MARKETING OF SERVICES

LESSON 29: THE INTEGRATED GAP MODEL OF SERVICE QUALITY

The Objective of this Lesson is to have an insight into
Significance of GAP Model GAP Model of service quality
Customer

Gaps Model of Service Quality

Expected services Perceived
Service delivery Gap 3 Company Gap 1 Customer driven service designs and standards Gap 2 Company perceptions of consumer expectations External communications to customers

As you have observed through out this text, effective services marketing is a complex undertaking involving many different skills and tasks. Executives of services organi-zations have long been confused about how to approach this complicated topic in an organized manner. This text was structured around-one approach to view services in a structured and integrated way called the gaps model of service quality. Each of the first five part openers in the text focused on specific aspects of the model that were covered in the chapters following it In this chapter ,we draw all of that material to gather in one place, reinforcing the general ideas and structure of the gaps model and thereby summarizing the text and course. The gaps model positions the key concepts, strategies, and decisions in services, marketing in a manner that begins with the customer and builds the organizations tasks around what are needed to close the gap between customer expectations and per-ceptions. The integrated gaps model of service quality, which was first overviewed in the Part One opener, is shown in Figure 18-1 The central focus of the gaps model is the customer gap, the difference between customer expectations and perceptions. Firms need to close this gap-between what customers expect and receive in order to satisfy their customers and build longterm. Relationships with them. To close this all-important customer gap, the model suggests that four other gaps-the provider gaps-need to be closed. The following four provider gaps, shown below the horizontal line in Figure 18-1, are the underlying causes behind the customer gap: Gap 1: Not knowing what customers expect. Gap 2: Not selecting the right service designs and standards. Gap 3: Not delivering to service standards. Gap 4: Not matching performance to promises.

Gap 4

Figure 18 1 Closing the Customer Gap Above the- center horizontal line in Figure 18-1 are the two boxes that correspond to customer expectations and customer perceptions. While customer perceptions are sub-jective assessments of actual service experiences, customer expectations are the stan-dards of, or reference points for, performance against which service experiences are compared. The sources of customer expectations consist of marketer-controlled fac-tors, such as advertising, as well as factors that the marketer has limited ability to af-fect, such as innate personal needs. Ideally, expectations and perceptions are identical: Customers perceive that they get what they think they will and should. In practice, a customer gap typically exists. Services marketing -bridges this distance, - and we de-voted virtually the entire text to describing strategies and practices designed to close this customer gap. In this text, we attempted to show that the unique characteristics of services dis-cussed as, intangibility, heterogeneity, inseparability of production and consumption, and perish ability-necessitated different consumer evaluation processes from those used when - assessing goods. The key factors leading to the customer gap are shown in Figure 18-2. Each of these factors was discussed in, initial chapters and strategies used to address them were offered in those same chapters. Provider Gap 1: Not Knowing What Customers Expect Provider gap 1 is the difference between customer expectations of service and com-pany understanding of those expectations. Many reasons exist for managers not being aware-of what customers expect: They may not interact directly with customers, be un-willing to ask about expectations, or be unprepared to address- them. When people with the authority and responsi-

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bility for setting priorities do not fully understand cus-tomers service expectations, they may trigger a chain of bad decisions and sub optimal resource allocations that result in perceptions of-poor service quality. In this text,

Too many layers between contact personnel and top management

Insufficient relationship focus

MARKETING OF SERVICES

Lack of market segmentation Focus on transactions rather than relationship Focus on new customers rather than relationship customers
Inadequate service recovery

Customer expectations
Customer gap
Provider gap 1: Not knowing what customer expect Provider gap 2; not selecting the right service designs and

standards
Provider gap 3: Not delivering to service standards Provider gap 4: not matching performance to promises

Company perceptions of customer expectations

Customer
Figures 18-2 key factors leading to the customer gap. we broadened the responsibility for the first provider gap from managers alone to any employee in the organization with the authority to change or influence service policies and procedures. In todays changing organizations, the authority to make adjustments in service delivery is delegated to empowered teams and front-line people. Figure 18-3 shows the key factors responsible for provider gap 1. An inadequate marketing research orientation is one of the critical factors. When management or em-powered employees do not acquire accurate information about customers expectations, provider gap 1 is large. Formal and informal methods to capture information about customer expectations must be developed through market research. Techniques involving a variety of traditional research approaches must be used to stay close to the customer, among them customer visits survey research, complaint systems, and cus-tomer panels. More innovative techniques-such as quality function deployment, structured brainstorming, and service quality gap analysis are Often needed. Figures 18-3 key factors leading to provider gap 1.

