This document provides an introduction to services marketing. It defines services and identifies their key characteristics of intangibility, heterogeneity, simultaneous production and consumption, and perishability. These characteristics present unique challenges for marketing services. The document introduces models for understanding services marketing, including the services marketing triangle, the expanded 7 Ps marketing mix for services, and the gaps model of service quality. It provides examples of service industries and discusses how the characteristics of services impact areas like quality, communication, employee commitment, and pricing. The goal is to outline the differences between goods and services and why special concepts and practices are needed for services marketing.

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Services MarketingServices Marketing

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SMSM
Contact: +923006641921 Usman Waheed
Chapter 1
INTRODUCTION
TO
SERVICES

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Objectives for Chapter 1:Objectives for Chapter 1:
Introduction to ServicesIntroduction to Services
• Explain what services are and identify service
trends
• Explain the need for special services marketing
concepts and practices
• Outline the basic differences between goods and
services and the resulting challenges for service
businesses
• Introduce the service marketing triangle
• Introduce the expanded services marketing mix
• Introduce the gaps model of service quality

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SM IntroductionIntroduction
• Services are deeds,processes and
performance
• Intangible, but may have a tangible
component
• Generally produced and consumed at the
same time
• Need to distinguish between SERVICE and
CUSTOMER SERVICE

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SM Challenges for ServicesChallenges for Services
• Defining and improving quality
• Communicating and testing new services
• Communicating and maintaining a consistent
image
• Motivating and sustaining employee commitment
• Coordinating marketing, operations and human
resource efforts
• Setting prices
• Standardization versus personalization

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Examples of ServiceExamples of Service
IndustriesIndustries
• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
• Travel
– airlines, travel agencies, theme park
• Others:
– hair styling, pest control, plumbing, lawn
maintenance, counseling services, health club

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

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Figure 1-2Figure 1-2
Percent ofPercent of
U.S. Labor Force by IndustryU.S. Labor Force by Industry
0
10
20
30
40
50
60
70
80
1929 1948 1969 1977 1984 1996
PercentofGDP
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and
July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S.
Economy,” Scientific American, 244,3 (1981): 31-39.
Yea
r
 Services
 Manufacturing
 Mining & Agriculture

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0
10
20
30
40
50
60
70
80
1948 1959 1967 1977 1987 1996
Figure 1-3Figure 1-3
Percent of U.S. Gross DomesticPercent of U.S. Gross Domestic
Product by IndustryProduct by IndustryPercentofGDP
Year
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table
B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S.
Economy,” Scientific American, 244,3 (1981): 31-39.
 Services
 Manufacturing
 Mining & Agriculture

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

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SM Implications of IntangibilityImplications of Intangibility
 Services cannot be inventoried
 Services cannot be patented
 Services cannot be readily displayed
or communicated
 Pricing is difficult

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SM Implications of HeterogeneityImplications of Heterogeneity
Service delivery and customer satisfaction
depend on employee actions
Service quality depends on many
uncontrollable factors
There is no sure knowledge that the service
delivered matches what was planned and
promoted

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Implications of SimultaneousImplications of Simultaneous
Production and ConsumptionProduction and Consumption
Customers participate in and affect the
transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult

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SM Implications of PerishabilityImplications of Perishability
 It is difficult to synchronize supply and
demand with services
 Services cannot be returned or resold

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Table 1-2Table 1-2
Services are DifferentServices are Different
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production
separate from
consumption
Simultaneous
production and
consumption
Customers participate in and affect the transaction.
Customers affect each other.
Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,”
Journal of Marketing 49 (Spring 1985): 33-46.

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

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Ways to Use theWays to Use the
Services Marketing TriangleServices Marketing Triangle
Overall Strategic
Assessment
• How is the service
organization doing
on all three sides of
the triangle?
• Where are the
weaknesses?
• What are the
strengths?
Specific Service
Implementation
• What is being promoted
and by whom?
• How will it be delivered
and by whom?
• Are the supporting
systems in place to
deliver the promised
service?

