MKTG207

 NOTES  
Week  One:  
• Marketing:  
– Means  solving  customers  problems  profitably    
– Marketing  is  the  management  process  for  identifying,  anticipating  
and  satisfying  customers  requirements  profitably    
– An  activity,  conducted  by  organisations  &  individuals  that  operates  
through  a  set  of  institutions  and  processes  for  creating,  
communicating,  delivering  and  exchanging  market  offerings  that  
have  value  for  customers,  clients,  marketers  and  society  at  large    
 
The  evolution  of  marketing:  
Marketing  to  (management  of  customers  and  markets)  à  Marketing  with  
(collaborate  with  customers  and  partners  ot  produce  and  sustain  value).    
 
Service  dominant  logic  
• Marketing  is  a  process  of  service  interaction  
• Customers  determine  what  is  of  value  to  them  
• Customers  cocreate  the  service  experience  
• Customers  are  the  arbiters  of  meaning  
 
• G-­‐D  
• Customer  and  Environments  as  Exogenous  
• Firms  Create  Value    
• Operand  Resources  are  Paramount      
• Management  of  Marketing  Mix    
• Relationships  are  Repeated  Encounters    
• Maximize  Profits    
• S-­‐D  
• Customer  and  Environments  as  Endogenous    
• Value  is  Co-­‐Created    
• Operant  Resources  are  Paramount      
• Co-­‐Creation  of  Marketing  Mix  
• Relationships  are  Embedded  
• Profits  are  Learning  Loop    
 
Service  is  a  performance  rather  than  physical  object.  Services  are  processes  that  
provide  time,  place,  form,  problem  solving  or  experiential  value.  
 
Difference  between  goods  and  services?  
• Customers  do  not  obtain  ownership  
• Intangible  elements  dominate  value  creation  
• Services  are  often  co-­‐produced  by  the  customer  
• Greater  difficulty  in  managing  quality  (variability)  
• Services  are  often  difficult  for  customers  to  evaluate  
• Absence  of  inventories  for  service  products  
• Distribution  may  take  place  through  non-­‐physical  channels    
 
Services  are  all  about  creating  value!  
  
How  can  services  be  classified?  
o The  degree  of  tangibility/intangibility  
o Who  or  what  is  the  direct  recipient  of  service  processes?  
o The  place  of  service  delivery  
o Customisation  versus  standardisation  
o Relationships  with  customers  
o Discrete  versus  continuous  services  
o High  contact  versus  low  contact  
 
Unique  service  features  
Intangibility            Services  cannot  be  stored,  protected  through  patents,  displayed.  
Difficult  to  set  prices.  
                                                                   
Inseparability        Consumer  involved  in  production  and  the  centralised  mass  
production  of  services  is  difficult.  
 
Heterogeneity        Standardisation  and  quality  control  is  difficult.    
Perishability              Services  cannot  be  inventoried.   Services  happen  ‘in  the  
moment’,  cannot  be  replicated  eg  a  plane  leaving,  cannot  fly  that  flight  in  that  
time  again  
Ownership              Customer  never  owns  the  service.    
 
 
WEEK  TWO:  
Why  study  services?  
• This  sector  accounts  for  25-­‐30%  of  world  trade  
• Between  6080%  of  GDP  for  most  countries  
• 11  million  Australians  work,  75%  in  service  sector  
 
Powerful  forces  in  transforming  the  service  economy:  
o The  ‘hollowing  out’  effect:  the  outsourcing  to  low-­‐wage  economies,  shift  
in  employment  patterns  
o Deregulation  and  privatisation:  previously  government  controlled  
services  have  been  sold  or  leased  to  private  companies.  This  has  
eliminated  or  minimised  constraints  on  competitive  activity  in  such  
industries  (freight,  airlines,  banks,  insurance),  barriers  to  entry  and  
restrictions  on  service  delivery  were  reduced.  
o Social  changes:  With  more  dual  income  families  ad  different  lifestyles,  
there  is  a  need  for  more  and  better  services  –  ‘the  experience  economy’,  
people  are  often  ‘time  poor’  and  will  pay  for  many  services  they  would  
once  perform  on  their  own.    
o Professional  services  and  franchises:  service  operations  have  become  
standardised,  service  quality  standards  are  emphasised  and  training  
programs  are  formalised  while  brand  names,  symbols,  and  uniforms  are  
standardised  to  ensure  wide  recognition.    
 
-­‐ Services  are  diverse:  consumer  services  or  business-­‐to-­‐business  services  
 -­‐ Customers  seek  value,  they  are  looking  for  desired  results,  they  expect  to  
obtain  value  from  their  service  purchases  in  exchange  for  their  time,  
money  and  effort.    
-­‐ Social  value:  through  communication,  belonging  on  facebook  through  
groups,  news,  creating  an  identity.  
-­‐ Social  value  //  transactional  value    
 
Intangibility  
Challenges:  Provide  tangible  evidence  
Responses:    
l Symbolic  cues  
l Provide  physical  clues  
l Display  brand/logo    
l Vivid  advertising  images  
Reduce  Risk  
l Stress  firm  reputation    
l Guarantees  
l Educate  clients    
l Promote  your  qualifications  /  experience  
 
Heterogeneity  
Challenge:  Measure  and  Manage  Quality    
Responses:    
l Commit  resources  to  market  research,  training,  internal  marketing,  
product  knowledge    
l Ensure  back-­‐stage  systems  support  front  line  staff  
l Use  standardisation  strategies    
l Build  quality  into  all  processes    
 
Inseparability:  
Challenge:  Manage  customer  relationships  
Responses:    
l Recruit  people  with  technical/interpersonal  skills    
l Train  front  line  staff  
l Service  recovery  procedures    
l View  production  process  as  a  marketing  activity  (hairdresser  is  both  
‘marketer’  and  ‘producer’)  
l Manage  ‘moments  of  truth’  
 
Perishability  
Challenges:  Manage  demand  
Responses:      
l Accurate  demand  forecasts    
l Differential  pricing    
l Use  reservation  systems  
Lack  of  inventory  
l Use  part  time  staff  
l Share  facilities    
l Extend  hours  of  operation    
 l Allow  customer  to  perform  tasks  (self-­‐serve)  
 
Categorising  services  processes  
l Tangible  actions:  “people  processing”  eg  Transport,  health  care,  sport  
l Tangible  actions:  “possession  processing”  eg  repairs  and  maintenance,  
distribution  
l Intangible  actions:  “mental  stimulus  processing”  eg  education,  
advertising,  religion  
l Intangible  actions:  “information  processing”  eg  legal,  accounting,  banking  
 
The  seven  P’s  for  services  
PROCESS  –  PEOPLE  –  PHYSICAL  EVIDENCE  
PLACE  (cyber-­‐space  &  time)  –  PRODUCT  –  PRICE  -­‐  PROMOTION  
   
The  additional  Marketing  Mix  
l People:  direct  contact  between  customers  and  service  personnel,  some  
services  involve  high  levels  of  contact,  high  levels  of  trust  and  
dependency.  
l Physical  evidence:  this  may  be  an  actual  physical  component  or  a  cue  to  
indicate  or  represent    the  existence  quality  of  the  service  purchased  
(often  referred  to  as  ‘Servicescape’).  
l Process:  the  order  and/or  system  of  service  delivery.  
     
   
WEEK  THREE  
Service  model  decision  process:  
Pre-­‐purchase  à  Service  encounter  à  Post-­‐purchase  behaviour  
 

 
 
  
Culture:  
Culture  Is  the  sum  of  all  learned  beliefs,  values  and  customers  that  create  
behavioural  norms  for  society.    
Culture  affects  every  consumer  evaluation:  
o Happens  at  a  subconscious  level  
o Culture  affects  how  service  providers  treat  customers  (eg  
collectivism  or  individualism)  
o Naturally  affects  our  expectations  
o Need  to  adapt  if  moving  to  another  customer  
 
Cultural
dimension Basic issue Contrasts across cultures Examples
Power Does society value LOWER POWER DISTANCE Western
distance equality or Power is relatively equally countries
inequality in distributed
interpersonal HIGH POWER DISTANCE Asia
interactions? Hierarchy is strong and power is
centralised at the top

Uncertainty What is the attitude LOW UNCERTAINTY AVOIDANCE Singapore,

avoidance towards risk in Calculated risk is seen as necessary Hong Kong,
society? in order to seize opportunity Sweden,
USA.
HIGH UNCERTAINTY AVOIDANCE
Risk is regarded as threatening and Portugal,
to be avoided Japan,
S. Korea,
Thailand
Cultural
dimension Basic issue Contrasts across cultures Examples
Individualism/ Do people rely on INDIVIDUALIST Western
collectivism themselves or Self-reliance is valued, as is the countries
others (that is, the need for the individual to satisfy
group) their own needs within the group
COLLECTIVIST Asia
Dependence is valued and society
expects the individual to
subordinate their own needs to
those of the group

Masculinity/ To what extent and FEMININE Scandinavia,

Femininity at whose expense Caring for others, and nurturing Thailand,
should the weaker roles and attitudes are favoured Taiwan
members of
society be cared MASCULINE Japan,
for? Personal achievement and Switzerland,
assertiveness are favoured Britain,
Australia,
New Zealand

