Services – Chapter 1

A service is an economic activity which is performed by one party to another. Theses

performances usually include activities of intangible nature that provide desired benefices
and/or solutions to beneficiaries provided by the service provider through service’s
employees and/or physical goods and systems. Services are usually characterized by the
following characteristics:
- Intangibility as services’ lack of physical existence. Services cannot be inventoried, difficult
to explain services and to protect them (lack of patents) and to assess pricing. In order to
decrease these negative impacts, companies may use tangible clues to help customers to
understand the service and to create a strong organizational image (DHL straightforward
rope).
- Heterogeneity as services are various and different in kind. Services standardization and
quality control are difficult to achieve. Companies should pursue both a customization and
standardization strategy. Better quality procedure, standardization of modules and trend to
automation decrease the degree of heterogeneity.
- Inseparability as services’ supply or production is not separable from consumption. The
service provided is physically connected to the service, and the customer itself and other
customers are involved in the production process. As a result, the mass production of
services is challenging. Due to inseparability, selection and training of public contact
personnel as well as the management of consumers and use of multisite locations are strongly
needed. Some services are separable, for example possessions processing.
- Perishability as services cannot be stored for future sale. As consequence, often the demand
exceeds supply as well as the optimal level of supply. Through the use of creative pricing
strategies (part-time employees to increase supply), shift of demand to complementary
services and implement reservation systems a company can drive the demand supply to the
optimum point. Some services can be stored, such as information-based information
The Service Sector is highly diverse sector as it comprises a huge range of different activities
and their features. Services are classified in terms of diversity of “raw material’s
transformation” as well as benefit’s type and receiver. Classification of services relies on 4
different cross-broad characteristics: People, possession, intangible and tangible.
(1) People as recipient of the service include tangible services known as people processing
(health care, barbers, services directed to people bodies) and (2) intangible services known
as mental stimulus processing such as education or advertising which are directed to the
mind. (3) Possessions’ tangible include possession-processing such as refuelling or
recycling which are directed to physical possessions while (4) intangible possessions
include information processing such as banking and accounting which are directed to
intangible assets
1) People processing: In order to receive the benefits, customers must physically enter the
service factory wherein personnel or machines create and deliver the service. Therefore,
Production and consumption are simultaneous: thus emphasis must be place also on physical
location, service operation, service processes and service environment. In addition, in order to
deliver the service, the customer needs to cooperate. In conclusion, managers should think
form the customer’s perspective, taking consideration of time as well as mental and physical
efforts.
2) Possessing processing: It provides tangible treatment for some physical possession. The
involvement is limited to the possession (less physical involvement) and the production and
consumption are separable and often distinct (E.g dropping ur fucked up phone to the shop).
3) Mental Stimulus Processing: it touches and aims to shape people’s minds, therefore
customers mind might be manipulated. Recipients do not necessarily have to be physically in
the system factory but just mentally. The core content of these services is information based:
services can be therefore be inventoried for consumption to a later date. (e.g porn on
youporn)
4) Information processing: It is the most intangible processing as it concerns possession
intangible. Information can be processed by information and communications technology or
by professional. It is sometimes difficult to establish difference between processing and
mental processing services, as the latter can be transformed in tangible possessions such as
letters, books or reports. This is way information processing and possessing are united under
the term information-based services
Service activities include: finance, insurance, real estate (FIRE-sector), transport, retail.
Telecommunication (Distributive sector), HORECA (hotel, restaurants and catering),
personal services and social and collective services.

Non ownership Concept:

Studies have emphasised and focused on the lack of transfer of ownership when purchasing a
service. Why, then, consumers buy services? Because services contain a form of rental or
access in which consumers obtain benefits. Consumers buy services to get access to skills,
expertise, facilities or networks instead of buying it which it is sometimes not possible. The
non-ownership framework is composed by 5 broad categories that focus on: use of labour,
skills, expertise (1), degree of using goods and facilities (2-4) and access to network and
systems:
1) Use of labour, skills and expertise: People hire other people to perform work, they
cannot do ( e.g plumber )
2) Rented goods services: rent and right to use physical object that they prefer not to
own (rented, boats, prostitutes ‘n so on man)
3) Defined space and facility rentals: customers obtain the use of a certain portion of a
larger facility, sharing the facility with other customers (suit in the hotel, seat on the
plane)
4) Access to shared facilities: customers get granted the right to use of the facilities.
