What is services?

It is the part of the product or the full product for which the customer
is willing to see value and pay for it.
What is a service?
 It is intangible.
 It does not result in ownership.
 It may or may not be attached with a physical product
Difference between physical goods and services
Physical goods Services

tangible intangible

homogeneous heterogeneous

Production and distribution are separated from Production, distribution and consumption are
consumption simultaneous processes

A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller

interaction

Customers do not participate in the production Customers participate in production

process

Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

Characteristics of services
 Intangibility
 Inseparability
 Perishability
 Variability
 The Service Marketing Triangle
Company
(Management)

Internal Marketing External Marketing

“Making the
“Enabling the promise”
promise”

Customers
Providers
Interactive Marketing
“Delivering the promise”
Service Marketing Mix
GAP Models of service quality
 The Customer Gap
 The Provider Gaps:
◦ Gap 1 – The Listening Gap
 not knowing what customers expect
◦ Gap 2 – The Service Design and Standards Gap
 not having the right service designs and standards
◦ Gap 3 – The Service Performance Gap
 not delivering to service standards
◦ Gap 4 – The Communication Gap
 not matching performance to promises
 Putting It All Together: Closing the Gaps
The Customer GAP
 Key Factors Leading to the Customer Gap
 Customer
Expectations

 Provider Gap 1: Not knowing what customers expect

Customer  Provider Gap 2: Not selecting the right service designs and standards
Gap
 Provider Gap 3: Not delivering to service standards

 Provider Gap 4: Not matching performance to promises

Customer
Perceptions
Gaps Model of Service Quality
 Customer Gap:
◦ difference between customer expectations and perceptions
 Provider Gap 1 (Listening Gap):
◦ not knowing what customers expect
 Provider Gap 2 (Service Design & Standards Gap):
◦ not having the right service designs and standards
 Provider Gap 3 (Service Performance Gap):
◦ not delivering to service standards
 Provider Gap 4 (Communication Gap):
◦ not matching performance to promises
Key Factors Leading to Provider Gap 1
Key Factors Leading to Provider Gap 2
Key Factors Leading to Provider Gap 3
Key Factors Leading to Provider Gap 4
Consumer Behaviour in Services
Unit 1 (2)
 CONSUMER PROBLEM
 TIME DEFICIENCY
 REASONS: dual career couples, single parent families
 IT LEADS TO: demand for different services
 SEARCH, EXPERIENCE & CREDENCE
PROPERTIES
 SEARCH QUALITIES: attributes that a consumer can
determine before the purchase
 EXPERIENCE QUALITIES : attributes that a consumer
can determine only after the purchase
 CREDENCE QUALITIES : attributes that consumer may
find impossible to evaluate even after purchase &
consumption
 Continuum of Evaluation for
Different Types of Products/services

Most Most
Goods Services

High in search High in experience High in credence

qualities qualities qualities
 SERVICES - DECISION MAKING PROCESS
Need awareness

Memory Memory Evaluation of service

suppliers

Future Intentions

Request service

Service delivery
 UNDERSTANDING DIFFERENCES AMONG
CONSUMERS
 GLOBAL DIFFERENCES
 ROLE OF CULTURE
 DIFFERENT VALUES, ATTITUTEDS
 DIFFERENT CUSTOMS
CUSTOMER EXPECTATION OF SERVICE

 Customer expectations are the beliefs about service

delivery that serve as standards or reference points
against which performance is judged.
LEVELS OF EXPECTATION
DUAL CUSTOMER EXPECTATIONS
Desired Service

Adequate Service
THE ZONE OF TOLERANCE

Desired Service

Zone of
Tolerance

Adequate Service
 ZONES OF TOLERANCE FOR DIFFERENT
SERVICE DIMENSIONS

Desired Service

Zone
of
Tolerance Desired Service

Adequate Service
Zone
of
Tolerance

Adequate Service

Reliability Tangibles
 FACTORS THAT INFLUENCE DESIRED
SERVICE
Lasting Service
Intensifiers

Desired Service

Personal Needs
Zone
of
Tolerance

Adequate Service

Lasting Service Intensifiers are individual, stable factors that lead the customer to a
heightened sensitivity to service.
 FACTORS THAT INFLUENCE ADEQUATE
SERVICE
Temporary Service
Intensifiers

Desired Service

Perceived Service
Alternatives Zone
of
Tolerance
Self-Perceived
Service Role Predicted
Adequate Service
Service

