Marketing of Services Total

1
SM
Services Marketing
Contact: +923006641921 Usman Waheed

2
SM Growth

3
S M
Cause Effect Illustrations
Technological Higher complexity of Engg. Services,
advancements products maintenance services
Globalisation
Causes for growth of
Business
internationalization
Multinational
couriers
sercauses regulated of
sectorsgrowthvice sector
Deregulation policies Pvtisation of Telecom, Insurance
Competition &Higher Expert knowledge Market research,

productivity consultancy, business
process engg
Cost effectiveness Optimum manpower, Security services,

subcontract Payroll processing

4
SM Contd..
Cause Effect Illustrations
Computer explosion Speed of work performance Multimedia, Advertising
services
Overall increase in affluency Increased spending power for Laundry services, ticketing,
comforts travel agency
Increase % of working Work performed by women Crèches, baby sitting
women is outsourced
More leisure time Shift towards pleasure & Recreation
entertainment
Greater life expectancy Special care facilities Nursing homes
Increased complexity of life Special services Consultants(law,I.T,
marriage)

5
SM Introduction
• Services are deeds,processes and

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

6
SM I.B.M
• International Business Machines (IBM)

United States. IBM is the
world's fourth largest technology company
and the second most valuable global brand[4]
(after Coca-Cola). offers infrastructure
services, hosting services, and
consulting services in areas ranging from
mainframe computers to nanotechnology

7
SM Challenges 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
8
Examples of Service
SM
Industries
• 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 1-1
SM Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics Fast-food
 Outlets
 Intangible
Dominant
Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
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SM Table 1-2
Services 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 Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption 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 1-5
SM The Services Marketing Triangle
Company
(Management)
Internal External
Marketing Marketing
“enabling the “setting the
promise” promise”
Employees Interactive Marketing Customers

“delivering the promise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

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

13
Figure 1-6
SM The Services Triangle

and Technology
Company
Technology
Providers Customers
Source: Adapted from A. Parasuraman

14
SM Services Marketing Mix:

7 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 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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SM Expanded Mix for Services --

the 7 Ps
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence

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Table 1-3
SM Expanded Marketing Mix for
Services
PRODUCT PLACE PROMOTION PRICE
Physical good Channel type Promotion Flexibility
features blend
Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding

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Table 1-3 (Continued)
SM Expanded Marketing Mix for
Services
PEOPLE PHYSICAL PROCESS
EVIDENCE
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicating Signage Level of customer

culture and values involvement
Employee research Employee dress
Other tangibles

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SM Ways to Use the 7 Ps
Overall Strategic Specific Service

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

20
SM
Applications 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?

21
SM
Part 1
FOCUS ON THE CUSTOMER

22
SM Gaps Model of Service Quality
CUSTOMER Expected
Service
Customer
Gap
Perceived
Service
External
COMPANY Service Delivery Communications
GAP 4 to Customers
GAP 1 GAP 3
Customer-Driven Service
Designs and Standards
GAP 2
Company Perceptions of
Consumer Expectations
Part 1 Opener
23
Gaps Model of Service
SM
Quality
• 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
Part 1 Opener
24
SM The Customer Gap
Expected
Service
GAP
Perceived
Service
Part 1 Opener
25
SM
Chapter 3
CUSTOMER
EXPECTATIONS OF
SERVICES

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Objectives for Chapter 3:
SM Customer Expectations of
Service
• 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 DEFINITIONS
• 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 3-1
SM Dual Customer
Expectation Levels
(Two levels of expectations)
Desired Service
Zone of
Tolerance
Adequate Service

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

Figure 3-3 30
SM Zones of Tolerance VARY for

Different Service Dimensions
Desired Service
Level
of
Zone of Desired
Expectation Desired Service
Tolerance Service
Adequate Service
Zone
of
Tolerance
Adequate
Adequate Service
Service
Most Important Factors Least Important Factors

Source: Berry, Parasuraman, and Zeithaml (1993)
Figure 3-4 31
Zones of Tolerance VARY for

SM
First-Time and Recovery Service
First-Time Service
Outcome
Process
Recovery Service
Outcome
Process
LOW HIGH
Expectations
Source: Parasuraman, Berry and Zeithaml (1991)
Figure 3-5 32
SM Factors that Influence

Desired Service
Enduring Service
Intensifiers
Desired
Service
Personal Needs
Zone
of
Tolerance
Adequate
Service

33
SM
• Personal needs include physical, social,

psychological categories
• Enduring service intensifiers are individual, stable

factors that lead to heightened sensitivity to
service
This can further divided into Derived Service
Expectations and Personal service Philosophies

34
Figure 3-6
SM Factors that Influence

Adequate Service
Transitory Service
Intensifiers
Desired
Perceived Service Service
Alternatives
Zone
of
Tolerance
Self-Perceived
Service Role Adequate
Service
Situational
Factors
35
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