(rent of tennis pitch)
5) Access and use of networks and systems; customers get granted the right to
participate in a specified network. (E.g telecommunications)
Dominant Logic
Two perspective have been made to distinguish services:
1) The Good Dominant logic refers to services (plural from) which either are a restricted
type of product or add-on that enhances the good’s value. Process of GDL involve: Making
something (goods or services), value as produced, customer as isolated entities and target and
primacy as efficiency
2 )The Service Dominant Logic refers to service (singular form) which is a process of doing
something of a second party that does have any reference to goods but have a focus on
exchange activity. Process of SDL involve: assisting customers in their own value creation
process (value as co-created), customers are in the context of their own networks and are
seen as resources. The efficiency is achieved through effectiveness.
Traditional Value creation process VS now.
The traditional value creation process placed the firm as the absolute center of the process,
supported by suppliers and marketing channels to create value and sell goods or services to
the passive consumer. The value creation is associated only with goods and services. As
absolute center position, the firm unilaterally defines and creates value; consumers represent
a passive demand as the firm has more information about them instead of the opposite.
Nowadays interactions with external sources become a source of value creation: the so called
“experienced environments” emerged as the new locus of competitive advantage. The internal
value chain is view only as a cost chain while the interaction space is a new source of value
creation: informed and empowered individual (customers) now want to have the control of
the experience. Experience environments include manager to manger, customers
communities, individual and partners’ interaction.
Service sector common Features:
1) Services cannot be inventoried, customers may be turned away or have to wait. In
order to overtake this; smoothing demand through promotions and dynamic pricing
2) Intagible elements dominated value creation; customers cannot taste or touch such
elements, thus it is harder to evaluate and distinguish companies from competiroer.
Firms should place emphasis on physical clues through the use of vivid image and
metaphor to make the service tangible
3) Difficult to visualize, thus consumers perceived greater uncertainty. Through
education of consumers companies can decrease the degree of uncertainty
4) Consumers are involved in the co-production and may be part of the service
(inseparable): interaction of constumers with service providers and equipment and
related risk of poor performance. Recruit and train and reward employees.
5) Inputs and outputs vary widely. It is harder to maintain quality and reliability and
constant costs. Quality standards should be based on customers expectations redesign
elements’ products for simplicity and failure-proofing.
6) Time factor. Important for consumers as they want to invest time wisely. Find ways to
deliver speedy and minimize waiting
7) Distribution may take place through non-physical channels. Information based
services can be deliver through electronic channels. Seek to create safe websites and
that information are delivered efficiently through channels
7 Ps of service marketing are needed to create viable strategies for meeting customers
needs profitably. Traditional marketing mix applied services include Product, Place, Price and
Promotion while extended marketing mix for Services include process, Physical Enviornment
and people. In order to operate successfully, 4 management functions play a central and
interrelated roles. Operations management, marketing management, information technology
and HR management; each function depend on the other.

Service Sector
Service sector has experienced in the last two decades a rapid growth. Reasons of such growth
are to be found:
- Social changes (rising expectation, Increased desire for buying experiences over things,
increased ownership of technology and therefore increased information)
- Governmental policies (changes in regulations, privatization, rules to protect customers,
new agreement on trade in services)
- Globalization ( increase of transnational and international travel, offshoring of customer
service, international merges and alliances)
- Business Trends (outsourcing, growth of franchising, increased value of services, focus on
quality and customer satisfaction)
- Advance in IT (Internet Growth, mobile equipment, increased software, wireless
networking)
Collectively these forces shaped the way customers acquire and use services and, therefore
market’s demand, supply, competition as well as new markets and products. Better
technology, increased innovation in service products and delivery system.