Another key factor that is related to provider gap 1 is lack of upward communica-tion. Front-line employees often know a great deal about customers; if management is not in contact with front-line employees and does not understand what they know, the gap widens. Another key factor related to provider gap 1 involves the lack of company strate-gies to retain customers and strengthen relationships with them, an approach called relationship marketing. When organizations have strong relationships with existing: cus-tomers; provider gap 1 is less likely to occur. Relationship marketing is distinct from transactional marketing, the term used to describe the more conventional emphasis on acquiring new customers rather than on retaining them. When companies focus too much on attracting new customers, they may fail to understand the changing needs and. expectations of their current customers. One of the major- marketing factors that is leveraged in relationship marketing, particularly in manufacturing companies, is service Technology affords companies the ability to acquire and integrate vast quan-tities of data on customers that can be used to build relationships. Frequent flyer travel programs conducted by airlines, car -rental companies, and hotels are among the most familiar programs of this type. The final key factor associated with provider gap 1 is lack of service recovery. Even the best companies, with the best of intentions and clear understanding of their cus-tomers expectations sometimes fail. It is critical for an organization to understand the importance of service recovery-why people complain, what they expect when they complain, and how to develop effective service recovery strategies for dealing with inevitable service failures. This might involve a well-defined complaint-handling proce-dure and empowering employees to react on the spot; in real time to fix the failure; other times it involves a-service guarantee or ways to compensate the customer for the unfulfilled promise. To address the factors in provider gap 1, this text covered topics that included how to understand customers through multiple research strategies (Chapter 5), how to build strong relationships and -understand customer needs over time (Chapter 6), and how to implement recovery strategies when things go wrong. (Chapter 7) Through these strategies, provider gap 1 the customer expectations gap can be minimized.

Customer Expectations Gap 1

Inadequate marketing research orientation

Insufficient marketing research Research not focused on service quality Inadequate use of market research Lack of upward communication Lack of interaction between management and customers Insufficient communication between contact employees and managers

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Provider Gap 2: Not Havingthe.right Service Quality Designs and-standards A recurring theme in service companies is the difficulty experienced in translating cus-tomers expectations into service-quality specifications. These problems are reflected in provider gap 2, the difference between company understanding of customer expectations and development of customer-driven service designs and standards. Figure 18-4 shows the key factors leading to this gap. Customer-driven standards are differ-ent from the conventional performance standards that most services companies establish in that they are based on pivotal customer requirements that are visible to and measured by customers. They are operations standards set to correspond to customer expectations and priorities rather than to company concerns such as productivity or ef-ficiency.
Customer Driven Service Design and Standards

setting customer defined performance standards-has a powerful positive effect- on closing the customer gap. Because services, are intangible, they are difficult to describe and communicate. This is particularly true when new services are being developed It is critical that all people involved (managers, front-line employees, and behind the scenes support staff) /be working with the same concepts of the new service, based on customer needs and expectations. For a service that already exists, any attempt to improve it will also suf-fer unless everyone has the same vision of the service and associated issues. One of the most important ways to avoid gap 2 is to clearly design services without over simplification, incompleteness, subjectivity, or bias. To do this, tools are needed to ensure that new an existing services are developed and improved in .as careful a manner as possible. Another factor involved in provider gap 2 is physical evidencethe tangibles sur-rounding the service. By physical evidence we mean, everything from business cards to reports, signage, Internet presence, equipment, and facilities used to deliver the service. The services cape, the physical setting where the service is delivered, must be appropriate. Think of a restaurant, a hotel, a theme park, health club, a hospital, or a school. The services cape-the physical facility-is critical in these industries in terms of communicating about the service and making the entire experience pleasurable. Service organizations must explore the importance of physical evidence, the variety of roles it plays and strategies for effectively designing physical evidence and the services cape to meet customer expectations. In this text, you learned to develop effective strategies for new services and to use service blueprinting as an implementation tool (Chapter 8), to develop customer defined (as opposed to company-defined) service standards t chapter 9), and to effectively design physical evidence and the services cape to meet customer expecta-tions (Chapter 10). Through these strategies, provider gap 2 the service design and standards gapcan be minimized. Provider Gap 3: Not Delivering to Service Standards Provider gap 3 is the discrepancy between development of customer-driven service standards and actual service performance by company employees. Even when guide-lines exist for performing services well and treating customers correctly, highquality service. Performance is not a: certainty. Standards must be backed by appropriate resources (people, systems, and technology) and also must be enforced to be effective that is, employees must be measured and compensated on the basis of performance along those standards. Thus, even when standards accurately reflect customers ex-pectations, if the company fails to provide support for them-if it does not facilitate, encourage, and require their achievement-standards do no good. When the level of service-delivery performance falls short of the standards, it falls short of what cus-tomers expect as well. Narrowing gap 3-by ensuring that all the resources needed to achieve the standards are in place-reduces the customer gap. Research and company experience has identified many of the critical -inhibitors to closing gap 3 (see Figure 18-5). These include employees who do not clearly under-stand the roles they are to play in the company, employees who see conflict between
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MARKETING OF SERVICES