Figure 3-7 36
Factors that Influence

SM
Desired and Predicted Service
Explicit Service
Promises
Implicit Service
Promises
Desired Word-of-Mouth
Service
Zone
Past Experience
of
Tolerance
Adequate Predicted
Service Service
37
SM
Chapter 4
CUSTOMER
PERCEPTIONS OF
SERVICE
38
SM Customer Perceptions of
Service
• 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
Figure 4-1 39
Customer Perceptions of
SM
Service Quality and
Customer Satisfaction
Reliability Situational
Factors
Responsiveness Service
Quality
Assurance
Customer
Empathy Satisfaction
Product
Quality
Tangibles
Personal
Price Factors
40
Factors Influencing
SM
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or
failure
• Equity or fairness evaluations
41
Outcomes of
SM
• Increased customer retention

• Positive word-of-mouth communications
• Increased revenues
Figure 4-3 42
Relationship between Customer

SM
Satisfaction and Loyalty in
Competitive Industries
100%
Loyalty (retention)
80%
60%
40%
20%
0%
Very Dissatisfied Neither Satisfied Very
dissatisfied satisfied nor satisfied
dissatisfied
Satisfaction measure
Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.
43
SM Service 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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SM The Five Dimensions of

Service Quality
Reliability Ability to perform the promised

service dependably and accurately.
Knowledge and courtesy of
Assurance employees and their ability to
convey trust and confidence.
Tangibles Physical facilities, equipment, and
appearance of personnel.
Empathy Caring, individualized attention the
firm provides its customers.
Responsiveness Willingness to help customers and
provide prompt service.
45
SM Exercise to
Identify Service Attributes
In groups of five, choose a services industry and spend 10 minutes
brainstorming specific requirements of customers in each of the five
service quality dimensions. Be certain the requirements reflect the
customer’s point of view.
Reliability:
Assurance:
Tangibles:
Empathy:
Responsiveness:
46
SERVQUAL Attributes
SM ASSURANCE
■ Employees who instill confidence in
customers
■ Making customers feel safe in their
transactions
RELIABILITY ■ Employees who are consistently courteous
■ Employees who have the knowledge to
■ Providing service as promised answer customer questions
■ Dependability in handling customers’
service problems EMPATHY
■ Performing services right the first time ■ Giving customers individual attention
■ Providing services at the promised time ■ Employees who deal with customers in a
■ Maintaining error-free records caring fashion
■ Having the customer’s best interest at heart
RESPONSIVENESS ■ Employees who understand the needs of
their customers
■ Keeping customers informed as to
■ Convenient business hours
when services will be performed TANGIBLES
■ Prompt service to customers ■ Modern equipment
■ Willingness to help customers ■ Visually appealing facilities
■ Readiness to respond to customers’ ■ Employees who have a
requests neat, professional
appearance
■ Visually appealing materials
associated with the service
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SM The 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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Figure 4-4
SM A Service Encounter
Cascade for a Hotel Visit
Check-In
Check-In
Bellboy
BellboyTakes
Takes to
to Room
Room
Restaurant
RestaurantMeal
Meal
Request
RequestWake-Up
Wake-Up Call
Call
Checkout
Checkout
Figure 4-5 49
A Service Encounter
SM
Cascade for an Industrial
Purchase
Sales
SalesCall
Call
Delivery
Delivery and
and Installation
Installation
Servicing
Servicing
Ordering
OrderingSupplies
Supplies
Billing
Billing
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Critical Service Encounters
SM
Research
• 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
51
Sample Questions for Critical
SM
Incidents Technique Study
• Think of a time when, as a customer, you had a

particularly satisfying (dissatisfying) interaction with
an employee of .
• When did the incident happen?
• What specific circumstances led up to this situation?
• Exactly what was said and done?
• What resulted that made you feel the interaction was
satisfying (dissatisfying)?
52
SM Common Themes in Critical

Service Encounters
Research
Recovery: Adaptability:
Employee Response Employee Response
to Service Delivery to Customer Needs
System Failure and Requests
Coping: Spontaneity:
Employee Response Unprompted and
to Problem Customers Unsolicited Employee
Actions and Attitudes
53
SM Recovery
DO DON’T
• Acknowledge • Ignore customer
problem • Blame customer
• Explain causes • Leave customer to
• Apologize fend for him/herself
• Compensate/upgrade • Downgrade
• Lay out options • Act as if nothing is
• Take responsibility wrong
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SM Adaptability
DO DON’T
• Recognize the • Promise, then fail to
seriousness of the need follow through
• Acknowledge • Ignore
• Anticipate • Show unwillingness to
• Attempt to accommodate try
• Explain rules/policies • Embarrass the customer
• Take responsibility • Laugh at the customer
• Exert effort to • Avoid responsibility
accommodate
55
SM Spontaneity
DO DON’T
• Take time • Exhibit impatience
• Be attentive • Ignore
• Anticipate needs
• Yell/laugh/swear
• Listen
• Provide information
• Steal from or cheat a
(even if not asked) customer
• Treat customers fairly • Discriminate
• Show empathy • Treat impersonally
• Acknowledge by name
56
SM Coping
DO DON’T
• Listen • Take customer’s
• Try to accommodate dissatisfaction
• personally
Explain
• Let customer’s
• Let go of the
customer dissatisfaction affect
others
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Figure 4-6
SM Evidence of Service from the
Customer’s Point of View
 Contact employees
 Customer
 Operational flow of him/herself
activities  Other customers
People
 Steps in process
 Flexibility vs.
standard
 Technology vs. Physical  Tangible
human Process
Evidence communication
 Servicescape
 Guarantees
 Technology
58
SM
Part 2
LISTENING TO
CUSTOMER
REQUIREMENTS
59
SM Provider GAP 1
CUSTOMER
Expected
Service
GAP 1
Company
COMPANY Perceptions of
Consumer
Expectations
Part 2 Opener
60
SM
Chapter 5
UNDERSTANDING
CUSTOMER
EXPECTATIONS AND
PERCEPTIONS THROUGH
MARKETING RESEARCH
61
SM Understanding Customer Expectations
and Perceptions through
Marketing Research
• Present the types of and guidelines for marketing
research in services
• Show the ways that marketing research information
can and should be used for services
• Describe the strategies by which companies can
facilitate interaction and communication between
management and customers
• Present ways that companies can and do facilitate
interaction between contact people and management
62
SM Common Research Objectives

