1

SM Module 1

INTRODUCTION
TO
SERVICES
MADHVI
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Objectives for Chapter 1:
SM
Introduction to Services
• Explain what services are and identify service trends
• Explain the need for special services marketing
concepts and practices
• Outline the basic differences between goods and
services and the resulting challenges for service
businesses
• Introduce the service marketing triangle
• Introduce the expanded services marketing mix
• Introduce the gaps model of service quality
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SM Introduction

• Services are deeds,processes and

performance
• Intangible, but may have a tangible
component
• Generally produced and consumed at the
same time
• Need to distinguish between SERVICE and
CUSTOMER SERVICE
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SM Challenges for Services

• Defining and improving quality

• Communicating and testing new services
• Communicating and maintaining a consistent
image
• Motivating and sustaining employee commitment
• Coordinating marketing, operations and human
resource efforts
• Setting prices
• Standardization versus personalization
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Examples of Service
SM
Industries
• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
• Travel
– airlines, travel agencies, theme park
• Others:
– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club
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Figure 1-1
SM Tangibility Spectrum
Salt
 Soft Drinks

 Detergents
 Automobiles
 Cosmetics
Fast-food
 Outlets

 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
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Differences Between
SM
Goods and Services

Intangibility Heterogeneity

Simultaneous
Production Perishability
and
Consumption
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SM Implications of Intangibility

 Services cannot be inventoried

 Services cannot be patented
 Services cannot be readily displayed
or communicated
 Pricing is difficult
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SM Implications of Heterogeneity

 Service delivery and customer satisfaction

depend on employee actions
 Service quality depends on many
uncontrollable factors
 There is no sure knowledge that the service
delivered matches what was planned and
promoted
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Implications of Simultaneous
SM
Production and Consumption

 Customers participate in and affect the

transaction
 Customers affect each other
 Employees affect the service outcome
 Decentralization may be essential
 Mass production is difficult
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SM Implications of Perishability

 It is difficult to synchronize supply and

demand with services
 Services cannot be returned or resold
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SM Table 1-2
Services are Different
Goods Services Resulting Implications
Tangible Intangible Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable
factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.
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Figure 1-5
SM The Services Marketing Triangle
Company
(Management)

Internal External
Marketing Marketing
“enabling the “setting the
promise” promise”

Employees Interactive Marketing Customers

“delivering the promise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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Ways to Use the
SM
Services Marketing Triangle
Overall Strategic Specific Service
Assessment Implementation
• How is the service • What is being promoted and
organization doing on by whom?
all three sides of the • How will it be delivered
triangle? and by whom?
• Where are the • Are the supporting systems
weaknesses? in place to deliver the
• What are the strengths? promised service?
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Figure 1-6

SM The Services Triangle

and Technology
Company

Technology

Providers Customers

Source: Adapted from A. Parasuraman

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SM Services Marketing Mix:

7 Ps for Services

• Traditional Marketing Mix

• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through
People, Processes, and Physical Evidence
• Ways to Use the 7 Ps
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SM Traditional Marketing Mix

• All elements within the control of the firm that

communicate the firm’s capabilities and image to
customers or that influence customer satisfaction
with the firm’s product and services:
 Product
 Price
 Place
 Promotion
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SM Expanded Mix for Services --

the 7 Ps

• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence
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Table 1-3
SM Expanded Marketing Mix for
Services
PRODUCT PLACE PROMOTION PRICE
Physical good Channel type Promotion Flexibility
features blend

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
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Table 1-3 (Continued)
SM Expanded Marketing Mix for
Services
PEOPLE PHYSICAL PROCESS
EVIDENCE
Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicating Signage Level of customer

culture and values involvement

Employee research Employee dress

Other tangibles
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SM Ways to Use the 7 Ps

Overall Strategic Specific Service

Assessment Implementation
• How effective is a firm’s • Who is the customer?
services marketing mix? • What is the service?
• Is the mix well-aligned • How effectively does the
services marketing mix for a
with overall vision and service communicate its
strategy? benefits and quality?
• What are the strengths and • What changes/improvements
weaknesses in terms of the are needed?
7 Ps?
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Figure 1-1
SM Tangibility Spectrum
Salt
 Soft Drinks

 Detergents
 Automobiles
 Cosmetics
Fast-food
 Outlets

 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting 
Teaching
 23
Services Marketing Triangle
SM
Applications Exercise
• Focus on a service organization. In the context
you are focusing on, who occupies each of the
three points of the triangle?
• How is each type of marketing being carried out
currently?
• Are the three sides of the triangle well aligned?
• Are there specific challenges or barriers in any of
the three areas?
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SM
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SM
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SM
Part 1

FOCUS ON THE CUSTOMER

MADHVI
26
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SM Gaps Model of Service Quality

CUSTOMER Expected
Service

Customer
Gap
Perceived
Service

External
COMPANY Service Delivery Communications
GAP 4 to Customers
GAP 1 GAP 3
Customer-Driven Service
Designs and Standards

