Service Marketing

Service Marketing
Part one:
Chapter 1: Introduction to services
Chapter 2: Consumer behavior in
services
Chapter 3: Customer expectations of
services
Chapter 4: Customer Perception of
services
 Introduction to Services
Chapter outline
Nature of services
Why Service Marketing
Differences in Goods Vs service marketing
Service Marketing Mix
 What are Services
Services are simply Deeds, Actions
Processes and Performances.

e.g. the core offering of Hospitals, courier

firms, banks, hotels comprise of deeds or
actions performed for customers.
 What are Services (contd)

An act of performance which one party

offers to another which is intangible and
doesn't result in the transfer of ownership.
i.e. ownership of service remains with the service
provider
 What are Services (contd)

is an economic activity whose output is

not a physical product, is generally
consumed at the time it is produced and
provides added value that is intangible for
its purchaser.
 Service Vs Customer Service
Service is ranging over many industries,
such as Telenor (telecommunications),
KASB bank (financial services), Air blue
(transportation), Marriot (hotels), EFU
(insurance) and so on.
Service Vs Customer Service (contd)
Customer service is service provided in support
of a companys core product.

Answering questions
Taking orders
Dealing with billing issues
Handling complaints
Managing product repairs and maintenances
FAQs and telephonic inquiries
Industries classified within service sector
Transportation and Public utilities
Railroad transits
Trucking and warehousing
Local and interurban transits
Air transportation
Water transportation
Pipelines
Couriers, cargo services
Marine lines, goods forwarders
Electric, gas and sanitary services
Communications
Telephone and telegraph
Radio and television broadcasting
Newspapers and printing
Publishing services
Internet service providers
Cable T.V operators
Advertising and PR services
Postal mail services & E-mail
Public Libraries
Commerce and financial services
Wholesale and retail services
Real estate
Insurance and finance
Security and commodity brokers
Holding and investment companies
Banking and financial institutions
Other services
Hotels and lodging
Personal services & Business services
Auto repair, services and parking
Repair services
Motion pictures
Health services
Legal services
Consultancy
Educational services
Social services community development)
Membership organizations
Amusement and recreations
E-commerce & Internet based services
Federal & local Govt.
Tangibility spectrum of Product
Pure
Goods Major good
Minor service Hybrid Product

Major Service
Pure
Minor Good
Service
 Why Service Marketing?
Service based economy
Service is essential for manufacturing
Professional service needs
Service equals profits
Service needs a different Marketing
Approach
 Differences in Goods Vs service
Marketing

Intangibility
Heterogeneity
Inseperability (Simultaneous Production
and Consumption)
Perishability
Intangibility and marketing Implications

Services cannot be inventoried.

Cannot be easily patented.
Cannot be displayed and communicated to
customers
Quality of service is difficult to assess by
customers
Actual cost of unit of service are hard to
determine and Price- quality relationship is
complex.
Heterogeneity and marketing Implications

Service Quality depend on many factors,

which are difficult to control by supplier.
E.g. Motivation of the staff, Time duration
of service delivery.
Consistency of service delivery is
important.
Inseperability and marketing Implications

Mass production is not possible

Service depends on what happens in real
time.
Cannot be contained or packaged.
Services cannot be stored.
 Perishability and marketing Implications

Service planning is difficult.

Demand forecasting and capacity
utilization is a challenge.
Absence of stock management,
inventories and batch productions.
Service cannot be returned or resold.
Strong Recovery system is required in
case of a problem.
Service Marketing Mix

Price

Product Placement

Service
Marketing Mix
Process Promotion

Physical
People
evidence
 Service Marketing Mix
Placement
Product Channel Decisions
Outlet location
Features
Order collection
Quality Order Processing
Accessories
Promotion
Warranties
Promotional mix
Branding Personal selling
Price

Advertising
Sales promotion
Flexibility Public relations

Price Level
Credit Terms
Discounts and
allowances
 Service Marketing Mix
People
Employees Process
Recruitment Service Design
Training Flow of activities
Motivation Standardized
Teamwork Customized
Rewards Number of steps
Customers Simple
Education Complex
Training Customer involvement point
Physical evidence
Facility design
Equipment
Environment
Employee dress
Other tangibles
Broachers and
customer guides
Business cards
Guarantees
Statements
 Understanding Customer
Satisfaction for Services Marketing

Satisfaction is a function of the gap between

expected service and perceived service.

