Service Marketing

Basic three in service marketing

• Understanding service
– Distinctive characteristics, Framework of
analysis, Customer experience
• Strategic Issues
– STP, The loyalty effect, Managing Demand
• Tools ( Marketing Mix)
– Creation and delivery, Value addition
through supplements
 What is Service

Any act of performance that one

party can offer another that is
essentially intangible and does not
result in the ownership of anything;
its production may or may not
be tied to a physical product.
Goods and Services Continuum
• There are two classes of services.
– Services that are the main purpose of a transaction
—renting a truck to move.
– Services that supplement the sale of a tangible
good — for example, an information hotline for
computer software.
• The focus here is primarily on identifiable, intangible
services that are the main object of a transaction
designed to provide want-satisfaction to customers;
supplementary services growing in importance,
however.
 The Goods-Services Continuum

Canned Ready- Auto- Draperies, Rest- Repairs: Air Insurance,

foods made mobiles Carpets aurant auto, house, travel Consulting,
clothes meals landscaping Teaching

MOSTLY GOODS MOSTLY SERVICES

 Service Sector in India
• Service contributes to around 54% of GDP
• Education, Healthcare, Financial Services,
Entertainment growing at a compound rate
of 26%
• Services backed by Technology is
registering appreciable growth
 Reasons for Growth
• Increased affluence at a particular level of
economy
• Increase in the number of working women
• IT explosion
• Improvement in communication
• Retail boom
 Giving Shape to Service
• Service benefits
• Service expectations
• Service offer
• Service elements
• Service form
• Service level/quality/standard
 Understanding Service

DISTINCTIVE CHARACTERISTICS
Distinctive Characteristics of Services

Intangibility

Inseparability

Heterogeneity

Perishability
Distinctive characteristics of services

• Intangibility
– To a large extent, abstract & intangible
• Heterogeneity
– Non standard and highly variable
• Inseparability
– Typically produced and consumed simultaneously,
with customer participation in the process
• Perishability
– Not possible to store in an inventory
 Intangibility
• Cannot be touched, Ephemeral performances
• Cannot be produced or displayed ahead of time
• Reducing intangibility
– Through stress on professionalism
– Providing tangible cues (physical facilities,
appearance and demeanor of staff, stationary, logo)
– Building a strong corporate image
 Heterogeneity
• Not exact replica of past experience
(Raises risk factor)
• Reducing variability risk
– by standardization, training to follow defined
procedure or automation (But protecting
against the attributes being right of the
services) or through service guarantees
(preferably unconditional – Not like Lufthansa
– on time arrival)
 Inseparability

• Customers are inseparable from service

delivery
• Service inextricably linked to one particular
individual
– Hair cutting, tax payer (comes with disorganized
records)
– Over demanding restaurant patron flustering wait
staff
• Uniform service in multi locations not possible
 Perishability

• Simultaneously produced and

consumed (Can not be inventoried)
– Can be controlled by increasing
personal selling during slack season,
off season price cuts
Extended Marketing Mix For services
Product

Promotion Price

Physical
Evidence
Place People

Process
Tangible Elements in Service Mktg.
• Personnel
– (sales representatives, staff)
• Facilities/Equipment
– (Building, Ambience)
• Non-personal Communication
– (Brochure, Advtg, Signals)
• Other people
– (Fellow customers, Word of mouth)
 Service Mix
• Tangible goods with accompanying Service
– (Automobile, Computer)
• Hybrid
– (Restaurant)
• Major service with minor goods
– (Airlines)
• Pure Service
– (Lawyer, Dentist)
 Framework of Analysis

• Classification of Product (Service

Act)
– At whom is the activity directed
– Is this activity tangible or intangible
Key factors in service Act nature
• People processing
– Customer must spend time actively co-operating with
the service provider
• Possession processing
– Less physical involvement of the customer
• Minds Processing
– Shapes & influences customer behavior
– Requires commitment of time
• Information processing
– Most intangible in form.
– Tangiblized in the form of books/reports/CD
 Services can vary in certain aspects

• These can be:

– Equipment based or People based
– Personalized or Business need
– Client present or Absent
– Pre-Sale or Post Sale
 Tangible Service Acts
Directed at:

• People’s bodies • Physical possession

– Passenger Transport – Freight transport
– Health Care – Repair/Maintenance
– Hotel – Warehousing/Storing
– Beauty saloons – Laundry
/haircutting
 Intangible Service Acts
Directed at:

• People’s Minds • Intangible assets

– Advertising / PR – Accounting
– Entertainment – Financial services
– Management – Software consultancy
consultancy – Legal Aid
– Education – Data processing /
– Information services transmission
Customer Perceptions of Service