for 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
63
Figure 5-1
SM Criteria for An Effective
Services Research Program
Includes
d es Quantitative
l u ve
Inc litati h Research Includes
a c
Qu esear Perceptions
R and
Expectations
Occurs of
Customers
with
Appropriate Research Includes
Frequency Measures
Objectives of
Loyalty or
Behavioral
Measures Intentions
Priorities
or C ost
Importance n ces of
la e
Includes Ba Valu ion
Statistical and rmat
o
Validity Inf
When Necessary
64
SM Portfolio of Services Research

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

To develop and test new service ideas
Future Expectations Research
65
Stages in the Research
SM
Process
• 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
66
Figure 5-5
SM Service Quality Perceptions

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

67
Service Quality Perceptions
SM Relative to Zones of Tolerance by
Dimensions
10
8
O O O O
O
6
0
Reliability Responsiveness Assurance Empathy Tangibles
Computer Zone of Tolerance O S.Q. Perception

Manufacturer
68
Figure 5-6
SM Importance/Performance Matrix
HIGH
High  
Leverage
Attributes to Improve Attributes to Maintain

Importance
  

Low

 Leverage

Attributes to Maintain Attributes to De-emphasize
LOW
HIGH
Performance
69
SM
Chapter 6
BUILDING
CUSTOMER
RELATIONSHIPS
70
SM Building Customer
Relationships
• 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”
71
SM Relationship 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
72
SM Lifetime Value of a Customer
• Assumptions
• Income
– Expected Customer Lifetime
– Average Revenue (month/year)
– Other Customers convinced via WOM
– Employee Loyalty??
• Expenses
– Costs of Serving Customer Increase??
73
SM
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
74
SM Customer Loyalty Exercise
• Think of a service provider you are loyal to.

• What do you do (your behaviors, actions, feelings)
that indicates you are loyal?
• Why are you loyal to this provider?
75
Benefits to the Organization
SM
of 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
76
SM Benefits 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
77
“The Customer Isn’t Always
SM
Right”
• Not all customers are good relationship

customers:
– wrong segment
– not profitable in the long term
– difficult customers
78
Strategies for Building
SM
Relationships
• Foundations:
– Excellent Quality/Value
– Careful Segmentation
• Bonding Strategies:
– Financial Bonds
– Social & Psychological Bonds
– Structural Bonds
– Customization Bonds
• Relationship Strategies Wheel
79
Figure 6-1
SM Customer Goals of
Relationship Marketing
Enhancing
Retaining
Satisfying
Getting
Figure 6-3 80
SM Underlying Logic of Customer

Retention Benefits to the
Organization
Customer Retention & Quality

Increased Profits Service
Employee Loyalty
81
Figure 6-5
SM Steps in Market Segmentation
and
Targeting for Services
STEP 1: STEP 2: STEP STEP4: STEP

Identify Develop 3:
Develop Select the
5: that
Ensure
Bases for Profiles of Measures Target Segments
Segmenting Resulting of Segment Segments Are
the Market Segments Attractive- Compatible
ness
Figure 6-6 82
SM Levels of Retention Strategies

Stable
Volume and Pricing
Frequency Bundling and
Rewards Cross Selling
Integrated I. Financial Continuous

Information Bonds Relationships
Systems
IV.
Excellent
Quality II.
Joint Structural Personal
Investments and Social Relationships
Bonds
Value Bonds
Shared Social Bonds

Processes III. Customization Among
and Bonds Customers
Equipment
Anticipation Customer
/ Innovation Intimacy
Mass
Customization
83
SM
Chapter 7
SERVICE RECOVERY
84
SM Service Recovery
• Illustrate the importance of recovery from service

failures in building loyalty
• Discuss the nature of consumer complaints and why
people do and do not complain
• Provide evidence of what customers expect and the
kind of responses they want when they complain
• Provide strategies for effective service recovery
• Discuss service guarantees
85
Figure 7-1
SM Unhappy Customers’
Repurchase Intentions
Unhappy Customers Who Don’t Complain
9%
Unhappy Customers Who Do Complain 37%
19%
Complaints Not Resolved
46%
54%
Complaints Resolved
70%
Complaints Resolved Quickly

82%
95%
Percent of Customers Who Will Buy Again
Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Source: Adapted from data reported by the Technical Assistance Research Program.
Figure 7-3 86
SM Customer Response
Following Service Failure
Service Failure
Take Action Do Nothing
Switch Providers Stay with Provider
Complain to Complain to Complain to