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Source: Adapted from A. Parasuraman
Company
CustomersProviders
Technology
Figure 1-6Figure 1-6
The Services TriangleThe Services Triangle
and Technologyand Technology

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Services Marketing Mix:Services Marketing Mix:
7 Ps for Services7 Ps for Services
• Traditional Marketing Mix
• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through
People, Processes, and Physical Evidence
• Ways to Use the 7 Ps

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SM Traditional Marketing MixTraditional Marketing Mix
• All elements within the control of the firm that
communicate the firm’s capabilities and image to
customers or that influence customer satisfaction
with the firm’s product and services:
 Product
 Price
 Place
 Promotion

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Expanded Mix for Services --Expanded Mix for Services --
the 7 Psthe 7 Ps
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence

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Table 1-3Table 1-3
Expanded Marketing Mix forExpanded Marketing Mix for
ServicesServices
PRODUCT PLACE PROMOTION PRICE
Physical good
features
Channel type Promotion
blend
Flexibility
Quality level Exposure Salespeople Price level
Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales
promotion
Differentiation
Warranties Transportation Publicity Allowances
Product lines Storage
Branding

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PEOPLE PHYSICAL
EVIDENCE
PROCESS
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicating
culture and values
Signage Level of customer
involvement
Employee research Employee dress
Other tangibles
Table 1-3 (Continued)Table 1-3 (Continued)
Expanded Marketing Mix forExpanded Marketing Mix for
ServicesServices

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SM Ways to Use the 7 PsWays to Use the 7 Ps
Overall Strategic
Assessment
• How effective is a firm’s
services marketing mix?
• Is the mix well-aligned
with overall vision and
strategy?
• What are the strengths and
weaknesses in terms of the
7 Ps?
Specific Service
Implementation
• Who is the customer?
• What is the service?
• How effectively does the
services marketing mix for a
service communicate its
benefits and quality?
• What
changes/improvements are
needed?

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Services Marketing TriangleServices Marketing Triangle
Applications ExerciseApplications Exercise
• Focus on a service organization. In the context
you are focusing on, who occupies each of the
three points of the triangle?
• How is each type of marketing being carried out
currently?
• Are the three sides of the triangle well aligned?
• Are there specific challenges or barriers in any of
the three areas?

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Part 1
FOCUS ON THE CUSTOMER

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

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Gaps Model of ServiceGaps Model of Service
QualityQuality
• Customer Gap:
• difference between expectations and
perceptions
• Provider Gap 1:
• not knowing what customers expect
• Provider Gap 2:
• not having the right service designs and
standards
• Provider Gap 3:
• not delivering to service standards
• Provider Gap 4:
• not matching performance to promisesPart 1 Opener

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SM The Customer GapThe Customer Gap
Expected
Service
Perceived
Service
GAP
Part 1 Opener

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Chapter 2
CONSUMER BEHAVIOR
IN SERVICES

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Objectives for Chapter 2:Objectives for Chapter 2:
Consumer Behavior inConsumer Behavior in
ServicesServices
• Overview the generic differences in consumer behavior
between services and goods
• Introduce the aspects of consumer behavior that a
marketer must understand in five categories of consumer
behavior:
• Information search
• Evaluation of service alternatives
• Service purchase and consumption
• Postpurchase evaluation
• Role of culture

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SM Consumer EvaluationConsumer Evaluation
Processes for ServicesProcesses for Services
• Search Qualities
– attributes a consumer can determine prior to
purchase of a product
• Experience Qualities
– attributes a consumer can determine after purchase
(or during consumption) of a product
• Credence Qualities
– characteristics that may be impossible to evaluate
even after purchase and consumption

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Figure 2-1Figure 2-1
Continuum of Evaluation forContinuum of Evaluation for
Different Types of ProductsDifferent Types of Products
Clothing
Jewelry
Furniture
Houses
Automobiles
Restaurantmeals
Vacations
Haircuts
Childcare
Televisionrepair
Legalservices
Rootcanals
Autorepair
Medicaldiagnosis
Difficult to evaluate
Easy to evaluate
{High in search
qualities
High in experience
qualities
High in credence
qualities
{
{Most
Goods
Most
Services

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Figure 2-2Figure 2-2
Categories in ConsumerCategories in Consumer
Decision-Making and Evaluation ofDecision-Making and Evaluation of
ServicesServices
Information
Search
Evaluation of
Alternatives
Purchase and
Consumption
Post-Purchase
Evaluation
 Use of personal sources
 Perceived risk
 Evoked set
 Emotion and mood
 Service provision as
drama
 Service roles and scripts
 Compatibility of
customers
 Attribution of dissatisfaction
 Innovation diffusion
 Brand loyalty

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Figure 2-3Figure 2-3
Categories in Consumer Decision-Categories in Consumer Decision-
Making and Evaluation of ServicesMaking and Evaluation of Services
Information
Search
Evaluation of
Alternatives
Purchase and
Consumption
Post-Purchase
Evaluation
 Use of personal sources
 Perceived risk
 Evoked set
 Emotion and mood
 Service provision as
drama
 Service roles and scripts
 Compatibility of
customers
 Attribution of dissatisfaction
 Innovation diffusion
 Brand loyalty
Culture
 Values and attitudes
 Manners and customs
 Material culture
 Aesthetics
 Educational and social
institutions

