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The American Journal of Surgery 181 (2001) 1–7

Physician leadership

Concepts in service marketing for healthcare professionals


Christopher L. Corbina, Scott W. Kelley, D.B.A.a, Richard W. Schwartz, M.D., M.B.A.b,c,d,*
a
Carol Martin Gatton College of Business and Economics, University of Kentucky, Lexington, KY 40536, USA
b
Department of Surgery, College of Medicine, University of Kentucky, Lexington, KY 40536, USA
c
Chancellor’s Office, Chandler Medical Center, University of Kentucky, Lexington, KY 40536, USA
d
Clinical Operations, Veterans Administration Medical Center, Lexington, KY 40536, USA

Received July 10, 2000; revised manuscript August 21, 2000

Abstract
Patients are becoming increasingly involved in making healthcare choices as their burden of healthcare costs continues to escalate. At
the same time, healthcare has entered a tightened market economy. For these reasons, the marketing of healthcare services has become
essential for the financial survival of physicians and healthcare organizations. Physicians can successfully use the fundamental service
marketing principles proven by other service industries to win patient satisfaction and loyalty and remain competitive in today’s market
economy. Understanding concepts such as service quality zone of tolerance, levels of consumer satisfaction, the branding of services, patient
participation, and service recovery can be useful in achieving these goals. © 2001 Excerpta Medica, Inc. All rights reserved.

Keywords: Service marketing; Marketing; Healthcare; Physicians

The marketing of healthcare services coincides with the and retention, which are the end results of successful mar-
service marketing revolution that is currently taking place in keting efforts. This choice has been made out of a combi-
the United States. Service industries have surpassed manu- nation of ignorance and lack of necessity. Until the recent
facturing industries in terms of their size and importance to past, the formulation for indemnity reimbursement pro-
the nation’s economy [1]. Traditional services such as re- grams placed all of the financial risk on the insurance
tailing, delivery, restaurants, banking, and insurance have carrier, and left both the providers and patients unaccount-
embraced the value of marketing in order to both create able. Thus, healthcare and cost containment, to date, have
public awareness and build customer satisfaction and reten- been an oxymoron. Therefore, the escalating costs of health-
tion. Achievement of these marketing goals has been the care were almost inconsequential to patients (consumers)
key to sustaining and expanding many service ventures. who had limited responsibility for out-of-pocket reimburse-
High-profile pioneers in service marketing include UPS, ment for their care.
McDonald’s, and Wal-Mart [2]. Their vision and goals for
Recently, however, the consumer’s involvement in
customer satisfaction have been achieved and provide mod-
healthcare choices has grown exponentially. This involve-
els for organizations in other service industries.
ment is attributable to insurance premiums that are growing
The question for healthcare providers is simple: why
annually by double-digit percentages, coupled with compli-
has the world’s largest service industry— healthcare— been
slow to acknowledge, much less embrace, the importance of cated stipulations of networked providers. In concert, be-
service marketing principles? National healthcare spending cause of federal and administrative interventions such as the
is projected by the middle of this decade to exceed two Institute of Medicine (IOM) report and the Balanced Budget
trillion dollars [3] (ie, one seventh of the nation’s gross Act of 1997, cost-containment measures are a permanent
domestic product). The healthcare industry has traditionally feature of the healthcare milieu. Thus, the healthcare service
not sought the benefits of improved customer satisfaction market has tightened considerably (as is true for a market
economy), and consumers, for the first time, are now active
decision-makers. Those physicians, healthcare profession-
* Corresponding author. Tel.: ⫹1-606-323-6346; fax: ⫹1-606-323-
6340. als, and healthcare organizations that choose the benefits of
E-mail address: rschw01@pop.uky.edu. marketing will increase market share and profit margins; in

0002-9610/01/$ – see front matter © 2001 Excerpta Medica, Inc. All rights reserved.
PII: S 0 0 0 2 - 9 6 1 0 ( 0 0 ) 0 0 5 3 5 - 3
2 C.L. Corbin et al. / The American Journal of Surgery 181 (2001) 1–7