GAP 2
Company Perceptions of
Consumer Expectations
Part 1 Opener
27
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Gaps Model of Service
SM
Quality

• Customer Gap:
• difference between expectations and perceptions
• Provider Gap 1:
• not knowing what customers expect
• Provider Gap 2:
• not having the right service designs and
standards
• Provider Gap 3:
• not delivering to service standards
• Provider Gap 4:
• not matching performance to promises
28
Part 1 Opener
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SM The Customer Gap

Expected
Service

GAP

Perceived
Service

29
Part 1 Opener
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SM
Chapter 2

CONSUMER BEHAVIOR
IN SERVICES

MADHVI
30
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Objectives for Chapter 2:
SM Consumer Behavior in
Services
• Overview the generic differences in consumer behavior
between services and goods
• Introduce the aspects of consumer behavior that a marketer
must understand in five categories of consumer behavior:
• Information search
• Evaluation of service alternatives
• Service purchase and consumption
• Postpurchase evaluation
• Role of culture

31
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SM Consumer Evaluation
Processes for Services
• Search Qualities
– attributes a consumer can determine prior to
purchase of a product
• Experience Qualities
– attributes a consumer can determine after purchase
(or during consumption) of a product
• Credence Qualities
– characteristics that may be impossible to evaluate
even after purchase and consumption
32
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Figure 2-1
SM Continuum of Evaluation for
Different Types of Products

Most Most
Goods Services

Easy to evaluate
Difficult to evaluate
Clothing

Jewelry

Furniture

Houses

Automobiles

Restaurant meals

Vacations

Haircuts

Child care

Television repair

Legal services

Root canals

Auto repair

Medical diagnosis
{
{
High in search
qualities
High in experience High in credence
qualities qualities
{ 33
 Figure 2-2 34
Categories in Consumer
SM Decision-Making and Evaluation of
Services
Information Evaluation of
Search Alternatives
 Use of personal sources  Evoked set
 Perceived risk  Emotion and mood

Purchase and Post-Purchase

Consumption Evaluation
 Service provision as drama  Attribution of dissatisfaction
 Service roles and scripts  Innovation diffusion
 Compatibility of customers  Brand loyalty
34
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Figure 2-3
SM Categories in Consumer Decision-
Making and Evaluation of Services

Information Evaluation of
Search Alternatives
 Use of personal sources  Evoked set
 Perceived risk  Emotion and mood

Culture
 Values and attitudes
 Manners and customs
 Material culture
 Aesthetics
 Educational and social
institutions

Purchase and Post-Purchase

Consumption Evaluation
 Service provision as  Attribution of dissatisfaction
drama
 Service roles and scripts  Innovation diffusion
 Compatibility of  Brand loyalty
customers 35
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SM Information search

• In buying services consumers rely more on

personal sources. WHY? Refer p32
• Personal influence becomes pivotal as
product complexity increases
• Word of mouth important in delivery of
services
• With service most evaluation follows
purchase
36
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SM Perceived Risk

• More risk would appear to be involved with

purchase of services (no guarantees)
• Many services so specialised and difficult
to evaluate (How do you know whether the
plumber has done a good job?)
• Therefore a firm needs to develop strategies
to reduce this risk, e.g, training of
employees, standardisation of offerings

37
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SM Evoked Set

• The evoked set of alternatives likely to be smaller

with services than goods
• If you would go to a shopping centre you may
only find one dry cleaner or “single brand”
• It is also difficult to obtain adequate prepurchase
information about service
• The Internet may widen this potential
• Consumer may choose to do it themselves, e.g.
garden services

38
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SM Emotion and Mood

• Emotion and mood are feeling states that

influence people’s perception and
evaluation of their experiences
• Moods are transient
• Emotions more intense, stable and
pervasive
• May have a negative or positive influence

39
 40

SM Service Provision as
Drama

• Need to maintain a desirable impression

• Service “actors” need to perform certain
routines
• Physical setting important, smell, music,
use of space, temperature, cleanliness, etc.

40
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Global Feature:
SM Differences in the Service
Experience in the U.S. and Japan

 Authenticity
 Caring
 Control Courtesy
 Formality
 Friendliness
 Personalization
 Promptness
41
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SM
Chapter 3

CUSTOMER
EXPECTATIONS OF
SERVICES

MADHVI
 Objectives for Chapter 3: 43

SM Customer Expectations of
Service
• Recognize that customers hold different types of
expectations for service performance
• Discuss controllable and uncontrollable sources of
customer expectations
• Distinguish between customers’ global expectations of
their relationships and their expectations of the service
encounter
• Acknowledge that expectations are similar for many
different types of customers
• Delineate the most important current issues surrounding
customer expectations
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SM DEFINITIONS

• Customers have different expectations re

services – or expected service
• Desired service – customer hopes to receive
• Adequate service – the level of service the
customer may accept

• DO YOUR EXPECTATIONS DIFFER RE

SPUR and CAPTAIN DOREGO?
 45
Figure 3-1
SM Dual Customer
Expectation Levels
(Two levels of expectations)
Desired Service

