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MOS notes - marketing of services

Master in Business Management (Amity University)

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The 7 P’s of Services Marketing

Product: In case of services, the ‘product’ is intangible, heterogeneous and perishable. Moreover, its
production and consumption are inseparable. Hence, there is scope for customizing the offering as per customer
requirements and the actual customer encounter therefore assumes particular significance. However, too much
customization would compromise the standard delivery of the service and adversely affect its quality. Hence
particular care has to be taken in designing the service offering.

Pricing: Pricing of services is tougher than pricing of goods. While the latter can be priced easily by taking into
account the raw material costs, in case of services attendant costs - such as labor and overhead costs - also need
to be factored in. Thus a restaurant not only has to charge for the cost of the food served but also has to
calculate a price for the ambience provided. The final price for the service is then arrived at by including a mark
up for an adequate profit margin.

Place: Since service delivery is concurrent with its production and cannot be stored or transported, the location
of the service product assumes importance. Service providers have to give special thought to where the service
would be provided. Thus, a fine dine restaurant is better located in a busy, upscale market as against on the
outskirts of a city. Similarly, a holiday resort is better situated in the countryside away from the rush and noise
of a city.

Promotion: Since a service offering can be easily replicated promotion becomes crucial in differentiating a
service offering in the mind of the consumer. Thus, service providers offering identical services such as airlines
or banks and insurance companies invest heavily in advertising their services. This is crucial in attracting
customers in a segment where the services providers have nearly identical offerings.

People: People are a defining factor in a service delivery process, since a service is inseparable from the person
providing it. Thus, a restaurant is known as much for its food as for the service provided by its staff. The same
is true of banks and department stores. Consequently, customer service training for staff has become a top
priority for many organizations today.

Process: The process of service delivery is crucial since it ensures that the same standard of service is
repeatedly delivered to the customers. Therefore, most companies have a service blue print which provides the
details of the service delivery process, often going down to even defining the service script and the greeting
phrases to be used by the service staff.

Physical Evidence: Since services are intangible in nature most service providers strive to incorporate certain
tangible elements into their offering to enhance customer experience. Thus, there are hair salons that have well
designed waiting areas often with magazines and plush sofas for patrons to read and relax while they await their
turn. Similarly, restaurants invest heavily in their interior design and decorations to offer a tangible and unique
experience to their guests.

Service Encounter / Moment of Truth

A moment of truth is usually defined as an instance wherein the customer and the organization come into
contact with one another in a manner that gives the customer an opportunity to either form or change an
impression about the firm. Such an interaction could occur through the product of the firm, its service offering
or both. Various instances could constitute a moment of truth - such as greeting the customer, handling
customer queries or complaints, promoting special offers or giving discounts and the closing of the interaction.

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Customer Satisfaction, Dissatisfaction and Delight

Based on the quality of the service experience a customer will either be satisfied, dissatisfied or delighted.
Knowing a customer’s expectation is instrumental in developing a strategy for meeting and exceeding customer
expectations.

Customer Dissatisfaction: This is a situation when the service delivery fails to match up to the customer’s
expectations. The customer does not perceive any value for money. It’s a moment of misery for the customer.

Customer Satisfaction: In this case, the service provider is able to match the customer’s expectations and
deliver a satisfactory experience. However, such a customer is not strongly attached to the bran and may easily
shift to a competing brand for considerations of price or discounts and freebies.

Customer Delight: This is an ideal situation where the service provider is able to exceed the customer’s
expectations creating a Moment of Magic for the customer. Such customers bond with the brand, are regular
and loyal and will not easily shift to other brands.

The SERVQUAL Model

The SERVQUAL Model is an empiric model by Zeithaml, Parasuraman and Berry to compare service
quality performance with customer service quality needs. It is used to do a gap analysis of an organization’s
service quality performance against the service quality needs of its customers.That’s why it’s also called the
GAP model.
It takes into account the perceptions of customers of the relative importance of service attributes. This allows an
organization to prioritize.

