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Professional Development Programme on Enriching Knowledge of the
Business, Accounting and Financial Studies (BAFS) Curriculum
Technology Education Section, Curriculum Development
InstituteEducation Bureau, HKSARG
August 2008
Unit 10 : Marketing Mix Design for Services
Course 2 : Contemporary Perspectives on Management
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Learning Objectives
On completion of the unit, participants should be able to:
understand the basic characteristics for services and
its impact on marketing mix design; elaborate on the unique
marketing mix for services;
People Physical evidence Process
define services quality by SERVQUAL Instrument; and
explore the possibilities of providing services on the
internet.
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Unit OutlineDefinitions of Services
Characteristics of
ServicesIntangibilityInseparabilityHeterogeneityPerishability
Services Marketing Mix5th P: People
Types of person/role conflictReducing person/role conflict
Empower and Enfranchise6th P: Physical
Location SelectionDesigning a good layout
7th P: ProcessCapacity Utilization MeasuresFraming Service
Experience
The Servuction ModelService PackageSupporting
FacilityFacilitating GoodsInformationExplicit ServicesImplicit
Services
Services QualitySERVQUAL Instrument
Services on the Internet
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Definitions of Services (1)
Services are relatively intangible, produced and consumed
simultaneously and often less standardised than goods. These unique
characteristics of services present special challenges and
marketing opportunitiesto the services marketer.
(Christopher Lovelock and Jochen Wirtz, 2004)
Unit Outline
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Philip Kotler (2002) explains, A service is any activity that
one party can offer to 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.
Definitions of Services (2)
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Services Characteristics and Marketing Strategy (1)
Intangibility Inseparability
Perishability
Characteristicsof Services
Heterogeneity
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Services Characteristics and Marketing Strategy (2)
Inseparability
Perishability
Characteristicsof Services
Heterogeneity
IntangibilityServices cannot be seen, tasted, felt, heard, or
smelled before they are bought.Marketing strategy:making the
service offering more tangible by drawing the buyers attention to
tangible features, e.g. place, people, price, equipment, etc.
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Tangible productsTangible products
ProductionProduction SaleSale ConsumptionConsumption
TimeTime
SaleSale
ConsumptionConsumption
Intangible productsIntangible products
Services Characteristics and Marketing Strategy (3)
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ProductionProduction
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Services Characteristics and Marketing Strategy (4)
Intangibility
Perishability
Characteristicsof Services
Heterogeneity
Inseparability
InseparabilitySimultaneous production and consumptionMarketing
strategy: increase production by training service providers to work
faster
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Intangibility Inseparability
Perishability
Characteristicsof Services
Heterogeneity
Services Characteristics and Marketing Strategy (5)
HeterogeneityStandardization is difficult - greatly depending on
who provides services and when, where and howHR strategy: select
best fit persons and train them accordinglymonitor customer
satisfaction
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Intangibility Inseparability
Perishability
Characteristicsof Services
Heterogeneity
Services Characteristics and Marketing Strategy (6)
Services cannot be stored for later sale or use.Marketing
strategy (when demand fluctuates):
- reservation system (on first come first serve)
- recruit more part-time employees to serve customers
Perishability
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Services Marketing Mix - 7 Ps
There are 7 elements in Services Marketing Mix:
1st P: Product * discussed in Unit 9 2nd P: Price * discussed in
Unit 9 3rd P: Place * discussed in Unit 9 4th P: Promotion *
discussed in Unit 9 5th P: People 6th P: Physical evidence 7th P:
Process
Unit Outline
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5th P: People (1)
Employees in boundary-spanning roles are named as boundary
spanners.
The Boundary-Spanning Role is defined as one that links an
organization with the outside world (i.e. by interacting with non
members of the organization).
Two roles of boundary spanners: Information transfer collect
information and
feedback to the service company Representation as the
organizations personal
representatives
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5th P: People (2)
Cashier, Sales Representatives, etc.Retail Shop
Receptionist, Beauty Consultant, etc.Beauty Consultancy Shop
Cashier, Waiter, Cleaner, etc.Fast Food Shop or restaurant
Teller, Customer Services Officers, etc.Bank
Examples of boundary spanners:Name of Services Organization
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People Person/role conflict (1)
Person/role conflicts is defined as a bad fit between an
individuals self perception and the specific role the person must
play in an organization.
Since boundary spanners keep close contact with customers (or
other non members of the organization), they may face Person/role
conflicts in their daily works.
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Challenging Corner 1
David has been working as a waiter (that is called as taking the
boundary spanner role) in a Chinese restaurant for over 10 years.
