Introduction

to
Services
Marketing

Summary:

 What are services?

 The tangibility spectrum

 Why services marketing?

 Characteristics of Services Compared to Goods

 Services Marketing Mix

 Gaps Model of Service Quality

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 What are services?
 Zeithaml et al:
 Services are deeds, processes, and performances

 Service sector: all economic activities whose output is not a physical product or
construction, is generally consumed at the time it is produced, and provides added
value in forms that are essentially intangible concerns of its first purchaser”

 Lovelock:
 An act or performance offered by one party to another. (Performances are intangible,
but may involve use of physical products.)
 An economic activity that does not result in ownership
 A process that creates benefits by facilitating a desired change in customers
themselves, physical possessions or intangible assets

What are services?

 Both manufacturing and traditional service firms offer services
 IBM:
 Acquired the IT arm of PriceWater Coopers
 Delivers consultancy services
 Offers guarantees over equipment
 Provides training

 Hewlett Packard:
 Merged with Compaq to promote the provision of services

 Boeing:
 Sells airplanes
 Consultancy services: forecasts demand for its customers

 General Electric: 80% of sales come from services

 Rank Sherox:
4

 French company sells ‘temperatures’ rather than air conditioning equipment

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 Tangibility Spectrum

Salt
 Soft Drinks
 Detergents
 Automobiles
 CosmeticsFast-food
 Outlets
 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
5 Consulting
Teaching

http://www.wagamama.com/

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Why study Services Marketing?

 Service-based economies

 Service as a business imperative in manufacturing and IT

 Service equals profits

 Services marketing is different

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 Goods versus Services

Challenges for Services

 Defining and improving quality
 Designing and testing new services
 Communicating and maintaining a consistent image
 Accommodating fluctuating demand
 Motivating and sustaining employee commitment
 Coordinating marketing, operations, and human resource efforts
 Setting prices
 Finding a balance between standardization versus personalization
 Ensuring the delivery of consistent quality
 …

 How to deal with these challenges???

10

5
 Services marketing mix

 Traditional marketing mix: the 4 Ps create customer value

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Expanded Mix for Services-The 7 Ps

 Product
 Price
 Place
 Promotion
 People
 All human actors who play a part in service delivery and thus influence the buyer’s
perceptions: namely, the firm’s personnel, the customer, and other customers in the
service environment.
 Physical Evidence
 The environment in which the service is delivered and where the firm and customer
interact, and any tangible components that facilitate performance or communication of
the service.
 Process
 The actual procedures, mechanisms, and flow of activities by which the service is
delivered—the service delivery and operating systems (the balance between men and
technology; flexibility vs standardization; stages of the service delivery processs, …
12

6
Expanded Marketing Mix for Services

13

Google
“Why use lifts to move between floors?”

The tobogan

http://ensaiogeral2009.blogspot.pt/2009/02/google-suica.html 14

Google Zurich: Pictures by Ángel Jiménez de Luis

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 Google
Working + Pleasure

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The Gaps Model of Service Quality

 A framework that is used to organize this course.

 The gaps model is a useful framework for understanding service
quality in an organization.
 The most critical service quality gap to close is the customer gap,
the difference between customer expectations and perceptions.
 Four gaps that occur in companies (provider gaps) are responsible for
the customer gap.
 What are the factors responsible for each of the four provider
gaps?

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8
 The Gaps Model of Service Quality

Expected
service

Customer Gap

Perceived
service

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Gaps Model of Service Quality

Expected
Service
CUSTOMER
Customer
Gap
Perceived
Service

External
COMPANY Service
Communications
Delivery Gap 4 to Customers
Gap 3
Gap 1 Customer-Driven
Service Designs and
Standards
Gap 2
Company Perceptions
of Consumer
Expectations
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9
 Key Factors Leading
to the Customer Gap

Customer
Customer Expectations
Gap

 Provider Gap 1: Not knowing what customers expect

 Provider Gap 2: Not selecting the right service designs/standards

 Provider Gap 3: Not delivering to service standards

 Provider Gap 4: Not matching performance to promises

Customer
Perceptions 19

Key Factors Leading to Provider Gap 1

Customer Expectations

Gap  Inadequate marketing research orientation

Insufficient marketing research
Research not focused on service quality
1 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