There are five core components of service quality:

1. Tangibles – physical facilities, equipment, staff appearance, etc.

2. Reliability – ability to perform service dependably and accurately.

3. Responsiveness – willingness to help and respond to customer need.

4. Assurance – ability of staff to inspire confidence and trust.

5. Empathy – the extent to which caring individualized service is given.

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The four themes that were identified by the SERVQUAL developers were numbered and labelled as:
1. Consumer expectation – management perception gap (Gap 1): Management may have inaccurate perceptions
of what consumers (actually) expect. The reason for this gap is lack of proper market/customer focus. The
presence of a marketing department does not automatically guarantee market focus. It requires the appropriate
management processes, market analysis tools and attitude.

2. Service quality specification gap (Gap 2): There may be an inability on the part of the management to
translate customer expectations into service quality specifications. This gap relates to aspects of service design.

3. Service delivery gap (Gap 3): Guidelines for service delivery do not guarantee high-quality service delivery
or performance. There are several reasons for this. These include: lack of sufficient support for the frontline
staff, process problems, or frontline/contact staff performance variability.

4. External communication gap (Gap 4): Consumer expectations are fashioned by the external communications
of an organization. A realistic expectation will normally promote a more positive perception of service quality.
A service organization must ensure that its marketing and promotion material accurately describes the service
offering and the way it is delivered

5. These four gaps cause a fifth gap (Gap 5), which is the difference between customer expectations and
perceptions of the service actually received Perceived quality of service depends on the size and direction of
Gap 5, which in turn depends on the nature of the gaps associated with marketing, design and delivery of
services.So,
Gap 5 is the product of gaps 1, 2, 3 and 4. If these four gaps, all of which are located below the line that
separates the customer from the company, are closed then gap 5 will close.

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PZB Gap Model

The PZB Model was first developed by Parasurarman, Zeithaml and Berry (1985) to attempt to define and
model service quality at a time when there was little focus on the construct. As part of their exploration they
concluded that quality involves a comparison of expectations with performance, and thus satisfaction with
services is related to fulfilling expectations. Through in-depth interviews with executives, a comprehensive case
study and an exploratory study consisting of interviews with an extended number of executives, the researchers
were able to reveal five ‘gaps’ regarding executives perceptions of service quality delivery and the tasks
associated with service delivery to customers. The first four gaps are related to the firm itself and the fifth to
consumers.

Gap I: Knowledge gap: The difference between consumer expectations and management perceptions of
consumer expectations.

Gap 2: Standard gap: The difference between management perceptions of consumer expectations and service
specifications.

Gap 3: Behaviour gap: The difference between service specifications and the service actually delivered.

Gap 4: Communication gap: The difference between service delivered and what is communicated about the
service to stakeholders.

Gap 5: Gap between service and expectations: The discrepancy between consumers’ expectations of the service
and perceptions of the actual service performance.

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Gap 1, the knowledge gap, occurs because the organization does not know what consumers expect.
Organizations are ignorant of consumer expectations or they have erroneous perceptions of their expectations.
This can be the result of inadequate research on consumers, lack of upward communication in the organization,
not having a focus on relationships with key consumers, excess levels of management that inhibit
communication and understanding. A knowledge gap can also be a result of organizations not monitoring the
behavior of consumers.

The standard gap, gap 2, is a result of not specifying service that satisfies consumers’ expectations of the
organization. It does not exhibit the expected correct service or it may have poor standards of service well
below those expected of them by consumers. This can be compounded by the absence of service quality that is
actively demanded of organizations by their consumers. This is easily evident in customer relationships but may
also include ethical guidelines. The lack of emphasis on building relationships that can lead to dialogue is also
an issue here.