Table 1 gible in that they do not take on a physical form. In addition,


Major principles in the marketing of healthcare services [1] services generally cannot be counted, measured, tested, or
1. Services versus commodities thoroughly evaluated before consumption [5]. Thus, con-
2. Service quality sumer perceptions and satisfaction are based solely on the
3. Other marketing outcomes perceived performance and outcome of the service. Sec-
4. Branding
5. Patients versus customers
ondly, services are heavily reliant upon personal interaction
6. Patient participation between the service provider and the consumer. The pres-
7. Patient loyalty ence of a human service provider and the associated per-
8. Patient defection sonal interaction creates variability in the service provision
9. Service recovery
for each individual consumer. These inherent inconsisten-
10. Moods
cies in service delivery can interfere with the provision of
consistent and reliable service and with the formation of
consumer trust. The third characteristic that separates ser-
contrast, those that remain stagnant will struggle for finan- vices from commodities is the inability to separate the
cial existence. consumer from the service provider in the completion of a
Therefore, the marketing of healthcare services has be-
service transaction. For example, the characteristic of insep-
come fundamental to the financial success of physician
arability is exemplified by the fact that surgery cannot be
practices and healthcare organizations of all sizes. As un-
performed without the physical presence of both a patient
popular as marketing (which most physicians equated with
and a physician. Finally, services cannot be held for future
advertising) may have been with healthcare providers in the
use. They are perishable and cannot be inventoried. These
past, it is clear that marketing has progressed from “. . .
characteristics make tracking and measuring consumer per-
merely advertising . . . [to] a comprehensive approach to
ceptions of service quality and satisfaction in service indus-
satisfying patient needs”[4]. Patients are now educating
tries difficult.
themselves with information from many sources and de-
With virtually all types of goods, various search methods
manding that their healthcare needs, both technical and
functional, be satisfied in both clinical and service outcome are used to find the product or service that best suits the
parameters. In short, they are appraising their satisfaction needs of the consumer. To that end, consumers use three
with their overall service experience. Private practices and broad criteria when evaluating products, whether they be
large healthcare organizations must embrace this patient goods or services: (1) search properties—may be evaluated
behavior and provide the services that are desired. Satisfied prior to purchase or consumption of a good or service (eg,
patients become “loyal customers,” and thus become posi- size, color and price); (2) experience properties—may be
tive contributors to the success of both their healthcare evaluated during or after consumption or transaction (eg,
experience and the overall function of their chosen health- taste, dependability); and (3) credence properties—may be
care entity. They are both allegiant to their physician and impossible to confidently evaluate even after consumption
active participants in the outcome of their care. (eg, the results of a surgical procedure).
As with all types of services, whether the conventional Services are generally very low in search properties and
customer-seller relationship or the more complex patient- extremely high in credence properties. That is, a consumer
physician association, there are fundamental principles and of healthcare services is generally unable to accurately se-
aspects of service marketing that are imperative in creating lect and evaluate a physician prior to the patient-physician
customer satisfaction and building loyalty. The complexi- interaction (search). Additionally, consumers are usually
ties and idiosyncrasies associated with service delivery in unable to identify and thoroughly understand the effects and
the healthcare industry necessitate thorough evaluation, bench- results of a healthcare interaction or procedure (credence).
marking, and tracking mechanisms that are imperative for Because consumers are unable to thoroughly evaluate all
determining the degree of patient satisfaction being achieved. available distinguishable characteristics before purchase
Ten key principles in effective service marketing, as they [5], the ability to preevaluate and measure perception and
pertain to physician practices and institutional healthcare satisfaction of services is further perplexing for service
organizations, are listed in Table 1. Discussion of each providers. Furthermore, limited access to search attributes
principle follows, with examples from the current health- by consumers of services, especially healthcare services,
care industry. necessitates that experience and credence attributes be
weighed heavily in the patient’s evaluation process. There-
fore, perception, evaluation, and satisfaction of the service
Services versus commodities are most often based on understood properties, such as the
cleanliness of the waiting room, waiting times, politeness of
Services have four unique characteristics that differenti- the staff, or the appearance and demeanor of the nurse or
ate them from commodities, namely, intangibility, hetero- physician. Interestingly, the properties used by consumers
geneity, inseparability, and perishability. Services are intan- to evaluate their healthcare service experiences often have
C.L. Corbin et al. / The American Journal of Surgery 181 (2001) 1–7 3

Fig. 1. Zone of Tolerance (Zeithaml V, Berry L, Parasuraman A. J Acad


Mark Sci, 21(1):5, copyright © 1993 by Academy of Marketing, Reprinted
by Permission of Sage Publications, Inc.)

little or nothing to do with the actual service or benefit they


were seeking from the healthcare encounter.