Situational
Factors
 FACTORS THAT INFLUENCE DESIRED
AND PREDICTED SERVICE

Explicit Service
Promises

Implicit Service
Promises

Desired Service Word-of-Mouth

Zone Past Experience

of
Tolerance
Predicted
Adequate Service Service
 CUSTOMER PERCEPTION OF SERVICE
 Customers perceive services in terms of quality of
service & how satisfied they are overall with their
experiences.
Customer Perceptions of Service
 Customer Perceptions

 Customer Satisfaction

 Service Quality

 Service Encounters: The Building Blocks for Customer

Perceptions

4-30
Objectives of Consumer Perceptions of Service:
 Provide a solid basis for understanding what influences customer perceptions of
service and the relationships among customer satisfaction, service quality, and
individual service encounters.
 Demonstrate the importance of customer satisfaction—what it is, the factors that
influence it, and the significant outcomes resulting from it.
 Develop critical knowledge of service quality and its five key dimensions: reliability,
responsiveness, empathy, assurance, and tangibles.
 Show that service encounters, or the “moments of truth” are the essential building
blocks from which customers form their perceptions.

4-31
The customer is . . .
Anyone who receives the company’s services, including:
◦ external customers (outside the organization, business
customers, suppliers, partners, end consumers)

◦ internal customers (inside the organization, e.g., other

departments, fellow employees)

4-32
Customer Perceptions of Quality and Customer
Satisfaction

4-33
Factors Influencing Customer Satisfaction
 Product quality
 Service quality
 Price
 Specific product or service features
 Consumer emotions
 Attributions for service success or failure
 Perceptions of equity or fairness
 Other consumers, family members, and coworkers
 Personal factors
 Situational factors

4-34
ASQI and Market Value Added

4-35
 Outcomes of Customer Satisfaction
 Increased customer loyalty
 Positive word-of-mouth communications
 Increased revenues
 Increased return to shareholders

4-36
Relationship between Customer Satisfaction and Loyalty in
Competitive Industries

4-37
 Top Box Scores – A Higher Standard
Overall Satisfaction Definitely Will Repurchase Definitely Would
with XYZ from Recommend XYZ
(% of customers) XYZ

TOP BOX
Very Satisfied = 96% = 91%
(64%)

44-point drop 55-point drop

SECOND BOX
All Customers Somewhat Satisfied = 52% = 36%
(29%)

BOTTOM 3 BOXES
Neutral to Very Dissatisfied
(7%) = 7% = 4%

Source: Technical Assistance Research Bureau (TARP), 2007. 4-38

 What is Service Quality?
The Customer Gap

Expected Service

Customer gap

Perceived Service

 Service quality is the customer’s judgment of overall excellence of the service provided in relation to the quality
that was expected.
4-39
Service Quality
 The customer’s judgment of overall excellence of the
service provided in relation to the quality that was
expected.
 Service quality assessments are formed on judgments of:
◦ outcome quality
◦ interaction quality
◦ physical environment quality

4-40
The Five Dimensions of Service Quality
Reliability Ability to perform the promised service dependably and accurately.

Knowledge and courtesy of employees and their ability to inspire trust

Assurance 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.

4-41
Geek Squad’s Focus on Responsiveness

4-42
How Customers Judge the Five Dimensions of Service Quality

4-43
 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 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
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
TANGIBLES
 Modern equipment
 Visually appealing facilities
 Employees who have a neat, professional appearance
 Visually appealing materials associated with the service
4-44
 Exercise to Identify Service Attributes
In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of
customers in each of the five service quality dimensions. Be certain the requirements reflect the
customer’s point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

4-45
The Service Encounter
 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

4-46
A Service Encounter Cascade for a
Hotel Visit

4-47
 A Service Encounter Cascade for an Industrial Purchase

Sales Call

Delivery and Installation

Servicing

Ordering Supplies

Billing

4-48
Service Encounters: An Opportunity to Build Satisfaction
and Quality

4-49
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

4-50
Recovery

4-51
Adaptability

4-52
Spontaneity

4-53
Coping

4-54
Technology-Based Service Encounters
 Themes for satisfying SSTs
◦ The technology solved an intensified need
◦ The technology was better than the alternative
◦ The technology did its job
 Themes for dissatisfying SSTs
◦ The technology itself failed
◦ The process failed
◦ The technology was poorly designed
◦ The customer did not use the technology properly