Provider gap 2 exists in service organizations for a variety of reasons. Those re-sponsible for setting standards, typically management, sometimes believe that cus-tomer expectations are unreasonable or unrealistic. They may also believe that the de-gree of variability inherent in service defies standardization and therefore that setting standards will not achieve the desired goal. However, the quality of service delivered by customer contact personnel is critically influenced by the standards against which

Customer driven service design and standards

Gap 2
Poor service design

Unsystematic new service development process Vague, undefined service designs Failure to connect service design to service positioning
Absence of customer defined standards

Lack of customer defined service standards Absence of process management to focus on customer requirements Absence of formal process for setting service quality goals
Inappropriate physical evidence and services cape

Management perceptions of customer expectations

Figures 18-4 key factors leading to provider gap 2. They are evaluated and compensated. Standards signal to contact personnel what man-agement priorities are and which types of performance really count. When service standards are absent or when the standards in place do not reflect customers expecta-tions, quality of service as perceived by customers is likely to suffer. In contrast, when there are standards reflecting what customers expect, the quality of service they re-ceive is likely to be enhanced. Therefore closing provider gap 2-by

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customers and company management, the wrong employees, inadequate technology, inappropriate compensation and recognition, and lack - of empowerment and team-work. These factors all relate to the companys human resource function, involving in-ternal-practices such as recruitment,-1raining, feedback job design, motivation, and Figures 18-5 key reasons leading to provider gap 3.

Service Delivery

Franchisers of services depend on their franchisees to execute service delivery as they have specified it. And it is in the execution: by the franchisee that the customer. Evaluate the service quality of the company.With franchises and other types: of intermediates mediaries, someone- other than the producer is critically important to the fulfillment of quality service. The service delivery process is complicated by outside parties who are likely to embrace goals and values that do not directly align with those of the service organization. For this reason, a firm must develop ways to either control- or motivate these- intermediaries to meet company goals. As we have just discussed, part of the variability in provider gap 3 comes from em-ployees and intermediaries who are involved with service delivery. The other impor-tant variable is the customer. Even if contact employees and - intermediaries are 100 percent consistent in their service delivery (an unlikely but highly-desirable state!), the uncontrollable-variable of the customer can introduce heterogeneity it service deliv-ery. If customer do not perform their roles appropriately-if, for example, they fail to provide all the information necessary to the provider or neglect-to read- and-follow instruction service quality is jeopardized. Another issue in gap 3 is the -need in service firms to synchronize demand and capacity. Because services are perishable cannot be inventoried, service companies frequently face situations of over or under demand. Lacking inventories to-handle overhead companies lose sales when capacity is inadequate to handle customer needs on the other hand, capacity is frequently underutilized in slow periods, most companies rely on operation strategies - such as cross -training or varying the size of the employee pool to synchronize supply and demand. The use of marketing strategies in many- companies is limited. Marketing strategies for managing demand such as price changes, advertising, promotion, and alternative service offerings-can supplement approaches for managing supply. Provider Gap 4: When Promises do not Match Performance Provider gap. 4 illustrate the difference between service delivery and the service providers external communications. Promises made by a service company through its media advertising sales force, and other communications may potentially raise customer expectations that serve as the standard against which customers assess service quality. The discrepancy between actual and promised service therefore has an adverse effect, on the customer gap. Broken promises can occur for many reasons: Over promising in advertising or personal selling, inadequate coordination between op-erations and marketing, and differences in policies and procedures across service out-lets. Figure 18-6 shows the key factors that lead to provider gap 4. In addition to unduly elevating expectations through exaggerated claims, there are other, less obvious ways in which external communications influence customers service quality assessments. Service companies frequently fail to capitalize on oppor-tunities to educate customers to use services appropriately. They also frequently fail to manage customer expectations of what they will receive in service transactions and relationships.
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MARKETING OF SERVICES

Gap 3

Deficiencies in Human Resource policies Ineffective recruitment Role ambiguity and role conflict Poor employee technology job it

Inappropriate evaluation and compensation system Lack of empowerment , perceived control and team work
Failure to match supply and demand

Failure to smooth peaks and valley of demand Inappropriate customer mix Over reliance on price to smooth demand
Customers not fulfilling roles