Gap 3, a mismatch between actual delivered service and service specifications can occur because there are no
human resource policies regarding what standards should be in place and followed. However, it may be that the
consumers themselves have not been clear on what sort of standards they expect from the organization. Another
issue is – who does what? Who is in charge of mapping and keeping track of these expectations and seeing to it
that they are fulfilled? Performance that does not deliver on promises, sometimes referred to as not walking the
talk, leads to gap 4, the communications gap, the difference between delivered service and what is
communicated.

Gap 4, Organizations may exaggerate promises or perhaps not even provide information in their external
communications. This gap can occur due to the lack of integration of communication within the organization –
not knowing what one element or unit is saying to whom externally. It can also come from over promising. The
organization basically makes promises they can’t keep thus setting themselves up for failure by communicating
a too rosy picture of what they can deliver.

Gap 5 occurs when the perception of the organization’s service does not match the service that is expected of
the organization. Expected service is influenced by the organization’s external communication, word of mouth,
the personal needs of the consumers, and consumers’ past experience with the organization. Arguably this is the
‘ultimate’ test for the organization as this gap depends on the size and direction of the other four gaps, i.e. on
how well the organization listens to its consumers, how it interprets their desires and wishes, how well it
delivers what it promises and lastly how credible its communications are. Consumers expect certain service
from an organization, often because they are promised this through the organization’s communication. They
also have a perception (image) of how the organization performs this service. The organization, for its part,
delivers service based on, at the worst, no knowledge of what their customers expect or how they perceive the
organization.

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The service marketing triangle

Service triangle as it is commonly called, underlines the relationships between the various providers of services,
and the customers who consume these services.

1) Company to Customers
One of the critical thing is to communicate the service strategy to the customers. Most of the E-commerce
companies are nowadays employed in convincing the customers to buy from their portal only. For this buying,
they are communicating various service advantages which the customers have.
Communication of the service strategy to customers is important to build the trust of customers and hence to
convert the customers to be loyal to the company.
2) Company to employees
Another important relationship in the service triangle is that between the company and the employees. Imagine
an Airline where the flight attendants themselves are frustrated with the company. You, as a customer, will land
up with the poorest services.
Hence, training employees, building value and trust, and empowering employees are some of the ways that the
company can make their employees a positive influencing force for the customers.
3) Company to systems
To keep customers happy, efficient and productive systems need to be developed. Imagine your bank in the
1960’s where everything was done by paper. If you wanted to transfer money, you will have to fill many forms,
and the recipient had to fill many forms. Ultimately it was a tedious process.
However, due to advanced systems, nowadays you can not only transfer money to others sitting at home, you
can practically do 80% of the banking work sitting at home from your laptop. That’s the importance of systems
in a service marketing triangle.
4) Customers to systems
Although building systems are important, these systems should be most useful to customers. Taking the same
example of banking systems above, it is surprising that even today when you go to a bank, there is a queue.
Look at retail stores. There’s always a big line to check out.

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The interaction between customer and system is critical to build the service brand. Taking the example of E-
commerce systems, when the customer is promised various service advantages, and when he fails to return a
product due to system errors or logistics errors, he becomes dissatisfied with the service.
For a company, it is important not only to build systems, but ensure that the systems comply to the customers
and give excellent experience to customers.
5) Employees to system
Not only do systems leave customers frustrated, they also leave the employees frustrated. Imagine a
McDonald’s where orders taken at the front desk are not reaching the kitchen. Or imagine a service center,
where although you have entered a grievance, the employee is not getting your complaint and hence not calling
you. Ultimately it is the employee on whom you are going to get angry!!
In one of the consumer durable companies i know, the systems were top of the line, but they had so many
processes with regards to outstanding and inventory, that a simple order processing took 20 minutes. This same
company had at least 1 lakh dealers and distributors. So imagine the continuous delay in order processing and
the pressure on employees due to this system issue. The system was working excellently, but it was creating
friction between the employees and the system.
Both, Employee motivation, and the empowerment of employees depends on the type of system you hand over
to your employees. If the systems are very good and your employees are able to make good use of it, you will
get very happy and satisfied customers.