 
PRE-­‐PURCHASE  STAGE:  
 
Need  arousal  –  information  set  –  evaluating  alternatives  (search  attributes,  
experience  attributes,  credence  attributes)  –  perceived  risk  
 
Factors  affecting  consumer’s  perceived  risk:  
¡ Level  of  involvement  
¡ Experience  of  purchase  
¡ Individuals’  risk  threshold  
¡ Situational  factors  
¡ Regulated  safeguards  
 
Types  of  risk:  
Function  –  Financial  –  Temporal  –  Psychological  –  Social  –  Sensory    
 
How  would  you  reduce  the  risk?  
¡ Provide  information  
¡ Firm’s  reputation  
¡ Provide  guarantees/warrantees    
¡ Ask  knowledgeable  employees  about  competing  services  
¡ Give  opportunity  to  try  the  service  prior  to  purchase  
¡ Internet  search  
¡ Standardise  the  service  
¡ Provide  appropriate  tangible  cues  
¡ How  do  customers  reduce  risk?  MKTG203  points  
 
SERVICE  ENCOUNTER  STAGE:  purchase  or  consumption  of  service  
Moments  of  truth:  The  moment  of  truth  is  when  the  customer  and  service  
personnel  meet.  The  point  when  the  skill,  motivation  and  the  tools  employed  by  
the  service  personnel  and  the  expectations  and  behaviour  of  the  customer  create  
the  service  experience.  
The  black  box:  Customer  perceptions,  view  points.  Every  customer  uses  
different  evaluative  criteria  to  judge  a  service.    
 
Factors  influencing  the  consumers  service  evaluation:  
-­‐ Mood  states:  part  of  the  affective  domain  (boredom,  aggression,  joy  etc).    
-­‐ Role  theory:  this  implies  that  consumers  are  often  acting  a  role  -­‐  there  
may  be  a  pattern  of  behaviour,  responses  and  attitudes  that  are  learned  
and  applied  to  different  situations.    
-­‐ Script  theory:  Scripts  are  cognitive  structures  that  provide  a  framework  
for  service  delivery.  They  may  vary  in  scope  and  intensity.    
-­‐ Control  theory:  Two  main  modes  of  control  –  behavioural  and  cognitive.  
This  theory  looks  at  the  correlation  between  the  consumer’s  feeling  of  
control,  behaviour  and  judgement  of  service  provision.  Employees  also  
need  control.    
 
Understanding  customer’s  psychological  needs  and  values:  
Security,  Respect.  Esteem  needs  and  ego  involvement,  the  concept  of  face  
(dignity),  fairness  of  equity  needs  (distributional  and  procedural  fairness)  
 
 POST-­‐PURCHASE  STAGE:  Post  purchase  valuation,  repeat  purchase,  customer  
loyalty,  positive  or  negative  WOM,  switching  service  providers.  
Critical  incidents:  Unsatisfactory  encounters  are  likely  to  be  more  influential  on  
a  customer’s  future  behaviour  than  satisfactory  ones.  
Critical  incidents  can  occur  pre  and  post  consumption  as  well  as  during.    
 
Categories  of  critical  incidents:  
-­‐ Employee  response  to  service  delivery  system  failures  
-­‐ Employee  response  to  customer  needs  and  requests  
-­‐ Unprompted  and  unsolicited  employee  actions  
 
WEEK  FOUR  
 
Definition  of  satisfaction:  “Satisfaction  is  a  consumer’s  post-­‐purchase  
evaluation  of  the  overall  service  experience  (processes  and  outcome).  It  is  an  
affective  (emotion)  state  or  feeling  reaction  in  which  the  consumer’s  needs,  
desires  and  expectations  during  the  course  of  the  service  experience  have  been  
met  or  exceeded.”  
à  Satisfaction  and  the  way  people  respond  to  ‘satisfaction’  based  questions  are  
highly  subjective.  People  value  different  service  attributes  which  changes  their  
response.    
 
Customer  satisfaction  (and  service  quality):  
o Insulates  customers  from  competition  
o Encourages  repeat  patronage  and  loyalty  
o Cross-­‐selling  opportunities    
o Enhances/promotes  positive  WOM  
o Lower  costs  of  attracting  new  customers  (consumers  do  your  marketing  
for  you)  
o Reduces  failure  costs  
o Can  create  sustainable  advantage  
à  5%  increase  in  customer  retention  can  lead  to  35-­‐95%  increase  in  
profitability,  cheaper  to  keep  current  consumers  than  attract  new  ones  
à  If  someone  is  very  dissatsifed  they  will  participate  in  c-­‐destruction  of  value,  
they  will  seek  revenge  and  seek  to  damage  the  bran  “negatively  engaged  
consumers”  
 
 
INTERNAL EXTERNAL
SERVICE EMPLOYEE EMPLOYEE CUSTOMER CUSTOMER PROFIT
SATISFACTION RETENTION SERVICE
QUALITY SATISFACTION RETENTION
QUALITY
 

 
 
Problems  with  this  chain:  ^    
à  It  assumes  a  linear  relationship  between  attribute  performance  and  
satisfaction  
à  It  assumes  your  expectations  change  
 

 
Problems  with  satisfaction?  
n …satisfaction  metrics  are  a  good  first  step  but  satisfaction  is  a  fleeting  
attitude  that  lacks  durable  staying  power,  it’s  a  poor  substitute  for  loyalty  
and  sets  far  too  low  a  standard  of  excellence…  Reichheld,  2001,  p.  4  
n …satisfaction  as  a  variable  cannot  discriminate  between  true  brand  
loyalty  and  inertia  repeat  purchasing…  Amine,  1998,  p.  312  
 
Non-­‐linear  effects  of  satisfaction  levels  on  customer  loyalty:  
  
 
Zone  of  tolerance:  

 
 
Factors  affecting  tolerance:  
n The  importance  of  the  occasion  
n The  consumer’s  social  and  psychological  needs  
n Mood  state  
n Frequency  of  use  
n The  importance  of  the  particular  service  dimension  or  attribute  
 
The  disconfirmation  of  expectations  model  
  
 
Other  influences  on  satisfaction:  
n Prior  attitudes    
n Attribution  theory    
¨ Causal  –  who  is  to  blame  the  firm  or  the  customer?  
¨ Control  –was  the  firm  in  control  of  the  service  failure?  
¨ Stability  –  is  this  a  one  off  random  event  or  not?  
n Equity  theory  –  inputs  vs  outputs  
n Personal  Involvement    
 
Expectations:  
n Provide  a  standard  of  comparison    
n Are  dynamic    
n Must  be  managed    
 
Types  of  expectations:  
n Desired  (ideal)  (optimal  level  of  performance)  
n Equitable  or  deserved  (what  I  should  receive)    
n Predictive  (what  I  will  probably  receive)    
n Adequate  (minimum  tolerable)      
 
Problems  with  expectations?  
n Experiential  services  eg.  Credence?  
n Relative  to  the  individual  eg.  Tolerable  to  ideal  
n Cognitive  vs  emotional  evaluations?    
n Predictive  expectations  vs  desires?  
 
Determinants  of  Perceived  Service  Quality  

  Advertising Past
Promotion Experience
W.O.M.

 
Determinants of
Services Quality
 
1.
2.
Access
Communications   Expected
 
3. Competence
4. Courtesy Service
5. Credibility
6. Reliability Perceived
7. Responsiveness
 
Service
8. Security Quality
9. Tangibles
10. Understanding -
Knowing the Customer   Perceived

  Service

 
More  determinants  of  perceived  service  quality:  
RELIABILITY:  consistency  and  dependability  
ASSURANCE:  knowledge  and  courtesy  of  employees  
TANGIBLES:  physical  elements  of  the  service  provision  
EMPATHY:  how  much  individualized  attention  employees  give  
RESPONSIVENESS:  readiness  and  ability  of  employees  to  respond    
 
Unsuccessful  Service  Delivery  
1. Not  knowing  customer  expectations  
2. Specifying  service  standards  that  don’t  reflect  customer  expectations  
3. Service  performances  not  matching  specifications  
4. Not  living  up  to  marketing  promoted  or  promise  performance  
 
Note:  
n Service  is  always  a  relative  concept.  
n The  customer  is  the  judge.  
 
 
Service  satisfaction  information  system:  
n Customer  Complaints  http://notgoodenough.com  
n Surveys    
n Employee  Surveys    
n Focus  Groups    
n ‘Mystery  shopping’  research    
 
Measuring  Satisfaction:  
n Qualitative  Research    
n Understand  key  drivers  /  determinants    
n Questionnaire  design    
n Data  analysis    
n Importance  -­‐  performance  analysis    
 
WEEK  FIVE  –  lecture  one  
 
Customer  Profitability  as  a  Key  Driver:  
“Achieving  the  full  profit  potential  of  each  customer  relationship  should  be  the  
fundamental  goal  of  every  business…Even  using  conservative  estimates,  the  gap  
between  most  companies’  current  and  full  potential  performance  is  enormous.”  
Source:  Alan.  W.  H.  Grant  &  Leonard  H.  Schlesinger,  1995  (see  p162)  
 
Stages  of  the  relationship  marketing  and  management  process:  

 
 
Three  customer  retention  strategies:  
 
 
 
 
 
 
  

 
Retention  strategy  1:  create  loyalty  bonds  
 Key  determinants  of  a  successful  customer  relationship:  customer  satisfaction,  
value,  loyalty  motives,  reward-­‐based  bonds,  customer  engagement,  social  bonds  
and  structural  bonds.  
 
