Marketing Service Organisations BM404 – 2006 Lecture 2
Jan 04, 2016
Marketing Service Organisations
BM404 – 2006
Lecture 2
Overview
Defining services Understanding the services economy The service sector in Australia Mega-trends and the service sector:
Professional services Characteristics of services Marketing implications
Defining services?
Any act, performance or experience that one party can offer another; one 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
Lovelock (2004)
Characteristics of ServicesCompared to Goods
Intangibility
Perishability
SimultaneousProduction
andConsumption
Heterogeneity
Challenges for Services
Defining and improving qualityDesigning and testing new servicesCommunicating and maintaining a consistent
imageAccommodating fluctuating demandEnsuring the delivery of consistent quality
Challenges for Services (cont.) Motivating and sustaining employee
commitment Coordinating marketing, operations, and
human resource efforts Setting prices Finding a balance between standardization
versus personalization
Further challenges for services managers Differentiation and competitive advantage may be
difficult to achieve Marketing orientation is still relatively new to many
managers Operations management, rather than marketing,
continues to dominate Customer service management and marketing is
often in the hands of lower paid subordinates, possibly in multiple locations
Limited data on competitive performance is available Problems in determining costs for pricing purposes
An expanded marketing mix for services
Customers PricePlace & Time
Promotion
Product (Service)People Process
Physical Evidence
Customers Pricecustomers
Place, Cyber-space & Time
Internal marketing
Traditional marketing
OrganisationOrganisation
EmployeesEmployees CustomersCustomers
Satisfaction; Quality; Brand Loyalty
Relationship management
A framework for analysing servicesmarketing
Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions (Fig. 1.14)
Customers
Operations Management
Marketing Management
Human Resources Management
Gaps model of service quality
Zeithaml, Bitner and Gremler (2006)
The Gaps model of service quality (Zeithaml, Parasuraman & Berry 1990)
Expectedservice
Perceivedservice
Customer Gap
The Customer GapDifference between customer expectations and perceptions
Gaps Model of Service QualityProvider Gap 1 (The Knowledge Gap):not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap):not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):not delivering to service standards
Provider Gap 4 (The Communication Gap):not matching performance to promises
Provider Gap 1: Not knowing what customers expect
Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering to service standards
Provider Gap 4: Not matching performance to promises
Customer Expectations
Customer Perceptions
Key Factors Leadingto the Customer Gap
CustomerGap
Customer Expectations
Company Perceptions of Customer Expectations
Inadequate marketing research orientation Insufficient marketing research Research not focused on service quality Inadequate use of market research
Lack of upward communication Lack of interaction between management and customers Insufficient communication between contact employees and managers Too many layers between contact personnel and top management
Insufficient relationship focus Lack of market segmentation Focus on transactions rather than relationships Focus on new customers rather than relationship customers
Inadequate service recovery Lack of encouragement to listen to customer complaints Failure to make amends when things go wrong No appropriate recovery mechanisms in place for service failures
Figure 2.2
Key Factors Leading to Provider Gap 1
Gap1
Customer-Driven Service Designs and Standards
Management Perceptions of Customer Expectations
Poor service design Unsystematic new service development process Vague, undefined service designs
Failure to connect service design to service positioning Absence of customer-driven standards
Lack of customer-driven service standards Absence of process management to focus on customer
requirements Absence of formal process for setting service quality goals
Inappropriate physical evidence and servicescape Failure to develop tangibles in line with customer expectations Servicescape design that does not meet customer and
employee needs Inadequate maintenance and updating of the servicescape
Figure 2.3
Key Factors Leading to Provider Gap 2
Gap2
Service Delivery
Customer-Driven Service Designs and Standards
Deficiencies in human resource policies Ineffective recruitment Role ambiguity and role conflict Poor employee-technology job fit Inappropriate evaluation and compensation systems Lack of empowerment, perceived control, and teamwork
Customers who do not fulfill roles Customers who lack knowledge of their roles and responsibilities Customers who negatively impact each other
Problems with service intermediaries Channel conflict over objectives and performance Difficulty controlling quality and consistency Tension between empowerment and control
Failure to match supply and demand Failure to smooth peaks and valleys of demand Inappropriate customer mix Overreliance on price to smooth demand
Figure 2.4
Key Factors Leading to Provider Gap 3
Gap3
Service Delivery
Lack of integrated services marketing communications Tendency to view each external communication as independent Not including interactive marketing in communications plan Absence of strong internal marketing program