Provider Family & Friends Third Party
Switch Providers Stay with Provider

87
Figure 7-5
SM Service Recovery Strategies

We
En lcom
e co
vi
c ura e an
r ge d
Se Co
e m
th pla
f e i
Sa n ts
il
Fa
Act Quickly
Service
Learn from
Lost Custom
Recovery
Strategies
ers
y
air l
F
Le s
er
Re arn f om
co rom
ve ust
ry C
Ex e at
pe Tr
ri en
ce
s
Pricing
88
•
•
High Price
Price Increases
Figure 7-6
SM Causes Behind Service

• Unfair Pricing
• Deceptive Pricing
Inconvenience
• Location/Hours
• Wait for Appointment
• Wait for Service
Switching
Core Service Failure
• Service Mistakes
• Billing Errors
• Service Catastrophe
Service Encounter Failures

Service
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable Switching
Response to Service Failure
• Negative Response
Behavior
• No Response
• Reluctant Response
Competition
• Found Better Service
Ethical Problems
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Involuntary Switching
• Customer Moved Source: Sue Keaveney
• Provider Closed
89
SM Service Guarantees
• guarantee = an assurance of the fulfillment of a condition

(Webster’s Dictionary)
• for products, guarantee often done in the form of a

warranty
• services are often not guaranteed

– cannot return the service
– service experience is intangible
–(so what do you guarantee?)
90
Table 7-7
SM Characteristics of an
Effective Service Guarantee
Unconditional
• The guarantee should make its promise unconditionally -
no strings attached.
Meaningful
• It should guarantee elements of the service that are
important to the customer.
• The payout should cover fully the customer's
dissatisfaction.
Easy to Understand and Communicate
• For customers - they need to understand what to expect.
• For employees - they need to understand what to do.
Easy to Invoke and Collect
• There should not be a lot of hoops or red tape in the way
of accessing or collecting on the guarantee.
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
91
Why a Good Guarantee
SM
Works
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”

92
• 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
93
• 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”
94
SM
Part 3
ALIGNING STRATEGY,
SERVICE DESIGN
AND STANDARDS
95
SM
Provider GAP 2
CUSTOMER
COMPANY Customer-Driven
Service Designs and
Standards
GAP 2
Company
Perceptions of
Consumer
Expectations
Part 3 Opener
96
SM
Chapter 8
SERVICE DEVELOPMENT
AND DESIGN
Objectives for Chapter 8: 97
SM Service Development and

Design
• Describe the challenges inherent in service design
• Present steps in the new service development
process
• Show the value of service blueprinting and quality
function deployment (QFD) in new service design
and service improvement
• Present lessons learned in choosing and
implementing high-performance service
innovations
Figure 8-1 98
SM Risks of Relying on Words

Alone to
Describe Services
 Oversimplification
 Incompleteness
 Subjectivity
 Biased Interpretation
Figure 8-2 99
New Service Development Process
SM  Business Strategy Development or Review
 New Service Strategy Development
Front End
 Idea Generation
Planning
Screen ideas against new service strategy
 Concept Development and Evaluation
Test concept with customers and employees
 Business Analysis
Test for profitability and feasibility
 Service Development and Testing
Conduct service prototype test

 Market Testing
Implementation
Test service and other marketing-mix elements
 Commercialization
 Postintroduction Evaluation
Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.
Figure 8-3 100
SM New Service Strategy Matrix

for Identifying Growth
Opportunities
Markets
Offerings Current Customers New Customers
Existing
SHARE BUILDING MARKET
Services
DEVELOPMENT
New
Services SERVICE DIVERSIFICATION
DEVELOPMENT
Figure 8-4
Service 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.
Proces
s
Service Points of
Mappin Contact
g Evidenc
e
102
SM Service Blueprint Components

CUSTOMER ACTIONS
line of interaction
“ONSTAGE” CONTACT EMPLOYEE ACTIONS

line of visibility
“BACKSTAGE” CONTACT EMPLOYEE ACTIONS

line of internal interaction
SUPPORT PROCESSES
103
Express Mail Delivery Service
SM Truck
Packaging
Truck
Packaging
Forms Forms
EVIDENCE
CONTACT PERSON CUSTOME PHYSICAL
Hand-held Hand-held
Computer Computer
Uniform Uniform
Customer Customer Receive

Calls Gives Package
Package
(Back Stage) (On Stage)R
Driver
Picks Deliver
Up Pkg. Package
Customer
Service
Order
Airport Fly to
Dispatch Unload Load
Driver
Receives Sort Fly to
& Loads Center & On
Destinati Sort Truck
PROCESS
SUPPORT
Load on
Airplane
on
Sort
Packages
104
SM Overnight Hotel Stay

Bill
EVIDENCE
CUSTOMER PHYSICAL
Desk
Hotel Cart for Desk Elevators Cart for Room Menu Delivery Food Lobby
Exterior Bags RegistrationHallways Bags Amenities Tray Hotel
Parking Papers Room Bath Food Exterior
Lobby Appearance Parking
Key
Arrive Give Bags Call Check out
Go to Receive Sleep Receive
at to Check in Room Eat and
Room Bags Shower Food
Hotel Bellperson Service Leave
(Back Stage)(On Stage)
CONTACT PERSON
Greet and
Process Deliver Deliver Process
Take
Registration Bags Food Check Out
Bags
Take
Take Bags Food
to Room Order
SUPPORT PROCESS
Registration Prepare Registration