Customer  motives  for  loyalty:  
l Confidence  benefits:  feelings  of  trust  or  confidence  in  the  provider  along  
with  reduced  anxiety  and  comfort  in  knowing  what  to  expect  
l Social  benefits:  developing  social  relationships  and  bonds  
l Special-­‐treatment  benefits  
¡ Reward-­‐based  bonds  
¡ Customer  engagement  
¡ Structural  bonds  (B2B)  
 
Retention  strategy  2:  build  in  switching  barriers  
Economic  switching  barriers:  economic  or  financial  disincentives  to  leave  
Psychological  switching  barriers:  valuing  a  personal  relationship,  perceived  risk  
of  change  
 
Retention  strategy  3:  reducing  customer  churn  
-­‐ Analyse  customer  defections  and  monitor  declining  accounts  
-­‐ Address  key  churn  drivers  
-­‐ Regain  lost  customers  
 
WEEK  FIVE  –  lecture  two  
 
Customer  service:  ‘Customer  service  involves  task-­‐oriented  activities  (other  than  
proactive  selling)  that  involve  interactions  with  customers  in  person,  by  
telecommunications  or  by  mail  for  the  purposes  of  service  delivery  and  service  
support’  
 
o Customer  service  (i.e.  service  delivery  and  service  support)  is  central  to  
creating  customer  value  and  brand  equity  in  any  service  organisation.  
o Customer  service  should  be  a  function  that  is  built  into  the  very  fabric  of  
the  total  service  delivery  system,  and  not  something  that  simply  happens  
at  a  complaints  desk  or  an  isolated  customer  service  department.  
 
Service  culture:  
o The  behaviour  of  employees  in  an  organisation  will  be  heavily  influenced  
by  the  culture  of  the  organisation,  or  the  norms  and  values  that  impact  on  
individual  and  group  behaviour.  
o A  customer-­‐focused,  service-­‐oriented  organisation  will  have  at  its  heart  a  
service  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.’  
 
Employees  and  customer  service:  
o Employees  are  often  central  to  an  effective  customer  service  function  
o All  dimensions  of  service  quality  can  be  influenced  directly  by  service  
employees  
o Delivering  the  core  service  may  be  totally  in  the  control  of  front  line  
employees  
o When  services  fail  employees  are  critical  in  service-­‐recovery  efforts  
o How  a  customer  is  treated  influences  perceptions  of  the  firm’s  
responsiveness  and  attitude  towards  customers  
o Assurance  is  highly  dependent  on  the  employees’  ability  to  convey  
credibility,  and  inspire  trust  and  confidence  
o Showing  empathy  implies  that  employees  will  be  attentive  to  customers’  
needs  
o Employee  appearance  and  dress  are  important  components  of  the  
tangible  evidence  of  the  service  
 
The  goals  of  customer  service  
1. Customer  satisfaction  
2. Operational  efficiency  
 
Outsourcing  of  customer  service  
How  technology  is  leveraging  customer  service:  technology  can  improve  
operational  efficiency.  Service  firms  are  trying  to  develop  programs  for  building  
closer  ties  with  customers  by  centralising  certain  functions  that  don’t  reuire  
face-­‐to-­‐face  contact.  Traditional  connection  to  customers  is  no  longer  sufficient  
in  the  real  time  world.    
 
Factors  shaping  the  customer  service  function:  
o Presence  or  absence  of  intermediaries    
o High  contact  versus  low  contact  
 o Duration  of  service  delivery  process  
o Capacity-­‐constrained  services  
o Frequency  of  us  and  repurchase  
o Level  of  complexity    
 
Guidelines  for  an  effective  program  implementation:  
Recruit  the  right  employees,  train  and  educate  employees,  educate  customers  
too,  take  care  of  employees,  be  efficient  first  and  nice  second,  standardise  
response  systems,  develop  a  pricing  policy,  consider  using  subcontractors,  be  
proactive,  evaluate  performance  regularly,  acknowledge  and  affirm  good  work,  
take  corrective  action  on  defective  work.    
 
Service  standards  (Key  Performance  Indicator:  KPIs)  
o Standardisation  of  service  behaviours  and  actions  can  take  three  forms:  
n Substitution  of  technology  for  personal  contact  and  human  effort  
n Improvement  in  work  methods  
n Combinations  of  these  two  methods  
à  Service  targets  and  goals:  these  can  be  specific  targets  for  
individual  behaviours  or  actions,  or  formal  goal  setting  involving  
the  overall  department  or  company.  These  goals  and  targets  have  
specific,  quantified,  measurable  service  goals.    
o Customer  defined  service  standards  
n Converting  customer  expectations  into  specific  behaviours  and  
actions  
n Understanding  expectations  can  save  money  by  eliminating  
activities  and  features  that  the  customer  does  not  expect,  does  not  
notice  or  will  not  pay  for.    
n Customer  service  attributes  for  a  web-­‐based  financial  service  
o Site  transaction  security  
o Ease  of  navigation  
o Privacy  of  information  
o Well-­‐organised  menu  structures  
 
Steps  in  setting  customer-­‐defined  standards  
Step  1:     Determine  customer  expectations  for  encounter  
Step  2:     Translate  customer  expectations  into  behaviours/actions  
Step  3:     Identify  the  key  sources  of  customer  satisfaction  (or  
dissatisfaction)  and  relate  them  to  current  service  elements  
Step  4:     Select  behaviours/actions  for  standards  
Step5:     Set  service-­‐level  standards  or  key  performance  indicators  (KPIs)  
Step  6:     Design  jobs  and  technology  systems  to  meet  these  standards  
Step  7:     Track  and  measure  performance  against  standards  
Step  8:     Provide  feedback  to  employees  
Step  9:     Periodically  revise  standards  and  delivery  systems  in  the  light  of  
changing  customer  preferences,  technological  innovation  and  competitive  
activities.  
 
 
Converting  customer  expectations  into  organisational  action  and  
behaviours:  
General  concepts  à  Dimensions  à  Attributes  à  Behaviours/Actions  

 
 
WEEK  SIX  
Customer  satisfaction:  not  only  linked  to  fault  free  service  but  to  what  
transpires  when  things  go  wrong  
 
Do  job  right  the  first  time  PLUS  effective  complaint  handling  EQUALS  increased  
customer  satisfaction  and  loyalty.  
 
Customer  responses:  
-­‐ Do  nothing,  but  the  service  providers  reputation  is  diminished  
-­‐ Public  action:  
à  Complain  to  the  service  firm  directly  to  seek  redress  
à  Take  legal  action  eg  ACCC  
à  Complain  to  business  private  or  govt  agencies  
à  Negative  WOM  
-­‐ Private  action:  
à  Defect  and  not  use  provider  again  
à  Decide  to  stop  buying  product  or  brand  or  boycott  seller  
 
For  every  100  dissatisfied  customers,  96  do  not  complain  
Positive  experience:  consumers  tell  5  others  
Negative  experience:  consumers  tell  9  others  
 70%  of  customers  will  stay  loyal  if  a  complaint  is  handled  to  their  
satisfaction  
95%  of  customers  will  stay  loyal  if  a  complaint  is  resolved  very  quickly  
 
Complaints  as  Research  Data:  
Responsive  organisations  look  at  complaints  in  two  ways:  
n As  a  stream  of  market  research  information  highlighting  where  
improvements  are  needed  
n Series  of  individual  customer  problems  which  need  to  be  solved  
 
Complaints  as  an  opportunity:  
Can  be  used  to  help  monitor  quality  and  highlight  improvements  to  service  
design  and  execution  
 
Why  don’t  customers  complain?  
1. Too  much  trouble  
2. Lack  of  time  
3. Why  bother,  the  organisation  won’t  do  anything  
4. I’ll  just  get  sent  on  a  wild  goose  chase  
 
Factors  influencing  complaining  behaviour:  
n Level  of  dissatisfaction  i.e.  does  it  seem  worth  it?  
n Cost  of  complaining  e.g.  time  and  effort  
n Benefits  of  complaining  i.e.  value  of  the  outcome?  
n Likelihood  of  resolution  i.e.  belief  that  the  problem  will/can  be  solved  
satisfactorily  
n Available  resources  for  making  a  complaint  
n Access  to  a  means  of  registering  a  complaint  
n Knowing  who  is  to  blame  for  the  problem  
n Demographics  e.g.    younger  and  better  educated  people  are  more  likely  to  
complain  
 
Customer  complaining  types:  passives,  voicers,  irates,  activists  
 
Service  Recovery:  
n A  crucial  element  in  achieving  a  satisfied  customer  
n A  true  test  of  the  organisation’s  commitment  to  the  customer  
n Justice  considerations  have  a  large  impact  on  how  customers  evaluate  a  
provider’s  recovery  efforts  
 
