Description
FOUNDATIONS FOR SERVICES MARKETING
Part 1
FOUNDATIONS FOR SERVICES MARKETING
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
Introduction to Services
1
What are services? Why services marketing? Characteristics of Services Compared to Goods Services Marketing Mix
What are services?
All economic activities whose output is not a physical product, is generally consumed at the time it is produced and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Examples of Service 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
airline, travel agency, theme park
Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 1.2
Tangibility Spectrum
Salt
Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets
Tangible Dominant
Intangible Dominant
Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Why Services Marketing
Services based economies
United States ± 80% India ± 48%
Traditional marketing course has more focus on manufacturing and packaged goods (like P&G, Unilever, General Foods) There is a need for Marketing concepts specifically for Services Service initiatives and promoting service quality leads to competitive advantage and so to profits Customer satisfaction index for services is declining
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 1.1
Contributions of Service Industries to U.A.E. Gross Domestic Product
McGraw-Hill/Irwin
Source: Inside Sam¶s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, The McGraw-HillpCompanies, Inc. All rights reserved. © 2006 June 14, 2004, 86.
Employment in Dubai - 2005
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Table 1.2
Goods versus Services
Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, ³A Conceptual Model of Service Quality and Its Implications for Future Research,´ Journal of Marketing 49 (Fall 1985), pp. 41±50.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Characteristics of Services Compared to Goods
Intangibility
Heterogeneity
Simultaneous Production and Consumption
Perishability
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Intangibility
Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Heterogeneity
Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Simultaneous 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
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Perishability
It is difficult to synchronize supply and demand with services Services cannot be returned or resold
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
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
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Expanded Mix for Services -The 7 Ps
Product Price Place Promotion People
All human actors who play a part in service delivery and thus influence the buyer¶s perceptions: namely, the firm¶s personnel, the customer, and other customers in the service environment.
Physical Evidence
The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.
Process
The actual procedures, mechanisms, and flow of activities by which the service is delivered²the service delivery and operating systems.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Table 1.3
Expanded Marketing Mix for Services
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Gaps Model of Service Quality
2
The Customer Gap The Provider Gaps:
Gap 1 ± not knowing what customers expect Gap 2 ± not having the right service designs and standards Gap 3 ± not delivering to service standards Gap 4 ± not matching performance to promises
Putting It All Together: Closing the Gaps
Figure 2.1
The Customer Gap
Expected service
Customer Gap
Perceived service
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Gaps Model of Service Quality
Customer Gap:
difference between customer expectations and perceptions
Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap):
not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):
not delivering to service standards
Provider Gap 4 (The Communication Gap):
not matching performance to promises
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Key Factors Leading to the Customer Gap
Customer Gap Customer Expectations
Provider Gap 1: Not knowing what customers expect Provider Gap 2: Not selecting the right service designs and standards Provider Gap 3: Not delivering to service standards Provider Gap 4: Not matching performance to promises
Customer Perceptions
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.2
Not knowing what customers expect
Customer Expectations
Gap 1
Inadequate marketing research orientation
Insufficient marketing research Research not focused on service quality Inadequate use of market research
Lack of upward communication
Lack of interaction between management and customers Insufficient communication between contact employees and managers Too many layers between contact personnel and top management
Insufficient relationship focus
Lack of market segmentation Focus on transactions rather than relationships Focus on new customers rather than relationship customers
Inadequate service recovery
Lack of encouragement to listen to customer complaints Failure to make amends when things go wrong No appropriate recovery mechanisms in place for service failures
Company Perceptions of Customer Expectations
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.3
Not selecting the right service designs and standards Customer-Driven Service
Designs and Standards
Gap 2
Poor service design Unsystemati new servi e devel ment process Vague, undefined service designs Failure to connect service design to service positioning Absence of customer-driven standards Lack of customer-driven service standards Absence of process management to focus on customer requirements Absence of formal process for setting service quality goals Inappropriate physical evidence and servicescape Failure to develop tangibles in line with customer expectations Servicescape design that does not mee t customer and employee needs Inadequate maintenance and updating of the servicescape