Nowadays, service sector has a relevant impact on the overall economy. In fact, Service
Account, in developed countries, heavily contribute to the Gross Domestic Product (GDP)
roughly 60%. This market influences the labour market as well providing job places for over
half of the developed countries’ populations. The service market has also a strong impact over
the manufacturing industry which deals with tangible goods. Gaining strategic competitive
advantage only through physical products is not longer possible. Customers are more
demanding, not only on the quality of the product itself, but also expect high levels of
customer services. Service marketing therefore provides means for diversification. Through
delivering the physical product, companies add services which may increase the product
quality – (guaranties, installation), quality of customer’s orientation – service customer
care (after sales support, product’s maintenance, adaption of products), system quality -
service and consulting (problem solving, individualisation) and quality of knowledge –
service as core competence (stand alone service, value chain partnering).
As a result, understanding customers and competitors, establishing viable business model and
create value are activities aimed at increasing focus on service marketing and
management
Product – Chapter 4
Product is anything that can be offered to a market to satisfy a want or need, including
physical goods, services, experiences, events, persons, places, properties, organizations,
information, and ideas. Products may vary in terms of durability, tangibility, use, durable and
non durable and services.
Service product
Service product rather that owned performances are experienced; customers pays a
significant portion for the value added by service elements such as labour and specialized
equipment. A service product comprises of all the element of service performance, both
physical and intangible that creates value. Value proposition must address and integrate:
1) The core product which is the central component that supplying the principal benefit
or problem solving that customers seek for.
2) Supplementary services which have the function of facilitating and enhancing the
value. Play an important role in terms of differentiation and positioning the core
product Supplementary activities can be divided into:
- Facilitating activities which either are needed for service delivery or help in the use
of the core product
- Enhancing activities which add extra
3) Delivery Processes which refer to the channels and processes used to deliver core
and supplementary activities. The design of the service include as design:
- How different components are delivered
- The nature of the customers’ role in the process
- Length of delivery
- The recommended level and style of the service.
2) Supplementary Activities – The Flower of Service
The flower of service consists of the core service and a range of supplementary activities
which are divided in 2 major categories known as facilitating and enhancing elements and 8
different cluster. The facilitating activities include Information, Order-Taking. Billing and
payment while enhancing activities include consultation, hospitality, safekeeping and exceptions.
The eight clusters are displayed as petals surrounding the center of the flower and arranged
starting form information clockwise following the order the customers face them. Within a
well managed service product, the petals and core are fresh and well-formed. The market
positioning of the service help to implement strategy to determine which supplementary
activities should be included.
Facilitating Activities
1) Information: Customer oftern need information regarding how to obtain or use a product.
Informatio need to be timely and accurate otherwise customers might feel irritated and
perceive a lack of control: Directions to service sit, Schedules/service hour, Prices, Reminders,
Warnings, Conditions of sale/service, Notification of changes, Documentation, Confirmation of
reservation, Summaries of account activities and Receipts and tickets
2) Order Taking: Activities that secure customer of the commitment to delivery of the
company. This process should be fast and smooth and accurate. Order taking can be in the
form of:
Applications • Memberships in clubs/programs • Subscription services (e.g., utilities)
• Prerequisite based services (e.g., financial credit, college enrolment)
Order Entry • On-site order fulfilment • Mail/telephone/e-mail/web order
Reservations and Check-in
• Seats/tables/rooms • Vehicles or equipment rental • Professional appointments
3) Billing: common to all services, bills should be clear, accurate timely and inteligible.
• Periodic statements of account activity • Invoices for individual transactions
• Verbal statements of amount due • Self-billing (computed by customer)
• Machine display of amount due
4) Payments are expected to be easy and convenient: they include
Self-Service: • Insert card, cash or token into machine, Electronic funds transfer • Mail a check
• Enter credit card number online
Direct to Payee or Intermediary • Cash handling or change giving • Check handling
• Credit/charge/debit card handling • Coupon redemption
Automatic Deduction from Financial Deposits • Automated systems (e.g., machine-readable
tickets that operate entry gate) • Human systems (e.g., toll collectors)
Enhancing Activities
1) Consultation: instead of giving simple response (information), consultation involves
advances and consultation tailored to each customer’s needs and situation. Effective
consultation requires an understanding of each customer’s current situation.
Consultations include customized advice, personal counselling, tutoring and technical
consulting.
2) Hospitality: refers to the need to reflect pleasure at meeting with new or old
customers. It might involve: greeting, food and beverage, toilets, waiting facilities,
security and transport.