The  Recovery  paradox  
n Customers  who  experience  a  service  failure,  but  subsequently  receive  
excellent  service  recovery  may  ultimately  be  even  more  satisfied  than  
they  were  before  the  failure.  
Problems  with  this?  
-­‐ Most  customers  don’t  complain,  often  don’t  get  a  chance  to  engage  
with  them  
-­‐ Says  we  should  lower  expectations  rather  than  satisfy  them  
 
Principles  of  Effective  Service  Recovery  
n Top  management  commitment    
n ‘Complaints  as  opportunity’  culture    
n Training  and  empowerment    
n Ownership  of  complaint    
 
Service-­‐recovery  tactics  
n Act  fast:  time  is  of  the  essence  to  achieve  full  recovery  
n Apologise  but  do  not  be  defensive:  it  is  important    to  impress  on  the  
consumer  that  the  problem  is  an  infrequent  occurrence  
n Show  you  understand  the  problem  from  the  customer’s  point  of  view  
n Do  not  argue  with  customers:  gather  facts  to  reach  a  mutually  acceptable  
solution  
n Acknowledge  the  customer’s  feelings  to  help  build  rapport  
n Give  customers  the  benefit  of  the  doubt  
n Clarify  the  steps  needed  to  solve  the  problem  
n Keep  customers  informed  of  progress:  uncertainty  breeds  anxiety  
n Consider  compensation:  this  may  reduce  further  complaints  and  legal  
action  
n Persevere  to  regain  customer  goodwill:  outstanding  recovery  efforts  can  
build  loyalty  and  referrals  
 
70%  of  customers  who  had  their  complaint  dealt  with  satisfactorily  will  
buy  again  
 
Learning  from  experience:  
n Blueprinting:  understand  the  processes  behind  service  delivery  to  
identify  potentially  weak  links  
n Control  charts:  displaying  performance  as  measured  by  specific  criteria  
over  a  period  of  time    
 
Three  types  of  customer  engagement:  
1. Positive  engagement:  relationship  marketing  constructs  equals  high  
levels  of  rust  and  commitment.  They  will  exude  positive  cognition,  
emotion  and  behaviour.  
à  The  outcome  will  be  loyalty,  creation  of  value,  brand  equity  
2. Disengagement:  emotional  and  psychological  detachment,  weak  negative  
valence,  risk.  
3. Negative  engagement:  unfavourable  thoughts/feelings/behaviours  
towards  the  brand.  Negative  WOM  (outward  directed  and  social  in  
orientation  customers  will  express  these  negative  feelings).  
à  Risk  of  negative  information  spreading  to  other  consumers  and  making  
disengaged  customers  become  negatively  engaged.    
 
A  process  for  social  engagement  
1. Opportunity  to  engage  (culture,  social  relationships,  organisational  
culture,  environment)  
2. Awareness  of  ability  to  relationally  connect  with  brand  
 3. Propensity  to  engage:  history  of  your  relationships  influences  present  and  
future  propensity  to  engage  
4. Invitation  to  engage  
5. Actual  engagement  behaviour    
 
WEEK  SEVEN:  
Qualitative  research:  provides  rich  information,  depth  and  colour.  Highly  
experiential,  highly  subjective  and  is  accepting  of  the  persons  views,  experiences  
and  opinions.    
 
Key  features  of  Qualitative  research:    
Constructivist  worldview:  meanings  are  constructed  by  people  as  they  engage  
with  the  world  they  are  interpreting.  Try  to  interconnect  multiple  participant  
meanings  into  themes.  
 
Deshpande  says  quantitative  research  has  a:  positivistic,  particularistic,  objective  
outcome  oriented  world  view.  
Quantitative  research  simply  confirms  or  denys  characteristics,  it  is  process  
oriented  and  scientific  .  
 
Features  of  qualitative  research:  open  ended  questions,  loose  line  of  questioning,    
 
Banyan  Tree  
5  stage  process  of  what  they  do  at  Banyan  Tree:  how  to  interact  with  customers  
1. Training  different  to  service  culture:  
Culture  is  a  philosophy  (what  values,  attitudes  they  stand  for).  You  can  
train  for  basic  skills  and  competencies  but  you  can’t  train  culture  
2. Spontaneity  is  critical:  each  associate  knows  and  believes  to  serve  
customers  
3. Engage  in  structured  innovation.  New  owner  of  Banyan  Tree  created  a  
blue  print  of  ‘moments  of  truth’  
4. Structured  empowerment:  manager  and  trainee  buddy  system  
5. Structured  insurgent  attitudes  
-­‐ Had  someone  come  in  and  criticise  everything  and  question  it  
-­‐ This  created  positive  connections  and  innovation  
 
“Banyan  Tree  is  an  ordinary  company  with  extraordinary  people”  
-­‐ All  about  the  culture!  
-­‐  
 
WEEK  EIGHT  
“People  are  your  most  important  asset  is  WRONG  –  the  right  people  are  your  most  
important  asst”  
 
Personnel  and  competitive  advantage  
¢ From  a  customer’s  perspective:  the  encounter  with  service  staff  is  often  
the  most  important  aspect  of  a  service  
¢ From  the  firm’s  perspective:  service  staff  can  be  an  important  source  of  
differentiation  as  well  as  competitive  advantage.  
 Service  employees  are  a  core  part  of  the  product,  they  are  the  brand.    
 
 
 
 
 
INTERNAL EXTERNAL
EMPLOYEE EMPLOYEE CUSTOMER CUSTOMER PROFIT
SERVICE SERVICE
QUALITY SATISFACTION RETENTION SATISFACTION RETENTION
QUALITY

 
 
 
Basically:  internal  employee  satisfaction  à  external  customer  satisfaction  
 
Challenges:  Front-­‐line  work  
¢ Boundary  spanning  
¢ Sources  of  conflict  
l Person-­‐role  conflict  
l Organisation-­‐client  conflict  
l Interclient  conflict  
l Emotional  labour:  the  act  of  expressing  desired  emotions  during  
service  transactions  
à  This  is  when  you  are  required  to  emotionally  react  to  the  
customer  and  change  their  mood  or  position  so  that  they  
recommend  or  delivery  returns  
 
The  cycle  of  failure:  
¢ Businesses  with  high  employee  turnover  are  frequently  stuck  in  what  has  
been  termed  the  cycle  of  failure.  
¢ Two  concentric  but  interactive  cycles:  one  involving  failures  with  
employees;  the  second,  failures  with  customers.  
à  This  is  very  hard  to  change:  it  requires  a  change  in  organisational  
management  or  philosophy  
Customer  cycle:  Customer  dissatisfacto,  no  continuity  in  relationship  
with  customer,  no  development  of  customer  loyalty,  High  customer  
turnover  
Employee  cycle:  Employees  can’t  respond  to  customer  problems,  
employee  dissatisfaction,  high  employee  turnover,  poor  service  quality,  
low  profit  margins,  narrow  design  of  jobs  to  accomidate  low  skill  level,  
use  of  technology  to  control  quality,  payment  of  low  wages,  minimisation  
of  selection  effort,  minimisation  of  training,  bored  employees,  emphasis  
on  rules  rather  than  service  
 
The  cycle  of  mediocrity:  
 ¢ It  is  most  likely  to  be  found  in  large,  bureaucratic  organisations.  These  are  
often  typified  by  state  monopolies,  industrial  cartels  or  regulated  
oligopolies.  
¢ Customers  find  such  organisations  frustrating  to  deal  with.  
¢ Rigid,  lots  of  rules  
¢ These  sorts  of  firms  are  aimed  at  reducing  defections  not  improving  
service.  It’s  about  meeting  basic  problems  that  arise  not  pre-­‐emptively  
stopping  them    
¢ Not  oriented  towards  future  improvement  or  customer  delight  
Customer  cycle:  dissatisfaction,  resentment  of  inflexibility  and  lack  of  
employee  initiative,  complaints  to  employees,  no  incentive,  other  
suppliers  seen  just  as  poorly,  customers  trade  horro  stores,  service  is  not  
focused  on  customer  needs  
Employee  cycle:  jobs  are  boring  and  repetitive,  complaints  met  with  
indifference  of  hostility,  employee  dissatisfaction  but  can’t  easily  quit,  
narrow  design  of  job,  training  emphasises  learning  rules  instead  of  
pleasing  customers,  wages  are  good,  initiative  is  discouraged,  promotion  
increased  based  on  longevity.    
 
The  cycle  of  success:  
¢ Attractive  compensation  packages  are  used  to  attract  good  quality  staff.  
¢ Regular  customers  also  appreciate  the  continuity  in  service  relationships  
resulting  from  lower  turnover,  and  so  are  more  likely  to  remain  loyal.  
  