Ineffective management of customer expectations Absence of customer expectation management through all forms of
communication Lack of adequate education for customers
Overpromising Overpromising in advertising Overpromising in personal selling Overpromising through physical evidence cues
Inadequate horizontal communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units
External Communications to Customers
Figure 2.5
Key Factors Leading to Provider Gap 4
Gap4
PerceivedService
Expected Service
CUSTOMER
COMPANY
CustomerGap
Gap 1
Gap 2
Gap 3
External Communications
to CustomersGap 4ServiceDelivery
Customer-Driven Service Designs and
Standards
Company Perceptions of Consumer Expectations
Figure 2.6
Gaps Model of Service Quality
Consumer behaviour in services Examine how consumers choose and
evaluate services Identify the elements of consumer behaviour
that services marketers must understand: Choice behaviour Consumer experiences Post-purchase evaluation
Consumer Evaluation Processes for ServicesSearch Qualities
attributes a consumer can determine prior to purchase of a product
Experience Qualitiesattributes a consumer can determine after purchase (or
during consumption) of a product
Credence Qualitiescharacteristics that may be impossible to evaluate even
after purchase and consumption
Figure 3.2
Continuum of Evaluation for Different Types of Products
Clo
t hin
g
Jew
elry
Fur
n itu
re
Hou
ses
Aut
omob
iles
Res
tau
rant
mea
ls
Vac
a tio
ns
Ha i
r cut
s
Ch i
ld c
a re
Tel
evis
ion
repa
ir
Leg
a l s
ervi
ces
Roo
t c a
nals
Aut
o re
pair
Med
ical
dia
gno
sis
Difficult to evaluateEasy to evaluate
High in searchqualities
High in experiencequalities
High in credencequalities
MostGoods
MostServices
Figure 3.3
Stages in Consumer Decision Making and Evaluation of Services
Issues to Consider in Examining the Consumer’s Service ExperienceServices as processes
Service provision as drama
Service roles and scripts
The compatibility of service customers
Customer coproduction
Emotion and mood
Post purchase evaluation
Captured in measures of satisfaction, service quality, loyalty, emotional engagement:
Word of mouth communication Attribution of dissatisfaction Positive or negative bias
positivity bias for services Brand loyalty
Customer expectations of service Identify the different types of expectations
customers hold for service performance Sources of customer expectations
Figure 4.2
Possible Levels of Customer Expectations
Figure 4.3
Dual Customer Expectation Levels
Adequate Service
Desired Service
Figure 4.4
The Zone of Tolerance
Adequate Service
Desired Service
Zone ofTolerance
Reliability Tangibles
Level of
Expectation
Source: L. L. Berry, A. Parasuraman, and V. A. Zeithaml, “Ten Lessons for Improving Service Quality,” Marketing Science Institute, Report No. 93-104 (May 1993).
Adequate ServiceAdequate Service
Desired ServiceDesired Service
Desired Service
Adequate Service
Figure 4.5
Zones of Tolerance for DifferentService Dimensions
Zone of
Tolerance
Zoneof
Tolerance
Lasting ServiceIntensifiers
Lasting ServiceIntensifiers
Personal NeedsPersonal NeedsZone
of Tolerance
Desired Service
Adequate Service
Figure 4.6
Factors That Influence Desired Service
Self-PerceivedService Role
Self-PerceivedService Role
Situational Factors
Situational Factors
Perceived ServiceAlternatives
Perceived ServiceAlternatives
Temporary ServiceIntensifiers
Temporary ServiceIntensifiers
Zone of
Tolerance
Desired Service
Adequate Service
Figure 4.7
Factors That Influence Adequate Service
PredictedService
PredictedService
Predicted Service
Explicit ServicePromises
Explicit ServicePromises
Implicit ServicePromises
Implicit ServicePromises
Word-of-MouthWord-of-Mouth
Past ExperiencePast ExperienceZone
of Tolerance
Desired Service
Adequate Service
Figure 4.8
Factors That Influence Desired and Predicted Service
Frequently Asked QuestionsAbout Customer ExpectationsWhat does a service marketer do if customer expectations are “unrealistic”?
Should a company try to delight the customer?
How does a company exceed customer service expectations?
Do customer service expectations continually escalate?
How does a service company stay ahead of competition in meeting customer expectations?
Customer perceptions
Identify the factors which influence consumers’ perceptions
Examine the factors which influence satisfaction
Develop an understanding of the dimensions of service quality
Examine the importance of service encounters
Customer Perceptions of Quality and Customer Satisfaction
Factors Influencing Customer SatisfactionProduct/service qualitySpecific product or service featuresConsumer emotionsAttributions for service success or failure
Factors Influencing Customer Satisfaction Perceptions of equity or fairness Other consumers, family members, and
coworkers Price Personal factors
the customer’s mood or emotional state situational factors
Outcomes of Customer SatisfactionIncreased customer retentionPositive word-of-mouth communicationsIncreased revenues
ASCI and Annual Percentage Growthin S&P 500 Earnings
Source: C. Fornell “Customer Satisfaction and Corporate Earnings,“ commentary appearing on ACSI website, May 1, 2001,http://www.bus.umich.edu/research/nqre/Q1-01c.html.
Figure 5.4
Relationship between Customer Satisfaction and Loyalty in Competitive Industries
Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.
Models of service quality
Service Quality
The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.