Zone of
Tolerance

Adequate Service
 46

SM Figure 3-2
The Zone of Tolerance

Desired Service

Zone of
Tolerance

Adequate Service
 Figure 3-3 47

SM Zones of Tolerance VARY for

Different Service Dimensions
Desired Service

Level
of Zone of
Expectation Desired
Tolerance Desired Service
Service
Adequate Service
Zone
of
Tolerance

Adequate
Adequate Service
Service

Most Important Factors Least Important Factors

Source: Berry, Parasuraman, and Zeithaml (1993)
 Figure 3-4 48
Zones of Tolerance VARY for
SM
First-Time and Recovery Service

First-Time Service

Outcome

Process

Recovery Service

Outcome

Process

LOW HIGH
Expectations
Source: Parasuraman, Berry and Zeithaml (1991)
 Figure 3-5 49

SM Factors that Influence

Desired Service

Enduring Service
Intensifiers

Desired
Service
Personal Needs
Zone
of
Tolerance

Adequate
Service
 50

SM

• Personal needs include physical, social,

psychological categories

• Enduring service intensifiers are individual, stable

factors that lead to heightened sensitivity to
service
This can further divided into Derived Service
Expectations and Personal service Philosophies
 51
Figure 3-6

SM Factors that Influence

Adequate Service
Transitory Service
Intensifiers

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

Situational
Factors
 52

SM

• Transitory service intensifiers – temporary –

a computer breakdown will be less tolerated
at financial year-ends
• Perceived service alternatives
• Perceived service role of customer
• Situational factors
 Figure 3-7 53
Factors that Influence
SM
Desired and Predicted Service
Explicit Service
Promises

Implicit Service
Promises

Desired Word-of-Mouth
Service

Zone
Past Experience
of
Tolerance

Adequate Predicted
Service Service
 54

SM
Chapter 4

CUSTOMER
PERCEPTIONS OF
SERVICE

MADHVI
AIEMS
 55
Objectives for Chapter 4:
SM Customer Perceptions of
Service
• Provide you with definitions and
understanding of customer satisfaction and
service quality
• Show that service encounters or the
“moments of truth” are the building blocks of
customer perceptions
• Highlight strategies for managing customer
perceptions of service
 Figure 4-1 56
Customer Perceptions of
SM
Service Quality and
Customer Satisfaction
Reliability Situational
Factors
Responsiveness Service
Quality

Assurance
Customer
Empathy Satisfaction
Product
Quality
Tangibles

Personal
Price Factors
 57
Factors Influencing
SM
Customer Satisfaction

• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or
failure
• Equity or fairness evaluations
 58
Outcomes of
SM
Customer Satisfaction

• Increased customer retention

• Positive word-of-mouth communications
• Increased revenues
 Figure 4-3 59

Relationship between Customer

SM
Satisfaction and Loyalty in
Competitive Industries
100%
Loyalty (retention)

80%

60%

40%

20%

0%
Very Dissatisfied Neither Satisfied Very
dissatisfied satisfied nor satisfied
dissatisfied

Satisfaction measure

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.
 60

SM Service Quality

• The customer’s judgment of overall

excellence of the service provided in
relation to the quality that was expected.
• Process and outcome quality are both
important.
 61

SM The Five Dimensions of

Service Quality

Reliability Ability to perform the promised

service dependably and accurately.
Knowledge and courtesy of
Assurance employees and their ability to
convey trust and confidence.
Tangibles Physical facilities, equipment, and
appearance of personnel.
Empathy Caring, individualized attention the
firm provides its customers.
Responsiveness Willingness to help customers and
provide prompt service.
 62

SM 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:
 63
SERVQUAL Attributes
SM 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

RELIABILITY
 Providing service as promised
 Dependability in handling customers’
service problems EMPATHY
 Performing services right the first time  Giving customers individual attention
 Providing services at the promised time  Employees who deal with customers in a
 Maintaining error-free records caring fashion
 Having the customer’s best interest at heart
RESPONSIVENESS  Employees who understand the needs of
their customers
 Keeping customers informed as to
 Convenient business hours
when services will be performed TANGIBLES
 Prompt service to customers  Modern equipment
 Willingness to help customers  Visually appealing facilities
 Readiness to respond to customers’  Employees who have a
requests neat, professional
appearance
 Visually appealing materials
associated with the service
 64

SM 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
 65
Figure 4-4

SM A Service Encounter
Cascade for a Hotel Visit

Check-In
Check-In
Bellboy
BellboyTakes
Takesto
to Room
Room

Restaurant
RestaurantMeal
Meal
Request
RequestWake-Up
Wake-UpCall
Call
Checkout
Checkout
 Figure 4-5 66
A Service Encounter
SM Cascade for an Industrial
Purchase

Sales
SalesCall
Call
Delivery
Deliveryand
and Installation
Installation

Servicing
Servicing

Ordering
OrderingSupplies
Supplies
Billing
Billing