His usual duties include adding water to empty tea pots and taking
dishes order for the customers. During the peak period (lunch
hours), there are lot of customers in the restaurant raising their
hands for adding water services
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Challenging Corner 1
Some customers are anxious to finish their quick lunch. They
then would go to the pantry area and try to add water by themselves
instead of waiting for Davids services. How would he reduce the
person/role
conflict?
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Challenging Corner 1 (solution) (1)
Davids own personal space is the pantry area where he can defend
against customers and other boundary spanners. When customers
trespass on this space, it can lead to reactions that conflict with
his own role (as a waiter).
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Challenging Corner 1 (solution) (2)
David would build up his protection wall to pile up some table
cloths surrounding the pantry area so that the customers could not
easily trespass on his personal space.
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Reducing person/role conflict (1)
Implication to services managers = they need to be sensitive and
actively seek input from boundary spanners about the issue.
To improve the quality of service, it is important to ensure
that boundary spannersare well trained in managing the ad hocissues
by: Empowerment, and/or Enfranchisement
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Reducing person/role conflict (2)
Empowerment = giving discretion to boundary spanners (i.e. front
line personnel) to meet the needs of consumers creatively
Enfranchisement = empowerment coupled with a performance based
compensation method for boundary spanners who could meet the
services marketing objectives of the organization
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When to empower and enfranchise?
There is no single solution to the problems encountered in
managing contact personnel.
It depends on the personal judgment of the boundary
spanners.
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Location and site selection is a strategic decision. Why?
Because it will have long-term effects on
costs, demand, and profitability.
6th P: Physical Evidence (1)
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Particularly important to service organizations. Why? Because
most services are produced and
consumed simultaneously Also most services require a
customers
presence Some services make their facilities
accessible to as large a customer group as possible
6th P: Physical Evidence (2)
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6th P: Physical Evidence Location Selection (Quantitative
Method)
Factor weighting has 6 steps:-1. Develop a list of relevant
factors
2. Assign a weight to each factor
3. Develop a scale for each factor
4. Have management score at each location
5. Multiple the score times the weight
6. Consider the maximum point score
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Doras Cake Shop Location Selection (1)
Apply Factor weighting method to select a suitable location for
Doras cake shop between:
Central, Mongkok, and Shatin
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Doras Cake Shop Location Selection (2)
Step 1: Develop a list of relevant factors: Size of nearest
market
how many customers are close to the location under
consideration?
Transportation facilities Is the transportation facilities to
the location under
consideration well arranged? Could customers go to the cake shop
by public transportation?
Rental cost of the shop Are the monthly rental charges of the
location low?
Number and size of competitors Are there lots of large
competitors around?
Communication facilities Are the communication facilities of the
location well developed?
(in terms of fax, telephone lines, e-mail, etc.)Unit Outline
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Doras Cake Shop Location Selection (3)
Step 2: Assign a weight to each factor: Size of nearest market
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Transportation facilities 5
Rental cost of the shop 3
Number and size of competitors 4
Communication facilities 6
The higher weighted score indicates a higher importance of that
factor. In this illustration, for example, size of nearest market
is the most important factors whereas rental cost of the shop is
the least important.
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Doras Cake Shop Location Selection (4)
Step 3: Develop a scale for each factor: Size of nearest market
ranging from 1, 2, 3, 4 & 5
Transportation facilities ranging from 1, 2, 3, 4 & 5
Rental cost of the shop ranging from 1, 2, 3, 4 & 5
Number and size of competitors ranging from 1, 2, 3, 4 &
5
Communication facilities ranging from 1, 2, 3, 4 & 5 The
scale for each factor should be consistent. In this
illustration, it ranges from 1, 2, 3, 4 and 5. If the location
shows a preferable indicator towards the factor,
a higher score (5, or 4) will be assigned. On the other hand, if
the location represents a non preferable indicator towards the
factor, a lower score (1, or 2) will be assigned. The score3 stands
for mild preference.
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Doras Cake Shop Location Selection (5)
Step 4: Have management score at each location: Size of nearest
market - a high score for larger customer base
Transportation facilities a high score for a more convenient
mode of transportation available
Rental cost of the shop a high score for a place charged for
lower rent
Number and size of competitors - a high score for a place with
fewer competitors
Communication facilities - a high score for a place with better
communication facilities where customers could order cakes through
faxes, and internet, etc.
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Doras Cake Shop Location Selection (6)
Step 5: Multiple the score times the weight: For Size of the
nearest market,
Important weight = 7
Location score for Central = 5
Weighted score for Central = 7 times 5 = 35
Apply the similar calculation steps for Mongkok and
Shatinaccordingly.