3) Safekeeping refers to the activities aimed at looking after the customers’ personal
possessions that they bring with them to the service site. Services include child and pet
car, parking for vehicles. Coat rooms, storage space, safe deposit boxes.
4) Exceptions refer to services that fall outside the routine normal service delivery. Well
defined procedures anticipating eventual exceptional needs make it easier for
employees to respond promptly and effectively. They include:
- Special requests: care of children, dietary requirements, medical needs, religious
observance and personal disabilities
-Problem-solving: solving fails in the delivery of service
- Handling of special communications (complaints, suggestions and compliments)
- Restitution in case of performance failures or compensation in the form of repairs,
refunds, special offers or other payment in kinds.
Collectively, these activities
complete the core product.
Core product do not have
supplementary elements.
Note that people-processing
and high contact services
usually require more
supplementary services.
Possession-processing
services place heavily
demands on safekeeping
elements
Branding Service firms, products and experiences
Branding plays an important role in service as it enables customer to better visualize and
understanding intangible products. Branding reduce perceived monetary, social or safety risk
of buying services. In a well -managed firm, the brand is not only recognized but also has
meaning for customers, representing a particular way to do business. Moreover, product
brand help communicate distinctive experiences and benefits associated with a specific
service concept. Most service organizations offer a line of products rather than a single
product. There are 3 different alternatives: single brand to cover all products and services, a
separate stand alone brand for each offering or some combination of the first two options.
Branded House: for example Virgin, which applies the same logo for all the different services
it offers. Sub Brands for which the corporate is the main reference although the particular
service has a distinctive name (British airline first class offer “Deluxe service” for
intercontinental offerings and “Business Class” for intra-European flights)
In order to build a strong brand, it is important to understand what contributes to brand
equity which is the value premium that arise from the brand. The following steps are needed:
- Company’s presented brand (through advertising, service facilities and personnel)
- External brand communications ( publicity and word of mouth<9
- Customer experience with the company
- Brand awareness (ability to recognize and recall a brand)
- Brand meaning
- Brand equity.
New Service Development
Great brands continuously improve through innovation by creating new approaches to
service. Services are not immune to high failure rates that plague new manufactured
products. In developing countries new services are characterized by the fact that
core product is often of secondary importance, many innovations are in supplementary
services or service delivery. The ability to maintain quality of the total service offering is key,
accompanying marketing support activities are vital and the Market knowledge is of utmost
importance ( scientific studies conducted early in development process) . Market synergy is
important as new services require a good fit between new products and the firm’s image and
because provides advantage in meeting customers’ needs. Additional considerations include
that:
- Services should be experienced and designed through the customers’ eyes (User-centered)
- All stakeholders shall be included in the design (Concreative)
- A service should be visualized as a sequence of interrelated actions (sequencing)
- The entire environment of a service should be considered.
Major innovations:
Major Service Innovations: New core products for previously undefined markets
Major Process Innovations: Using new processes to deliver existing products with added
benefits
Product Line Extensions: Addition to current product lines
Process-line Extensions: Alternative delivery procedures
Supplementary Service Innovations: Additions of new or improved facilitating or
enhancing elements
Service Improvements: Modest changes in the performance of current products
Style Changes: Visible changes in service design or scripts
Chapter 5 – Distribution Channel
Marketing channels or distribution channels are composed by sets of independent
organizations participating in the process of making a product or service available for use or
consumption. The channel length is determined by the number of levels or different types of
intermediaries operating. Intermediaries include merchants, agents and facilitators. Cannels
can be defined as direct when distribution is carried without intermediaries and indirect
when there is at least on intermediating party. Within a direct channel the producer distribute
its product directly to the consumer or to the industrial user. On the other hand, in indirect
channels intermediaries such as retailers, industrial distributor, wholesalers as well as agents
and brokers are involved in the distribution from the producer to the consumer. In order to
survive, intermediaries need to to gather information regarding potential and current
customers, competitors and other actor and forces of the Channel. In addition, they have to
carefully negotiate to reach agreements on prices and other items as well as placing orders,
assessing risks and organizing distribution. Distribution can be defines as intensive in which
services are distributed from as many outlets as possible to provide location convenience,
exclusive in which distribution is limited only to one intermediary and finally selective in
which there are several intermediaries but not all. By providing services, there is not usually
delivery of physical products as experiences, performances and solutions are not shipped and
stored. What are being distributed are elements such as:
1) Information and promotion flow in order to get customers interest in buying the service
and can be related to the information and consultation petals of the Flower.