4-55
CUSTOMER PERCEPTIONS OF QUALITY AND CUSTOMER
SATISFACTION
BUILDERS OF CUSTOMER PERCEPTION
 SINGLE TRANSACTION SPECIFIC ENCOUNTER: how
the customer has been treated in a particular encounter
with a particular employee.
 CUMULATIVE PERCEPTION: customer’s overall
experience with the company.
 CUSTOMER SATISFACTION
 It is a judgment that a product or service feature or the
product or service itself provides a pleasurable level of
consumption related fulfillment.
 It is the customer’s evaluation of a product or service in
terms of whether it has met the customer’s needs &
expectations. Its failure leads to dissatisfaction.
 DETERMINANTS OF CUSTOMER
SATISFACTION
 PRODUCT & SERVICE FEATURES
 CUSTOMER EMOTIONS- your mood
 ATTRIBUTION FOR SERVICE SUCCESS OR FAILURE: how much the
customer blames or credits the failure or success of a service on the service
provider
 PERCEPTION OF EQUITY OR FAIRNESS: have I been treated fairly
compared to other customers?
 PERCEPTION OF FAMILY MEMBERS, FRIENDS, PEERS ETC
 OUTCOMES OF
CUSTOMER SATISFACTION
 Increased customer retention

 Positive word-of-mouth communications

 Increased revenues
 RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND
LOYALTY IN COMPETITIVE INDUSTRIES

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.
 SERVICE QUALITY
 The customer’s judgment of overall excellence of the
service provided in relation to the quality that was
expected.

 Service quality assessments are formed on judgments of:

◦ outcome quality
◦ interaction quality
◦ physical environment quality
 THE FIVE DIMENSIONS OF
SERVICE QUALITY
Ability to perform the promised service dependably
Reliability and accurately.

Knowledge and courtesy of employees and their ability

Assurance to inspire trust and confidence.

Physical facilities, equipment, and appearance of

personnel.
Tangibles
Caring, individualized attention the firm provides its
customers.
Empathy
Willingness to help customers and provide prompt
service.
Responsiveness
 THE SERVICE ENCOUNTER
 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
 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
 UNDERSTANDING CUSTOMER EXPECTATION AND PERCEPTION
THROUGH MARKETING RESEARCH

Customer
CUSTOMER
Expected Service

(Customer Gap)

Perceived Service
GAP 1

COMPANY

Company Perceptions of
Consumer Expectations
Company
 WHY DO SERVICE RESEARCH?
 To identify dissatisfied customers
 To discover customer requirements or expectations
 To monitor and track service performance
 To assess overall company performance compared to competition
 To assess gaps between customer expectations and perceptions
 To gauge effectiveness of changes in service
 To appraise performance of individuals/teams for rewards
 To determine expectations for a new service
 To monitor changing expectations in an industry
 To forecast future expectations
 CRITERIA FOR AN EFFECTIVE
SERVICE RESEARCH PROGRAM
 Includes both qualitative and quantitative research
 Includes both expectations and perceptions of customers
 Balances the cost of the research and the value of the information
 Includes statistical validity when necessary
 Measures priorities or importance of attributes
 Occurs with appropriate frequency
 Includes measures of loyalty, behavioral intentions, or actual behavior
 STAGES IN THE RESEARCH PROCESS
 Stage 1 : Define Problem

 Stage 2 : Develop Measurement Strategy

 Stage 3 : Implement Research Program

 Stage 4 : Collect and Tabulate Data

 Stage 5 : Interpret and Analyze Findings

 Stage 6 : Report Findings

 PORTFOLIO OF SERVICES RESEARCH

Research Objective Type of Research

Identify dissatisfied customers to attempt recovery; identify most
common categories of service failure for remedial action
Customer Complaint Solicitation

Assess company’s service performance compared to competitors; identify

“Relationship” Surveys
service-improvement priorities; track service improvement over time
Post-Transaction Surveys
Obtain customer feedback while service experience is fresh; act on feedback
quickly if negative patterns develop
Customer Focus Groups
Use as input for quantitative surveys; provide a forum for customers to
suggest service-improvement ideas
“Mystery Shopping” of Service Providers
Measure individual employee service behaviors for use in coaching, training,
performance evaluation, recognition and rewards; identify systemic
strengths and weaknesses in service Employee Surveys

Measure internal service quality; identify employee-perceived obstacles to

improve service; track employee morale and attitudes

Determine the reasons why customers defect Lost Customer Research

Forecast future expectations of customers; develop and test new service
ideas Future Expectations Research