 
Human  resource  management:  how  to  get  it  right  
¢ Hiring  the  right  people:  be  the  preferred  employer  brand  and  compete  for  
the  talent  market  share  
¢ Identify  the  best  people:  personality  tests  
¢ Train  service  employees  actively:  service  employees  need  to  learn  the  
organisational  vision,  culture  and  strategy,  interpersonal  nd  technical  
skills  and  product/service  knowledge  
¢ Empower  the  front  line:  give  staff  the  information  and  authority  to  make  
discretionary  decisions  –  to  vary  from  the  policy  and  procedural  manual  
in  some  circumstances  
¢ Build  high-­‐performance  service  delivery  teams:  team  ability  and  
motivation  are  crucial  for  effective  delivery  of  many  service  types    
¢ Motivate  and  energise  people:  rewards,  feedback  and  recognition,  goal  
accomplishment    
 
The  inverted  organisational  pyramid  

 
 
Internal  marketing:  
¢ Strong  communication  is  essential  to  shape  the  culture  and  get  the  
message  to  the  troops.  
¢ Internal  communications  play  a  vital  role  in  maintaining  and  nurturing  a  
corporate  culture  founded  on  specific  service  values.  
¢ Effective  internal  communication  helps  to  ensure  efficient  and  
satisfactory  service  delivery,  achieve  productive  and  harmonious  working  
relationships  and  build  employee  trust,  respect  and  loyalty.  
 
Example:  AMEX  
Champion:  provide  feedback  on  customer  experience  with  the  brand.  
Measure:  “How  likely  are  you  to  recommend?”  
Empower:  Processes  in  place  to  allow  micro-­‐innovation  
Reward:    Not  just  about  wages  but  awards,  “chairman  award”  
 
WEEK  NINE:  Developing  a  Service  Product  Strategy  
 
Service  products:  
n Services  are  performances;  experienced  not  owned  
n Where  there  are  physical  elements  much  of  the  price  will  be  value  added  
service  
n Customers  actively  participate  in  the  production  
n Servicescape  is  central  to  satisfaction  and  differentiation  
n Use  of  technology  to  deliver  service  changes  the  service  experience  
n Services  consist  of  a  core  surrounded  by  supplementary  services  
 
What  is  a  service  product?  
n Many  organisations  offer  core  service  and  a  range  of  supplementary  
services  or  optional  extras  
n The  importance  of  each  attribute  varies  and  may  depend  on  whether  the  
service  is  high  or  low  contact    
n The  totality  of  the  service  provider’s  offering  also  includes  the  place  and  
manner  of  the  service  delivery  
 
The  Augmented  Product  
The  augmented  product  is  what  we  pack  around  the  core  to  create  value  for  the  
consumers.    
Sometimes  value  is  created  by  customers  who  buy  from  the  brand  and  who  
interact  with  each  other  and  the  brand  –  this  is  not  mentioned  in  these  models  
(from  this  lecture).  These  models  don’t  capture  engagement  or  customer  
participation,  and  therefore  don’t  fully  capture  survive  value.    
 
The  delivery  processes  
Another  component  of  the  service  product  value  offering  concerns  the  processes  
used  to  deliver  both  the  core  product  and  each  other  supplementary  services.  
This  involves  the  place  and  manner  of  service  delivery.    
 
The  structure  of  service  products  
n Distinction  between  the  core  service,  which  defines  the  type  of  business  
in  which  the  firm  is  competing,  and  the  supplementary  services  that  
surround  it.  
 
Supplementary  Services  
These  add  value  to  the  core  (and  help  differentiate  it  from  competitors).  
Eg  Coffee  is  the  core  product,  the  interaction  with  employees,  extra  benefits  etc  
are  the  supplementary  services.    
 
Core  product  surrounded  by  supplementary  services  
  
 
à  Information:  providing  consumers  with  rational  info  to  facilitate  cognitive  
decision  making  and  their  evaluative  thought  processes,  informing  choice.    
à  Consultation:  customising  service  delivery  to  meet  peoples  needs    
à  Order-­‐taking:  how  easy  is  it  to  purchase  or  engage  with  the  service  
à  Hospitality:  how  employees  can  engage  with  customers,  the  kind  of  
orientation  towards  the  customer  they  adopt,  how  they  view  their  relationship  
with  the  customer  (in  a  transactional  way,  or  as  a  lifetime,  more  personal  way).  
à  Exceptions:  when  an  employee  steps  outside  the  organisations  policy  
boundaries    
 
Clusters  of  Supplementary  Services  
Facilitating:  these  are  necessary  but  not  sufficient  in  creating  an  exceptional  or  
differentiated  service  
n Information:  relevant  and  accurate  info  required  
n Order  Taking  &  Bookings:  must  be  processed  when  customers  are  ready  
to  buy  without  delay  or  difficulty  
n Billing/Invoicing:  clear  and  informative  
n Payment:  ease  and  convenience  is  expected  
n Technical  facilitation      
Supporting:  points  of  differentiation  or  uniqueness  –  these  attributes  can  be  
leveraged  to  create  a  difference  or  uniqueness  to  the  service  in  the  market  
n Consultation/Special  assistance:  discover  customer  requirements  then  
develop  a  tailored  solution  
n Hospitality:  customers  to  enter  service  ‘factory’  and  stay  until  service  
delivery  is  complete  
n Safekeeping:  looking  after  possessions  
n Complaints  &  special  requests    (exceptions)  
 
Information  technology  can  be  used  to  enhance  delivery  of  
supplementary  services  
  
Developing  a  service  product  Strategy  
à  Managers  must  link  their  strategic  service  concept  and  service  product  
strategy  with  all  of  the  supplementary  services  
 
The  strategic  service  concept  
n Core  +  Supplementary  
n Degree  of  customisation,  labour  intensity  and  personalisation  
n What  human  resources  
n Definition  of  service  value  proposition  
 
Market  Positioning  Statement  
n What  product(s)  will  be  offered  
n Specify  the  distinguishing  characteristics  of  the  service  product  
n Specify  the  market  segment  to  be  targeted  
 
The  Service  Marketing  Concept  
n Customer  benefits:  core  product,  supplementary  services,  service  
reliability  levels,  accessibility  (where  and  when)  
n Service  costs:  money,  time,  mental  effort,  physical  effort  
 
The  Service  Operations  Concept  
n Geographic  scope  
n Scheduling  
n Facilities  
n Leverage  through  intermediaries  
n Leverage  through  customers’  assets  
n Specific  tasks  assigned  to  ‘frontstage’  and  ‘backstage’  operations  
 
Creating  New  Services  
n Major  service  innovations:  new  core  offerings  for  markets  that  have  not  
been  previously  defined.  
n Major  process  innovations:  new  ways  of  delivering  core  products  with  
additional  benefits  
n Product  line  extensions:  additions  to  current  lines  
n Process  line  extensions:  distinctive  new  ways  of  delivering  existing  
services  
n Supplementary  service  innovations:  adding  new  facilitating  services  or  
improving  supplementary  services  
n Service  improvements:  modest  changes  
n Style  change/Service  redesign:  simple  innovation/modest  changes  such  
as  using  new  colour  schemes.  
à  Self-­‐service  
à  Direct  service  (moving  point-­‐of-­‐service  delivery  to  customers  location)  
à  Pre-­‐service  (hastens  the  service  activation  process)  
à  Bundled  service  
à  Physical  service    
 
A  different  perspective  on  creating  new  services  
 o Unique  value  proposition  and  differentiation:    something  unique  or  truly  
superior  to  what  is  already  available  in  the  marketplace  
o New  service  fit:  A  new  service  or  product  must  have  an  excellent  fit,  not  
only  in  terms  of  the  strategy  and  competencies  for  the  firm  but  in  terms  of  
the  customers  perception  of  company  reputation  and  experience.    
o Customer  involvement:  Customer  input  in  the  development  process,  seen  
as  partners  in  the  process.    
o The  role  of  frontline  personnel:  frontline  personnel  play  a  critical  role  in  
reducing  the  cost  and  risk  of  failure.    
 
Creating  a  powerful  service  brand:  
Branding  alternatives:  branded  house,  sub-­‐brand,  endorsed  brand,  house  of  
brands    
Tiering  service  products  with  branding  
Offering  a  branded  experience  
 
 
WEEK  TEN:  Target  Marketing  and  Positioning  
Basic  focus  strategies  
l A  fully  focused  organisation  provides  a  limited  range  of  services  (perhaps  
just  a  single  core  product)  to  a  narrow  and  specific  market  t.  
l A  market-­‐focused  company  concentrates  on  a  narrow  market  segment  but  
has  a  wide  range  of  services.  
l Service-­‐focused  firms  offer  a  narrow  range  of  services  to  a  fairly  broad  
market.  
l Unfocused  service  providers  try  to  serve  broad  markets  and  provide  a  
wide  range  of  services.  
 