Management Perceptions of Customer Expectations
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.4
Not delivering to service standards
Customer-Driven Service Designs and Standards
Gap 3
Defi iencies in
I P I L ff l ti it i it l -t i t l f
n esource olicies
t l l ti t, fli t j fit i ti t l, t t sponsi iliti s
Customers
Cust s Customers
o o not fulfill roles
l l ft i l s o negati el impact each other
Problems
ith service intermedi ries
Channel conflict over objectives and performance Difficult controlling ualit and consistency ension bet een empowerment and control
Failure to match suppl and demand
Failure to smooth peaks and valleys of demand Inappropriate customer mix Overreliance on price to smooth demand
Service Delivery
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.5
Not matching the performance to promises
Service Delivery
Lack e a e se v ces a ke c ca s Tenden to vie ea h e te nal co unication a independent Not including inte active ma eting in communication plan Ab ence o strong internal marketing program Ine ec ve ana e ent of c stome ex ectations Absence o customer e pectation management through all forms of communication Lack of adequate education for customers Ove omising Overpromising in advertising Overpromising in personal selling Overpromising through ph sical evidence cues Ina e ate horizonta communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units
Gap 4
Externa Communications to Customers
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.6
Gaps Model of Service Quality
CUSTOMER
Customer Gap
Expected Service
Perceived Service
Service Delivery External Communications to Customers
COMPANY
Gap 3 Gap 1 Gap 2
Gap 4
Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
The Customer Gap Chapter 3 ± Consumer Behavior in Services Chapter 4 ± Customer Expectations of Service Chapter 5 ± Customer Perceptions of Service Gap 1 ± Not Knowing What Customers Expect (The Knowledge Gap) Chapter 6 ± Listening to Customers through Research Chapter 7 ± Building Customer Relationships Chapter 8 ± Service Recovery Gap 2 ± Not Having the Right Service Quality Designs and Standards (The Service Design and Standards Gap) Chapter 9 ± Service Development and Design Chapter 10 ± Customer-Defined Service Standards Chapter 11 ± Physical Evidence and the Servicescape Gap 3 ± Not Delivering to Service Standards (The Service Performance Gap) Chapter 12 ± Employees¶ Roles in Service Delivery Chapter 13 ± Customers¶ Roles in Service Delivery Chapter 14 ± Delivering Service through Intermediaries and Electronic Channels Chapter 15 ± Managing Demand and Capacity Gap 4 ± Not Matching Performance to Promises (The Communication Gap) Chapter 16 ± Integrated Services Marketing Communications Chapter 17 ± Pricing of Services
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
doc_404203755.ppt
FOUNDATIONS FOR SERVICES MARKETING
Part 1
FOUNDATIONS FOR SERVICES MARKETING
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
Introduction to Services
1
What are services? Why services marketing? Characteristics of Services Compared to Goods Services Marketing Mix
What are services?
All economic activities whose output is not a physical product, is generally consumed at the time it is produced and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Examples of Service 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
airline, travel agency, theme park
Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 1.2
Tangibility Spectrum
Salt
Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets
Tangible Dominant
Intangible Dominant
Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Why Services Marketing
Services based economies
United States ± 80% India ± 48%
Traditional marketing course has more focus on manufacturing and packaged goods (like P&G, Unilever, General Foods) There is a need for Marketing concepts specifically for Services Service initiatives and promoting service quality leads to competitive advantage and so to profits Customer satisfaction index for services is declining
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 1.1
Contributions of Service Industries to U.A.E. Gross Domestic Product
McGraw-Hill/Irwin
Source: Inside Sam¶s $100 Billion Growth Machine, by David Kirkpatrick, Fortune, The McGraw-HillpCompanies, Inc. All rights reserved. © 2006 June 14, 2004, 86.
Employment in Dubai - 2005
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Table 1.2
Goods versus Services
Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, ³A Conceptual Model of Service Quality and Its Implications for Future Research,´ Journal of Marketing 49 (Fall 1985), pp. 41±50.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Characteristics of Services Compared to Goods
Intangibility
Heterogeneity
Simultaneous Production and Consumption
Perishability
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Intangibility
Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Heterogeneity
Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Simultaneous 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
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Implications of Perishability
It is difficult to synchronize supply and demand with services Services cannot be returned or resold
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
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
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Expanded Mix for Services -The 7 Ps
Product Price Place Promotion People
All human actors who play a part in service delivery and thus influence the buyer¶s perceptions: namely, the firm¶s personnel, the customer, and other customers in the service environment.
Physical Evidence
The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.