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SM Information searchInformation search
• In buying services consumers rely more on
personal sources. WHY? Refer p32
• Personal influence becomes pivotal as
product complexity increases
• Word of mouth important in delivery of
services
• With service most evaluation follows
purchase

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SM Perceived RiskPerceived Risk
• More risk would appear to be involved with
purchase of services (no guarantees)
• Many services so specialised and difficult to
evaluate (How do you know whether the
plumber has done a good job?)
• Therefore a firm needs to develop strategies
to reduce this risk, e.g, training of
employees, standardisation of offerings

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SM Evoked SetEvoked Set
• The evoked set of alternatives likely to be smaller
with services than goods
• If you would go to a shopping centre you may
only find one dry cleaner or “single brand”
• It is also difficult to obtain adequate prepurchase
information about service
• The Internet may widen this potential
• Consumer may choose to do it themselves, e.g.
garden services

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SM Emotion and MoodEmotion and Mood
• Emotion and mood are feeling states that
influence people’s perception and
evaluation of their experiences
• Moods are transient
• Emotions more intense, stable and
pervasive
• May have a negative or positive influence

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Service Provision asService Provision as
DramaDrama
• Need to maintain a desirable impression
• Service “actors” need to perform certain
routines
• Physical setting important, smell, music,
use of space, temperature, cleanliness, etc.

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Global Feature:Global Feature:
Differences in the ServiceDifferences in the Service
Experience in the U.S. and JapanExperience in the U.S. and Japan
 Authenticity
 Caring
 Control Courtesy
 Formality
 Friendliness
 Personalization
 Promptness

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SMSM
Chapter 3
CUSTOMER
EXPECTATIONS OF
SERVICES

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Objectives for Chapter 3:Objectives for Chapter 3:
Customer Expectations ofCustomer Expectations of
ServiceService
• Recognize that customers hold different types of
expectations for service performance
• Discuss controllable and uncontrollable sources of
customer expectations
• Distinguish between customers’ global expectations of
their relationships and their expectations of the service
encounter
• Acknowledge that expectations are similar for many
different types of customers
• Delineate the most important current issues surrounding
customer expectations

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SM DEFINITIONSDEFINITIONS
• Customers have different expectations re
services – or expected service
• Desired service – customer hopes to receive
• Adequate service – the level of service the
customer may accept
• DO YOUR EXPECTATIONS DIFFER RE
SPUR and CAPTAIN DOREGO?

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

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

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Figure 3-3Figure 3-3
Zones of ToleranceZones of Tolerance VARYVARY forfor
Different Service DimensionsDifferent Service Dimensions
Most Important Factors Least Important Factors
Level
of
Expectation
Source: Berry, Parasuraman, and Zeithaml (1993)
Adequate Service
Desired Service
Zone of
Tolerance
Desired
Service
Adequate
Service
Zone
of
Tolerance
Desired Service
Adequate Service

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

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• 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

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

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SM
• Transitory service intensifiers – temporary –
a computer breakdown will be less tolerated
at financial year-ends
• Perceived service alternatives
• Perceived service role of customer
• Situational factors

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

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Chapter 4
CUSTOMER
PERCEPTIONS OF
SERVICE

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Objectives for Chapter 4:Objectives for Chapter 4:
Customer Perceptions ofCustomer Perceptions of
ServiceService
• Provide you with definitions and
understanding of customer satisfaction and
service quality
• Show that service encounters or the
“moments of truth” are the building blocks of
customer perceptions
• Highlight strategies for managing customer
perceptions of service

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

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Factors InfluencingFactors Influencing
Customer SatisfactionCustomer Satisfaction
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or
failure
• Equity or fairness evaluations

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Outcomes ofOutcomes of
Customer SatisfactionCustomer Satisfaction
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues

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SM Service QualityService Quality
• The customer’s judgment of overall
excellence of the service provided in
relation to the quality that was expected.
• Process and outcome quality are both
important.