Service quality assessments are formed on judgments of:outcome quality interaction qualityphysical environment quality
The evolution ofservice quality
Disconfirmation of expectations The Nordic model The three component model The Gaps model of service quality &
SERVQUAL
Disconfirmation of expectations (Oliver 1980)
The Nordic model (Gronroos 1990)
Represents the service experience on the basis of functional and technical elements
Technical quality refers to what the customer receives from the service
Functional quality refers to service delivery Model emphasises companies must be careful what
they promise
The three-component model Rust & Oliver (1994)
Source: Rust & Oliver, 1994. p. 11
The SERVQUAL dimensions – Perceived Service Quality (Parasuraman, Zeithaml & Berry 1988) Reliability (dependability, accurate performance)
Assurance (competence, courtesy, credibility & security)
Tangibles (appearance of physical elements)
Empathy (easy access, good communications & customer
understanding)
Responsiveness (promptness & helpfulness)
SERVQUAL
SERVQUAL (cont.)
The Five Dimensions of Service Quality
Ability to perform the promised service dependably and accurately.
Knowledge and courtesy of employees and their ability to inspire trust and confidence.
Physical facilities, equipment, and appearance of personnel.
Caring, individualized attention the firm provides its customers.
Willingness to help customers and provide prompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy
Exercise to Identify Service AttributesIn groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view.
Reliability:
Assurance:
Tangibles:
Empathy:
Responsiveness:
Providing service as promised Dependability in handling customers’
service problems Performing services right the first time Providing services at the promised time Maintaining error-free records
Keeping customers informed as to when services will be performed
Prompt service to customers Willingness to help customers Readiness to respond to customers’
requests
RELIABILITY
RESPONSIVENESS
Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous Employees who have the knowledge to
answer customer questions
ASSURANCE
Giving customers individual attention Employees who deal with customers in a
caring fashion Having the customer’s best interest at heart Employees who understand the needs of
their customers Convenient business hours
EMPATHY
Modern equipment Visually appealing facilities Employees who have a neat,
professional appearance Visually appealing materials
associated with the service
TANGIBLES
SERVQUAL Attributes
The Service Encounter
is the “moment of truth”occurs any time the customer interacts with the firmcan potentially be critical in determining customer satisfaction and loyalty
types of encounters:remote encounters, phone encounters, face-to-face
encounters is an opportunity to:
build trustreinforce qualitybuild brand identity increase loyalty
Check-InCheck-In
Request Wake-Up CallRequest Wake-Up Call
CheckoutCheckout
Bellboy Takes to Room Bellboy Takes to Room
Restaurant MealRestaurant Meal
Figure 5.5
A Service Encounter Cascadefor a Hotel Visit
Sales CallSales Call
Ordering SuppliesOrdering Supplies
BillingBilling
Delivery and Installation Delivery and Installation
ServicingServicing
A Service Encounter Cascade for an Industrial Purchase
Critical Service Encounters ResearchGOAL:
understanding actual events and behaviors that cause customer dis/satisfaction in service encounters
METHOD:Critical Incident Technique
DATA:stories from customers and employees
OUTPUT: identification of themes underlying satisfaction and
dissatisfaction with service encounters
Sample Questions for Critical Incidents Technique StudyThink of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of ______________.
When did the incident happen?
What specific circumstances led up to this situation?
Exactly what was said and done?
What resulted that made you feel the interaction was satisfying (dissatisfying)?
Common Themes in CriticalService Encounters Research
Recovery: Adaptability:
Spontaneity:Coping:
employee responseto service delivery
system failure
employee responseto customer needs
and requests
employee responseto problem customers
unprompted andunsolicited employeeactions and attitudes
Recovery
Acknowledge problemExplain causesApologizeCompensate/upgradeLay out optionsTake responsibility
Ignore customerBlame customerLeave customer to fend
for him/herselfDowngradeAct as if nothing is
wrong “Pass the buck”
DO DON’T
Adaptability
Recognize the seriousness of the need
AcknowledgeAnticipateAttempt to accommodateAdjust the systemExplain rules/policiesTake responsibility
IgnorePromise, but fail to follow
throughShow unwillingness to tryEmbarrass the customerLaugh at the customerAvoid responsibility “Pass the buck”
DO DON’T
Spontaneity
Take timeBe attentiveAnticipate needsListenProvide informationShow empathy
Exhibit impatience IgnoreYell/laugh/swearSteal from customersDiscriminate
DO DON’T
Coping
ListenTry to accommodateExplainLet go of the customer
Take customer’s dissatisfaction personally
Let customer’s dissatisfaction affect others
DO DON’T
Figure 5.7
Evidence of Service from theCustomer’s Point of View
People
Process PhysicalEvidence
Contact employees Customer him/herself Other customers
Operational flow of activities
Steps in process
Flexibility vs. standard
Technology vs. human
Tangible communication
Servicescape
Guarantees
Technology
WebsiteSource: From “Managing the Evidence of Service” by M. J. Bitner from The Service Quality Handbook, eds. E. E. Scheuing and W. F. Christopher (1993), pp. 358-70.