Process
The actual procedures, mechanisms, and flow of activities by which the service is delivered²the service delivery and operating systems.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Table 1.3
Expanded Marketing Mix for Services
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter
The Gaps Model of Service Quality
2
The Customer Gap The Provider Gaps:
Gap 1 ± not knowing what customers expect Gap 2 ± not having the right service designs and standards Gap 3 ± not delivering to service standards Gap 4 ± not matching performance to promises
Putting It All Together: Closing the Gaps
Figure 2.1
The Customer Gap
Expected service
Customer Gap
Perceived service
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Gaps Model of Service Quality
Customer Gap:
difference between customer expectations and perceptions
Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap):
not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):
not delivering to service standards
Provider Gap 4 (The Communication Gap):
not matching performance to promises
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Key Factors Leading to the Customer Gap
Customer Gap Customer Expectations
Provider Gap 1: Not knowing what customers expect Provider Gap 2: Not selecting the right service designs and standards Provider Gap 3: Not delivering to service standards Provider Gap 4: Not matching performance to promises
Customer Perceptions
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.2
Not knowing what customers expect
Customer Expectations
Gap 1
Inadequate marketing research orientation
Insufficient marketing research Research not focused on service quality Inadequate use of market research
Lack of upward communication
Lack of interaction between management and customers Insufficient communication between contact employees and managers Too many layers between contact personnel and top management
Insufficient relationship focus
Lack of market segmentation Focus on transactions rather than relationships Focus on new customers rather than relationship customers
Inadequate service recovery
Lack of encouragement to listen to customer complaints Failure to make amends when things go wrong No appropriate recovery mechanisms in place for service failures
Company Perceptions of Customer Expectations
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.3
Not selecting the right service designs and standards Customer-Driven Service
Designs and Standards
Gap 2
Poor service design Unsystemati new servi e devel ment process Vague, undefined service designs Failure to connect service design to service positioning Absence of customer-driven standards Lack of customer-driven service standards Absence of process management to focus on customer requirements Absence of formal process for setting service quality goals Inappropriate physical evidence and servicescape Failure to develop tangibles in line with customer expectations Servicescape design that does not mee t customer and employee needs Inadequate maintenance and updating of the servicescape
Management Perceptions of Customer Expectations
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.4
Not delivering to service standards
Customer-Driven Service Designs and Standards
Gap 3
Defi iencies in
I P I L ff l ti it i it l -t i t l f
n esource olicies
t l l ti t, fli t j fit i ti t l, t t sponsi iliti s
Customers
Cust s Customers
o o not fulfill roles
l l ft i l s o negati el impact each other
Problems
ith service intermedi ries
Channel conflict over objectives and performance Difficult controlling ualit and consistency ension bet een empowerment and control
Failure to match suppl and demand
Failure to smooth peaks and valleys of demand Inappropriate customer mix Overreliance on price to smooth demand
Service Delivery
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.5
Not matching the performance to promises
Service Delivery
Lack e a e se v ces a ke c ca s Tenden to vie ea h e te nal co unication a independent Not including inte active ma eting in communication plan Ab ence o strong internal marketing program Ine ec ve ana e ent of c stome ex ectations Absence o customer e pectation management through all forms of communication Lack of adequate education for customers Ove omising Overpromising in advertising Overpromising in personal selling Overpromising through ph sical evidence cues Ina e ate horizonta communications Insufficient communication between sales and operations Insufficient communication between advertising and operations Differences in policies and procedures across branches or units
Gap 4
Externa Communications to Customers
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Figure 2.6
Gaps Model of Service Quality
CUSTOMER
Customer Gap
Expected Service
Perceived Service
Service Delivery External Communications to Customers
COMPANY
Gap 3 Gap 1 Gap 2
Gap 4
Customer-Driven Service Designs and Standards Company Perceptions of Consumer Expectations
McGraw-Hill/Irwin
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
The Customer Gap Chapter 3 ± Consumer Behavior in Services Chapter 4 ± Customer Expectations of Service Chapter 5 ± Customer Perceptions of Service Gap 1 ± Not Knowing What Customers Expect (The Knowledge Gap) Chapter 6 ± Listening to Customers through Research Chapter 7 ± Building Customer Relationships Chapter 8 ± Service Recovery Gap 2 ± Not Having the Right Service Quality Designs and Standards (The Service Design and Standards Gap) Chapter 9 ± Service Development and Design Chapter 10 ± Customer-Defined Service Standards Chapter 11 ± Physical Evidence and the Servicescape Gap 3 ± Not Delivering to Service Standards (The Service Performance Gap) Chapter 12 ± Employees¶ Roles in Service Delivery Chapter 13 ± Customers¶ Roles in Service Delivery Chapter 14 ± Delivering Service through Intermediaries and Electronic Channels Chapter 15 ± Managing Demand and Capacity Gap 4 ± Not Matching Performance to Promises (The Communication Gap) Chapter 16 ± Integrated Services Marketing Communications Chapter 17 ± Pricing of Services
© 2006 The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
doc_404203755.ppt