Fig. 2. Customer service appreciation [1].


Service quality

Healthcare providers can no longer market only clinical Other marketing outcomes
outcomes; patients are demanding supportive services in
addition to the treatment of their illnesses. Patients have As competition increases for patient market share, it
preconceived desires about the level of service they should becomes increasingly important for healthcare professionals
receive; conversely, they also have a minimal level of ad- to provide high quality healthcare service experiences. As
equacy that they are willing to accept. The difference be- service quality improves, patient satisfaction will tend to
tween these levels of desired service and adequate service is improve as well, and will move towards its highest level,
considered the zone of tolerance (Fig. 1) [6]. The zone of delight. Levels of appreciation have evolved over the years
tolerance is conceptualized on an attribute-by-attribute ba- and the chart in Fig. 2 shows one model that targets cus-
sis, resulting in varying levels of difference between desired tomer service appreciation. The progression inward toward
service and adequate service across service attributes. For customer delight is more than merely a cyclical progression;
example, the zone of tolerance with regard to clinical out- these steps depict the time line in customer demand over the
comes is probably very narrow. In other words, from the last 20 years [1]. The initial phase in this progression,
patient’s perspective the clinical aspects of the service being service quality, is the first step towards customer satisfac-
provided must be done correctly. On the other hand, patients tion. In this step, the service must be provided in a manner
may have a much wider zone of tolerance when it comes to such that customers recognize and accept the fundamental
the length of time they wait to receive the service. In a broad quality administered.
sense five dimensions of service have been identified. These The second phase in the chronology of this progression is
factors include reliability, responsiveness, assurance, empa- value. In achieving value, customers are satisfied with what
thy, and tangibles [7]. Each of these broad factors will have they received in exchange for what they paid in both finan-
zones of tolerance of varying size associated with them. cial and opportunity costs. The third phase, customer satis-
From a service delivery standpoint, it is extremely impor- faction, encompasses contentment on all levels. Quality
tant for healthcare providers to understand the magnitude of service is provided and benefits outweigh costs.
the zone of tolerance associated with the various aspects of The last stage, delight, is the highest attainable outcome
the service provided. level of service. Customer loyalty, word-of-mouth commu-
As reported in a recent issue of the Journal of the Amer- nication, and repeat purchases are evidence of customer
ican Medical Association, 2.2% of recent medical school delight. With all types of service industries, the outcome
graduates plan to practice in rural areas [8]. These data measures delineated above are distributed throughout these
reflect the ever-increasing competition between physicians stages based on their progress. Owing to both ignorance and
in urban/metropolitan areas. With this increased competi- lack of necessity, physicians and healthcare providers alike
tion between providers and the transition of medical prac- are just beginning to realize and understand the need to
tice into a service economy, patients have begun viewing develop the initial healthcare service quality standards that
themselves as customers and demanding better service. other service industries have long since adopted, developed
Therefore, physician accessibility, patient access, conve- and improved upon.
nience and comfort are all elements that contribute to their Fig. 3 also depicts the relationship between service qual-
fundamental assessment of the level of service provided. ity, value, satisfaction, and delight [1]. Contributing factors
4 C.L. Corbin et al. / The American Journal of Surgery 181 (2001) 1–7

Fig. 3. The relationship between service quality, value, satisfaction, and


delight [1]. Fig. 4. Branding of Healthcare Services (Reprinted with permission from
Marketing Health Services, published by the American Marketing Asso-
ciation, Peyser, 1997;17:41).