An extension of buyer behavior

What you thought was going to happen Vs your
perception of what happened
 Three core concepts
Customer Satisfaction

Service Quality Customer Expectations

 Three core concepts to consider:

Service Quality
Controllable for Marketer
Service Delivery Mechanism

Customer satisfaction
Partially controllable for the Marketer
Ultimate aim of Marketer

Customer Expectations
Uncontrollable for the Marketer
Driving force for service delivery
 Customer Satisfaction Formula
Identify Customer Expectations
Measure Customer Expectations
Convert Expectations into operational and
detailed service standards
Fulfill standards for Service Quality
 C.S. Formula (cont)
Customer Satisfaction =
Customer Expectations Service Quality

Customer Customer
Satisfaction Expectations

Service
Quality
 GAP Theory for Services
4 Types of Gaps:
Gap between Customer expectations and
Management perception.
Gap between Management perception and quality
standards.
Gap between quality standards and service
delivery.
Gap between service delivery and external
communications
Key is to minimize the gap
Give the customer what they expect.
CONSUMER BEHAVIOR IN
SERVICES

Chapter 3

27
 CONSUMER BEHAVIOR IN
SERVICES
At the end of this module the learning
outcomes are
What are the various types of good and
services
What are the difficulties markers face in
understanding consumer behavior in
services
What are the steps to be followed in
understanding consumer behavior
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 CONSUMER BEHAVIOR IN
SERVICES
Consumer Behavior
What consumers buy?
Where consumers buy?
When consumers buy?
How consumers buy?
What consumers buy?

We study these behaviors

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 CONSUMER BEHAVIOR IN
SERVICES
COMPARED TO GOODS SERVICES
ARE
More difficult to choose
More difficult to evaluate
Intangibility
Non-standardized
Production and consumption together

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 CONSUMER BEHAVIOR IN
SERVICES
BENEFITS UNDERSTANDING
CONSUMER BEHAVIOR
Low chances of product failure
Products acceptability higher
Helps us to make right distribution
strategies
Right promotional strategies

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 CONSUMER BEHAVIOR IN
SERVICES
Three types of products

Search qualities
Experience qualities
Credence qualities

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 CONSUMER BEHAVIOR IN
SERVICES
1. SEARCH QUALITIES
Consumers can evaluate before purchasing a product
Color, style, feel, smell, taste

Example
Automobiles
Can determine attributes before purchase
Go for test drive
Get the entire feel
Similarly clothing, soaps, soap.

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 CONSUMER BEHAVIOR IN
SERVICES
2. EXPERIENCE QUALITIES
Consumers can evaluate after purchase or
during consumption
Difficult to evaluate than search qualities
Example
Vacations/Holiday package
How do you evaluate?
If satisfied, buy again

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 CONSUMER BEHAVIOR IN
SERVICES
3. CREDENCE QUALITIES
Very difficult to evaluate even after purchase
and consumption
Consumers do not have sufficient knowledge
Examples : Surgery Bypass
Complicated
Consumers have little knowledge
Visits required after surgery
Most difficult to Market
Difficult for consumers to evaluate
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 CONSUMER BEHAVIOR IN
SERVICES
SERVICES
Dominated by experience and credence
qualities
Consumers employ different evaluation
processes

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CONSUMER BEHAVIOR IN
SERVICES

Most Most
Goods Services
Easy to evaluate

Difficult to evaluate

High in search High in experience High in credence

qualities qualities qualities 37
 CONSUMER BEHAVIOR IN
SERVICES
Consumer decision making process
Five steps
Need recognition
Information search
Evaluation of alternatives
Purchase
Postpurchase evaluation

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 CONSUMER BEHAVIOR IN
SERVICES
1. Information Search
In services
Rely more on personal resources

Example
Legal services
Not advertised on the mass media
How to choose a lawyer?
Speak to friends, relatives
Word of mouth, relatives
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 CONSUMER BEHAVIOR IN
SERVICES
2. EVALUATION OF SERVICE ALTERNATIVES
Lesser alternatives in services than goods
For goods, you go to retail shops
All brands are displayed
Choose any one out of competing brands
In services
Fewer options
Go to one bank at a time
Very little display of simultaneous brands

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 CONSUMER BEHAVIOR IN
SERVICES
EMOTION AND MOOD
Customer in bad mood
Enters service establishment
Service interpretation NEGATIVE
Customer in good mood
Service interpretation POSTIVE
Behavior of other customers

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 CONSUMER BEHAVIOR IN
SERVICES
Example- PIA
Traveling from Lahore to London
Fellow companion passenger Misbehaving
Though PIA Service is good; What do you feel?
Bad experience
A feeling that PIA cannot control misbehavior of
passengers
May decide not to travel again

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 CONSUMER BEHAVIOR IN
SERVICES
SERVICE PURCHASE
Conformance to script important
Script
Logical sequence of events expected by the customer