System Food System
105
SM Figure 8-8
Building a Service Blueprint
Step
Step11 Step
Step22 Step
Step33 Step
Step44 Step
Step55 Step
Step66
Map Map
Mapcontact Add
Identify
Identifythe
the Identify
Identifythe
the Mapthe
the contact Link
Linkcustomer
customer Add
process employee evidence
evidenceofof
process to
process to customer
customeroror processfrom
from employee and contact
and contact
be the actions, service
serviceatat
beblue-
blue- customer
customer the actions, person
person
printed. segment. customer’s onstage
onstageand activities each
printed. segment. customer’s and activitiestoto each
point back-stage. customer
pointofof back-stage. needed
needed customer
view. support action
actionstep.
step.
view. support
functions.
functions.
106
Application of Service
SM
Blueprints
• 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
107
Blueprints Can Be Used By:
SM
• Service Marketers • Human Resources

– creating realistic customer – empowering the human element
expectations • job descriptions
• service system design • selection criteria
• promotion • appraisal systems
• Operations Management
– rendering the service as promised• System Technology
• managing fail points
– providing necessary tools:
• training systems
• quality control
• system specifications
• personal preference databases
108
SM
Chapter 9
CUSTOMER-DEFINED
SERVICE STANDARDS
Objectives for Chapter 9: 109
SM Customer-defined Service
Standards
• 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
Figure 9-1 110
AT&T’s Process Map for Measurements
SM
Business Process Customer Need Internal Metric
Reliability (40%) % Repair Call
30% Product
Easy To Use (20%) % Calls for Help
Features / Functions (40%) Functional Performance Test
Knowledge (30%) Supervisor Observations

30% Sales Responsive (25%) % Proposal Made on Time
Follow-Up (10%) % Follow Up Made
Total
Delivery Interval Meets Needs (30%) Average Order Interval
Quality 10% Installation
Does Not Break (25%) % Repair Reports
Installed When Promised (10%) % Installed On Due Date
No Repeat Trouble (30%) % Repeat Reports

15% Repair Fixed Fast (25%) Average Speed Of Repair
Kept Informed (10%) % Customers Informed
Accuracy, No Surprise (45%) % Billing Inquiries

15% Billing Resolve On First Call (35%) % Resolved First Call
Easy To Understand (10%) % Billing Inquiries
Source: AT&T General Business Systems

111
Exercise for Creating
SM Customer-Defined Service
Standards
• 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
112
Customer-Driven Standards and
SM Measurements Exercise
Service Encounter Customer Requirements Measurements
Service
Quality
Figure 9-2 113
SM Getting to Actionable Steps

Requirements: Diagnosticity:
Satisfaction Value Abstract Low

Relationship General Concepts
Solution Provider
Dig Reliability Empathy

Deeper Assurance Tangibles Dimensions
Responsiveness Price
Dig Delivers on Time

Deeper Returns Calls Quickly Attributes
Knows My Industry
Dig Delivers by Weds 11/4 Behaviors

Deeper Returns Calls in 2 Hrs
Knows Strengths of and Actions
My Competitors
Concrete High
Figure 9-3 114
Process for Setting
SM Customer-Defined Standards
1. Identify Existing or Desired Service Encounter Sequence
2.2.Translate
TranslateCustomer
CustomerExpectations
ExpectationsInto
IntoBehaviors/Actions
Behaviors/Actions
3.3.Select
SelectBehaviors/Actions
Behaviors/Actionsfor
forStandards
Standards
4. Set Hard or Soft Standards
Measure by Measure by
Audits or Hard 5.5.Develop Transaction-
DevelopFeedback
Feedback Soft
Operating Data Mechanisms Based Surveys
Mechanisms
6.6.Establish
EstablishMeasures
Measuresand
andTarget
TargetLevels
Levels
7. Track Measures Against Standards
8.8. Update
UpdateTarget
TargetLevels
Levelsand
andMeasures
Measures
115
SM Importance/Performance Matrix
HIGH 10.0
Improve Maintain
Does whatever it takes to
correct problems (9.26, 7.96)
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)
   Gets price we originally agreed upon (9.21, 8.64)
Tells me cost ahead of time (9.06, 8.46)
9.0   
Provides equipment that operates as vendor said it would (9.24, 8.14)
Gets back to me when
Takes responsibility for their mistakes (9.18, 8.01)
promised (9.04, 7.63)
Delivers or installs on
Importance promised date (9.02, 7.84)
8.0
LOW 7.0
HIGH
8.0 9.0 10.0
Performance
116
Figure 9-5
SM Linkage between Soft Measures and

Hard Measures for Speed of
Complaint Handling
S
A 10
T 9
I 8 Large Customers
S 7
Small Customers
F 6
A 5
C 4
T 3
I 2
O 1 2 4 6 8 12 16 20 24
N 0 WORKING HOURS
Figure 9-6 117
Aligning Company
SM Processes with Customer Expectations
Customer Expectations
48 Hours
Customer
Process
Blueprint Report Lost Receive New
Card Card
Company
Process Company Sequential Processes
Blueprint
A
A B
B C
C D
D EE FF G
G H
H
Lost Card New Card
Reported 40 Days Mailed
118
SM
Chapter 10
PHYSICAL EVIDENCE
AND THE SERVICESCAPE
119
SM Physical Evidence and the
Servicescape
• 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
120
Table 10-1
SM Elements of Physical
Evidence
Servicescape Other tangibles
Facility exterior Business cards

