Service Marketing Part1

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
Service MarketingMazhar Hayat
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
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.
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

Service MarketingPublic Libraries
Mazhar Hayat
Tangibility spectrum of Product

Pure
Goods
Major good
Minor service
Hybrid Product
Major Service
Minor Good
Pure
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.

Price
Placement
Product
Process
Service
Marketing Mix
Physical
evidence
People
Promotion
Product
Channel type
Channel length and
coverage
Intermediaries
Outlet location
Storage facilities
Stock management
Transportation
Features
Quality
Accessories
Packaging
Warranties
Branding
Price
Placement
Flexibility
Price Level
Credit Terms
Discounts and allowances
Promotion
Promotional mix
Personal selling
Advertising
Sales promotion
Public relations

People
Employees
Recruitment
Training
Motivation
Teamwork
Rewards
Customers
Education
Training
Process
Flow of activities
Standardized
Customized
Number of steps
Simple
Complex
Customer involvement
Physical evidence
Facility design
Equipment
Environment
Employee dress
Other tangibles
Broachers and
customer guides
Business cards
Guarantees
Service Marketing Statements
Mazhar Hayat
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
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)

=
Service Quality
Customer
Expectations
Customer
Satisfaction
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.
Chapter 3
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
Ideal Expectations
High
or desires
I need to have an A/c in a

bank that offers the most
advanced & superior
quality services with best
value for money.
My bank should offer
good services and personal
attention to old customers
like myself.
Normative should
be expectations
My bank offers prompt

services but some of the
staff is not friendly or
bank does not offer online
banking
Experience based
norms
Acceptable
expectations
I am holding an A/c in this

bank because at least staff
is welcoming.
Min. tolerance
expectations
I am holding an A/c in this

bank only because it is the
nearest possible branch.
Low
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
Expectation
Zone of
Tolerance
Adequate Service
Desired 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
service roles
Adequate Service
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
Exercise to identify Factors

influencing Adequate service level
In groups of four, choose a services industry and spend15 minutes
brainstorming to identify specific situations of customers in each
of the four factors influencing adequate service level of
customers. (Think of practical examples from the industry)
Be certain the requirements reflect the customers point of
view.
Temporary Service Intensifiers

Perceived Service Alternatives
Self-perceived service roles
Situational Factors
Chapter # 4
Customer Perceptions
of Service
Customer Perception of Service

Customer Perceived service is a
result of two importance dimensions
of service:
Service Quality
Customer Perception (Satisfaction Vs Quality)

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

Reliability
Responsiveness
Assurance
Service
Quality
Situational
factors
Product
Quality
Customer
Satisfaction
Empathy
Tangibles
Price
Personal
factors
Customer
Loyalty
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
Assurance
Empathy
Tangibles
Tangibles
Responsiveness
Service
Quality
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.
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
customers point of view.
Reliability:
Assurance:
Tangibles:
Empathy:
Responsiveness
:
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
SalesCall
Call
Delivery
Deliveryand
andInstallation
Installation
Servicing
Servicing
Ordering
OrderingSupplies
Supplies
Billing
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.
Explain causes.
Apologize.
Compensate/upgrade.
Lay out options.
Take responsibility.
Ignore customer.
Blame customer.
Act as if nothing is
wrong.
Make a fun of customer
Speak rudely in
response to customers
angry tone.

(Adaptability)
Dos
Donts
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.
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.

(Spontaneity)
Dos
Take time.
Be attentive.
Anticipate needs.
Listen carefully.
Understand why
customer taking
service.
Provide complete
information.
Show
concern/empathy.
Donts
Ignore customer.
Yell/laugh/swear.
Steal from the
customer.
Give false claims.
Discriminate.
Claim more money.

(Coping)
Dos
Donts
Listen
Try to accommodate
Explain
Ask questions to
understand customers
point of view.
Let go of the customer
Ignore customer.
Make a fun of customer
Speak rudely in
response to customers
angry tone.
Take customers
dissatisfaction
personally
Let customers
dissatisfaction affect
others.
Exercise to
Identify Effective Service Behavior
In groups of four, choose a services industry and
spend 10 minutes brainstorming to identify all
possible Encounter situations and define effective
service behavior to make all the encounters
pleasant for the customer and actions to avoid
that make the encounter unpleasant, resulting in
negative perception of customer. Be certain that
the requirements reflect both the company and
customers point of view.
Chapter # 5
Customer Relationship
Management
(CRM for services)
Customer Relationship Management

The process of identifying and
maintaining information related to
individual customers, in order to
develop and maintain a positive
long- term relationship with
customers.
Objectives of CRM
Enhancing
er
m
s to
u
C
Retaining
Satisfying
Acquiring
Levels of Customer Relationship

Partner
Advocate
Member
Client
First time
buyer
Repeat
customer
Prospect
Suspect
Inactive
customer
CRM and Customer profitability

segments
Who is the real customer?