and associations among these four service outcomes are


illustrated. Although, their chronological progression might ment or disease branding, such as the reputations of the
not be evident, this graphic provides a solid representation local or regional “cancer hospital” or “heart hospital.” (See
of the progression of healthcare services. If patient diagno- Fig. 4, which compares branding of healthcare providers
sis and treatment fail to follow anything more than a generic and their retail counterparts.) Branding efforts may provide
clinical care pathway, expected and unexpected complica- healthcare professionals with a means of creating awareness
tions might naturally arise that create different levels of that is in the direct control of the healthcare marketer as
service outcomes. For example, a consumer of healthcare opposed to relying on current or former patients to deliver
services might move directly to delight, bypassing interven- the marketing message.
ing areas, because of a superb outcome to a surgical proce- The development of healthcare branding also facilitates
dure. the franchising of clinical services. Franchising of clinical
services through branding creates standardization in order to
cultivate and develop positive awareness and create trust
Branding (again, this decreases credence properties). Franchising also
parallels itself to clinical protocols, as “demonstrated best
Branding of goods and services has become pervasive practices seek motivated owners and operators in [the] ar-
throughout the marketplace. Brands can serve as a signal of ea”[10], and thus, both build reputation and increase patient
consistency and in a sense “control the customer experience demand market share.
from start to finish”[9]. As in virtually every aspect of Branding of healthcare services is currently a novel idea,
service marketing, healthcare organizations and physician but with consumer demand for satisfaction on the rise, its
practices are lagging behind other service industries in the popularity is sure to increase. Otherwise indifferent health-
practice of branding. Branding of healthcare services can care organizations will soon be scrambling to create con-
provide a platform whereby consumers can view their ser- sumer value, secure market share, and improve profitability
vice encounter as the purchase of a product and, therefore, by creating consistency and personalization of service. The
reduce the influence of the credence properties associated success of these initiatives will require branding, a key
with such interactions. ingredient to overall consumer demand, trust, and patient
Healthcare services need to be branded such that they satisfaction.
appeal to consumers’ needs and desires. Branding efforts
related to consumer convenience, practice environment, and
professional demeanor may help consumers to focus on Patients versus customers
their salient healthcare needs and desires. Furthermore,
branding of healthcare services might also envelop the idea At first, the differences between the words patient and
of disease management networks (ie, clinical centers of customer appear to be one of semantics only; however, the
excellence). This market niche has been a factor in the difference runs deeper than that. The labels of patient and
healthcare market for the last two decades, but has relied customer connote very different sets of behavioral expecta-
primarily upon word-of-mouth communication as a medium tions for the individuals involved. Individuals labeled as
to create awareness. Currently, organizations have capital- customers may be more likely to “shop around” to find the
ized on their past or present successes in disease manage- best deal, may be more likely to question the decisions of
C.L. Corbin et al. / The American Journal of Surgery 181 (2001) 1–7 5