Exterior design Stationery
Signage Billing statements
Parking Reports
Landscape Employee dress
Surrounding environment Uniforms
Brochures
Facility interior Internet/Web pages
Interior design
Equipment
Signage
Layout
Air quality/temperature
Table 10-2 121
Examples of Physical Evidence from the
SM Service
Customer’s Point of View
Physical evidence
Servicescape Other tangibles
Insurance Not applicable Policy itself
Billing statements
Periodic updates
Company brochure
Letters/cards
Hospital Building exterior Uniforms
Parking Reports/stationery
Signs Billing statements
Waiting areas
Admissions office
Patient care room
Medical equipment
Recovery room
Airline Airline gate area Tickets
Airplane exterior Food
Airplane interior (décor, seats, air Uniforms
quality)
Express mail Not applicable Packaging
Trucks
Uniforms
Computers
Sporting Parking, Seating, Restrooms Signs
event Stadium exterior Tickets
Ticketing area, Concession Areas Program
Entrance, Playiing Field Uniforms
Table 10-3 122
Typology of Service Organizations
SM Based on Variations in Form
and Use of the Servicescape
Complexity of the servicescape evidence
Servicescape Elaborate Lean
usage
Self-service Golf Land ATM
(customer only) Surf 'n' Splash Ticketron
Post office kiosk
Internet services
Express mail drop-off
Interpersonal Hotel Dry cleaner
services Restaurants Hot dog stand
(both customer and Health clinic Hair salon
employeee) Hospital
Bank
Airline
School
Remote service Telephone company Telephone mail-order desk
(employee only) Insurance company Automated voice-messaging-
Utility based services
Many professional services
Figure 10-3 123
A Framework for Understanding
SM Environment-user Relationships
in Service Organizations
PHYSICAL HOLISTIC INTERNAL BEHAVIOR
ENVIRONMENTAL ENVIRONMENT RESPONSES
DIMENSIONS Cognitive
Emotional
Physiological
Individual
Behaviors
Employee
Responses
Ambient Social
Conditions Interactions
Space/Function Perceived between and
Servicescape among
customer and
Signs, Symbols, employees
and Artifacts
Customer
Responses
Individual
Behaviors
Cognitive
Emotional
Source: Adapted from Mary Jo Bitner, “Servicescapes.”
Physiological
124
SM
Part 4
DELIVERING AND
PERFORMING SERVICE
125
SM Provider GAP 3
CUSTOMER
Service Delivery
COMPANY
GAP 3
Customer-Driven
Service Designs and
Standards
Part 4 Opener
126
SM
Chapter 11
EMPLOYEES’ ROLES IN
SERVICE DELIVERY
127
SM Employees’ Roles in
Service Delivery
• Illustrate the critical importance of service employees in
creating customer satisfaction and service quality
• Demonstrate the challenges inherent in boundary-
spanning roles
• Provide examples of strategies for creating customer-
oriented service delivery
• Show how the strategies can support a service culture
where providing excellent service is a way of life
128
SM Service 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
129
SM Service 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
Figure 11-3 130
Boundary Spanners Interact
SM with Both Internal
and External Constituents
External Environment
Internal Environment
131
Figure 11-4
SM Sources of Conflict for
Boundary-Spanning Workers
• Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity

Figure 11-5 132
Human Resource Strategies for Closing GAP 3
SM
Hire for
r Service
fo Competencies B
Pr e t
e
t t
pe es and Service Em efe he
m B le pl rred
Co the op Inclination oy
Pe er
Str ard nd
Te Inte kills
Tr nica tive
Re ure a
ch rac
Hire the
ain l
Pr ervic g
fo and
ide e
Right People
n
rs
w
as
S
o
r
Me
ov
S
Develop
Customer-
Employees
Empower
Employees
Customers
Retain the People to

oriented
Treat
Deliver
Best
as
Service Service
People Delivery Quality
Em th any’
wo e
rk
Inc ee
am ot
Provide
plo e
Te rom
Co Visio
lu d s in
y
Needed Support
mp n
P
e
De Systems
Se v e l o
s
re
or rvic p a su al
i
Int ente -
e
Provide Me tern e
Pr ern d In rvic y
oc Supportive Se alit
es al
se
s Technology Qu
and
Equipment
133
SM Empowerment
• Benefits: • Drawbacks:
– quicker responses – greater investments in
– employees feel more selection and training
responsible – higher labor costs
– employees tend to interact – slower and/or inconsistent
with warmth/enthusiasm delivery
– empowered employees are a – may violate customer
great source of ideas perceptions of fair play
– positive word-of-mouth from – “giving away the store”
customers (making bad decisions)
134
SM Service 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.”
135
SM
Chapter 12
CUSTOMERS’ ROLES IN
SERVICE DELIVERY
136
SM Customers’ Roles in Service
Delivery
• 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
137
Importance of Other
SM Customers in Service
Delivery
• 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
138
SM How 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
Figure 12-2 139
SM Customer Roles in Service