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Doras Cake Shop Location Selection (7)
Step 6: Consider the maximum point score: From the next page of
computation table:
The summation weighted score for
Central = 114
Mongkok = 97
Shatin = 89
Centrals score (of 114) out-wins that of Mongkok (97) and Shatin
(89).
Thus, Central will be a suitable place to locate Doras cake
shop.
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8997114TOTAL
2424304456Communication facilities
128203254Number and size of competitors
121294433Rental cost of the shop
2025204545Transportation facilities
2128353457Size of nearest market
ShatinMongkokCentralShatinMongkokCentralImportantWeight
Factor
Weighted ScoresLocation Scores
Doras Cake Shop Location Selection (8)
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6th P: Physical Evidence Designing a good layout
Another factor to consider is good layout which satisfies the
following objectives:
1. Movement of people, materials and paper work must be kept at
the minimum distance possible
2. High utilization of the space
3. Flexibility of rearrangement, services and growth
4. Satisfactory physical environment
5. Convenience for customers during the service
6. Attractive appearance
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Doras Cake Shop - Layout Design (1)
How to design the layout for Doras cake shop?
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Doras Cake Shop - Layout Design (2)
Western caf appeal of home feel Big sofa + armchairs + round
table + TV + broadcast of
soft music, Feasible to rearrange the furniture and other
decorations
after a few months
Portrait of being natural mood Feel liked home Be yourself and
relaxed
A place to meet friends + enjoy cake & coffee May bring
pets
as pets may be viewed as one of the family members of the
customers
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7th P: Process
Process is the 7th P because one unique characteristic of
services is inseparability.
Services are all about the interaction between the service
providers and the customers.
Throughout the process, customers satisfaction or
dissatisfaction will be formed based on the quality of services
delivered (as compared with the expectations of the customers).
It is necessary to manage the capacity of the service providers
well to satisfy customer demands.
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7th P: Process Capacity Utilization Measures (1)
Three measures of capacity utilization are needed:
percentage of total time that facilities and equipment are in
operation
percentage of the physical space (e.g., seats) actually
utilised
intensity of usage of labor time
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7th P: Process Capacity Utilization Measures (2)
In a well managed service operation, all three areas stated
above should be in balance. Similarly, sequential operations will
be designed to minimisethe risk of bottlenecks at any point in the
process.
However, this ideal may prove difficult to achieve. Not only
does the demand vary over time but the time and effort required to
possess each customer also varies.
Also service tasks are not homogeneous (i.e. heterogeneity) so
the serving times vary according to the nature of the customers'
problems.
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7th P: Process Framing Service Experience
Happy employees will bring in happy customers.
Besides boundary spanners personal feeling, customers service
experience in the process could not be overlooked to ensure the
future business success of running a service organization.
The Servuction Model - is a simple but powerful model that
illustrates factors influencing the service experience of a
customer when enjoying a service.
(K. Douglas Hoffman and John E. G. Bateson, 2002)
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Framing Service Experience:The Servuction Model (1)
The model is constructed by two parts which are visible or
invisible to the consumer:
The visible part of the model consists of three parts: the
inanimate environment, contact personnel or service providers, and
other customers (denoted as Customer B in the following figure on
slide number 42).
The invisible component of the model consists of the invisible
organization and systems.
(K. Douglas Hoffman and John E. G. Bateson, 2002)
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Framing Service Experience:The Servuction Model (2)
Invisible Visible
InanimateEnvironment
ContactPersonnel
OrServiceProvider
Invisibleorganizationand systems
Customer A
Customer B
Bundle of servicebenefits receivedby Customer A
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Servuction Model :Inanimate Environment (1)
Includes all nonliving features that are present during the
service encounter.
Because services are intangible, they cannot be objectively
evaluated like products. Hence, in the absence of tangible product,
consumers look for tangible cues that surround the service on which
to base their service performance evaluation.
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Servuction Model :Inanimate Environment (2)
The inanimate environment is full of tangible cues such as
furniture, flooring, lighting, music, wall hangings and an array of
other inanimate objects that vary according to the service being
provided.
This relates to the importance of the physical evidence in
consumer perceptions of service performance.
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Servuction Model : Contact personnel
Contact personnel are the employees other than primary service
provider who briefly interact with customers.
Example: parking attendants, receptionists, and hosts and
hostesses.
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Servuction Model : Service Provider
Service provider are the primary providers of a core
service.
Example: dentists, physicians, school teachers.
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Servuction Model : Service Provider - Implications (1)
Unlike consumption of physical products, the consumption of
services often takes place where the service is produced (i.e.
Doras Cake Shop) or where the service is provided at the consumers
residence or workplace (i.e. venue being specified by the
corporations).