the medical professionals involved in their care, and may stand their roles in this process; this holds especially true in
hold very different expectations for the type of relationship the delivery of healthcare services where the ability and
they desire than individuals who see themselves as patients. willingness of patients to understand their roles and the
This difference is clearly seen in emergent surgical situa- methods for achieving their goals is vitally important. Par-
tions when physicians treat people strictly as patients rather ticipatory relationships enhance the likelihood of this oc-
than as customers, and the focus is on the disease or the curring. Lastly, patient cooperation involves the orchestra-
condition rather than the person. In emergent medical situ- tion of patient feedback on day-to-day operations and/or
ations, patients are less able to “shop” for services and the service delivery. Patient feedback allows the organization a
patient-physician relationship is often limited to a single “free” organizational consultant, but unlike traditional con-
encounter. sultants these people are vested participants who are volun-
In contrast, the long-term, intimate relationships formed tarily providing their expert opinion in the service delivery
between patients and their physicians far surpass the rela- transactions associated with the organization.
tionships developed in most instances between service pro-
viders and customers in other service industries. A long-
lasting, powerful relationship is an avenue for moving from Patient loyalty
unadorned service quality directly to customer delight.
Traditionally, healthcare organizations have failed to ac-
knowledge the need to build and develop long-term patient-
Patient participation provider relationships. The focus, to date, has been on
discrete encounters, defined by Gutek et al [14] as “single
The physician-patient relationship that is built on shared interactions between a customer and provider; neither ex-
intimacy and trust is unusually strong compared to relation- pects to interact with the other in the future.”
ships between other types of service providers and their Healthcare professionals probably underestimate the life-
customers. Because of the nature of clinical services, pa- time value of a loyal patient. A patient and his primary care
tients are fundamental participants in their care and, conse- physician probably have many encounters during the life of
quently, play an important role in determining healthcare the relationship. Although the reimbursement for an average
service outcomes. Studies show that when a service rela- patient visit may be small, the patient loyalty that evolves
tionship is positive, it promotes loyalty, cooperation, and from such contact might result in a patient choosing the
participation with the service provider and the organization physician or her facility when a more expensive procedure
[11]. Patients are provided advice and medications; how- becomes necessary.
ever, after they return home, the responsibility of continuing Approaching healthcare service encounters as discrete
the treatment regimen rests on them. To this end, evidence encounters may be appropriate for some types of healthcare
indicates that those patients who are active in the promotion services such as trauma or emergency services; however,
of their clinical well being, perceive greater satisfaction long-term relationships, customer loyalty, and patient reten-
with the service delivery transaction [11–13]. For example, tion are paramount for most other healthcare service en-
hypertensive patients might be asked by their physician to counters involving “face time” with patients in an ongoing
reduce their dietary intake of sodium and increase their level fashion. During the healthcare service encounter, patients
of activity. Patients who adhere to the regimen will tend to often share their innermost fears and thoughts and depend
be more satisfied with their outcomes. Conversely, those on physicians to both alleviate their problems and provide
who fail to follow their physician’s advice suffer the effects, solutions. Through this longitudinal communication, it is
and tend to be less satisfied with their service outcomes. possible to develop a bond of trust between provider and
Studies in service marketing indicate that when patients patient as their relationship constantly evolves. If the needs
act as participants or temporary “employees” of the organi- of the patient are not satisfied the physician can lose that
zation, satisfied patients are more vocal about their percep- integral element of loyalty that most other types of service
tions of the organization. They become voluntary perform- providers never quite achieve: trust.
ers of the organization, whereby “[they participate in] Developing and fostering a relationship, and providing
helpful, discretionary behaviors . . . that support the ability meaningful interpersonal interactions along with a satisfac-
of the firm to deliver service quality” [11]. tory clinical outcome can form intense feelings of loyalty
The importance of creating and developing participatory among patients. Loyalty, as defined by Lain [15], “. . . is a
patient relationships is threefold: loyalty, cooperation, and response on the part of a customer when a company fully
participation [11]. First, participatory relationships result in delivers on and often exceeds its promise to the customer. It
the achievement of patient loyalty which involves the cre- becomes a state of mind such that the loyal customer does
ation of allegiance to the organization, as well as its pro- not entertain alternatives.” This statement epitomizes the
motion. Secondly, relationship development enhances co- importance of developing relationships and creating loyalty
operation. Consumers of services have preconceived ideas regardless of practice size.
as to their service delivery transaction and, ideally, under- Moreover, the peculiar thing about loyalty as it relates to
6 C.L. Corbin et al. / The American Journal of Surgery 181 (2001) 1–7