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The Five Dimensions ofThe Five Dimensions of
Service QualityService Quality
Ability to perform the promised
service dependably and accurately.
Knowledge and courtesy of
employees and their ability to
convey trust and confidence.
Physical facilities, equipment, and
appearance of personnel.
Caring, individualized attention the
firm provides its customers.
Willingness to help customers and
provide prompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy

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SERVQUAL AttributesSERVQUAL Attributes
Providing service as promised
Dependability in handling customers’
service problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records
Keeping customers informed as to
when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers’
requests
RELIABILITY
RESPONSIVENESS
Employees who instill confidence in
customers
Making customers feel safe in their
transactions
Employees who are consistently courteous
Employees who have the knowledge to
answer customer questions
ASSURANCE
Giving customers individual attention
Employees who deal with customers in a
caring fashion
Having the customer’s best interest at heart
Employees who understand the needs of
their customers
Convenient business hours
EMPATHY
Modern equipment
Visually appealing facilities
Employees who have a
neat, professional
appearance
Visually appealing materials
associated with the service
TANGIBLES

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SM The Service EncounterThe Service Encounter
• is the “moment of truth”
• occurs any time the customer interacts with the firm
• can potentially be critical in determining customer satisfaction and
loyalty
• types of encounters:
– remote encounters
– phone encounters
– face-to-face encounters
• is an opportunity to:
– build trust
– reinforce quality
– build brand identity
– increase loyalty

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

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SM Common Themes in CriticalCommon Themes in Critical
Service EncountersService Encounters
ResearchResearch
Recovery: Adaptability:
Spontaneity:Coping:
Employee Response
to Service Delivery
System Failure
Employee Response
to Customer Needs
and Requests
Employee Response
to Problem Customers
Unprompted and
Unsolicited Employee
Actions and Attitudes

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Figure 4-6Figure 4-6
Evidence of Service from theEvidence of Service from the
Customer’s Point of ViewCustomer’s Point of View
People
Process
Physical
Evidence
 Contact employees
 Customer
him/herself
 Other customers
 Operational flow of
activities
 Steps in process
 Flexibility vs.
standard
 Technology vs.
human
 Tangible
communication
 Servicescape
 Guarantees
 Technology

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SMSM
Part 2
LISTENING TO
CUSTOMER
REQUIREMENTS

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

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SMSM
Chapter 5
UNDERSTANDING
CUSTOMER
EXPECTATIONS AND
PERCEPTIONS THROUGH
MARKETING RESEARCH

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Common Research ObjectivesCommon Research Objectives
for Servicesfor Services
• To identify dissatisfied customers
• To discover customer requirements or expectations
• To monitor and track service performance
• To assess overall company performance compared to
competition
• To assess gaps between customer expectations and
perceptions
• To gauge effectiveness of changes in service
• To appraise service performance of individuals and teams
for rewards
• To determine expectations for a new service
• To monitor changing expectations in an industry
• To forecast future expectations

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SM
Figure 5-1Figure 5-1
Criteria for An EffectiveCriteria for An Effective
Services Research ProgramServices Research Program
Research
Objectives
Includes
Qualitative
Research
Includes
Quantitative
Research Includes
Perceptions
and
Expectations
of
Customers
Includes
Measures
of
Loyalty or
Behavioral
Intentions
Balances Cost
and Value of
InformationIncludes
Statistical
Validity
When Necessary
Measures
Priorities
or
Importance
Occurs
with
Appropriate
Frequency

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SM
Portfolio of Services ResearchPortfolio of Services Research
Customer Complaint
Solicitation
“Relationship” Surveys
Post-Transaction Surveys
Customer Focus Groups
“Mystery Shopping” of
Service Providers
Employee Surveys
Lost Customer Research
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure
for remedial action
Obtain customer feedback while service experience is still
fresh; act on feedback quickly if negative patterns develop
Use as input for quantitative surveys; provide a
forum for customers to suggest service-improvement
ideas
Assess company’s service performance compared to
competitors; identify service-improvement priorities; track
service improvement over time
Measure individual employee service behaviors for use in
coaching, training, performance evaluation, recognition and
rewards; identify systemic strengths and weaknesses in
service
Measure internal service quality; identify employee-
perceived obstacles to improve service; track
employee morale and attitudes
Determine the reasons why customers defect
Research Objective Type of Research
Future Expectations Research
To forecast future expectations of customers
To develop and test new service ideas

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SM
Stages in the ResearchStages in the Research
ProcessProcess
• Stage 1 : Define Problem
• Stage 2 : Develop Measurement Strategy
• Stage 3 : Implement Research Program
• Stage 4 : Collect and Tabulate Data
• Stage 5 : Interpret and Analyze Findings
• Stage 6 : Report Findings

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

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SMSM
Chapter 6
BUILDING
CUSTOMER
RELATIONSHIPS

74. 74
SM Relationship MarketingRelationship Marketing
• is a philosophy of doing business that focuses on keeping
and improving current customers
• does not necessarily emphasize acquiring new customers
• is usually cheaper (for the firm)--to keep a current
customer costs less than to attract a new one
• goal = to build and maintain a base of committed
customers who are profitable for the organization
• thus, the focus is on the attraction, retention, and
enhancement of customer relationships