Major  approaches  to  market  segmentation:  

 
 
Bases  for  Segmentation  (Consumer  Markets)  
l Geographic  (region,  population,  climate)    
l Demographic  (age,  gender,  income,  nationality)  
l Psychographic  (personality,  values,  attitudes,  lifestyle)  
l Behavioural  (benefits  sought,  usage,  loyalty)  
  
Bases  for  Segmentation  (Business  Markets)  
l Industry  type  
l The  respective  size,  
l Location  and  strategic  importance  of  different  firms  
l The  nature  of  the  purchasing  situation  
l Anticipated  purchasing  volume  and  requirements  
l Potential  for  reciprocal  purchasing  and  alliances  
 
Criteria  for  Evaluating  Segments  
l Measurability:  degree  to  which  size  of  segment  and  purchasing  
behaviour  can  be  measured/quantified  
l Accessibility:  degree  to  which  segment  can  be  reached  and  served  
l Substantiality:  degree  to  which  segment  is  economically  viable  and  
profitable  
l Actionability:  degree  to  which  it  is  possible  to  design  an  effective  
marketing  program  for  a  segment  
 
Target  Market  Understanding  
l Research-­‐based  insights  into  how  the  various  components  or  attributes  of  
a  service  are  valued  by  current  and  prospective  customers  
l Identify  the  target’s  characteristics,  needs,  wants,  aspirations,  attitudes,  
perceptions,  motivations,  and  expectations  
Challenges  
l Because  of  the  intangibility,  inseparability,  heterogeneity  and  
perishability  of  services,  segmentation  is  potentially  more  difficult.  
l These  key  differences  can  result  in:  
l Difficulty  in  communicating  a  unique  position  
l Difficulty  in  achieving  sustainable  differentiation  
l Lack  of  customer  “involvement”  
l Stable  purchasing  patterns  suggesting  high  loyalty  but,  perhaps,  
masking  customer  indifference      
 
Importance  versus  Determinance  
Importance  attributes  are  those  which  have  to  be  met  by  all  competing  service  
providers  in  order  to    
l be  in  the  prospective  customer’s  evoked  set  and  pre-­‐purchase  
evaluation  process  
l satisfy  any  pre-­‐conceived  perception  of  risk  
Determinance  attributes  are  not  always  the  most  important  attributes  but  are  
the  attributes  by  which  customers  see  significant  and  compelling  differences  
between  competing  alternatives.    
“Determinant  attributes  eventually  fade  to  become  non-­‐determinant  as  markets  
mature  (and  competitors  catch  up).”  
This  is  especially  true  in  service  markets.  
Hence  markets  are  constantly  moving  targets.    
 
Service  Product  Positioning  
 l A  service  product’s  position  is  the  way  the  product  is  perceived  and  
compared  by  customers  on  important  attributes  -­‐  the  place  the  product  
occupies  in  consumers’  minds  relative  to  competing  products.    
 
Positioning  
l Because  of  the  intangible,  experiential  nature  of  services,  a  well  defined  
‘positioning’  can  help  prospective  customers  get  a  ‘mental  fix’  on  your  
brand  or  organisation  service.  
 
The  building  blocks  of  a  successful  positioning  strategy  
Points  of  difference:  These  are  service  attributes  that  consumers  positively  
associate  with  a  brand  and  belief  that  cannot  find  (or  not  to  the  same  extent)  in  a  
competitor  brand.  
Points  of  contention:  These  are  attributes  about  which  the  firm  and  its  
customers  disagree  regarding  how  its  performance  or  service  quality  compares  
with  competitors  
Points  of  parity:  Attribtues  shared  among  brands.  Category  points  of  parity  are  
associations  that  consumers  view  as  essential  for  an  offering  to  be  legitimate  and  
credible  within  a  certain  product  or  service  category.  Competitive  points  of  
parity  are  designed  to  negate  competitors  points  of  differences    
 
Analysing  Competitive  Positioning  
l What  does  our  firm  currently  stand  for  in  the  minds  of  current  and  
prospective  customers?  
l How  do  our  customers  perceive  us?  What  are  their  expectations?  How  
well  do  we  understand  and  fulfill  these  expectations?  
l What  customers  do  we  now  serve  and  which  ones  would  we  like  to  target  
for  the  future?  
l What  are  the  characteristics  and  benefits  of  our  current  service  offerings  
(core  and  supplementary)?    
l How  do  our  service  offerings  differ  from  those  of  the  competition,  and  
how  compelling  are  those  differences?  
l Do  we  exploit  competitors’  weaknesses  to  our  advantage?  
l How  well  do  our  service  offerings  meet  the  needs  of  different  market  
segments?  
l What  changes  must  we  make  to  strengthen  our  competitive  position?  
l Do  we  need  to  reposition?  
 
Copy  Positioning  versus  Product  Positioning  
l Copy  positioning  is  positioning  mostly  concerned  with  the  
communications  elements  in  the  marketing  mix.  Widespread  use  of  
advertising  in  packaged  goods  marketing  to  create  images  and  
associations  for  broadly  similar  branded  products  in  order  to  give  them  a  
special  distinction  in  the  customers  mind.    
l Product  positioning  is  concerned  with  the  nature  and  performance  of  the  
service  offering’s  attributes.  To  improve  a  product’s  appeal,  firms  change  
their  performance  on  certain  attributes,  to  reduce  its  price  or  alter  times  
and  locations  in  which  it  is  available.    
 
 Positioning  plays  a  pivotal  role  in  marketing  strategy  because  it  links  
market  analysis  and  competitive  analysis  to  corporate  strategy.    
 
Potential  Positioning  Pitfalls  
l The  organisation  (or  one  of  its  service  products)  is  pushed  into  
competition  from  stronger  competitors  
l The  organisation  is  pushed  into  a  position  that  nobody  else  wants  
because  there  is  little  demand  for  its  offerings  
l The  organisation’s  service  position  is  so  fuzzy  that  nobody  knows  what  its  
distinctive  competence  really  is  
l The  service  has  no  position  at  all  because  nobody  has  heard  of  it  
 
Steps  in  Developing  Strategy  
l Positioning  (perceptual  maps)  
l Market  analysis:  size,  locations,  demand,  trends,  segmentation,  selecting  
target  markets  
l Internal  corporate  analysis:  resources,  constraints,  values  
l Competitive  analysis:  strengths,  weaknesses  and  current  positioning  
l Selection  of  benefits  to  emphasise  to  customers  
l Marketing  Action  Plan  
 
Perceptual  map  
 
WEEK  11:  COMMUNICATING  AND  PROMOTING  SERVICES  
 
Service  V  Goods:  Implication  for  Communication  Strategy  
o Intangible  nature  of  performances:  marketing  communications  can  
serve  to  position,  differentiate  and  ‘tangibilise’  the  service  offering  
o Supply  and  Demand  management:  balancing  seasonal  fluctuations  with  
marketing  mix  strategies  
o Reduced  role  for  intermediaries:  services  are  less  frequently  sold  
through  intermediaries  than  goods  (some  exceptions  are  travel  and  
insurance)  
o Importance  of  contact  personnel:  a  critical  role  is  played  by  the  service  
personnel,  they  are  the  ‘brand  champions’  of  the  organisation  
o Customer  involvement  in  production:  customers  must  understand  the  
service  ‘script’    and  be  involved  in  any  changes  to  the  ‘front-­‐stage’        
 
Importance  of  integrating  marketing  communication  in  Services  
o Creates  powerful,  tangible  images    
o Gives  sense  of  credibility,  confidence  (risk  reduction)    
o Uses  brand  names  to  give  visibility  to  intangible  performances  
o Promotes  people  as  the  service  
o Position  and  differentiate  the  service:  can  persuade  target  consumers  that  
their  service  offers  the  best  solution  to  their  needs  
o Promote  the  contribution  of  service  personnel  and  backstage  operations    
o Add  value  through  the  communication  content  
o Facilitate  consumer  involvement  in  service  production  
o Stipulate  or  dampen  demand  to  match  capacity    
  
Internal  Communications  
o Vital  for  nurturing  the  desired  corporate  culture  
o Particularly  needed  for  large,  international  organisations  to  ensure  
consistency  of  service  delivery  and  to  have  all  employees  on  board  with  
the  same  promotions  and  promises  that  are  being  offered  
o Goals  of  internal  communications  include  ensuring  efficient  and  
satisfactory  service  delivery,  achieving  productive  and  harmonious  
working  relationships  and  building  employee  trust,  respect  and  loyalty  
 
Common  objectives  include:  
o Creating  and  Communicating  memorable  images  
o Building  awareness  and  interest  
o Stimulating  trial  
o Communicating  special  strengths  and  benefits  
o Stimulating  demand  in  otherwise  low-­‐demand  periods  and  discouraging  
demand  in  peak  periods  
o Countering  competitive  claims  
o Alleviating  uncertainties  and  the  sense  of  risk  
o Providing  reassurance    
o Recognising  and  rewarding  valued  customers  and  employees  
o Repositioning  a  service  
 
 
Key  Planning  Considerations  
o The  nature  of  the  service  product  
o The  nature,  characteristics  and  behaviour  of  the  target  market  and  
audience  
o The  content,  structure  and  style  of  the  message  and  the  manner  of  its  
presentation  
o The  media  most  suited  to  reaching  the  intended  audience  
o Measurement  of  effectiveness  
o The  budget  available  for  the  campaign  
o Tasks  &  responsibilities  and  the  availability  of  personnel  to  carry  them  
out  
o Time  frames  as  defined  by  targets,  seasonality,  market  opportunities  and  
competitive  practices  
o Means  of  measuring  and  evaluating  performance  
 
The  marketing  communications  mix  for  services  
 
  
 