Example
Meeting reputed cardiologist at Apollo hospital
Patient enters the hospital
Observes other patients are waiting
Cardiologist comes
Talks to you
Examines you
Gives you feedback

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 CONSUMER BEHAVIOR IN
SERVICES
Example
If the above script happens you are comfortable
But if.
- no patients in hospital
- Cardiologist sends his junior to examine you
- Refuses to meet you due to lack of time
You feel that service is not up to the
expectations
Dont change the expected script
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 CONSUMER BEHAVIOR IN
SERVICES
CUSTOMER COMPATIBILITY
When you are visiting hospital, airlines,
restaurant or a bank
How do you feel when
There is overcrowding ?
Misbehavior of neighboring customers
Dissatisfied
Compatibility of customers is critical
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 CONSUMER BEHAVIOR IN
SERVICES
CUSTOMER COMPATIBILITY CRITICAL

Singapore Airlines
Seating plan
Vegetarian customers Sit together
Smokers sit together
Customers with similar taste and preferences
are made to sit together
Affects customer satisfaction
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 CONSUMER BEHAVIOR IN
SERVICES
4. POST-PURCHASE EVALUATION

You go for haircut

Not up to your expectations
Reasons
Poor skills of hairstylist
Blame yourself for choosing wrong hairstylist
Not communicating what you wanted
Quality of services depends on customer feedback
A doctors diagnosis depends on customer feedback

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 CONSUMER BEHAVIOR IN
SERVICES
A. Diffusion of innovation
As services are intangible
Sometimes impossible to test, taste before purchase
Difficult to introduce innovations

Example
Blocked heart arteries
Bypass surgery is the traditional diagnosis
Now Stents
Resist such innovations
Not sure of the outcome

Consumers adopt innovations in services more slowly than they

adopt innovations in goods

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 CONSUMER BEHAVIOR IN
SERVICES
INTRODUCTION OF ATMs
Introduced in 80s
Customers resisted
Didnt want to interact with a machine
Not sure of outcomes
Banks trying to make ATM customer friendly
One bank Introduced ATM and Allowed customers to
insert cards halfway by Holding the other half of card
by hand

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 CONSUMER BEHAVIOR IN
SERVICES
INTRODUCTION OF ATMs
Do transactions
Customers became more friendly and comfortable to automation
What else was done
1.Advertisement campaign
. Celebrities using ATMs
2.Installed Mirrors at ATMs
. Mood of the customers improve when they use the ATM
Broken initial resistance
Customers became comfortable with ATM
Switched over to fully automated ATMs
Successful launch of a service by studying consumer
behavior

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 CONSUMER BEHAVIOR IN
SERVICES
B. BRAND LOYALTY
Brand switching is less frequent in services than goods
When you change brands
Risk, uncertainty
Costs may be associated
It is higher in services

Example
Changing your Family doctor
If you choose a new cardiologist
Insist on new tests
New medical reports

Switching cost are high. If perceived risks are high, consumers are
unlikely to change brands.

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 CONSUMER BEHAVIOR IN
SERVICES
IMPLICATIONS FOR SERVICE MARKETERS

How to Convince Citibank credit card customers to

switch to Standard chartered credit cards?

Membership fees waived off

Lower interest rate on outstanding/overdue payments
Free saving bank account in Standard Chartered Bank
Standard Chartered trying to making switching cost lower

Marketers need to lower switching costs to

shift brand loyalty

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 Chapter 4

Customer expectations
of services
 What is Customer
expectations?
Customers Beliefs or understandings about
experiences or benefits related to service
delivery.
Serves as a standard or reference points
against which performance is judged.
Exact knowledge about customer
expectations is crucial step in delivering
quality service.
 What does poor knowledge of
Customer expectations means?
Not understanding expectations accurately means
losing customers.
Allowing competitors to win market share.
Incorrect positioning strategy.
Expending money, time and other resources on
issues not related to customer.
Poor service delivery resulting in poor customer
satisfaction.
Bad words of mouth.
Poor service image.
Declining sales resulting in lower profits.
Possible level of customer
expectations
I need to have an A/c in a
Ideal Expectations High bank that offers the most
advanced & superior
or desires quality services with best
value for money.

Normative should My bank should offer

good services and
be expectations personal attention to old
customers like myself.

My bank offers prompt

Experience based services but some of the
norms staff is not friendly or
bank does not offer online
banking

Acceptable I am holding an A/c in this

bank because at least staff
expectations is welcoming.