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SM
A Loyal Customer is One Who...A Loyal Customer is One Who...
• Shows Behavioral Commitment
– buys from only one supplier, even though other options
exist
– increasingly buys more and more from a particular
supplier
– provides constructive feedback/suggestions
• Exhibits Psychological Commitment
– wouldn’t consider terminating the relationship--
psychological commitment
– has a positive attitude about the supplier
– says good things about the supplier

76. 76
SM
Benefits to the OrganizationBenefits to the Organization
of Customer Loyaltyof Customer Loyalty
• loyal customers tend to spend more with the
organization over time
• on average costs of relationship maintenance are
lower than new customer costs
• employee retention is more likely with a stable
customer base
• lifetime value of a customer can be very high

77. 77
SM Benefits to the CustomerBenefits to the Customer
• inherent benefits in getting good value
• economic, social, and continuity benefits
– contribution to sense of well-being and quality
of life and other psychological benefits
– avoidance of change
– simplified decision making
– social support and friendships
– special deals

78. 78
SM
Strategies for BuildingStrategies for Building
RelationshipsRelationships
• Foundations:
– Excellent Quality/Value
– Careful Segmentation
• Bonding Strategies:
– Financial Bonds
– Social & Psychological Bonds
– Structural Bonds
– Customization Bonds
• Relationship Strategies Wheel

79. 79
SM
Getting
Satisfying
Retaining
Enhancing
Figure 6-1Figure 6-1
Customer Goals ofCustomer Goals of
Relationship MarketingRelationship Marketing

80. 80
SM
Figure 6-3Figure 6-3
Underlying Logic of CustomerUnderlying Logic of Customer
Retention Benefits to theRetention Benefits to the
OrganizationOrganization
Customer Retention &
Increased Profits
Employee Loyalty
Quality
Service
Customer Satisfaction

81. 81
SM
Figure 6-5Figure 6-5
Steps in Market SegmentationSteps in Market Segmentation
andand
Targeting for ServicesTargeting for Services
Identify
Bases for
Segmenting
the Market
STEP 1:
Develop
Profiles of
Resulting
Segments
STEP 2:
Develop
Measures
of Segment
Attractive-
ness
STEP 3:
Select the
Target
Segments
STEP4:
Ensure that
Segments
Are
Compatible
STEP 5:

82. 82
SM
Excellent
Quality
and
Value
Figure 6-6Figure 6-6
Levels of Retention StrategiesLevels of Retention Strategies
I. Financial
Bonds
II.
Social
Bonds
IV.
Structural
Bonds
III. Customization
Bonds
Volume and
Frequency
Rewards
Bundling and
Cross Selling
Stable
Pricing
Social Bonds
Among
Customers
Personal
Relationships
Continuous
Relationships
Customer
Intimacy
Mass
Customization
Anticipation
/ Innovation
Shared
Processes
and
Equipment
Joint
Investments
Integrated
Information
Systems

83. 83
SMSM
Chapter 7
SERVICE RECOVERY

84. 84
SM
Figure 7-5Figure 7-5
Service Recovery StrategiesService Recovery Strategies
Learn from
Recovery Experiences
Treat Custom
ers
Fairly
Learnfrom
LostCustomers
Welcome and
Encourage Complaints
Fail Safe
the
Service
ActQuickly
Service
Recovery
Strategies

85. 85
SM
Figure 7-6Figure 7-6
Causes Behind ServiceCauses Behind Service
SwitchingSwitching
Service
Switching
Behavior
• High Price
• Price Increases
• Unfair Pricing
• Deceptive Pricing
Pricing
• Location/Hours
• Wait for Appointment
• Wait for Service
Inconvenience
• Service Mistakes
• Billing Errors
• Service Catastrophe
Core Service Failure
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable
Service Encounter Failures
• Negative Response
• No Response
• Reluctant Response
Response to Service Failure
• Found Better Service
Competition
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Ethical Problems
• Customer Moved
• Provider Closed
Involuntary Switching
Source: Sue Keaveney

86. 86
SM
Why a Good GuaranteeWhy a Good Guarantee
WorksWorks
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”

87. 87
SMSM
Part 3
ALIGNING STRATEGY,
SERVICE DESIGN
AND STANDARDS

88. 88
SM
CUSTOMER
COMPANY
GAP 2
Customer-Driven
Service Designs and
Standards
Company
Perceptions of
Consumer
Expectations
Provider GAP 2Provider GAP 2
Part 3 Opener