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Company Perceptions of
Customer Expectations

10
Key Factors Leading to Provider Gap 2

Customer-Driven Service
Designs and Standards

Gap  Poor service design

Unsystematic new service development process
2 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

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Management Perceptions of
Customer Expectations

Key Factors Leading to Provider Gap 3

Customer-Driven Service
Designs and Standards

Gap  Deficiencies in human resource policies

Ineffective recruitment

3
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
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Service Delivery

11
Key Factors Leading to Provider Gap 4

Service Delivery

 Lack of integrated services marketing communications

Gap Tendency to view each external communication as independent
Not including interactive marketing in communications plan

4 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 23
Customers

Gaps Model of Service Quality

Expected
Service
CUSTOMER
Customer
Gap
Perceived
Service

External
COMPANY Service
Communications
Delivery Gap 4 to Customers
Gap 3
Gap 1 Customer-Driven
Service Designs and
Standards
Gap 2
Company Perceptions
of Consumer
Expectations
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12
Consumer

behavior

in services

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Summary:

 Products’ properties

 The impact of service specificities across the buying

decision process

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13
 Continuum of Evaluation for
Different Types of Products

Most Most
Goods Services

Easy to evaluate Difficult to

evaluate

High in search High in experience High in credence

qualities 27
qualities qualities

Stages in Consumer Decision

Making and Evaluation of Services

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 Issues to Consider in Examining the Consumer’s
Service Experience

 Services as processes

 Service provision as drama (ex: https://www.zappos.com)

 Service roles and scripts (MacDonalds)

 The compatibility of service customers

 Customer coproduction

 Emotion and mood

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Consumer expectations

https://www.google.pt/imgres?imgurl=http://mimiandeunice.com/wp-
content/uploads/2011/07/ME_399_Expectations.png&imgrefurl=http://mimiandeunice.com/2011/07/19/expectations/&h=747&w=2400&tbnid=eLNFEaVkQCvZ7M:&docid=PWrX91EaylRw0M&ei=tASqVrWXLY
L1aK_KkagH&tbm=isch&ved=0ahUKEwi1wbuyvMzKAhWCOhoKHS9lBHUQMwhPKCcwJw

http://www.vacationrentalmarketingblog.com/expectations/

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https://onourweightohealth.wordpress.com/2014/03/08/great-expectations/

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Customer Expectations of Service Chapter

 Meaning and Types of Service Expectations

 Factors that Influence Customer Expectations of Service

 Issues Involving Customers’ Service Expectations

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Dual Customer Expectation

Levels

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The Zone of Tolerance

Zones of Tolerance

 The range of expectations between desired and

adequate…

 can be wide or narrow

 can change over time

 can vary among individuals

 may vary with the type of product/service

 may vary across service dimensions

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Zones of Tolerance for Different Service Dimensions

How to use
this framework?

36

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 Customer satisfaction:

concept, importance and measurement

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Customer satisfaction
 A definition:
 “It is a judgment that a product or service feature, or the product or service
itself, provides a pleasurable level of consumption-related fulfillment”
(Oliver)

 It is a consumer’s evaluation of the extent to which the product has fulfilled

his/her expectations

 Value = benefits - costs

 Satisfaction: Perceptions  expectations

 Dissatisfaction: Perceptions < expectations

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http://www.dreamstime.com/royalty-free-stock-images-wow-customer-delight-
image23441229

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Customer satisfaction

http://bepersonneltd.com/latest-news/how-you-measure-customer-satisfaction

 The positive outcomes of customer satisfaction:

 At the customer level

 At the employee level

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Customer satisfaction

Relationship between Customer Satisfaction and Loyalty

in Competitive Industries

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 Customer satisfaction

 Customer satisfaction studies should have 4 major tasks:

 Identification of attributes that influence customer satisfaction

 Assessment of company and competitors’ performance

 Establishing priorities and taking corrective actions

 Monitor progress

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Customer satisfaction
 Generally, the questionnaire includes:
 Assessment of overall satisfaction with the company (and with 5-7 competitors)

 Assessment of the importance of each attribute

 Assessment of firm performance (and of its 2-3 major competitors) by attribute

 Assessment of future intentions / behavior (repurchase / recommendations)

 Open question to obtain information on the sources of (dis)satisfaction

 Demographic/psychographic/behavioral questions

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23
Customer satisfaction

 Results should be compared to:

 Values obtained by competitors

 Values obtained by the firm in the past

 Average values of the sector

 Firm’s customer satisfaction goals

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Customer satisfaction

 The scale of 100 points?