Delivery
Productive Resources
Contributors to
Quality and
Satisfaction
Competitors
140
SM Customers as Productive
Resources
• “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?
141
Customers as Contributors
SM to Service Quality and
Satisfaction
• 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
142
SM Customers as Competitors
• customers may “compete” with the service provider

• “internal exchange” vs. “external exchange”
• internal/external decision often based on:
– expertise
– resources
– time
– economic rewards
– psychic rewards
– trust
– control
143
Technology Spotlight:
SM Services Production Continuum
Customer Production Joint Production Firm Production
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
Figure 12-3 144
SM Strategies for Enhancing

Customer Participation
Effective
Define Customer
Customer Recruit, Educate,
Participation and Reward
Jobs
Customers
Manage the
Customer
Mix
145
Strategies for Enhancing
SM
Customer Participation
1. Define customers’ jobs

- helping himself
- helping others
- promoting the company
2. Individual differences: not everyone wants

to participate
146
Strategies for Recruiting,
SM Educating and Rewarding
Customers
1. Recruit the right customers
2. Educate and train customers to perform
effectively
3. Reward customers for their contribution
4. Avoid negative outcomes of inappropriate
customer participation
Manage the Customer Mix

147
SM
Chapter 14
MANAGING DEMAND
AND CAPACITY
148
SM Managing Demand and
Capacity
• 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
149
Understanding Capacity
SM Constraints and Demand
Patterns
Capacity Constraints Demand Patterns
• Time, labor, equipment and • Charting demand

facilities
patterns
• Optimal versus maximal use
of capacity • Predictable cycles
• Random demand
fluctuations
• Demand patterns by
market segment
150
Figure 14-3
SM Strategies for Shifting Demand

to Match Capacity
Demand Too High Shift Demand Demand Too Low

• Use signage to communicate busy days and times • Use sales and advertising to
• Offer incentives to customers for usage during non-peak increase business from current
times
• Take care of loyal or regular customers first market segments
• Advertise peak usage times and benefits of non-peak use
• Charge full price for the service--no discounts • 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
Figure 14-4 151
Strategies for Flexing Capacity
SM
to Match Demand
Demand Too High Flex Capacity Demand Too Low
• Stretch time, labor, facilities and equipment
• Cross-train employees • Perform maintenance
Hire part-time employees
• renovations
• Request overtime work from employees
• Rent or share facilities • Schedule vacations
Rent or share equipment
•
• Subcontract or outsource activities • Schedule employee training
• Lay off employees
Table 14-1 152
SM What is the Nature of Demand

Relative to Supply?
Extent of demand fluctuations over time
Extent to which
supply is Wide Narrow
constrained
Peak demand can 1 2
usually be met Electricity Insurance
without a major Natural gas Legal services
delay Telephone Banking
Hospital maternity unit Laundry and dry cleaning
Police and fire
emergencies
Peak demand 4 3
regularly exceeds Accounting and tax Services similar to those in
capacity preparation 2 but which have
Passenger transportation insufficient capacity for
Hotels and motels their base level of business
Restaurants
Theaters
Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.
Table 14-2 153
What is the Constraint on
SM Capacity?
Nature of the constraint Type of service
Time Legal
Consulting
Accounting
Medical
Labor Law firm
Accounting firm
Consulting firm
Health clinic
Equipment Delivery services
Telecommunication
Utilities
Health club
Facilities Hotels
Restaurants
Hospitals
Airlines
Schools
Theaters
Churches
154
SM Waiting Line Issues

and Strategies
• unoccupied time feels longer
• preprocess waits feel longer
• anxiety makes waits seem longer
• uncertain waits seem longer than finite waits
• unexplained waits seem longer
• unfair waits feel longer
• longer waits are more acceptable for “valuable”
services
• solo waits feel longer
155
SM
Part 5
MANAGING SERVICE
PROMISES
156
SM
Provider GAP 4
CUSTOMER
COMPANY
Service Delivery External
Communications
GAP 4 to Customers
Part 5 Opener
157
SM
Chapter 15
INTEGRATED
MARKETING
COMMUNICATION
158
SM Integrated Services
Marketing Communications
• Introduce the concept of Integrated Services Marketing
Communication
• Discuss the key reasons for service communication problems
• Present four key ways to integrate marketing communication in
service organizations
• Present specific strategies for managing promises, managing
customer expectations, educating customers, and managing
internal communications
• Provide perspective on the popular service objective of
exceeding customer expectations
159
Figure 15-1
SM Communications and the
Company
Internal Marketing External Marketing

Vertical Communications Communication
Horizontal Communications Advertising
Sales Promotion
Public Relations
Direct Marketing
Employees Interactive Marketing Customers

Personal Selling
Customer Service Center
Service Encounters
Servicescapes
Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler
Figure 15-3 160
Approaches for
SM Integrating Services Marketing
Communication
Manage
Customer
Expectations
Goal:
Manage Delivery Improve
Service greater than Customer
Promises or equal to Education
promises
Manage
Internal
Marketing
Communication
161
Figure 15-4
SM Approaches for
Managing Service Promises
MANAGING SERVICE PROMISES
Goal:
Create Coordinate Offer Delivery
Effective Make
External Realistic Service greater than
Services Communication Guarantees or equal to
Communications Promises
promises
Figure 15-8 162
Approaches for
SM Managing Customer Expectations
Offer Choices
Create Tiered-Value
Offerings
Communicate Criteria for