2) Negotiation flow which refers to agreements achieved to receive the right to use (sell) a
service (E.g tickets) and can be related to order-taking, billing and payments
3) Product flow refers to the development of network of local sites and it is generally related
o the core product as most of the core services require physical location. On the other
hand, supplementary services are informational and distributed widely and cost
effectively via other means such as telephone and internet.
The delivery of the service depends on the features of the service itself; in some cases, the
customer physically visits the service site, resulting in convenience for the provider and
high degree of importance of operational schedule. Facilities’ location is usually determined
by cost, productivity and labour availability while sometimes location is subject to constraint
such as operational requirements (eg airport), geographic factor (eg skying facilities) and
need for economies of scale (eg hospitals) Other times, the service provider visits the
customers which is unavoidable when the service has to be deliver to an immovable,
resulting in higher expenses and time consuming for the service provider. Some services
transactions are conducted remotely through logistics and telecommunications.
Obviously convenience is a key driver of channel choice. However, due to high perceived risk
and social motives, people tend to rely on personal channels. On the other hand, customers
with greater confidence and knowledge tend to use impersonal channels.
In indirect channels of distribution, the producer has to act as guardian of the overall process,
ensuring that each element offered by the intermediary fits. Original firms compute the core
product, information, consulting and exception while intermediaries compute the remaining
supplementary activities.
Franchising . It is a method of distributing products or services by licensing business process,
products, services and intellectual property to investors who will operate within an
established business model. Two parties are involved with this system; the franchisor which
provides its trade name or business model and the franchisee who by paying royalties plus an
initial fee receives the right to do business under the franchisor’s name and model. Benefits
include: management training and support, brand name appeal, standardized quality,
financial assistance, national advertising and overall greater chances of success. Drawbacks
include the fess and royalties, restrictions on operations and purchasing, contract constraints
and overall lower degree of freedom.
Prices – Chapter 6
Setting price imply the following steps:
1) Selecting the pricing objective: companies need to chose strategies over their goals. Price
can be set in regards with one of the following strategies; survival, maximum profits,
maximum market share, maximum market skimming, product quality leadership or other
objectives
2) Determining demand: elements such as price sensitivity (low sensitivity might be due to
product’ distinction, unknown or low quality substitutes, small expenditure, product function
as complement, product cannot be stored) elasticity of demand and estimation of demand
through surveys, experiments and statically analyse are needed to be carried.
3) Estimating Costs: to determine price, managers must analyse the types of costs (V,FC and
AVC)
4) Analysing competitors prices
5) Selecting a pricing method (price floor equal costs, competitor’s price is orientating while
price ceiling is the maximum price)
6) Additional factors such as policies and firm philosophy.
Customers often show lack of price reference for service due to difficult collection, services’
variability and different customers needs.
Pricing strategy can be represented by the pricing tripod. There are three main approaches
to pricing which are represented in the metaphor as the legs of a tripod which are costs,
competition and value to customer.
Cost-based pricing
Prices are set on the costs incurred. Expenses for raw materials, labour, overheads have an
impact as price is the result form the sum of direct costs + overheads + profit margin.
However costs are difficult to trace to services, particularly when multiple services are
offered. Moreover, a major component of cost is opportunity cost which is strictly related to
time; employees and the value of people’s time is not easy to stimulate. The traditional
activity base costing assigns overheads costs to products through two stage processes:
(1) assigning overhead to activity cost pools and (2) identify appropriate cost drivers for each
and allocate overheads on proportion. However, the cost based pricing is not efficient as
customers care value for themselves and not for the provider’s costs.
Competition based pricing
Prices are set depending on the prices charged by firms in the same industry. This does not
imply charging same price but using an anchor for the firm’s price. Small business may find
this strategy difficult to apply. In addition the heterogeneity of services across providers
makes this approach complicated.