Regardless of the service delivery location, interactions
between consumers and contact personnel or service providers are
commonplace.
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Servuction Model : Service Provider - Implications (2)
Thus, the impact of contact personnel and service providers on
the service experience can be profound.
Because of the important role of service providers and other
contact personnel within the service encounter, the management
issues of People(hiring, training and empowering issues) could not
be overlooked.
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Servuction Model : Customer A
Customer A is the recipient of the bundle of benefits that is
created through the service experience.
Customer A is the one who actually purchases the service.
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Servuction Model : Customer B
Customers B represents all other customers who are part of
customer As experience
Consumption of services as shared experiencebecause it often
occurs in the presence of other customers. Examples include eating
at a cake shop, seeing a show at a movie theatre, attending class
in a classroom, etc.
As in the case with the other visible components of the
servuction model, other customers can impact Customer As service
experience.
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Servuction Model : Customers - Implications (1)
One day, customer A (i.e. David and his wife) went into Doras
cake shop and ordered cakes and coffees,
Customer B (i.e. another customer who was also in the cake shop)
suddenly screamed and vomited after eating a small slice of
cake.
Upon seeing this unappetising news, David and his wife stared at
one another so as not to look in the direction of Customer Bs
problem while deciding on their next course of action.
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Servuction Model : Customers - Implications (2)
In this case, Customer B had indeed made a significant impact on
all the cake shops customers.
In fact, Customer Bs actions practically cleared the entire cake
shop in under 60 seconds.
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The Service Package (1)
A bundle of goods and services that is provided in some
environment (Roger W Schmenner, 1986) Consisted of 5 features which
are experienced by
customers and form the basis of his or her perception of the
service:
Supporting Facility Facilitating Goods Information Explicit
Services Implicit Services
Key Success Factor: service manager offers a total experience
for customer that is consistent with the desired service
package.
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Service Package:Supporting Facility
Supporting Facility: The physical resources that must be in
place before a service can be sold.
Example: golf course, hospital, school campus, airplane.
= Doras Cake Shop
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Service Package:Facilitating Goods
Facilitating Goods: The material consumed by the buyer or items
provided by the consumer.
Example: food items, legal documents, golf club membership,
medical history.
= Cake and coffee consumed by the customers at Doras cake
shop
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Service Package:Information
Information: Operations data or information that is provided by
the customer to enable efficient and customised service.
Example: patient medical records, seats available on a flight,
customer preferences, location of customer to dispatch a taxi.
= Customers preferences on taste of cakes and coffee being
served at Doras cake shop
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Service Package:Explicit Services
Explicit Services: Benefits readily observable by the senses and
that consist of the essential or intrinsic features of the
services.
Example: quality of meal, attitude of the waiter, on-time
departure.
= The quality of cakes and coffee provided by Doras cake shop,
attitude of Doras staff on serving the customers, on-time delivery
of cakes to the corporate customers (located in the Central)
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Service Package:Implicit Services
Implicit Services: Psychological benefits or extrinsic features
which the consumer may sense only vaguely.
Example: privacy of loan office, security of a well lighted
parking lot, worry free auto repair, etc.
= Feel of comfort or Home feel at Doras cake shop
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Defining Services Quality (1)
Assessment of quality is made during the service delivery
process.
Each customer contact is referred to as a moment of truth, an
opportunity to satisfy or dissatisfy the customer.
Customer satisfaction is defined by comparing perceptions of
service received with expectations of service desired.
Expectations are based on: (1) word of mouth, (2) personal
needs, and (3) past experience.
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Defining Services Quality (2)
Service Quality Dimensions Reliability Responsiveness Assurance
Empathy Tangibles
Word of mouth Personal needs Past experience
Expected service
Perceived service
Service Quality Assessment1. Expectations exceeded
ES < PS (Quality surprise)2. Expectations met
ES = PS (Satisfactory quality)3. Expectation not met
EX > PS (Unacceptable quality)
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SERVQUAL Instrument (1)
Measuring service quality is a challenge because customer
satisfaction is determined by many intangible factors. Unlike a
product with physical features that can be objectively measured,
service quality contains many psychological features.
In addition, service quality often extends beyond immediate
encounter because it has an impact on a persons future quality of
life.
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SERVQUAL Instrument (2)
The multiple dimensions of service quality are captured in the
SERVQUAL instrument which is an effective tool for surveying
customer satisfaction.
By SERVQUAL, it could be understood as a combination of SERVice
and QUALity.
Most of the best services award would be based on the following
five dimensions to evaluate the overall service quality of a
service provider.