 1 to 5 / 1 to 7 / 1 to 9 (completely dissatisfied to completely satisfied)?

 1 to 7 scale: 5+6+7 = % of satisfied customers

 The smiling face scale

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 Customer satisfaction

 How to identify relevant attributes

 Inquire (frontline) employees

 Look at the indirect measures of satisfaction (e.g., customer complaints)

 Conduct qualitative studies with customers (of the firm and of its competitors)

 Conduct quantitative studies with customers

 Analyze results

 Present and discuss the findings inside the organization

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Customer satisfaction
 Examples of questions for discovering attributes through qualitative studies
 If you were talking to a manager of firm X, what would you tell him about their
products/services?

 Tell us about one or more situations in which you have been highly satisfied with
the service provided by firm X.

 Tell us about one or more situations in which you have been highly dissatisfied with
the service provided by firm X.

 What has the company done to solve your problem?

 What do you expect from an excellent company in this sector?

 When you choose a supplier of …, what are you looking for?

 Why have you been loyal to this supplier?

 What factors have made you switch to a different supplier? 50

 How do you compare firm Y with firm X?

25
Customer satisfaction

 Identifying attributes: An example from industrial marketing (that

also considers service attributes)

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Customer satisfaction
 Product satisfaction
 Product technical performance
 Reliability of the product
 Price/value relationship
 Cost efficiency across the life cycle
 Service-friendliness of the products

 Satisfaction with salespeople

 Knowledge about usage conditions of the product within the client firm
 Support in problem solving
 Friendliness of the interaction
 Personnel continuity of salespeople
 Time to respond to requests for visits
 Frequency of visits

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Customer satisfaction

 Satisfaction with product-related information

 Info. provided in the technical documentation

 Avaiabality of technical documentation

 Usability of operating instructions

 Info. Given in other documentation (eg brochures, ...)

 Satisfaction with order handling

 Time taken to confirm order

 Reliability of order processing

 Delivery times as given in the order confirmation

 Adherence to delivery schedules

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Customer satisfaction

 Satisfaction with technical services (maintenance, repair, ...)

 Speed of availability of staff

 Technical quality of the service

 Price/value of the service

 Satisfaction with interaction with internal staff

 Reaction to written requests

 Reaction to telephone requests

 Reachability of employees in manufacturing sites

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Customer satisfaction

 Satisfaction with complaint handling

 Action regarding product related complaints within warranty period

 Action regarding product related complaints outside warranty period

 Reaction on general complaints

 Other issues: training???

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Service
quality

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OUR VISION
We intend to be the recognized leader in service excellence among all
companies—not just elevator companies—worldwide. We will inspire our
customers’ total confidence through exceptional service that earns us 100
percent of their business, 100 percent of the time.

Service excellence is more than what we provide, it’s how we think and
act. It’s not just “fixing a problem” or performing routine maintenance, it’s the
“smile” in the voice on the phone, the prompt response to a request and the
drive to always improve. It’s how we work with one another and how we work
with our customers and the riding public.
We believe that service excellence begins with each employee’s commitment to
improve the things—no matter how small—that are in their control. By keeping
an “at your service” attitude and striving to exceed our customers’ and each
other’s expectations, we are working hard to become a benchmark for superior
service—not just for elevator companies, but for all companies worldwide.

http://www.otisworldwide.com/d60-service.html

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Service Quality
 Quality:
 “The degree and direction of discrepancy between customers’ service perceptions and
expectations” (Parasuraman, Zeithaml and Berry, 1985)
 The customer’s judgment of overall excellence of the service provided in relation to the
service that was expected.

 The quality of services vs goods

 Services are intangible/more difficult to evaluate
 Simultaneous production and consumption
 Services are heterogeneous
 Some services are very technical
 …

 Expectations: desired vs adequate

 Measures of service quality

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 Superiority of the service
 Adequability of the service

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 Service Quality

 Service quality assessments are formed on judgments of:

 outcome quality
 interaction quality
 physical environment quality

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The Five Dimensions of Service Quality

Reliability Ability to perform the promised service dependably and

accurately.