89. 89
SMSM
Chapter 8
SERVICE DEVELOPMENT
AND DESIGN

90. 90
SM
Figure 8-1Figure 8-1
Risks of Relying on WordsRisks of Relying on Words
Alone toAlone to
Describe ServicesDescribe Services
 Oversimplification
 Incompleteness
 Subjectivity
 Biased Interpretation

91. Figure 8-4Figure 8-4
Service Mapping/BlueprintingService Mapping/Blueprinting
A tool for simultaneously depicting the service
process, the points of customer contact, and the
evidence of service from the customer’s point of
view.
Service
Mappin
g
Process
Points of Contact
Evidence

92. 92
SM Service Blueprint ComponentsService Blueprint Components
CUSTOMER ACTIONS
line of interaction
“ONSTAGE” CONTACT EMPLOYEE ACTIONS
line of visibility
“BACKSTAGE” CONTACT EMPLOYEE ACTIONS
line of internal interaction
SUPPORT PROCESSES

93. 93
SM
Application of ServiceApplication of Service
BlueprintsBlueprints
• New Service Development
• concept development
• market testing
• Supporting a “Zero Defects” Culture
• managing reliability
• identifying empowerment issues
• Service Recovery Strategies
• identifying service problems
• conducting root cause analysis
• modifying processes

94. 94
SMSM
Chapter 10
PHYSICAL EVIDENCE
AND THE SERVICESCAPE

95. 95
SM
Table 10-1Table 10-1
Elements of PhysicalElements of Physical
EvidenceEvidence
Servicescape Other tangibles
Facility exterior
Exterior design
Signage
Parking
Landscape
Surrounding environment
Facility interior
Interior design
Equipment
Signage
Layout
Air quality/temperature
Business cards
Stationery
Billing statements
Reports
Employee dress
Uniforms
Brochures
Internet/Web pages

96. 96
SM
Table 10-2Table 10-2
Examples of Physical Evidence from theExamples of Physical Evidence from the
Customer’s Point of ViewCustomer’s Point of View
Service Physical evidence
Servicescape Other tangibles
Insurance Not applicable Policy itself
Billing statements
Periodic updates
Company brochure
Letters/cards
Hospital Building exterior
Parking
Signs
Waiting areas
Admissions office
Patient care room
Medical equipment
Recovery room
Uniforms
Reports/stationery
Billing statements
Airline Airline gate area
Airplane exterior
Airplane interior (décor, seats, air
quality)
Tickets
Food
Uniforms
Express mail Not applicable Packaging
Trucks
Uniforms
Computers
Sporting
event
Parking, Seating, Restrooms
Stadium exterior
Ticketing area, Concession Areas
Entrance, Playiing Field
Signs
Tickets
Program
Uniforms

97. 97
SMSM
Part 4
DELIVERING AND
PERFORMING SERVICE

98. 98
SM
CUSTOMER
COMPANY
Provider GAP 3Provider GAP 3
Service Delivery
GAP 3
Customer-Driven
Service Designs and
Standards
Part 4 Opener

99. 99
SMSM
Chapter 11
EMPLOYEES’ ROLES IN
SERVICE DELIVERY

100. 100
SM Service EmployeesService Employees
• They are the service
• They are the firm in the customer’s eyes
• They are marketers
• Importance is evident in
– The Services Marketing Mix (People)
– The Service-Profit Chain
– The Services Triangle

101. 101
SM Service EmployeesService Employees
• Who are they?
– “boundary spanners”
• What are these jobs like?
– emotional labor
– many sources of potential conflict
• person/role
• organization/client
• interclient
• quality/productivity

102. 102
SM
Figure 11-3Figure 11-3
Boundary Spanners InteractBoundary Spanners Interact
with Both Internalwith Both Internal
and External Constituentsand External Constituents
Internal Environment
External Environment

103. 103
SM
Figure 11-4Figure 11-4
Sources of Conflict forSources of Conflict for
Boundary-Spanning WorkersBoundary-Spanning Workers
• Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity

104. 104
SM
Figure 11-5Figure 11-5
Human Resource Strategies for Closing GAP 3Human Resource Strategies for Closing GAP 3
Customer-
oriented
Service
Delivery
Hire the
Right People
Provide
Needed Support
Systems
Retain the
Best
People
Develop
People to
Deliver
Service
Quality
Com
pete
for
the
Best
People
Hire for
Service
Competencies
and Service
Inclination
Provide
Supportive
Technology
and
Equipment
Treat
Employees
as
Customers
Empower
Employees
Be the
Preferred
Em
ployer
Train
for
Technicaland
Interactive
SkillsProm
ote
Team
work
Measure
Internal
Service
Quality
Develop
Service-
oriented
Internal
Processes
Measureand
RewardStrongService
Providers
Include
Employeesin
the
Company’s
Vision

105. 106
SM Service CultureService Culture
“A culture where an appreciation for good service
exists, and where giving good service to internal
as well as ultimate, external customers, is
considered a natural way of life and one of the
most important norms by everyone in the
organization.”