Customers lack knowledge of their roles and responsibilities Customers negatively affect each other
Problems with service intermediaries

Channel conflict over objectives and performance Channels conflict over cost rewards Difficulty controlling quality and consistency
Tension between empowerment and control

Customer Driven service designs and standards

organizational structure. To deliver better service performance, these issues must be - addressed across functions (e.g., with both marketing and human resources) if they are to be effective. One of thy difficulties associated with gap 3 involves the challenge in delivering service through such intermediaries as retailers, franchisees, agents, and brokers. Be-cause quality in service occurs in the human interaction between customers and service providers, control over the-service encounter by the company is crucial, yet it rarely is fully possible. Most service (and many manufacturing) companies face an even more formidable task: attaining service excellence an<1 consistency in the pres-ence of intermediaries who represent them, interact with their customers, and yet are not under their direct control. Among the intermediaries that playa central role in service delivery are retailers, franchisees and dealers.

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One of the major difficulties associated with provider gap is that communications to consumers involve issues that crossdisciplinary boundaries. Because service ad-vertising promises what people do, and because what people do cannot be controlled in the way that machines that produce physical goods can be controlled, this type of communication involves functions other than the marketing department. This is what we called interactive marketing-the marketing between contact people and cus-tomers and it must be coordinated with the conventional types of external marketing used in product and ,service firms. When employees who promote the service do not fully understand the reality of service delivery, they are likely to make exaggerated promises or fail to communicate to customers aspects of the service intended to serve them well. The result is poor service quality perceptions. Effectively coordinating ac-tual service delivery with external communications, therefore, narrows provider gap 4 and favorably affects the customer gap as well. Another issue related to gap 4 is ass9ciated with the pricing of services. In pack-aged goods (and even in durable goods), many customers possess enough price knowledge before purchase to be able to judge whether a price is fair or in line with competition. With services, customers often have no internal reference point for prices before purchase and consumption. Pricing strategies such as discounting, everyday Figure 18-6 key reasons for provider gap 4.

prices, and couponing obviously need to be different with services in cases where the customer has no sense of the price to start with. Techniques for developing prices for services are more complicated than those for pricing of tangible goods. In summary, external communications-whether from. marketing communications or pricing-can create a larger customer gap by raising expectations about service de-livery. In addition to improving service delivery, companies must also manage all communications to customers so that inflated promises do not lead to higher expecta-tions. Chapters 15 (which discussed integrated services n1arketing communications) and 16 (which covered pricing) of this text described methods to accomplish these objectives. Putting it all Together: Closing the Gaps The full conceptual model shown in Figure 18-1 conveys a clear message to managers wishing to improve the quality of service: The key to closing the customer gap is to close provider gaps 1 through 4 and keep them closed. To the extent that one or more of provider gaps 1 through 4 exist, customers perceive service quality shortfalls. The model, called the gaps model of service quality, serves as a framework for service or-ganizations .attempting to .improve quality service and services marketing. This model begins where the process of improving service quality begins: by gain-ing an understanding of the nature and extent of the customer gap. Given the strong focus on the customer and the need to use knowledge about the customer to drive busi-ness strategy, we believe this foundation of emphasis is warranted.

MARKETING OF SERVICES

Gap 4

Service delivery

Summary
The chapter presented the integrated gaps model of service quality (shown in Figure 18-1) a framework for understanding and improving service delivery. The entire text was organized around this model of service quality, which focuses on five. pivotal gaps in delivering and marketing services:
The customer gap: Difference between customer expectations

Lack of integrated services marketing communications

Tendency to view each external communication as independent Not including interactive marketing inn communications plan Absence of strong internal marketing program
Ineffective management of customer expectations

and perceptions.
Provider gap 1: Not knowing what customers expect. Provider gap 2: Not selecting the right service designs and

standards.
Provider gap 3: Not delivering to service standards. Provider gap 4: Not matching performance to promises.

Not managing customer expectations through all forms of communication Not adequately education customer
Over promising

Over promising in advertising Over promising in personal selling Over promising though physical evidence cues
Inadequate horizontal communications

The gaps model positions the key concepts, strategies, and decisions in services mar-keting in a manner that begins with the custOf11er and builds the organizations tasks around what is needed to close the gap between customer expectations and perception.

Tutorials
1. If you were the manager of a service organization and wanted to apply the gaps model to im-prove service/ which gap would you start with? Why? In what order would you proceed to close the gaps? 2 Can provider gap 4 be closed prior to closing any of the other three provider gaps? How?

Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedure across branches or units

External communications to customers

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3. Which of the four provider gaps do you believe is hardest to close? Why?

MARKETING OF SERVICES

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