Assurance Knowledge and courtesy of employees and the ability of firms

and its employees to inspire trust and confidence.

Tangibles Physical facilities, equipment, and appearance of personnel.

Empathy Caring, individualized attention the firm provides its customers.

Responsiveness Willingness to help customers and provide prompt service.

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 SERVQUAL Attributes

RELIABILITY
 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
RESPONSIVENESS
 Keeping customers informed as to when TANGIBLES
services will be performed
 Prompt service to customers
 Willingness to help customers
 Readiness to respond to customers’
requests
ASSURANCE
 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
Example: supermarket questionnaire
EMPATHY
 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
 Modern equipment
 Visually appealing facilities
 Employees who have a neat, professional
appearance
 Visually appealing materials associated
with the service
61

E-service quality
 ‘core service evaluation’
 Efficiency:
 “the ability of customers to get to the website, find their desired product
and information associated with it, and check out with minimal effort”

 Fulfillment
 “the accuracy of service promises, having products in stock, and
delivering the products in the promised time”

 Reliability
 “The technical functioning of the site, particularly the extent to which it
is available and functioning properly”

 Privacy
 “The assurance that shopping behavior data are not shared and that
credit information is secure”

62

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E-service quality

 ‘Evaluation of service recovery’ (ex: Amazon)

 Responsiveness
 “the ability of e-tailers to provide appropriate information to
customers when a problem occurs, to have mechanisms for
handling returns, and to provide online guarantees”

 Compensation
 “the degree to which customers are to receive money back and
are reimbursed for shipping and handling costs”

 Contact:
 “the availability of live customer service agents online or
through the phone”

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(Reliability)

64

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The Service Encounter and Customer Satisfaction
 is the “moment of truth”

 occurs any time the customer interacts with the firm

 can 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 trust
 reinforce quality
 build brand identity
 increase loyalty
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A Service Encounter Cascade

for a Hotel Visit

Check-In

Bellboy Takes to Room

Restaurant Meal

Request Wake-Up Call

Checkout

66

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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

67

The Service Encounter and

Satisfaction

 Recovery
 Example of satisfying incident:
 “They lost my room reservation but the manager gave me
the VP suite for the same price”

 Example of dissatisfying incident:

 “We had made advance reservations at the hotel. When we
arrived we found we had no room – no explanation, no
apologies, and no assistance in finding another hotel”

68

34
The Service Encounter and
Satisfaction
 Adaptability
 Example of satisfying incident:
 “It was snowing outside-my car broke down. I checked
10 hotels and there were no rooms. Finally, one
understood my situation and offered to rent me a bed
and set it up in a small banquet room.”

 Example of dissatisfying incident:

 “Despite our repeated requests, the hotel staff would
not deal with the noisy people partying in the hall at 3
a.m.”

69

The Service Encounter and

Satisfaction
 Spontaneity
 Example of satisfying incident:
 “we always travel with our teddy bears. When we got back to
our room at the hotel, we saw that the cleaning person had
arranged our bears very comfortably in a chair. The bears were
holding hands.”

 Example of dissatisfying incident:

 “The lady at the front desk acted as if we were bothering her.
She was watching TV and paying more attention to the TV than
to the hotel guests.”

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The Service Encounter and
Satisfaction
 Coping (with difficult customers):
 Example of satisfying incident:
 “A person who became intoxicated on a flight started
speaking loudly, annoying the other passengers. The flight
attendant asked the passenger if he would be driving when
the plane landed and offered him coffee. He accepted the
coffee and became quieter and friendlier.”
 Example of dissatisfying incident:
 “An intoxicated man began pinching the female flight
attendants. One attendant told him to stop, but he continued
and then hit another passenger. The copilot was called and
asked the man to sit down and leave the others alone, but
the passenger refused. The copilot then “decked” the man,
knocking him into his seat.”
71

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http://www.helpscout.net/10-customer-service-stories/

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Recovery

Adaptability

37
Spontaneity

Coping

38
Final thoughts on customer
satisfaction and service quality

77

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