106. 107
SMSM
Chapter 12
CUSTOMERS’ ROLES IN
SERVICE DELIVERY

107. 108
SM
Importance ofImportance of OtherOther
Customers in ServiceCustomers in Service
DeliveryDelivery
• Other customers can detract from
satisfaction
• disruptive behaviors
• excessive crowding
• incompatible needs
• Other customers can enhance satisfaction
• mere presence
• socialization/friendships
• roles: assistants, teachers, supporters

108. 109
SM How Customers Widen Gap 3How Customers Widen Gap 3
• Lack of understanding of their roles
• Not being willing or able to perform their roles
• No rewards for “good performance”
• Interfering with other customers
• Incompatible market segments

109. 110
SM
Customers as ContributorsCustomers as Contributors
to Service Quality andto Service Quality and
SatisfactionSatisfaction
• Customers can contribute to
– their own satisfaction with the service
• by performing their role effectively
• by working with the service provider
– the quality of the service they receive
• by asking questions
• by taking responsibility for their own satisfaction
• by complaining when there is a service failure

110. 111
SM
Strategies for EnhancingStrategies for Enhancing
Customer ParticipationCustomer Participation
1. Define customers’ jobs
- helping himself
- helping others
- promoting the company
2. Individual differences: not everyone wants
to participate

111. 112
SMSM
Chapter 14
MANAGING DEMAND
AND CAPACITY

112. 113
SM
Understanding CapacityUnderstanding Capacity
Constraints and DemandConstraints and Demand
PatternsPatterns
• Time, labor,
equipment and
facilities
• Optimal versus
maximal use of
capacity
• Charting demand
patterns
• Predictable cycles
• Random demand
fluctuations
• Demand patterns by
market segment
Capacity Constraints Demand Patterns

113. 114
SMSM
Part 5
MANAGING SERVICE
PROMISES

114. 115
SM
CUSTOMER
COMPANY
External
Communications
to CustomersGAP 4
Service Delivery
Provider GAP 4Provider GAP 4
Part 5 Opener

115. 116
SMSM
Chapter 15
INTEGRATED
MARKETING
COMMUNICATION

116. 117
SM
Figure 15-1Figure 15-1
Communications and theCommunications and the
Services Marketing TriangleServices Marketing Triangle
Internal MarketingInternal Marketing
Vertical Communications
Horizontal Communications
Interactive Marketing
Personal Selling
Customer Service Center
Service Encounters
Servicescapes
External Marketing
Communication
Advertising
Sales Promotion
Public Relations
Direct Marketing
Company
CustomersEmployees
Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

117. 118
SM
Approaches forApproaches for
Integrating Services MarketingIntegrating Services Marketing
CommunicationCommunication
Goal:
Delivery
greater than
or equal to
promises
Improve
Customer
Education
Manage
Service
Promises
Manage
Customer
Expectations
Manage
Internal
Marketing
Communication
Figure 15-3Figure 15-3

118. 119
SM
Goal:
Delivery
greater than
or equal to
promises
Offer
Service
Guarantees
Create
Effective
Services
Communications
MANAGING SERVICE PROMISES
Make
Realistic
Promises
Coordinate
External
Communication
Figure 15-4Figure 15-4
Approaches forApproaches for
Managing Service PromisesManaging Service Promises

119. 120
SM
Communicate Criteria for
Service Effectiveness
Create Tiered-Value
Offerings
Figure 15-8Figure 15-8
Approaches forApproaches for
Managing Customer ExpectationsManaging Customer Expectations
Negotiate
Unrealistic
Expectations
Goal:
Delivery
greater than
or equal to
promises
Offer Choices

120. 121
SM
Goal:
Delivery
greater than
or equal to
promises
Prepare
Customers
for the
Service
Process
Clarify
Expectations
after the Sale
Figure 15-9Figure 15-9
Approaches forApproaches for
Improving Customer EducationImproving Customer Education
Teach
Customers
to Avoid
Peak
Demand
Periods
and
Seek Slow
Periods
Confirm
Performance
to Standards

121. 122
SM
Goal:
Delivery
greater than
or equal to
promises
Figure 15-10Figure 15-10
Approaches for ManagingApproaches for Managing
Internal Marketing CommunicationsInternal Marketing Communications
Create Effective
Vertical
Communications
Align Back
Office Personnel
w/ External Customers
Create Effective
Horizontal
Communications
Create
Cross-Functional
Teams

