CHAPTER 9: SERVICE AS THE CORE OFFERING Part 3: Develop the Value Offering—The Product Experience McGraw-Hill Education Copyright © McGraw-Hill Education.

CHAPTER 9:SERVICE AS THE CORE OFFERING

Part 3: Develop the Value Offering—The Product Experience

McGraw-Hill Education

Copyright © McGraw-Hill Education.  All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

LEARNING OBJECTIVES

Understand why service is a key source of potential differentiation

Explain the characteristics that set services apart from physical goods

Explain the service-profit chain and how it guides marketing management decisions about service

Describe the continuum from pure goods to pure services

Discuss concepts of service quality and gap analysis

Measure service quality through use of SERVQUAL

Understand service blueprinting and how it aids marketing managers

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WHY SERVICE IS IMPORTANT

A service is a product in the sense that it represents a bundle of benefits that can satisfy customer wants and needs, yet it does so without physical form.

More than 80% of U.S. jobs are service-related

Services produce 75% of GDP

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Service as a Differentiator Focusing on service and on enabling

employees to effectively deliver service can be one differentiator that is hard for the competition to replicate.

Great service provides sustainable competitive advantage

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A New Dominant Logic for Marketing

Customers do not buy goods or services: They buy offerings which render services

which create value …. The traditional division between goods and

services is long outdated. A service-centered perspective leads to

market expansion by assisting customers in the process of specialization and value creation.

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Characteristics of ServicesEXHIBIT

9..1

Intangibility

Inseparability

Variability Perishability

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Intangibility

A service cannot be experienced through the physical senses.

It cannot be seen, heard, tasted, felt, or smelled by a customer.

Goods can easily be experienced through the senses.

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Inseparability

A customer still can’t really experience it until it is actually consumed.

It is produced and consumed at the same time and cannot be separated from its provider.

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Variability

Because it cannot be separated from the provider, a service’s quality can only be as good as that of the provider him/herself.

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Perishability

A service cannot be stored or saved up for future use.

Perishability is a major potential problem for service providers.

Fluctuating demand is related to perishability of services.

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The Service-Profit ChainEXHIBIT

9.2

Reprinted by permission of Harvard Business Review, from “Putting the Service–Profit Chain to Work”, by James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser Jr. and Leonard A. Schlessinger, March/April 1994. Copyright © 1994 by the Hardvard Business School Publishing Corporation; all rights reserved.

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THE SERVICE-PROFIT CHAIN

Internal Service Quality Internal marketing, treating employees as

customers, and developing systems and benefits that satisfy their needs, is an essential element of internal service quality.

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Internal Service Quality

Firms practicing internal service quality are customer-centric:

They do the following:1. Instill an organization-wide focus on understanding

customers’ requirements.

2. Generate an understanding of the marketplace and disseminate that knowledge to everyone in the firm.

3. Align system capabilities internally so that the organization can respond effectively with innovative, competitively differentiated, satisfaction-generating goods and services.

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Satisfied, Productive, and Loyal Employees

Internal marketing must include the following: Competing for

talent

Offering an overall vision

Training and developing

people

Stressing teamwork

Modeling desired behaviors by

managers

Enabling employees to

make their own decisions

Measuring and rewarding great

service performance

Knowing and reacting to employees’

needs.

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Greater Service Value for External Customers

There is strong evidence that attention to internal service quality and to employee satisfaction, productivity, and retention result in stronger value to external customers of a service.

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Greater Service Value for External Customers

Customers set their expectations based largely on the evidence provided by the marketer before the purchase.

Customer Expectations Management Do not set customer expectations so high

that they cannot be effectively met on a consistent basis.

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Customer Satisfaction and Loyalty Loyalty sparks:

High customer retention – low propensity to switch, as well as repeat business and referrals.

Customer advocacy – a willingness and ability on the part of a customer to participate in communicating the brand message to others.

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Focus on the Most Satisfied CustomersEXHIBIT

13.4

Reprinted by permission of Harvard Business Review, from “Putting the Service–Profit Chain to Work”, by James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser Jr. and Leonard A. Schlessinger, March/April 1994. Copyright © 1994 by the Hardvard Business School Publishing Corporation; all rights reserved.

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Continuum of Evaluation for Different Types of Offerings

EXHIBIT 9.5

Source: Valarie A. Zeithaml, “How Consumer Evaluation Processes Differ between Goods and Services,” in Marketing of Services,James H. Donnelly and William R. George, eds. 1991. Reprinted with permission of the American Marketing Association.

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SERVICE ATTRIBUTES

Search Attributes Experience Attributes Credence Attributes

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SERVICE QUALITY

Service quality represents a formalization of the measurement of customer expectations of a service compared to their perceptions of actual service performance. Service Encounter Customer Delight Moment Of Truth

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Gap Analysis

Gap 1• Management’s Perceptions of Customer Service Expectations versus

Actual Customer Expectations of Service

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Gap Analysis

Gap 3• Actual Service Quality

Specifications versus Actual Service Delivery

Gap 5• Perceived Service by

Customers versus Actual Customer Expectations of Service

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Source: A. Parasuraman, Valarie A. Zeithaml, and Leonard L. Berry, “A Conceptual Model of Service Quality and its Implications for FutureResearch,” Journal of Marketing, Fall 1985, pp. 41–50. Reprinted with permission of the American Marketing Association.

Gap Model of Service QualityEXHIBIT 9.6

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SERVICE QUALITY

SERVQUAL: A Multiple Item Scale to Measure Service Quality

Five dimensions of service quality

Tangibles

Reliability

Responsivenes

s

Assurance

Empathy

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SERVICE BLUEPRINTS

Service blueprints map out a complete pictorial design and flow chart of all the activities from the first customer contact to the actual delivery of the service.

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Service Blueprint for Floral DeliveryEXHIBIT 9.13

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Photo Credits

Slide 9-4: Image Club Slide 9-20: Tom Grill/Corbis

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