(James A Fitzsimmons and Mona J Fitzsimmons, 2006)
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SERVQUAL Instrument (2)
5 dimensions of service quality:
Reliability: Perform promised service dependably and
accurately
Responsiveness: Willingness to help customers promptly
Assurance: Ability to convey trust and confidence
Empathy: Ability to be approachable
Tangibles: Physical facilities and facilitating goods
(James A Fitzsimmons and Mona J Fitzsimmons, 2006)
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SERVQUAL Instrument (3)
This two-part instrument has an initial section to record
customer expectations for a class of service (e.g. catering
services) , followed by a second section to record a customers
perceptionsfor a particular service firm (e.g. Doras cake
shop).
The statements in the survey describe aspects of the five
dimensions of service quality: Reliability, Responsiveness,
Assurance, Empathy and Tangibles.
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SERVQUAL Instrument (4)
A score for the quality of service is calculated by computing
the differences between the ratings that customers assign to paired
expectation and perception statements.
A seven-point scale ranging from Strongly Agree (7) to Strongly
Disagree (1), with no labels for the intermediate scale points
(i.e. 2 through 6), accompanied each statement.
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SERVQUAL Instrument (5)
Check customers expectation: Statements may include:
Doras cake shop should have up-to-date equipment.
Her physical facilities should be visually appealing.
Her employees should be well dressed and appear neat.
She shouldnt be expected to have operating hours convenient to
all their customers.
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SERVQUAL Instrument (6)
Check customers perception: Statements may include:
Doras cake shop has up-to-date equipment.
Her physical facilities are visually appealing. Her employees
are well dressed and appear
neat. She does not have operating hours
convenient to all their customers. etc.
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Services on the Internet :Multiple applications for websites
(1)
As a Channel to sell a Product or Service
As a Supplemental Channel of Conventional Businesses to extend
their market
To Process Transaction, such as transfer from clients one
account to another
To Convey Information about the organization (including names of
officers, addresses, phone numbers, and types of services)
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Services on the Internet :Multiple applications for websites
(2)
As a Promotion Channel - More advertisers are now using the
medium of internet to advertise and promote their businesses or
products for the specifically targeted groups of audience
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Challenging Corner 2
Design the services marketing mix for Doras cake shop in terms
of the 5th, 6th and 7th P:
5th P: People
6th P: Physical evidence
7th P: Process
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Challenging Corner 2 (solution) (1)
5th P People:
Recruit one to two new staff: able to brew coffee, love to meet
people (sociable), etc.
Happy employees bring in happy customers
OR, ask for new partners to run the cake shop business? When is
the appropriate time?
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Challenging Corner 2 (solution) (2)
6th P - Physical evidence: Location: Central
Based on Factor Weighting in Selection of Dora cake shops
Location (slide page 33)
Close to the four major customers (i.e. corporate customers)
Near Hollywood Road, Hong Kong where most of the potential
individual customers locate:
Office workers Retired couples Yuppies (leisure life followers)
Friends (on a social gathering)
and to avoid high rent issue
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Challenging Corner 2 (solution) (3)
7th P - Process: When customers pop in Doras cake shop, Dora
and her team (as boundary spanners) will warm welcome them,
calling their names (if their memory are good and assuming that
this is not the first time visit from the customers), directing
them to a place where they like to settle down.
Customers sit comfortably at the sofa, listening to the soft
music, thinking of what kind of cake and coffee to order. The
moment of truth is so memorable.
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Challenging Corner 2 (solution) (4)
7th P - Process (cont.) : If there are not many customers in the
cake shop,
Dora will actively introduce her new flavour cake to the loyal
customers and invite them to try a slice of the cake (on
complimentary basis).
Customers feedbacks are collected informally to improve the
products sold.
New customers also feel the warm atmospherein the cake shop and
will consider visiting it again.
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Summary
ServicesProcess
People
Cake & Drink
Physical evidence 4P (Unit 9)
Tangibleelements
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References
James A Fitzsimmons and Mona J Fitzsimmons, Service Management:
Operations, Strategy, Information Technology, 5th edition, McGraw
Hill, 2006.
Christopher Lovelock and Jochen Wirtz, Services Marketing:
People, Technology, Strategy, 5th edition, Prentice Hall, 2004.
K. Douglas Hoffman and John E. G. Bateson, Essentials of
Services Marketing: Concepts, Strategies and Cases, 2nd edition,
Harcourt, 2002.
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Further Readings
, (1998), ,
(2003), ,
(1999), ,
(2004), ,
(1982), ,
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End of the Unit
EndEnd--ofof--unit Assessmentunit AssessmentThis is the end of
Unit 10.
Please go to the Unit Assessment before attempting
the next unit.