122. Contact: +923006641921 Usman Waheed
123
SMSM
Chapter 17
THE FINANCIAL AND
ECONOMIC IMPACT OF
SERVICE QUALITY

123. Contact: +923006641921 Usman Waheed
124
SM
Objectives for Chapter 17:Objectives for Chapter 17:
The Financial and EconomicThe Financial and Economic
Impact of ServiceImpact of Service
• Examine the direct effects of service on profits
• Consider the impact of service on getting new
customers
• Evaluate the role of service in keeping customers
• Examine the link between perceptions of service and
purchase intentions
• Emphasize the importance of selecting profitable
customers
• Discuss what is know about the key service drivers of
overall service quality, customer retention and
profitability
• Discuss the balanced performance scorecard to focus
on strategic measurement other than financials

124. Contact: +923006641921 Usman Waheed
125
SM
Figure 17-1Figure 17-1
The Direct Relationship betweenThe Direct Relationship between
Service and ProfitsService and Profits
Profits
?Service
Quality

125. Contact: +923006641921 Usman Waheed
126
SM
Figure 17-2Figure 17-2
Offensive Marketing Effects ofOffensive Marketing Effects of
Service on ProfitsService on Profits
Profits
Market
Share
Reputation Sales
Price
Premium
Service
Quality

126. Contact: +923006641921 Usman Waheed
127
SM
Figure 17-3Figure 17-3
Defensive Marketing Effects ofDefensive Marketing Effects of
Service on ProfitService on Profit
Margins
Profits
Customer
Retention
Costs
Price
Premium
Word of
Mouth
Volume of
PurchasesService
Quality

127. Contact: +923006641921 Usman Waheed
128
SM
Figure 17-5Figure 17-5
Perceptions of Service,Perceptions of Service,
BehavioralBehavioral
Intentions and ProfitsIntentions and Profits
Customer
Retention
Costs
Price
Premium
Word of
Mouth
Margins
Profits
Volume of
Purchases
Service Behavioral
Intentions
Sales

128. Contact: +923006641921 Usman Waheed
129
SM
Figure 17-6Figure 17-6
The “80/20” Customer PyramidThe “80/20” Customer Pyramid
Most Profitable
Customers
Least Profitable
Customers
What segment spends more with
us over time, costs less to maintain,
spreads positive word of mouth?
What segment costs us in
time, effort and money yet
does not provide the return
we want? What segment is
difficult to do business with?
Other
Customers
Best
Customers

129. Contact: +923006641921 Usman Waheed
130
SM
Figure 17-7Figure 17-7
The Expanded Customer PyramidThe Expanded Customer Pyramid
Most Profitable
Customers
Least Profitable
Customers
What segment spends more with
us over time, costs less to maintain,
spreads positive word of mouth?
What segment costs us in
time, effort and money yet
does not provide the return
we want? What segment is
difficult to do business with?
Gold
Iron
Lead
Platinum

130. Contact: +923006641921 Usman Waheed
131
SM
Figure 17-8Figure 17-8
The Key Drivers of Service Quality,The Key Drivers of Service Quality,
Customer Retention, and ProfitsCustomer Retention, and Profits
Key Drivers
Service
Quality
Service
Encounter
Service
Encounter
Service
Encounter
Customer
Retention
Behavioral
Intentions Profits
Service
Encounter
Service Encounters

131. Contact: +923006641921 Usman Waheed
132
SM
Figure 17-9Figure 17-9
Sample Measurements for theSample Measurements for the
Balanced ScorecardBalanced Scorecard
Adapted from Kaplan and Norton
Innovation and
Learning Perspective
Customer
Perspective
Service Perceptions
Service Expectations
Perceived Value
Behavioral Intentions:
Operational
Perspective:
Right first time (% hits)
Right on time (% hits)
Responsiveness (% on
time)
Transaction time (hours,
days)
Throughput time
Reduction in waste
Process quality
Financial Measures
Price Premium
Volume Increases
Value of Customer
Referrals
Value of Cross Sales
Long-term Value of
Customer
% Loyalty
% Intent to Switch
# Customer
Referrals
# Cross Sales
# of Defections
Number of new products
Return on innovation
Employee skills
Time to market
Time spent talking to
customers

132. Contact: +923006641921 Usman Waheed
133
SM
Figure 17-10Figure 17-10
Service Quality Spells ProfitsService Quality Spells Profits
Service
Quality
Customer
Retention
Costs
Price
Premium
Word of
Mouth
Margins
Profits
Defensive
Marketing
Volume of
Purchases
Market
Share
Reputation
Sales
Price
Premium
Offensive
Marketing