , Crane machines
, Railways etc.)
43. Service is categorized on the basis of customer contact
High Contact- Where customer spends time
in days , weeks , months or years like education and
hospitality services.
Low Contact –Low contact service is one which the
contact with service system ranges from few minutes
to some hours like appliance repair service, postal
services etc.
45. 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?
46. Source: Adapted from A. Parasuraman
Company
Customers
Providers
Technology
The Services Triangle
and Technology
47. Traditional Marketing Mix
Expanded Mix for Services: 7 Ps
Building Customer Relationships Through
People, Processes, and Physical Evidence
Ways to Use the 7 Ps
48. 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
49. Product
Price
Place
Promotion
People
Process
Physical Evidence
50. 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
51. 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
52. 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?
53. 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?
56. 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
promises
56
Part 1 Opener
59. 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
59
60. 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
60
61. 61
Difficult to evaluate
Easy to evaluate
High in search
qualities
High in experience
qualities
High in credence
qualities
Most
Goods
Most
Services
63. 63
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
64. 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
64
65. 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
65
66. 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
66
67. 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
67
68. Need to maintain a desirable impression
Service “actors” need to perform certain
routines
Physical setting important, smell, music, use
of space, temperature, cleanliness, etc.
68
71. 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
72. 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?
74. Figure 3-2
The Zone of Tolerance
Adequate Service
Desired Service
Zone of
Tolerance
75. 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
Zone
of
Tolerance
Desired Service
Adequate Service
76. 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)
77. Figure 3-5
Factors that Influence
Desired Service
Desired
Service
Adequate
Service
Zone
of
Tolerance
Enduring Service
Intensifiers
Personal Needs
78. 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
79. 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
80. 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
81. 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
84. Product/service quality
Product/service attributes or features
Consumer Emotions
Attributions for product/service success or
failure
Equity or fairness evaluations
87. 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.
88. 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
Tangibles
Reliability
Responsiveness
Assurance
Empathy
89. 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:
90. SERVQUAL 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
91. 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
94. 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
95. 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)?
97. Acknowledge
problem
Explain causes
Apologize
Compensate/upgr
ade
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
98. 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
99. 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
100. Listen
Try to
accommodate
Explain
Let go of the
customer
Take customer’s
dissatisfaction
personally
Let customer’s
dissatisfaction
affect others
DO DON’T
101. 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
105. 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
106. 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
108. 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
109. 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
110. 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
111. 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
114. 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”
115. 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
116. Assumptions
Income
◦ Expected Customer Lifetime
◦ Average Revenue (month/year)
◦ Other Customers convinced via WOM
◦ Employee Loyalty??
Expenses
◦ Costs of Serving Customer Increase??
117. 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
118. 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?
119. 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
120. 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
121. Not all customers are good relationship
customers:
◦ wrong segment
◦ not profitable in the long term
◦ difficult customers
125. 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:
126. 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
128. 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
129. 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.
130. 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
132. 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
133. 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?)
134. 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.
135. forces company to focus on customers
sets clear standards
generates feedback
forces company to understand why it
failed
builds “marketing muscle”
136. 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
137. 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”
142. Figure 8-2
New 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
144. 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
Mapping
Process
Points of Contact
Evidence
145. CUSTOMER ACTIONS
line of interaction
“ONSTAGE” CONTACT EMPLOYEE ACTIONS
line of visibility
“BACKSTAGE” CONTACT EMPLOYEE ACTIONS
line of internal interaction
SUPPORT PROCESSES
146. Driver
Picks
Up Pkg.
Dispatch
Driver
Airport
Receives
& Loads
Sort
Packages
Load on
Airplane
Fly to
Destinatio
n
Unload
&
Sort
Load
On
Truck
SUPPORT
PROCESS
CONTACT
PERSON
(Back
Stage)
(On
Stage)
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
148. 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.
149. 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
150. 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
152. 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
153. 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
154. 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
156. 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
157. 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
158. 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)
159. 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
160. 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
162. 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
164. 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
165. 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
166. 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
170. 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
171. 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
172. Who are they?
◦ “boundary spanners”
What are these jobs like?
◦ emotional labor
◦ many sources of potential conflict
person/role
organization/client
interclient
quality/productivity
174. • Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity
175. Customer-
oriented
Service
Delivery
Hire the
Right People
Provide
Needed Support
Systems
Retain the
Best
People
Develop
People to
Deliver
Service
Quality
Hire for
Service
Competencies
and Service
Inclination
Provide
Supportive
Technology
and
Equipment
Treat
Employees
as
Customers
Empower
Employees
176. “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.”
178. 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
179. 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
180. 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
182. “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?
183. 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
184. 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
185. 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
187. 1. Define customers’ jobs
- helping himself
- helping others
- promoting the company
2. Individual differences: not everyone wants
to participate
188. 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
190. 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
191. 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
192. 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 Low
Shift Demand
193. 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 Low
Flex Capacity
194. 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.
195. 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
196. 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
200. 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
201. 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
202. Goal:
Delivery
greater than
or equal to
promises
Improve
Customer
Education
Manage
Service
Promises
Manage
Customer
Expectations
Manage
Internal
Marketing
Communication
Figure 15-3
203. Goal:
Delivery
greater than
or equal to
promises
Offer
Service
Guarantees
Create
Effective
Services
Communications
MANAGING SERVICE PROMISES
Make
Realistic
Promises
Coordinate
External
Communicatio
n
Figure 15-4
Approaches for
Managing Service Promises
204. 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
205. 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
206. 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
208. 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
213. 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
214. 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
216. 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
217. 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