Demand based pricing
Prices are set depending on customers perceptions of value and how much they would have
been likely to pay. Non-monetary costs and benefits must be factored in the calculation and
such is more than challenging.
Service Value
The most appropriate ways to charge prices is basing such on the perceived value of the
service to customers. Service value is the mental tradeoff of perceived quality obtained
matched with the sacrifice needed in terms of both monetary and non monetary resources.
Four major definitions of Values
1) Value is low price: when customers define values as such, strategies to be followed
are discounting, penetration pricing, odd pricing and synchro-pricing
2) Values is everything wanted: prestige pricing and skimming pricing
3) Value is quantity: value pricing, market segmentation pricing
4) Value is what I give for all that I get: price framing, price bundling. Complementary
pricing and result-based pricing.
Chapter 7 – Promoting and educating Customers
Integrated marketing communications (IMC) refer to the company’s strategy to integrate and
harmonize all the external channels used. It has the benefit to build strong brad identity by
reinforcing image. All the messages expressed by the company are coordinate across al
venues.
Intangibility of services creates 4 main problems:
1) Abstractness as there is no correspondence with physical objects
2) Generality as service comprises several class of objects, persons or events
3) Non-searchability as the service cannot be physically inspected
4) Mental impalpability, complex and multi dimensional offerings are difficult to
understand
In order to address the issues that arise form intangibility, firms should use:
narrative to demonstrate the service, vivid information, interactive imagery (association,
physical representation, visualization) brand icons, featuring of satisfied customers,
generation of wotd of mouth through employee relationships.
Interactive imagery refers to the mental event that links the visualization of a concept and
its relationship; imagery can enhance names and facts by integrating two or more items in
some mutual action (Eg: Using umbrella protecting people for an insurance company).
Through association customers link the service to a tangible concept. Through physical
representation company shows tangible elements within the service provided such as
employees, buildings, equipment. Visualization refers to the creation of a vivid mental
picture related to a service (E.g happy tourists for a travelling agency company). Generate
word of mouth trough employee is a consequence of a personal connection between
employees and customers, care displayed by employees and employee familiarity with the
customer. Word of mouth is most effective when other customers provide recommendations.
Strategies to stimulate word of mouth include stories on the great service offered, offering
promotions, reference incentives (invita un amico), presenting with testimonials.
The 5 Ws Model
What to Achieve?
Who is the target?
How to communicate?
Where should it be communicated?
Where do communications need to take place?
What to achieve? Companies want to achieve objectives which must be smart, specific,
measurable (stated in quantity), achievable (realistic), relevant and coherent, and with a time
bound as they should be achieved within a specific time. Depending on the product life cycle
stage, communication objective and tactics differ. At early introduction stages, the objective
results to be informational and can be achieved through introducing the offer, create brand
awareness and encourage trial. At growth and maturity, communication objective are
informational but also persuasive achieved through the enhancement of the brand image and
provoking immediate buying. At stage of maturity or decline, companies have the objective to
be persuasive and to remind customers through encourage repeat purchase and express
gratitude.
Target audience? Target of communication usually include all the stakeholders of the service
company. Communication is addressed to prospects customers through traditional
communication mix (e.g media, online), existing users as well as employees through internal
marketing aimed at shape behaviours.
How to communicate? The campaign approach is strongly affected by the market budgeting.

Communication is also strongly affected by the positioning strategy of the company which
communicates how the service differs itself from competing alternatives.
Where? Refers to the choice of the appropriate marketing channel.
Supplement channels include internet marketing channels (websites, online advertising),
promoting awareness, information, trials and opportunity to purchase. The design should be
characterized by high quality, efficiency and quick updates.
Chapter 8
Flow charting service delivery helps to clarify the product elements. It describes the
method and sequence in which the service creates value promised to customers, offering a
way to understand total customer service experience. The flow depends on the type of service
offered (people, possession, mental stimulation and information processing, look at examples
Slide 5, chap 8)
Blueprinting
It a technique that simultaneously depict the service process, the point of customers’ contact
and the evidence of service from the consumer’s point of view. Customers actions are on top
and ends with a line of interactions, contact employee action are showed in the middle and
ends with line of visibility while invisible contact employee actions are showed at the
bottom and ends with line of internal interaction.