6) The most important relationship in the service triangle – Employee to Customers

The employee to customer interaction is also known as the “moment of truth” or “critical incidents”. A single
customer can become dissatisfied with the way the employee treated him. Or that single customer can buy a lot
of material from the same store, because the employee treated him or her like a king or queen.
That’s the difference your employees can create when they interact with customers. There are companies which
are high in the customer satisfaction index, just because their employees are well-trained and are empowered to
take their own decisions. More importantly, these employees are ingrained with the habit that “Customer is
king”.
Once your employees starts treating the customer as if they are really king, the whole service triangle gets
completed, and you will get the best results from all processes employed.
How to market with the service marketing triangle?

There are 3 types of marketing which happen within the service marketing triangle
Internal marketing – Marketing from the company to the employees
External marketing – Marketing from the company to the customers

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Interactive marketing – Marketing between the customers and the employees

1) Internal marketing in the service triangle
Holistic marketing is most used when internal marketing is in effect. An advertising firm always tries to keep its
own employees motivated. They are given a hell lot of parties and outings just so that they are in a jovial mood.
And they need to be in a jovial mood because the rest of the times they are using their creative brains very hard
to give the ultimate service to their customers.
Furthermore, these same advertising companies empower their employees to take the right decisions in front of
customers. This empowerment goes a long way in building motivation and confidence.
And that’s what internal marketing based on the service triangle is all about. Building confidence and
motivation in your employees, so that they build excellent relationships with the end customers and the
company gets the money.

2) External Marketing: Marketing from the company to the customers. This is the most common type of
marketing which we, as customers, encounter in the market. The various types of service marketing can be
advertising, sales promotions, public relations, direct marketing, or more prominently, internet marketing in
today’s age.
3) Interactive marketing: The marketing which happens on a retail store, in a restaurant, in a mall, in a bank, or
in any format where the customer comes in touch with the employee, is known as interactive marketing. This
marketing within the service triangle happens between the customers and the employees.
Interactive marketing is also a strong way to influence customers. It is most commonly used to help customers
come to a decision with regards to their purchase decision. If a retail executive has received orders that he has to
liquidate stock of Samsung, he will only tell you the positive things about samsung and try to convert your
decision into buying Samsung.
The various forms of interactive marketing include personal selling, servicing the customer and interacting with
customers on social media or other such interactive platforms.
In essence, there are two main differences between the services sector and the manufacturing sector. One is that
the services sector needs to be more flexible for their customers. And second is, that this flexibility brings
stress, and a services guy should be able to deal with stress.
The service marketing triangle is an excellent representation of all the interactions which happen within a
services sector, and accordingly how different forms of marketing can be used based on the interactions
happening.

Service blueprint is a picture or map that accurately portrays the service system so that different people
involved in providing it can understand and deal with it objectively regardless of their individual point of
view. It is particularly useful at design and redesign stages of service development.

It provides a way to break the service into logical components and to depict the steps or tasks in the
processes, the means by which they are executed and evidence of the service as consumer experiences it.

ServiceMapping/Blueprinting

It is a tool for simultaneously depicting the service process, the points of customer contact, and the
evidence of service from the customer's point of view.

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Blueprint components

Basic components of Service Blueprint are:

* Customer actions
* "Onstage" contact employee actions
* "Backstage" contact employee actions
* Support processes

Customer Actions

It includes steps, choices, activities and interactions that customer performs in the process of purchasing,
consuming and evaluating the service.

Onstage Employee Actions

The steps and activities that the contact employees performs that are visible to the customer.

Backstage Employee Actions

The steps and activities that occur behind the scene to support onstage activities.

Support Processes

They include the internal services, steps and interactions that take place to support the contact employees
in delivering the service.