• Service encounters or the “moments of truth”

are the building blocks of customer
perceptions.
• Definitions and understanding of customer
satisfaction and service quality.
• Strategies for managing customer
perceptions of service.
 Customer Perceptions of Service
• How to Measure:
– Customer Satisfaction
– Service Quality
• Service Encounters are the Foundations
for Satisfaction and Service Quality
• Strategies for Influencing Customer
Perceptions
Customer Experience
 Customer Experience
• Interface with service personnel
• Appearance/feature of service facility
• Interaction with self- service equipment
• Characteristic/behaviour of other
customers
 Customer’s Service Experiences
• Moments of Truth (Jan Carlzon)
– Customer's points of interaction with the service provider
• Servuction method ( Bateson)
– Two components in service
• Visible (people)
• Invisible( Inanimate environment)
• Service Theatre (Grove and Fisk)
– Factors involved are
• Actors( Service providing people)
• Teamwork of backstage/Front stage (service task)
• Impression ( Communication, expectation management,
impact creation by effective performance
 Customer Experience

Levels of Contact
• High Contact
– (Hospital, College Education, Star hotels)
• Medium Contact
– (Fast food, Laundry, Retail Banking)
• Low Contact
– (Insurance, Auto repair, Electronic
banking)
Customer’s Evaluation of Service
• Physical products evaluated by
search qualities
• Service products evaluated by
experience qualities
• Specialized service (like medicare)
evaluated by credence qualities
Importance of Service ‘Encounters’
• Creates Impression of service providence
• Combination of positive negative
interactions will leave customers feeling
– unsure of the service quality,
– doubtful of consistent service delivery and
– vulnerable to competitors’ appeal
 Types of Service ‘Encounters’
• Remote Encounters
– Bank ATMs, Automated ticketing machines, Ordering retail
merchandises through internet
• Phone Encounters
– Conveyance of various promotional offers, Confirmation of
service delivery
• Face to face Encounters
– Direct interactions ( A theme park may have multiple direct
interactions i. e. ticket sellers, maintenance personnel, ride
personnel, character entertainers, food and beverage servers
etc.)
 Service Encounter Sequence
• Service Encounters = ∑Transactions = ∑Tasks
• Poor quality in one task can taint the perception
of quality for the entire sequence

-- Service Encounter --

Service Service Transaction 2 Service

Transaction Transaction
1
Initiation Diagnosis Service Verify 3
 Service ‘Encounters’
• Service encounter cascade for a hotel visit
– Check in
– Bell person takes to room
– Restaurant meal
– Wake up call
– Check out
 Common Themes in Critical
Service Encounters Research

Recovery: Adaptability:
Employee Response Employee Response
to Service Delivery to Customer Needs
System Failure and Requests

Coping: Spontaneity:
Employee Response Unprompted and
to Problem Customers Unsolicited Employee
Actions and Attitudes
 Recovery
• Satisfactory
– Hotel lost my room reservation voucher but the
Manager gave me the VIP suite at same price
• Dissatisfactory
– For weeks I did not receive my Mutual fund dividend
cheque. I personally went to their office. I was asked to
wait for half an hour when the staff was checking. Then,
came the excuse that it is in the mail.
 Adaptability
• Satisfactory
– Went to a doctor without appointment with
aggravated sickness. Despite long queue,
attending staff seeing my condition apologized
to others to give me priority and took me to the
doctor within 15 minutes
• Dissatisfactory
– My young son was sent to Mumbai under the
escort of the airhostess who left him alone at the
destination airport
 Spontaneity
• Satisfactory
– While serving food , the flight attendant noticed a
stain on my shirt collar and removed it without
damaging the texture
• Dissatisfactory
– The receptionist at a reputed business school kept
me waiting for over 10 minutes as he was having
lighter moments with his friend over phone
 Coping
• Satisfactory
– An intoxicated passenger was shouting in the flight at the
in-flight crew. The chief flight supervisor politely told him
that on arrival at the destination, he would be arranged a
meeting with the Airways managing director as a VIP
frequent flier and write now he could write a complaint
which will be communicated to the MD’s office right then
by the pilot.
• Dissatisfactory
– In the same situation, the supervisor raised her voice and
got co-pilot to physically knock him on the seat threatening
of dire consequence
General Service Behaviours– Do’s
and Don’ts
• Recovery
– Do’s
• Acknowledge Problem
• Explain causes
• Apologize
• Compensate/ upgrade
• Lay out options
• Take responsibility
– Don’ts
• Ignore / blame customer
• Leave customer to fend for himself
• Downgrade
• Act as if nothing is wrong
• Pass on the buck
 General Service Behaviours– Do’s
and Don’ts
• Adaptability
– Do’s
• Recognize seriousness of the need
• Acknowledge
• Anticipate
• Attempt to accommodate
• Adjust the system
• Explain rules/ policies
• Take responsibility
– Don’ts
• Ignore
• Promise but fail to follow through
• Show unwillingness to try
• Embarrass / Laugh at the customer
• Avoid responsibility
• Pass on the buck
General Service Behaviours– Do’s
and Don’ts
• Spontaneity
– Do’s
• Be alert to opportunity
• Take time
• Anticipate need
• Listen
• Provide information
• Show empathy
– Don’ts
• Exhibit impatience
• Get carried by routinized mentality
• Ignore
• Yell/ Laugh/ swear
• Discriminate
General Service Behaviours– Do’s
and Don’ts
• Coping
– Do’s
• Listen
• Try to accommodate
• Explain
• Opt for least controversial remedy
– Don’ts
• Take customer’s dissatisfaction personally
• Allow customer’s dissatisfaction affect others
• Lose cool
CUSTOMER EXPECTATIONS
OF SERVICES
 Customer Expectations of
Service