The advantage of blueprint relies on the opportunity to clearly distinguish between “front-
stage” and “back-stage” activity. In addition it clarifies interactions and support by backstage
activities and identifies potential fail points and pinpoint stages where customers commonly
have to wait. Fail points shall be carefully handled trough their identification, analysis of
reasons for failure reveals and opportunities to reduce/eliminate and need for fail-safe
methods for both customers and employees.
Chapter 10-Service Escape
The physical evidence refers to the environment in which the service is delivered, where
usually firma and customers interact as well as any tangible commodities that facilitate the
performance or communication of the service. Service-escape include exterior of facility
(exterior design, parking, signage, surrounding environment), facility interior (interior design,
equipment, sound, air quality, layout) and other tangibles (business cards, billing,
employee’s uniforms, reports)

Service environments shape customers’ experience and their behaviours. It enhances

productivity, facilitating the service encounter. Service environment is a core part of the value
proposition, supporting image, position and differentiation. Each service clearly
communicates and reinforce respective positioning through service-escape (hotels Vs.
Hostels) Shaping consumers experience through:
1) Symbolic clues company communicates the nature and quality of the service (message-
creating medium), (2)customizing and differentiating service-escape (attention-creating
medium) and (3) through colours, sounds and texture (effect-creating medium)
(eg apple: clean open spacious store which displays product as in a museum. Modern
atmosphere provided by white walls and central glass staircase. Information, interaction and
access are key elements).
Understanding the roots of consumer ‘response to service environments
Kotler’s atmospherics
Kotler based his studies over atmospherics stating that emotional effects in the buyer
enhancing willingness to purchase are apprehended through senses as the pure taste does not
apply to atmosphere. According to Kotles, atmospheric elements to be taken into
consideration include:
1) Architecture; therefore the atmospherics of the exterior building structure
2) Interior Design; interior spaces of the balding
3) Window Dressing: the atmospheric of a store window.
Kotler believed that sensory qualities of space surrounding (indented atmosphere) are
perceived by customers (perceived atmosphere), modifying buyers’ affective state, thus
modifying purchase probability.
Stimulus-organism-response theory
It is a framework developed by Mehrabin and Russell which place emphasis on the use of
human emotional response to the environment as variables linking such emotions to the
environment. Stimulus (colours light, taste and odour) is intended as the multidimensional
environment, organism as the human subjects (employee, customer) while response is the
behaviours directed at the environment. According to the researches any response to an
environment can be classified as either approach or avoidance behaviour and are related to
the desire to physically stay, explore, work and affiliate with the situation.
Emotional states of pleasure, arousal and dominance are placed as the core feelings related to
response to the environment and depends over stimuli and affect the response. Environment
through conscious or not perception and interpretation influence how people feel. Feelings
rather than perceptions drive behaviours. Emotional responses can be described into 3 main
dimensions:
1) pleasure which is subjective and depends on how much the individual likes or not the
environment (pleased/annoyed ; happy/unhappy; satisfied/unsatisfied)
2) Arousal which stimulates feeling provided by information and load of the
environment (excited/ calm; stimulated/relaxed)
3) Dominance which is the individual role within the environment (influential/influenced
controlling/controlled)
Pleasant environments result in approach and arousal while unpleasant ones in avoidance
and unaroused feeling.
An Integrative Framework: The service Escape method
It identifies the main dimension and views them holistically. Responses of customers and
employees are categorized into cognitive (beliefs about a place), emotional (colour, music
affecting pleasure and arousal) and psychological (volume, air quality, lighting) responses
which lead to behavioural responses. Design of environment is effective if how each individual
fits together with the environment . The main dimension of the service-escape model are :
1) the ambient conditions (lighting, colours, size, sounds, temperature).
- Music, for example have a powerful effect on perception and behaviours; tempos,
volume and harmony are perceived as holistically.
- Scent can have a significant effect on customer perception
- Colour can be defined into three dimension: hue is the pigment, value the degree of
lightness or darkness and Chroma to saturation and brilliance. It was proved that
people are generally drawn to warm colours (encourage fast buying and are good for
low involvement decision)
2) layout & functionality
3) signs, symbols and artefacts which communicate the firm’s image and help customer
find solution , guiding customers through the delivery process.