Service Blueprint Components

CUSTOMER ACTIONS
Line of interaction
----------------------------------------------
"ONSTAGE" CONTACT EMPLOYEE ACTIONS
Line of visibility
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"BACKSTAGE" CONTACT EMPLOYEE ACTIONS
Line of internal interaction
----------------------------------------------
SUPPORT PROCESSES

Line of interaction

Direct interactions b/w the customer and organization.

Line of visibility

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This line separates all service activities that are visible to the customers from those that are not visible.

Line of internal interaction

Separates contact employees activities from those of other service support activities and people.

SERVICE BLUEPRINT MODEL - I

SERVICE BLUEPRINT MODEL - II

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Planning for Services Marketing

To ensure effective services marketing, tourism marketers need to be strategic in their planning
process. Using a tourism marketing system requires carefully evaluating multiple alternatives,
choosing the right activities for specific markets, anticipating challenges, adapting to these challenges,
and measuring success (Morrison, 2010). Tourism marketers can choose to follow a strategic
management process called the PRICE concept, where they:

 P: plan (where are we now?)

 R: research (where would we like to be?)
 I: implement (how do we get there?)
 C: control (how do we make sure we get there?)
 E: evaluate (how do we know if we got there?)

In this way, marketers can be more assured they are strategically satisfying both the customer’s needs
and the organization’s objectives (Morrison, 2010). The relationship between company, employees,
and customers in the services marketing context can be described as a services marketing
triangle (Morrison, 2010), which is illustrated in Figure 8.5.

In traditional marketing, a business broadcasts messaging directly to the consumer. In contrast, in services
marketing, employees play an integral component. The communications between the three groups can be
summarized as follows (Morrison, 2010):

1. External marketing: promotional efforts aimed at potential customers and guests (creating a promise
between the organization and the guest)
2. Internal marketing: training, culture, and internal communications (enabling employees to deliver on
the promise)
3. Interactive marketing: direct exchanges between employees and guests (delivering the promise)

Glossary for MOS

1. Back Office the service delivery activities not observable to the customers, e.g. restaurants kitchen.

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2. Benchmarking the practice of comparing one’s performance with that of other firms that as known as ‘best in
class’.
3. Blueprinting is a more detailed form of flow charting, allowing detailed design and re-design of customer
service processes.
4. Capacity is a measure of output per unit of time when fully busy
5. Capacity utilization is a measure of how much output is actually achieved relative to the process capacity when
fully busy
6. Complexity a dimension of service process structure that measures the number and intricacy of steps in the
process
7. Co-producer the productivity role a customer can play in the service delivery process.
8. Credence Qualities: Includes characteristics that the customer may find impossible to evaluate even after
purchase and consumption.
9. Dash board multiply measurement of different matrix displayed together on one table.
10. Differentiation a competitive strategy that creates a service that is perceived as being unique.
11. Empowerment providing contact personal with the training and information to make decisions for the firm
without close supervision.
12. Explicit Services the essential or intrinsic features readily observable by the senses, e.g. food, golf club.
13. Experience Qualities: These are the attributes that can be discerned only after purchase or during
consumption.
14. Flowcharting is a technique for displaying the nature and sequence of the different steps in delivering a service
to the customers. It is a simple way to visualize the total customer service experience.
15. Focus a competitive strategy built around the concept of serving a particular target market very well by
addressing the customers’ specific needs.
16. Front Office the service delivery activities observable to the customer, e.g. dining area of a restaurant.
17. Fully focused a firm provides a limited range of services (perhaps only one) to a narrow target segment(e.g.,
should ice hospital)
18. Hard measures relate to operational processes and outcomes and can be counted, timed, or observed. Control
charts are a simple method of displaying performance on hard measures over time against specific quality
standards.
19. Heterogeneity refers to the fact that no two services can be alike.
20. Implicit Services psychological benefits or extrinsic features the customers may sense only vaguely, e.g. security
of a well-lighted parking lot, privacy of a loan office.
21. Intangibility: It is the most basic distinguishing characteristics of services. Because services are performances or
actions rather than objects, they cannot be seen, felt, tasted, or touched versus tangible goods.
22. Line of visibility a line drawn on the service blueprint showing separation of front-office from back office
activities.