service transactions is the consumer’s ability to remain ment of a service recovery plan designed to correct mistakes
flexible and understand the problems sometimes associated when they arise can assist in defusing the dissatisfaction of
with the organization. As stated earlier, the presence of the aggravated patients.
patient as a participant (or voluntary employee) of the or- No one wants to lose a customer and an effectively
ganization, demonstrates the allegiance between the patient implemented service recovery program can reduce patient
and provider and the flexibility of their zone of tolerance in defections and even enhance loyalty levels. Data suggest
service quality. However, even a loyal patient will only that it costs five times more to replace a customer than to
accept a certain number of mistakes before they become retain a customer [17], and some experts would argue that
avoiders (and negative promoters) of the organization. the loss of a patient could exceed this ratio. Hart et al [17]
provide the following programmatic steps toward successful
recovery:
Patient defection Measure the costs: failure to acknowledge patient’s costs
associated with a service mistake often leads to further
Another important element of service marketing as it dissatisfaction and even defection. Therefore, it is important
relates to healthcare involves the antithesis of patient loyalty to evaluate all of the costs a patient incurs as a result of the
and long-term patient-provider relationships—patient de- service mistake or failure. These costs include monetary
fection. Patient defection may sound benign, but the finan- costs, time costs, psychological costs, and opportunity costs.
cial effect suffered by an organization that has a high level All of these costs are important because they serve as a basis
of patient defection is enormous. A patient defector is mod- for determining the appropriate size of the service recovery.
estly defined as a patient who does not return for services. Patients will mentally tabulate the costs they have incurred
Unlike lost patrons of a restaurant or automotive repair as a result of the service failure and will use these total costs
shop, patient defectors of healthcare organizations are more to help decide what is a fair service recovery in their own
difficult to track. For example, a patient may be treated once minds.
and may not need further treatment for 20 or 30 years. Is Break the silence: in short, it should be easy for patients
that patient a defector? The answer should be no, because to let their healthcare provider know when a failure has
they have remained monogamous to their physician or occurred. Patient complaints should be viewed as an oppor-
healthcare provider. However, the sheer length of time be- tunity to correct problems within the organization. By pro-
tween service transactions makes it difficult to differentiate viding a mechanism for consumers to express constructive
loyal patients from patient defectors. Regardless, the cost of criticism, a healthcare organization can make necessary,
patient defection is definitely underappreciated. Data indi- positive changes.
cate that companies can boost profits by almost 100% by Anticipate the need for recovery: an organization that has
retaining an additional 5% of their customers [16]. The effectively broken the silence should use this information.
creation of patient loyalty and reduction of patient defec- This may sound like common sense, but in all types of
tions will ultimately result in increased net revenue. Addi- service organizations this step is often overlooked. Health-
tionally, Reichheld and Sasser’s research [16] shows that care organizations should make use of the information that
those organizations with lower defection rates have the their patients provide to them. This information may be
ability to outperform their competition, even those with a useful in correcting existing service failures, as well as,
higher market share. Many of these latter organizations have preventing future service failures from occurring.
a high customer turnover; they will eventually exhaust their Act fast: prompt justice and closure can do two important
target market and be left with a nondesirable market niche. things for a physician practice or healthcare organization.
Managing and reducing patient defectors allows healthcare First, because little time elapses it reduces the number of
organizations to achieve and maintain a competitive advan- people a consumer will tell about their poor experience.
tage. Second, it promotes a sense of caring and thus aids in
building trust and loyalty.
Train and empower employees: unfortunately for most
Service recovery service organizations, healthcare included, in most cases
front-line employees (the first staff that consumers generally
Mistakes do happen in all types industries, including the encounter) receive lower wages and have achieved rela-
healthcare service industry. These mistakes are often re- tively lower levels of education. Should a service mishap
ferred to as service failures. Service failures in the health- occur, front-line employees that have been trained in the art
care industry range in severity from mishaps involving of service recovery and that are empowered to provide
clinical errors to something as common as an excessive wait recoveries will reduce the time between service failure and
for service. Although they sound like typical everyday oc- recovery, diminish consumer dissatisfaction, and reduce the
currences and merely a part of the service transaction, pa- likelihood of patient defection.
tients may soon begin to take notice and become defectors Close the loop: whether recovery is successful or not, the
of the organization as a result of these errors. The develop- need on the part of the consumer to find closure is impor-
C.L. Corbin et al. / The American Journal of Surgery 181 (2001) 1–7 7

tant. Even if a mistake remains unresolved, offering an practice of medicine has become a business; simply put, all
explanation to the patient may be as important as a success- business entities require revenue in order to continue oper-
ful recovery. As a result, the final step in an effective service ations. Patients initiate the revenue, which requires the
recovery program involves letting the customer know what effective implementation of service marketing to ensure
was done or will be done to resolve her failure. success. These service marketing principles have been pro-
vided so that physicians may begin to appreciate such is-
sues. Acceptance, appreciation, and application of these
Moods introductory principles will become even more important as
competition continues to intensify and profit margins con-
Unfortunately for the healthcare industry, most people tinue to shrink.
generally do not look forward to visiting their doctor. Fur-
thermore, most patients are typically unhappy about the
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