The  Mix  
o Advertising:  frequently  used  to  create  awareness,  stimulate  interest,  set  
expectations  and  to  ‘tangibilise’  the  intangible  
o Personal  Selling:  Interpersonal  encounters  made  face  to  face  or  voice  to  
voice  
o Direct:  methods  include  direct  mail,  letter  box  drops,  fax,  email,  
telecommunications  
o Sales  Promotion:  communication  attached  to  a  value-­‐added  incentive  to  
push  the  purchasing  decision  
o Public  relations:  involves  building  credibility  and  fostering  goodwill  
among  individuals  and  groups  
o Servicescape:  design  needs  careful  attention  as  appearance  is  an  
important  means  of  communications  
o Corporate  communications:  involves  creating  a  unified  and  distinctive  
visual  treatment    for  all  the  tangible  elements  that  contribute  towards  the  
corporate  image  such  as  stationery,  and  promotions  literature  
o Customer  Service:  personnel  need  to  be  aware  of  the  extent  to  which  
they  represent  their  organisation  to  customers  and  others  
o Word  of  Mouth/Blogs/Twitter  
o Through  the  internet:  company’s  website,  online  advertising,    
o Through  service  delivery  channels:  service  outlets,  frontline  
employees,  self-­‐service  delivery  points  
 
Keys  to  effective  marcomms  
o Plan  and  design  marketing  communications  to  reflect  a  sound  knowledge  
and  understanding  of  the  audience  
o Ensure  that  the  message  and  media  are  the  most  suitable  in  appealing  to  
the  nature,  characteristics  and  motivation  of  the  target  audience  
o A  range  of  marketing  communications  may  need  to  be  conducted  
simultaneously  or  at  different  times  
o Consistency  of  messages  is  important  
o Ensure  that  service  offerings  are  attractive  solutions  to  consumers’  
problems  and  needs  
 o Persuade  through  credible,  compelling  and  beneficial  offerings  
o Do  not  over-­‐promise  
o Set  realistic  expectations  and  ensure  that  the  offering  is  delivered  
consistently  
o Make  the  message  easy  to  understand  and  respond  to  
 
Challenges  of  service  communications:  
Issues  of  intangibility  and  overcoming  this:  
Tangible  cues,  use  metaphors,  feature  service  employees.  
 
Overcoming  the  challenge  of  managing  promises  and  expectations:  
Create  a  powerful  service  brand,  external,  controllable  company  communication  
must  be  coordinated,  don’t  over  promise  and  under-­‐deliver,  create  tiered-­‐value  
service  offerings    
 
 
WEEK  TWELVE  
 
Shape  customers’  experiences  and  behaviour  
1. As  a  message  creating  medium,  using  symbolic  cues  
2. As  an  attention-­‐creating  medium,  to  make  it  stand  out,  attract  customers  
from  target  segments  
3. As  an  effect  creating  medium,  to  enhance  the  desired  experience,  heighten  
appetite  etc.    
 
For  image,  positioning  and  differentiation  –  important  due  to  the  
intangibility  of  services.  The  service  environment  is  an  important  quality  
proxy,  to  portray  desired  image.    
The  servicescape  as  part  of  the  value  proposition  eg  theme  parks,  hotels  
Facilitate  the  service  encounter  and  enhance  productivity    
 
The  Mehrabian-­‐Russel  Stimulus-­‐Response  Model:  illicits  that  feelings  more  
than  anything  else  with  drive  behaviour.    
Russells  Model  of  Affect:  emotional  response  to  environments  will  either  be  
pleasure  or  arousal.  
Affective  and  cognitive  processes:  Affect  caused  by  perceptions  and  cognitive  
processes  by  any  degree  of  complexity.  
Behavioural  consequences  of  affect:  apprpoach  or  avoid    
 
Article  1:  Bitner  1992  
à  Style,  appearance,  or  functionality  of  the  physical  surroundings  in  a  service  
setting    -­‐  the  holistic  space  is  the  first  impression  a  customer  has  
à  Atmospherics  colour  light  smell  space  layout  
à  Communicates  firms  purpose,  positioning  and  image,  
à  Influences  consumer  behaviour  and  employee  behaviour  
 
Classifying  servicescapes  
} Simple  and  lean  –  few  elements,  few  spaces,  straightforward  eg.  Self  
service  vending  machines,  Aust  Post,  ATM,  hair  dressers  
 } Complex  and  elaborate  –  variability  in  functions  performed,  many  spaces,  
many  elements  eg.  Hotels,  hospitals,  restaurants,  airlines,  health  clinics  
} Servicescapes  can  transport  you  to  another  world  and  transcend  your  
everyday  experiences  –  pure  hedonic  experience  facilitate  dby  the  
servicescape.  
} Disneyland:  interactions  with  other  customers  –  seeing  everyone  enjoying  
themselves  and  having  fun,  heightens  you  experience.  
} “Imagineering:    
 
Dimensions  of  the  servicescape  
} All  objective  physical  factors  that  can  be  controlled  by  the  firm  to  enhance  
or  constrain  employee  and  customers  actions  
◦ Ambient  conditions  
◦ Spatial  layout  
◦ Signs  symbols  artefacts  
v Servicescape  also  has  big  impact  on  cognitive  and  emotional  mood  of  the  
employees,  could  be  demotivating.  
v Gestalt:  the  whole  is  greater  than  the  sum  of  its  parts  :  in  a  servicescape  
people  don’t  break  down  the  details,  straight  away  it  is  just  one  
impression,  one  judgement.  Consumers  don’t  generally  engage  in  
attribute  analysis,  just  use  wholistic  perception.    
 
The  servicescape  

 
Ambient  conditions:  
} Background  characteristics  of  the  environment  
} Anything  that  affects  the  5  senses  
 } Strong  influence  on  consumer  behaviour    
} Music  –  affects  the  amount  of  time  you  spend  there,  your  pace,  influences  
perceptions  on  time  spent  shopping,  mood  etc  
 
Spatial  layout  &  functionality  
} Services  encounters  are  purposeful  –  service  encounters  exist  to  fulfil  
customer  needs  
} Layout  refers  to:  the  way  in  which  machinery,  equipment,  furnishings,  are  
arranged  
} The  size  and  shape    of  items  and  the  spatial  relationships  between  them  
} Functionality  refers  to:  ability  of  items  to  facilitate  performance    
} Janas  Bank  –  layout  changed  from  customer  line  and  closed  of  rooms  to  L  
shaped  booths  and  an  open  plan  space  –  no  walls,  no  doors.  
} Changes  the  employee  orientation  to  see  customers  on  more  equal  level  
and  aims  to  shift  customer  perception  that  bank  cares  about  them  etc  etc  
 
Signs,  symbols  &  artefacts  
} Explicit  or  implicit  signals  about  the  place  
} Signs  =  explicit  
} Symbolic  cues  shape  consumers  perceptions  
} Labels,  brand  logo,  signage  eg  Exit  
} These  have  an  impact  on  conveying  firm  image  –  tell  you  about  
expectations  of  behaviour  in  the  servicescape.  
} Quality  of  materials  influences  your  perception  
} Table  cloths  and  subdued  lighting  conveyed  levels  of  service  
} Office  size  and  space  conveys  hierarchy  
 
Effect  on  behaviour  
} Effect  of  servicescape  on  behaviour  not  explored  until  1960  
} Environmental  psychologists  suggest  that  consumers  respond  to  their  
environment  with  either  approach  or  avoidance  behaviours  
} Servicescape  also  influences  nature  and  quality  of  customer  employee  
interactions    
} Leads  to  approach  or  avoid  
} Approach:  positive  behaviours,  stay  longer,  explore,  affiliate  with  the  
servicescape,  the  employees  and  other  customers,  engage  with  the  service  
provider    
} In  a  retail  environemtn:  enjoying,  spending  more  money/time  browsing    
} Tempo  of  music  affects  time  spent    
} Avoidance  behaviours:  feel  uncofmrotable,  want  to  disassociate  
 
Effects  on  emotion  and  cognition  
} Cognition  –  the  way  we  process  information  
} Emotion  –  the  way  we  feel  about  an  experience  
} Gestalt  psychology  –  we  view  servicescapes  holistically    
} Do  consumers  think  or  feel  first?  
} Cognition:  rational  thinking  –  beliefs  are  a  part  of  cognition  –  what  we  
believe  about  employees/product/service.  Cognition  affected  by  non-­‐
 verbal  communication:  object  language  (tells  us  what  we  can  expect  from  
service  provider).    
} Categorisation:  assign  labels  to  certain  services(ie  restaurants,  what  kind  
of  seats  they  have,  are  they  encouraging  you  to  stay).  
} Bright,  light  colours  encourage  more  handling  of  products  and  are  more  
appealing  to  children.    
} Classical  music  encouraged  purchasing  of  expensive  wine  
} Unfamilar  music  drives  epople  away  –  played  Mozart  in  London  
underground  to  avoid  loitering  
 
Interesting  findings  LIN  paper  
} Perception  –  is  a  function  of  multiple  sources  of  input  from  the  
environment  and  one’s  own  predisposition  
} Gestalt  –  signifies  form,  shape  or  configuration    
} Process:  servicescape  (attributes)>cognitive  processing  (organising  
perceptual  image)>affective  processing  (emotion),  cognitive  processing  
(evaluation)>  behaviour  (approach/avoid)  
 
Interesting  findings  GRAYSON  
} Atmospherics  include:  
◦ Ambient  factors  
◦ Design  factors  
◦ Social  factors  
◦ Exterior  factors  
 