Chapter – 11 Service Employees
Service employees are crucial, as they are the service. Employees are the organization in the
customer’s eyes as they represent the brand. Their importance is fundamental in the services
marketing mix, service triangle and service profit-chain. The service marketing triangle
places Company, providers (employees) and customers as angles of the triangles and internal
(enabling the promise) and external marketing (making the progress) as the sides that
connect providers and customers. The bottom side is known as interactive marketing and it is
the moment promises are kept or broken by the firm’s employees. Thus employees are a
critical element. Organization must continuously work to align the 3 sides of the triangle.
In order to make promises companies must understand customer needs and expectations
and use channels such as sales e promotion, advertising and web communication
In order to keep promises companies must manage the service delivery in terms of
reliability, responsiveness and efficiency offering an overall great Customer Experience. This
process places emphasis especially on the service employees’ performance.
In order to enable promises a company should hire, train and develop the right people and
empower them offering a support system, reward and incentives and appropriate equipment
and technology. The service triangle permits to have an overall overview of the company’s
weaknesses and strengths as well as the process of implementing or analysing specific
services.
The encounter with service staff is most important aspect from the prospective of customers
as well as for the firms’. Frontline is in fact important source of differentiation and
opportunity to gain competitive advantage as can anticipate and customize needs, building
personalized relationships. Frontline employees are required to delight customers, be
efficient in operating and act as marketers (offering products etc.). Sometimes conflicts can
arise between jobs requirements and employees’ own personalities (bus driver not willing to
bend down to collect money which dropped during the payment of a ticket). In order to avoid
conflicts, company should instil professionalism in frontline staff. Sometimes conflict may
arise by the trade-off of satisfying the customer or follow organizational rules. Emotional
labour in response of society or management’s rules can have stressful impact on employees
(flight attendant needs to smile and show boobies). Good HR should implement training,
counselling and strategies to alleviate stress.
Satisfaction VS. service quality- Chapter 14
The customer satisfaction is the specific evaluation of the service experience received by the
client in the short run. On the other hand, service quality refers to the process in the long-run
of satisfying customers as well as a source to gain competitive advantage from new clients,
increased and perpetual purchase and customer loyalty. The distance between customer’
expectations and the perceived of the actual service is know as the service gap leading to
negative word of mouth and impact on the image. It depends, according to the Gap Analysis
method over 4 gaps:
1) Knowledge Gap refers to the difference between expectations and how management
perceives such expectations. In order to avoid knowledges gaps, company should carry
efficient research orientation, upward communication (bottom-up) and reducing
complexity of the managerial hierarchy.
2) Standards Gap refers to the difference between management perceive about
expectation and the specification for the delivery of the service. Reasons may be found
in the strategies of profit maximization of the company or within the absence of
knowledge about culture of service quality. Examination of flowcharts and blueprint is
a way to decrease or eliminate the gap
3) Delivery Gap refers to the difference between the quality standards for the delivery of
service and the actual quality of it. Reasons may arise from bad employees service,
inadequate facilities and equipment or due to complexity of the service
4) Communication Gap refer to the difference between the actual quality of service and
the quality declared due to overpromising or lack of communication.
Exceptions of customers is quantified by three different levels: The upper is the quality
customers believe a service should be delivered, followed by the zone of tolerance and lastly
as a bottom to the minimum level customers are willing to accept.
The quality dimension
Servual is diagnostic tool that uncovers a firms’ board weaknesses and strengths in the area of
service quality and it is based on the 5 service quality dimension:
- Tangibles refers to the appropriateness of equipment such as facilities, employees’
appearance .
- Reliability refers to the performance of the company compared with what was promised. It
requires accuracy, timely performance and free of errors
- Responsiveness refers to inform customers about the service. It requires prompt service
and effective aid
- Assurance refers to the ability to convey trust. It requires trained frontline employees and
overall safety of transaction and delivery.
- Empathy refers to the ability in proving exceptions and attention to individual customers
It is a questionnaire composed by 22 qsts for each dimension, It compares and excellent firm
in the market with the analysed firm. The less the difference, the greater the expectations.
However the test results ineffective because unable to deliver the right questions.