• Recognizing that customers hold different types of

expectations for service performance
• Discussing controllable and uncontrollable sources of
customer expectations
• Distinguishing between customers’ global expectations
of their relationships and their expectations of the service
encounter
• Acknowledging that expectations are similar for many
different types of customers
• Delineating the most important current issues
surrounding customer expectations
 DEFINITIONS
• Customers have different expectations re
services – or expected service
• Desired service – customer hopes to
receive
• Adequate service – the level of service the
customer may accept
 Dual Customer
Expectation Levels
(Two levels of expectations)

Desired Service

Zone of
Tolerance

Adequate Service
 Zones of Tolerance VARY for
Different Service
Dimensions
Desired Service

Level
of
Zone of Desired
Expectation Desired Service
Tolerance Service
Adequate Service
Zone
of
Tolerance

Adequate
Adequate Service
Service

Most Important Factors Least Important Factors

 Factors that Influence
Desired Service

Enduring Service
Intensifiers

Desired
Service
Personal Needs
Zone
of
Tolerance

Adequate
Service
 Factors that Influence
Adequate Service
Transitory Service
Intensifiers

Desired
Perceived Service Service
Alternatives
Zone
of
Tolerance
Self-Perceived
Service Role Adequate
Service

Situational
Factors
 Factors that Influence
Desired Service
• Personal needs include physical, social,
psychological categories

• Enduring service intensifiers are individual,

stable factors that lead to heightened sensitivity
to service
This can further divided into Derived Service
Expectations and Personal service Philosophies
 Factors that Influence
Desired and Predicted Service
Explicit Service
Promises

Implicit Service
Promises

Desired Word-of-Mouth
Service

Zone
Past Experience
of
Tolerance

Adequate Predicted
Service Service
 Satisfaction

Service Received
minus
Service Expected
 Satisfaction - Loyalty Curve
Apostles
80 Affection
Zone
Loyalty (Retention)

60

40
Indifference
Zone

20

Defection Zone

0
1 2 3 4 5

Satisfaction Level
 Factors Influencing
Customer Satisfaction

• Product/service quality
• Product/service attributes or features
• Consumer Emotions
Service Quality

Service Quality
=
Perception
minus
Expectation
 Service-quality Model
Word of mouth Past Experience
Communication

Personal needs

Expected service

GAP 5

Perceived service
GAP 1

GAP 4 External
Service Delivery
Communication
GAP 3

Perception translated into service

quality

GAP 2 GAP 23
1
4 NotKnowing
Not deliveringright
selecting
matching to
service
what customer
performance
standards
designs
to Expects
promises
/ standards
Management Perception
 Gap Model of Service Quality
• Customer GAP
• Gap 5: Customer Perceptions - Customer Expectations

• Provider GAP
• Gap 1: Not Knowing What Customers Expect
➲ Company Perception of Customer Expectations – Actual

• Gap 2: Not Selecting the Right Design Standards

➲ Service Design Standards - Company Perception of Customer
Expectations

• Gap 3: Not Delivering to Service Standards:

(The Operations Gap)
Actual Service Performance - Standards
• Gap 4: Not Matching Performance to Promises
➲ Actual Service Performance - Promised Performance
 Ten Criteria of Evaluating
• Reliability
Service Quality
– Perform what Promise
• Access
– Easiness of Approach
• Security
– Customers’ safety feeling
• Credibility
– Trustworthiness
• Degree of Customer Expectation
– Company’s effort to know customer
 Ten Criteria of Evaluating
Service Quality
• Responsiveness
– Employee willingness
• Competence
– of Employee / Technology
• Courtesy
– Behaviour
• Tangibles
– Physical appearance areas
• Communication
– Both Routine / non routine
Five Dimensions of Service Quality