Min. tolerance I am holding an A/c in this

bank only because it is the
expectations Low nearest possible branch.
 Levels of Expectations
Marketers Focus on two of the important
levels.
Desired Service

Zone of Tolerance

Adequate Service
 Desired Service
A blend of what customer thinks can be
or should be.
Ideal state of affairs.
E.g. When a customer is entering a bank
to draw some money he expects personal
attention and prompt service delivery.
 Adequate Service
The level of service the customer will
accept or consider is good enough.
Principle of bounded rationality.
A blend of acceptable expectation and min.
tolerable expectation levels.
E.g. if customer gets money drawn even
after waiting in a queue for 10 mins., and
consider it acceptable.
 Zone of Tolerance
The extent to which customers recognize
a variation and are willing to accept it.
E.g. customer consider waiting for money
acceptable because it is a Monday or early
hours of Bank timing or bank
representative has apologized for the
delay.
 Levels of Expectations (contd)
If service drops below adequate service customer is
frustrated.
If service is higher than desired level customer will be
delighted or even surprised. In some cases people
consider this a coincidence.
Zone of tolerance is a range or window in which a
customer do not notice the service performance.
When service falls outside the range (either low or
high) the service gets customers attention in either a
positive or negative way.
 Considerations for
Zones of Tolerance
Different customer possess different zones of
Tolerance.
e.g. a busy customer would always be pressing for prompt
response by the company, and desires short wait times, i.e.
this customer has a much narrow zone of tolerance than
other customers.
Zones of Tolerance varies from service
Dimensions.
i.e. customers hold higher expectations regarding important
dimensions of service, and less tolerant for these dimensions
such as price variations, service failure, Fast delivery etc.
 Zones of Tolerance for
Different Service Dimensions
Desired Service

Level
of Zone of
Expectation Tolerance
Desired Service

Adequate Service
Zone
of
Tolerance

Adequate Service

Most Important Factors Least Important Factors

 Factors that influence customer
Expectations of service
Factors influencing Desired Service
Expectations.

Factors influencing Adequate Service

Expectations.
 Factors that influence Desired
Service Expectations of customer

Personal Needs

Desired Service
Lasting Service
Intensifiers

Zone of Tolerance

Adequate Service
 Personal Needs
States which are essential to a customers
well-being.
Fall into several categories such as
Physical
Social
Psychological
Functional
 Lasting Service Intensifiers
Individual stable factors that lead the customer to greater
sensitivity.
Also known as derived service expectations i.e. these
expectations are driven by another person or group of
people.
A customers individual expectations are intensified
because they represent other parties who will receive the
service.
E.g. A spouse selecting vacation plan, An employee
selecting an office for his firm, A father choosing
educational institution for children etc.
 Factors that influence Adequate
Service Expectations of customer

Desired Service

Temporary Service
Intensifiers

Zone of Tolerance
Perceived Service
Alternatives

Self-perceived Adequate Service

service roles

Situational Factors
 Temporary Service Intensifiers
Individual short term factors that make a
customer more aware of a service need or
intensifies his need.
There are certain times when a customer holds
higher expectations for a service.
E.g. a customer ordering home delivery of food may expect
quick delivery when he is hosting guests at home or when he
is feeling hungry.
Personal emergency situations where service is
urgently needed.
E.g. Break down of office equipment on a busy day.
An accident and need for car insurance
 Perceived Service Alternatives
Knowledge about other providers from
whom customer can obtain the service.
If customer has multiple service providers
to choose from, their level of adequate
service is higher and vice versa.
 Self-perceived service roles
It is the customers perception of the degree to which he
or she exerts influence on the level of service they
receive.
When customer perceives greater control over service,
he becomes less tolerant.
If customer believes he is performing his role in service
delivery, the zone of tolerance is narrow and vice versa.
There can be many roles a customer can be performing
such as complaining when service is poor, or specifying
the level of service he wants before the service is even
delivered.
 Situational Factors
Several performance conditions that a
customer views as beyond the control of
provider, such as
Natural disasters
Over crowding on special events
Emergencies
 Chapter # 5

Customer Perceptions of
Service
Customer Perception of Service
Customer Perceived service is a result of
two importance dimensions of service:

Customer Satisfaction
Service Quality
 Customer Perception (Satisfaction Vs
Quality)

Customer Satisfaction Service Quality

Represents a broader Focuses specifically on

concept, which includes service dimensions.
several dimensions and
aspects related to the
Product. E.g. Product It is a component of
features, Price, customer customer satisfaction.
value etc.
Customer Perception (Satisfaction Vs
Quality)