Service Effectiveness
Negotiate
Unrealistic
Expectations
Goal:
Delivery
greater than
or equal to
promises
163
Figure 15-9
SM Approaches for
Improving Customer Education
Teach
Customers
Prepare Confirm Clarify to Avoid
Goal: Performance Expectations
Delivery Customers Peak
for the to Standards after the Sale Demand
greater than Service
or equal to Periods
Process and
promises
Seek Slow
Periods
164
Figure 15-10
SM Approaches for Managing
Internal Marketing Communications
Goal:
Delivery
greater than
or equal to
promises
Create Effective
Vertical
Communications
Create Effective
Horizontal
Communications
Align Back
Office Personnel
w/ External Customers
Create
Cross-Functional
Teams
165
SM
Chapter 17
THE FINANCIAL AND

ECONOMIC IMPACT OF
SERVICE QUALITY

166
SM The Financial and Economic
Impact 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

167
Figure 17-1
SM The Direct Relationship between
Service and Profits
Service
Quality
? Profits

168
Figure 17-2
SM Offensive Marketing Effects of
Service on Profits
Service
Quality
Profits
Market
Share
Reputation Sales
Price
Premium
169
Figure 17-3
SM Defensive Marketing Effects of

Service on Profit
Costs
Volume of Margins
Service Customer
Purchases
Quality Retention Price

Premium
Word of
Mouth Profits

170
Figure 17-5
SM Perceptions of Service,
Behavioral
Intentions and Profits
Costs
Volume of Margins
Purchases
Customer
Retention Price
Behavioral Premium
Service Intentions
Word of
Mouth Profits
Sales

Figure 17-6 171
SM The “80/20” Customer Pyramid
Most Profitable
What segment spends more with
Customers us over time, costs less to maintain,
Best
Customers spreads positive word of mouth?
Other
Customers What segment costs us in
time, effort and money yet
does not provide the return
Least Profitable we want? What segment is
Customers difficult to do business with?

172
Figure 17-7
SM The Expanded Customer Pyramid
Most Profitable
What segment spends more with
Customers Platinum us over time, costs less to maintain,
spreads positive word of mouth?
Gold
Iron
What segment costs us in

Lead time, effort and money yet
does not provide the return
Least Profitable we want? What segment is
difficult to do business with?
Customers

173
Figure 17-8
SM The Key Drivers of Service Quality,

Customer Retention, and Profits
Key Drivers Service Encounters

Service
Encounter
Service
Encounter
Service Behavioral Customer
Quality Intentions Retention Profits
Service
Encounter
Service
Encounter

Figure 17-9 174
Sample Measurements for the
SM Balanced Scorecard
Financial Measures
Price Premium
Volume Increases
Value of Customer
Referrals
Customer
Perspective
Value of Cross Sales Operational
Long-term Value of Perspective:
Customer
Service Perceptions
Right first time (% hits)
Service Expectations
Right on time (% hits)
Perceived Value
Responsiveness (% on
Behavioral Intentions: Innovation and time)
% Loyalty Learning Perspective Transaction time (hours,
% Intent to Switch days)
# Customer Number of new products Throughput time
Referrals Return on innovation Reduction in waste
# Cross Sales Employee skills Process quality
# of Defections Time to market
Time spent talking to
customers
Adapted from Kaplan and Norton

Figure 17-10 175
SM Service Quality Spells Profits

Costs
Defensive Volume of Margins

Marketing Purchases
Price
Premium
Service Customer
Quality Retention
Word of
Mouth Profits
Market
Share
Sales
Offensive
Marketing Reputation
Price
Premium

Marketing of Services Total

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Contact: +923006641921 Usman Waheed

Competition &Higher Expert knowledge Market research,

Cost effectiveness Optimum manpower, Security services,

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• Services are deeds,processes and

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• International Business Machines (IBM)

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SM Challenges for Services

• Defining and improving quality

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Employees Interactive Marketing Customers

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SM The Services Triangle

Source: Adapted from A. Parasuraman

SM Services Marketing Mix:

• Traditional Marketing Mix

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SM Traditional Marketing Mix

• All elements within the control of the firm that

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SM Expanded Mix for Services --

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Quality level Exposure Salespeople Price level

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Customers Equipment Number of steps

Communicating Signage Level of customer

Employee research Employee dress

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SM Ways to Use the 7 Ps

Overall Strategic Specific Service

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FOCUS ON THE CUSTOMER

SM Gaps Model of Service Quality

SM The Customer Gap

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• Customers have different expectations re

• DO YOUR EXPECTATIONS DIFFER RE

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The Zone of Tolerance

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SM Zones of Tolerance VARY for

Most Important Factors Least Important Factors

Zones of Tolerance VARY for

SM Factors that Influence

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• Personal needs include physical, social,

• Enduring service intensifiers are individual, stable

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SM Factors that Influence

• Transitory service intensifiers – temporary –

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Factors that Influence

• Increased customer retention

Relationship between Customer