How many customers are profitable?
80-20 rule.
Fed-Ex categorizes its customers,
as the good, the bad and the uglybased on their profitability.
The Customer Pyramid
Customer Pyramid
Most profitable
customers
Platinum
Platinum
customers
customers
Profitable because they

spend more over time,
cost less to maintain
and spread positive
word of mouth
Gold
Goldcustomers
customers
Iron
Ironcustomers
customers
Least profitable
customers
Lead
Leadcustomers
customers
Expensive to serve in
terms of time, effort
and money
Platinum customers
Most profitable customers

Heavy users
Typically not price sensitive
Willing to invest in and try new
offerings of the company
Loyal and committed customers
Gold customers
Offers lower profits because mostly
ask for price discounts
Heavy users who minimize their risk
by working with multiple vendors at
the same time.
Ask for special favors.
Iron customers
Essential customers who provide the
volume needed to utilize the firms
capacity.
Spending level is low.
Their loyalty and profitability is not
god enough for special treatments
and favors.
Lead customers
These customers are costing the
company money to serve them.
They demand more attention and
favor than they deserve.
Buy in small quantity and price
sensitive, resulting in poor profits.
Sometimes problem customers i.e.
complaining about the firm to others.
Relationship Development
Model
Relationship Drivers
Outcomes
Relationship Bonds
Financial bonds
Social bonds
Customization bonds
Structural bonds
Customer Benefits
Confidence benefits
Social benefits
Special treatment benefits
Customer loyalty
Core service Provisions

Satisfaction
Perceived service quality
Firm Benefits
Economic benefits
Customer behavior benefits
HRM benefits
Switching barriers
Customer inertia
Switching costs
Relationship Bonds
(levels of relationship strategies)
Stable
Volume &
pricing
Frequency
rewards
Integrated
information
systems
Joint
investments
Bundling &
Cross selling
1.
Financial bonds
Excellent
Service
&
value
4.
Structural
bonds
Continuous
relationships
2.
Social
bonds
3.
Customization
bonds
Shared
processes &
equipment
Anticipation/
innovation
Mass
customization
Social bond
among
customers
Personal
relationships
Customer
intimacy
Financial bonds
Volume & Frequency rewards
Stable pricing
Bundling & Cross selling
Social bonds
Continuous relationships
Social bond among customers
Personal relationships
Customization bonds
Customer intimacy
Mass customization
Anticipation/ innovation
Structural bonds
Integrated information systems
Joint investments
Shared processes & equipment

Service Marketing Part1

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Service Marketing Part1

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Service Marketing

Service MarketingMazhar Hayat

What are Services

Service MarketingMazhar Hayat

What are Services (contd)

Service MarketingMazhar Hayat

What are Services (contd)

Service MarketingMazhar Hayat

Service Vs Customer Service

Service MarketingMazhar Hayat

Service Vs Customer Service (contd)

Service MarketingMazhar Hayat

Industries classified within service sector

Transportation and Public utilities

Commerce and financial services

Wholesale and retail services

Hotels and lodging

Telephone and telegraph

Cable T.V operators

Advertising and PR services

Postal mail services & E-mail

Tangibility spectrum of Product

Service MarketingMazhar Hayat

Why Service Marketing?

Differences in Goods Vs service

Service MarketingMazhar Hayat

Intangibility and marketing Implications

Heterogeneity and marketing Implications

Service MarketingMazhar Hayat

Inseperability and marketing Implications

Service MarketingMazhar Hayat

Perishability and marketing Implications

Service Marketing Mix

Service MarketingMazhar Hayat

Service Marketing Mix

Service MarketingMazhar Hayat

Service Marketing Mix

Service MarketingMazhar Hayat

Three core concepts

Three core concepts to consider:

Service MarketingMazhar Hayat

Customer Satisfaction Formula

Service MarketingMazhar Hayat

C.S. Formula (cont)

GAP Theory for Services

Service MarketingMazhar Hayat

Key is to minimize the gap

Service MarketingMazhar Hayat

What is Customer expectations?

What does poor knowledge of

Possible level of customer

I need to have an A/c in a

My bank offers prompt

I am holding an A/c in this

I am holding an A/c in this

Service MarketingMazhar Hayat

Service MarketingMazhar Hayat

Levels of Expectations (contd)

Zones of Tolerance varies from service

Service MarketingMazhar Hayat

Zones of Tolerance for

Most Important Factors

Least Important Factors

Factors that influence customer