Reliability

Responsiveness
Service Situational
Assurance Quality factors

Empathy

Tangibles

Product Customer Customer

Quality Satisfaction Loyalty

Price Personal
factors
Types of Customer Perceptions
Transaction Perception:
Perception about single, transaction specific issue of a service
e.g. behavior of the sales person during customer visit.
Understanding these can help provider in knowing the service
problems and making immediate changes for improvement

Cumulative Perception:
Perception about the company based on all their experiences
and overall aspect of service.
These help the provider to identify customer loyalty and
manage overall company image
Transaction perceptions help to form cumulative perception.
Both can be different or same varying from customer to
customer and time to time.
 Service Quality Dimensions

Reliability
Reliability
Responsiveness Tangibles Responsiveness

Assurance Service
Quality
Empathy
Tangibles Empathy Assurance
 Reliability

Ability to perform the promised service

accurately.
When a company is committed and able
to deliver on promises.
Promises about delivery, price, problem
resolution etc.
 Responsiveness
Willingness to help customer and provide
prompt services.
Relates to Promptness of service.
Customer measures responsiveness
through the length of time he has to wait
for a service, or companys response to
his questions or service failure and
assistance etc.
 Assurance
Employees knowledge and courtesy and
their ability to inspire trust and confidence.
This dimension is related to services
where customer perceives high risks, e.g.
Banking, courier, Insurance, medical,
brokerage etc.
 Empathy

Companys commitment to care for customers

and provide individualized attention to
customers.
A service provider can convey this dimension
through customized services and understanding
individual needs of customers and giving
attention to them.
 Tangibles

Represents company physicals.

Appearance of physical facilities,
equipment, personnel and written material
etc.
Provider can use this dimension to
represent superior service quality.
Service Quality Dimensions
Customers develop perceptions about service quality
based on these dimensions.

One of the dimension can be more important for a

customer in a specific situation.
e.g. Assurance is important for a customer taking a treatment at
hospital, or A customer sending a birthday gift to friend through
courier is considering reliability more than other dimensions.
Sometimes a customer uses all of these dimension
and sometime not.
e.g. Empathy is not applicable in case of ATM use. Or
Tangibles will not be considered by customer giving a
telephonic order.
 Building blocks for Customer
Perceptions
Service Encounter (Moments of Truth)
When a customer interacts with the service firm.

Check-in
Bell person takes customer to room

Restaurant Meal

Wake-up call

Checkout
Service encounter experienced by a hotel customer
 A Service Encounter
Cascade for an Industrial Purchase

Sales Call

Delivery and Installation

Servicing

Ordering Supplies
Billing
 Service Encounter
Some services has few encounters other has
several encounters.
E.g. Disney world estimates that each of its theme park customers
experience about 74 service encounters and that negative experience in any
of the encounter may result in negative overall evaluation or perception of
customer.

Service encounters are critical in determining

customer satisfaction and loyalty.
Encounters allow customers to form perceptions
about the service firm.
 Types of Service Encounters

Remote Encounters
Phone Encounters
Face to Face Encounters
 Service Encounter Themes
(Sources of pleasure and displeasure in service
Encounters)
Recovery
Employee response to service delivery system failure

Adaptability
Employee response to customer Needs and requests

Spontaneity
Unprompted and unsolicited employee actions

Coping
Employee response to problem customers
 Effective service behavior
(Recovery)
Dos Donts

Acknowledge problem. Ignore customer.

Explain causes. Blame customer.
Apologize. Act as if nothing is wrong.
Compensate/upgrade. Make a fun of customer
Lay out options. Speak rudely in response
Take responsibility. to customers angry tone.
 Effective service behavior
(Adaptability)
Dos
Recognize the seriousness of
the need.
Acknowledge.
Attempt to accommodate.
Adjust the system.
Explain rules/policies.
Give other favors if customer
request is not possible.
Take responsibility.
Donts
Ignore customer.
Make false claims/promises.
Show unwillingness to tr.
Make a fun of customer.
Speak rudely.
Avoid responsibility.
Forget the promise done with
customer.
Let the customer repeat if his
request is acknowledged.
Claim more money.
 Effective service behavior
(Spontaneity)
Dos Donts
Take time. Ignore customer.
Be attentive. Yell/laugh/swear.
Anticipate needs. Steal from the customer.
Listen carefully. Give false claims.
Understand why customer Discriminate.
taking service. Claim more money.
Provide complete
information.
Show concern/empathy.
 Effective service behavior
(Coping)
Dos Donts
Listen Ignore customer.
Try to accommodate Make a fun of customer
Explain Speak rudely in response
Ask questions to to customers angry tone.
understand customers Take customers
point of view. dissatisfaction personally
Let go of the customer Let customers
dissatisfaction affect
others.