Reliability Ability to perform the promised service

dependably and accurately.
Knowledge and courtesy of employees
Assurance and their ability to convey trust and
confidence.
Physical facilities, equipment, and
appearance of personnel.
Tangibles
Caring, individualized attention the firm
provides its customers.
Empathy
Willingness to help customers and
provide prompt service.
Responsiveness
 Managing Service Quality
• Quality is hard to define, measure, control, and
communicate
• Quality is defined by the consumer
• It’s important to measure customer satisfaction with an
organization’s service quality.
• Customers see five important components:
– Core service must measure up.
– Quality of service, meeting expectations.
– Technical aspects of delivery.
– Interaction with people who deliver service.
– Affective dimensions: How customers feel.
The Chain Effect - Service Quality Improvement
on Profits Through Retention

Spending on Service Quality

Improved Service Performance

Increased Customer Satisfaction

Increased Customer Retention

Increased Market Share

Increased Revenue

Increased profits
Blue print for Service Management
Focus the organization

Short Attract customers

term

Listen to customer

Measure customer satisfaction Long

term
Middle Determine financial impact
term

Improve service

Look for the future

 Marketing Debate

 Is Service Marketing Different

From Product Marketing?

Take a position:
1. Product and service marketing are
fundamentally different.
2. Product and service marketing are highly
related.
 Assignment
• Think of a time when, as a customer, you had a
particularly satisfying (dissatisfying) interaction with
an employee of
• Describe the incident .
• When did the incident happen?
• What specific circumstances led up to this situation?
• Exactly what was said and done?
• What resulted that made you feel the interaction
was satisfying (dissatisfying)?
 Exercise to
Identify Service Attributes
Pick a services industry below and brainstorm 3 specific requirements of
customers in each of the five service quality dimensions. Be certain the
requirements reflect the customer’s point of view.
Choices: Airline, Fast Food, Upscale Restaurant, Auto Repair, UNM,
Exterminator

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness
:
Questions
STUDY SLIDES
 Theatre as a Metaphor for Service
delivery
• Theater is a good metaphor as service delivery
consists of a series of events that customers
experience as a performance
• Particularly useful in high-contact service
providers such as physicians, educators, hotels
and restaurants, and for businesses that serve
many people simultaneously, such as
professional sports, hospitals, and entertainment
• Not that relevant in individualized / personalized
services like tax consultancy, legal services etc.
Theatre as a Metaphor for Service
delivery
• Due to intangibility and simultaneity of
production and consumption of services,
customers often have difficulty in
assessing quality of services they receive.
Hence the ‘encounters’ and aspects of
‘tangibalisation’ provide important cues to
the excellence of service rendered
 Theatrical nature of Service
Experiences
• Performance
– Describes an actor’s activity when in continuous contact
with an audience. To create / communicate believable
experience, actors employ various expressive devices lie
set, light, personal appearance, behavioural manner
(dress, facial expression, gestures, personality portrayal
etc. )
• Service Experiences are performances
– Reflect efforts on the part of service provider to satisfy
customer need in pursuit of excellence in an appropriate
servicescape and through scripting and following
commensurate service design / delivery
 Theatrical nature of Service
Experiences
• Performance Teams
– Sets of actors respect each others’ role and co-
operate with each other to create a single
response to which the audience responds. One
bad performance can spoil the drama.
• Service Providers need similar teams
– Require co-ordination / understanding among all
the employees of the scripted service design to
deliver the set standard. A single employee may
mar the entire contemplation.
 Theatrical nature of Service
Experiences
• Theatre needs appropriate setting, front
stage and backstage co-ordination for
successful show
• Typical service experience occurs in a
setting marked by distinct front and back
stage operations in sync
 Theatrical nature of Service
Experiences
• Actors of a theatre are impression
managers as their presence /behaviour
/performance fashion the show
• Service Experiences rely on the
impression management expertise of the
workers
 Theatrical nature of Service
Experiences
• Every theatrical performance is designed
to appeal to a particular audience. Great
performances are sometimes lost on the
wrong audience. Individuals expecting a
comedy get disappointed if there is a
tragedy enacted on the stage
• For service experience to be successful,
segmenting right customers is important
 Air travel as a model
• Act 1
– Departure (ticket checking, seat allotment, baggage
check, departure)
• Act 2
– Flight (crew reception, escorting to seat, hand
baggage loading, food servicing)
• Act 3
– Destination arrival ( transportation to the lounge,
baggage clearance, escort to connecting flights