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23. Loyalty programs aim at building share of wallet through financial rewards (e.g. loyalty points) and non-
financial rewards (higher-tier service levels and recognition and appreciation.
24. Market focused: a firm concentrations on a narrow market segment, but offers a wide range of services to
address the many diverse needs to that segment(e.g., Rentokil)
25. Overall cost leadership a competitive strategy based on efficient operations, cost control, and innovative
technology.
26. Nonphysical fences refers fences refer to consumption (e.g., stay must be over a weekend), transaction (e.g.,
two weeks advance booking with cancelation and change penalties), or buyer characteristics (e.g., student and
group discounts). The service experience is identical across fence conditions although different prices are
charged.
27. Perishability refers to the fact that services cannot stored, re-sold or returned.
28. Physical Evidence is what a company physically exhibits to customers. It includes the physical environment of
the service outlet, the exterior, the interior, all tangibles such as equipment, furniture, vehicles, stationary,
signage, certificate, receipts, service personnel & so on.
29. Physical fences refer to tangible product differences related to different prices (e.g., seat location in a theatre,
size of a hotel room, or service level).
30. Pricing Includes nonmonetary costs to the consumer and revenue management considerations.
31. Process layout a service permitting customization because customers determine their own sequence of
activities (e.g.an amusement park)
32. Process: The procedures, mechanisms, and flow
33. Productivity involves the financial valuation of outputs relative to inputs (e.g., input/output ratio)
a) Efficiency involves comparison to a standard such as industry average (e.g., speed of delivery)

b) Effectiveness refers to the degree a goal, such as customer satisfaction, is being met.

34. Quality function deployment a process in which a house of quality is constructed to incorporate customer need
into the design of the service process.
35. Services: Services are deeds, processes, and performances provided or coproduced by one entity or person for
another entity or person.
36. Service attributes. People often have difficulty in evaluating the services because services tend to have a high
proportion of experience and credence attributes that make it difficult for consumers to evaluate services
before purchase.
37. Service blueprints a diagram of the service process showing activities, flows, physical evidence, and lines of
visibility and interactions.
38. Service encounter triad a triangle depicting the balance of goals among the service organization, the service
organization, the contact personnel, the contact personnel, and the customer.

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39. Service expectations: These are shaped by the information search and evaluation of service attributes the
components of expectations include desired, adequate, and predicted service levels. Between the desired and
adequate service levels is the zone of tolerance, within which customers are willing to accept variation in
service in service levels.
40. Service focused : a firm offers a narrow range of services to a fairly broad market (e.g., Lasik eye surgery clinics
or Starbucks coffee shops)
41. Service Package a description of a service based on four components: supporting facility, facilitating goods,
explicit services, and implicit services.
42. Service Process Matrix is classification of services based on the degree of interaction and customization and the
degree of level intensity.
43. Service recovery converting a previously dissatisfied customer into a loyal customer.
44. Servicescape: The physical environment of a service facility that influences the behavior and perceptions of the
service for both the customers and the workers.
45. SERVQUAL a customer survey instrument used to measure service quality gaps.
46. Soft measures are usually based on perception of and feedback from customers and employees.
47. Search Qualities: These are the attributes that a customer can determine before purchasing a product.
48. The Moment-of-truth metaphor refers to customer touch points that can make or break a customer
relationship
49. Walk through audit a process oriented survey given to customer and manager to evaluate the perception of
the customer service experience.
50. Yield management an information system that attempts to maximize revenue for services with time-perishable
capacity, e.g. airlines, hotels.

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