Interesting  findings  DAVIES  
} Smell  –  the  most  mysterious  of  all  sensory  functions.  Fragrance  creates  an  
emotional  response,  but  those  responding  to  it  are  unaware  of  it  
} 6-­‐10  million  receptor  cells  in  the  olfactory  epithelium  
} Humans  can  distinguish  2000-­‐4000  different  scents  
} Affected  by  visual  colour,  cultural  background,  psychological  state  and  
scent  memory  
 
Role  of  the  Servicescape  
Package  
Facilitator  (help  the  performance  of  customers  and  employees  in  the  
environment.  A  well  designed  service  facility  can  make  the  experience  
enjoyable  from  customers  POV  and  enjoyable  to  perform  from  employee  
POV)  
Socialise  (help  with  socialization  of  both  employees  and  customers,  can  
ease  their  interactions)  
Differentiator  (the  design  of  the  physical  facility  can  differentiate  a  firm  
from  its  competitors)    
 
Affective  responses:    RUSSELL  MODE  OF  AFFECT  
Arousing  à  Exciting  à  Pleasant  à  Relaxing  à  Sleeping  -­‐à  gloomy  à  
unpleasant  à  displeasant  à  distressing  
 
Physiological  responses  –  servicescapes  can  influence  these  
 Heart  beat  rate  
Pupil  dilation  
Tears  
Perspiration  
Pain    
 
Individual  behaviours  created  by  servicescape  
Approach  behaviours  
Avoidance  behaviours  
Arousal  seekers  (look  for  high  levels  of  stimulation)  
Arousal  avoiders  (prefer  lower  levels  of  stimulation)    
Environmental  stimuli  screeners  (not  affected  by  high  levels  of  
stimulation)  
Environmental  stimuli  non-­‐screeners  (highly  affected  and  can  exhibit  
extreme  responses  even  to  low  levels  of  stimulation)    
 
Social  Interactions  
Between  and  among  customers  and  employees  
Spatial  layout  
 
Maximising  the  service  environment  
1) Recognize  strategic  impact  
2) Blueprint  
3) Clarify  roles  of  the  servicescape  
4) Assess  and  identify  physical  evidence  opportunities  
5) Update  and  modernize  (match  or  better  them  to  your  competitors)  
 
Effects  on  cognition:  could  impact  a  customers  perception  about  someones  
trustworthiness,  success,  reliability,  competence.  
 
Employee  example:  office  size  and  type  of  furnishings  may  affect  an  employees  
beliefs  about  the  importance  of  this  role  and  function  in  relation  to  other  
employees    
 
Effect  on  emotion:  
The  way  we  feel  about  an  experience,  perceived  servicescape  could  elicit  
emotional  responses  that  in  turn  influence  behaviour  
Tom  dimensions:  pleasure  and  excitement    
 
WEEK  13  
 
o Semester  1,  2012  Past  Paper  
o Only  chapters  listed  in  the  unit  outline  
o How  can  you  apply  theory  to  real  life  examples?  
o Tutorial  set  readings!  
o Four  Q’s  require  use  of  a  brand  example  (your  choice  for  3rd  and  4th  is  
stipulated  –  is  a  service  category).  
o Two  are  straight  theory  –  don’t  use  examples  
 o More  than  one  draws  from  your  tutorial    
o One  question  draws  on  individual  essay  and  another  chapter    
 
o Always  start  with  the  theory  
à  Define  the  theoretical  concept  you  are  asked  about:  define  any  components  of  
the  concept  
à  Then  if  requested,  comprehensively  apply  and  example  to  each  element  of  the  
theory  
 
o  Understanding  services  –  what  are  they  and  why  are  they  important?  
o What  is  service  success  and  how  can  it  be  achieved?  
o What  is  involved  with  managing  service  delivery?  
o How  can  it  be  improved?  
o What  is  value,  how  can  we  create  and  enhance  value?  (Not  just  
transactional,  involvement  in  service  experience,  elements  of  service:  
core  product  etc).  
o Who  is  involved  in  services?  How  and  why  and  to  what  effect?  (Service  
eco-­‐systems,  employees,  non-­‐customers)  
 
What  is  expected?  
o Reflect  critically  on  oncept  sna  djustify  your  position  
o Integrate  learning  of  tet  conepts  with  leaders  then  lecture  and  tte  
discussions  
 
Introduction  week  
What  are  services?  
-­‐ Something  that  can  be  bought  or  sold  but  no  tangible  
-­‐ Service  dominant  logic  
-­‐ Performance  
-­‐ Processes  
-­‐ Time,  place,  form,  experiential  value  
-­‐ Intangible    
 
WEEK  2  
New  perspectives  on  marketing  in  the  service  economy:    
Services  are  different  to  goods  in  4  ways:  
Intangibility,  Inseparability,  Heterogeneity,  Perishability,  SD  logic.  
Search,  experience  and  credence  qualities  
7  P’s  of  marketing  (people,  processes  and  physical  evidence)  
 
3  Customer  Bheaviour  
o Pre-­‐purchse  -­‐-­‐>  encounter  à  post-­‐purchase  
o Culture  (permeates  the  entire  model,  influences  all  3  phases):  Hofstede  
dimensions  (masculine/femini/uncertainty/individual/collect)  
o Types  of  risk  in  decision  making:  psychological,  financial,  temporal  (time),  
functional,  sensory  and  social.  Marketers  need  to  find  strategies  to  reduce  
these  risks.    
 
4  Satisfaction  &  Service  Quality  
 o Satisfaction  is  about:  post  purchase  evaluations,  expectations  
o Disconfirmation  of  expectations  
o Satisfaction  (transactional)  vs  service  quality  (global)  
o Is  satisfaction  useful/adequate-­‐  should  we  be  measuring  something  else?  
o Service  profit  chain  
o How  do  we  measure  Service  Quality?  
 
5  Managing  People  
o People  are  the  service,  they  represent  the  brand,  they  are  a  point  of  
evaluation  
o Cycle  of  failure/mediocrity  and  success  –  service  profit  chain  link  
o Strategies  to  improve  service  through  HR  mechanisms  
à  Hire,  develop,  support,  and  retain:  happy  staff  equals  happy  customers  
equals  profitable  organisation  
à  Employee  behaviours  can  lead  to  loyalty  (Banyan  tree  employees)  
à  5%  increase  in  loyalty  –  anywhere  between  35-­‐85%  inceasrse  in  
customer  lifetime  loyalty  
 
6  Targeting  and  Positioning  
o 4  criteria  for  measurement  
o POD’s  (point  of  difference)  and  POP’s  (point  of  parity)  
o Segmentation  bases  
à  Business  vs  consumer  
o Positioning  –  its  all  in  the  mind.  Conceptual  mapping,  axis  of  
differentiation  
 
7  Service  Product  Strategy  
o Service  product  
à  Core  
à  Facilitating  
à  Supporting  
o New  service  development  (don’t  need  to  study  this)  
 
9  Communicating  and  promoting  
o Services  vs  goods  –  marketing  mix  implications  
à  intangible,  demand  mgt,  personnel,  customer  involvement,  no  
intermediaries  
o Services  marketing  mix  
o Digital  media  (brand  meaning  is  socially  constructed)  
 
10  Customer  service  and  relationships  
o Service  culture  (MCDonalds)  
o Importance  of  employees  in  creating  the  service  experience  
o Reasons  why  we  want  to  make  our  customers  loyal  ad  then  keep  them  
(relationship  marketing)  
à  How  do  you  do  this?  Financial,  social,  structural  bonds    
 
11  Complaints  and  Recovery  
o Customers  responses  to  failure  (boycott,  legal  action)  
 o Reasons  why  they  complain  
o What  should  be  done  about  it?  
à  Procedural,  interactional  and  outcome  justice  
o Service  recovery  and  the  recovery  paradox  
o Sabotage  
 
12  Servicescape  –  textbook  not  enough  for  this  topic,  listen  to  lecture  and  4  
articles  discussed  –  model  put  up  in  the  lecture  LEARN  MODEL  
o The  style,  appearance,  or  functionality  of  the  physical  surroundings  in  a  
service  setting  
o Atmospherics  colour  light  smell  space  layout  
o Communicates  firms  purpose,  positioning  and  image  
o Influences  consumer  behaviour  and  employee  behaviour  –  cognition  and  
emotion  
 
PRACTICE  QUESTION  (photo  taken)  
 
a) define  and  describe  the  4  differences  of  services  and  products    
b) Outline  the  characteristics  and  challenges  that  eah  of  these  difference  
create  for  service  providers  
 
Include  in  answer:  ch  1,  ch  2  and  essay  knowledge    
à  Slide  1  introduction  week    
à  Slide  2  –  new  perspectives  on  marketing  in  the  service  economy  
 
à  Definition    
à  Intangibility  defined.  
Leads  customers  to:  
Leads  to  difficulty  in  evaluation  
Perceived  risk  
Use  price  to  assess  quality  
 
How  can  management  deal  with  this?  
Reduce  complexity  
Tangible  cues  
WOM  referral  and  recommendations  
à  Find  an  example  and  apply  it!  
 
à  Inseparability  
Define  it  
Leads  customers  to:  
-­‐ co-­‐produce  
-­‐ Co-­‐consumer  with  other  consumers  
-­‐ Travel  to  service  location    
Management  response