Services Marketing

Read from the handwritten marks

Every topic is tagged by how heavily the teacher marked it.

Zeithaml, Chapter 1

What services are

Services are deeds, processes and performancesZeithaml's definition of a service: acts provided, coproduced or cocreated by one party for another, rather than objects.Three nouns, all of them actions. If you can drop it on your foot it is not a service. Use the wording verbatim. provided, coproduced or cocreated by one entity or person for and/or with another entity or person.

The broader economic definition: all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (convenience, amusement, timeliness, comfort, health) that are essentially intangible concerns of its first purchaser.

Four ways the word "service" is used

A standard short-answer question. Keep the four apart and attach one example each.

Tangibility spectrum ✱✱✱must know

The tangibility spectrumA continuum classifying offerings from tangible dominant (salt) to intangible dominant (teaching).Shostack, 1977. The trap is writing that services are simply 'intangible' — the point is that it is a continuum, which is why fast food is the standard middle case. is a continuum that classifies goods and services by how tangible or intangible they are, from tangible dominant to intangible dominant. Pure goods sit at the far left, pure services at the far right.

How it works

• Very few products are purely intangible or totally tangible. Fast food is classified as a service yet includes food and packaging; an automobile is manufactured yet supplies transportation and navigation services.
• Services tend to be more intangible than manufactured products; manufactured products tend to be more tangible than services.
• Even intangible-dominant services include tangible components: consumables and durables.
• Tangible evidence can be used to indicate service quality.

Benefits

• Helps service providers identify ways to improve service quality.
• Helps them use tangible cuesThe physical signals customers read to judge a service they cannot otherwise assess: decor, uniforms, equipment, reports, paperwork.The same idea recurs three times in this syllabus — physical evidence in the 7 Ps, the servicescape in gap 2, risk reduction in Lovelock. or develop a corporate image to signal quality where the offering itself cannot be seen or touched.

Services in practice

Service-based economy in Bangladesh

Bangladesh's services sector expanded by nearly 90% over five years to Tk 18.98 trillion, about 54% of the Tk 34.84 trillion nominal GDP in FY2020–21. It spans accommodation, education, financial services, transport, and wholesale and retail trading.

The wider claim behind it: all businesses are service businesses. IBM, General Electric, Apple and Samsung are service providers; most new business models, such as Airbnb and Uber, are built on a services model.

New service business ideas

The slides group emerging service categories. Learn the four buckets and two examples each.

Others named across the slides: drone delivery, personalized AI-powered wellness coaching, VR experiences, on-demand home maintenance, eco-friendly cleaning, specialized pet care, sustainable fashion rental platforms, remote healthcare monitoring, 3D printing customization, community-based food delivery networks, virtual event planning.

Why services marketing?

• Service-based economy. Services dominate GDP and employment; in Bangladesh the services sector reached Tk 18.98 trillion, about 54% of nominal GDP in FY2020–21.
• Service as a business imperative in goods-focused business. GE, Caterpillar, Xerox, IBM and P&G grow through service. Drivers: commoditization squeezing margins, customers demanding solutions, higher service margins, service as a differentiator.
• Deregulated industries and professional service needs. Airlines, banking, telecom and trucking deregulated; doctors, lawyers, accountants and architects now compete and advertise.
• Service marketing is different. Packaged-goods skills did not transfer; new concepts were required.
• Service equals profits. Service quality drives loyalty and satisfaction, and therefore profit.

…but "service stinks"

The counter-argument: firms offer tiered service so many customers get less than before; self-service and technology-based service spreads; expectations rise and are applied to every firm; organizations cut costs; and firms pay lip service, failing to train and compensate employees.

Service and technology

Technology creates new service offerings, new ways to deliver service, engages both customers and employees, gives services global reach, and is itself a service (the internet). The dark side: customers and employees may resist it, human contact is lost, and the payback on technology investment is uncertain.

Characteristics of services

Four characteristics, each with resulting marketing implications. This is the most examinable single object in the chapter, so reproduce it.

Intangibility is the most basic distinguishing characteristic: services are performances, not objects. Heterogeneity arises because no two employees, customers or occasions are alike, and customers cocreate. Simultaneity puts the customer inside the factory as coproducer, alongside other customers. Perishability means a seat, an hour of a lawyer's time or an empty hotel room is gone forever.

Services marketing mix: the 7 Ps

The marketing mixThe controllable elements a firm uses to satisfy and communicate with customers.The 4 Ps are McCarthy, 1960; the extra three are Booms and Bitner, 1981. Naming both sources is cheap marks. is the set of elements an organization controls that can be used to satisfy or communicate with customers. The traditional mix is the 4 Ps: product, place (distribution), promotion, price.

The three added elements:

Lovelock Chapter 1 extracts ✱✱important

Assigned on Zeithaml slide 25 as reference reading, and ticked throughout the photocopy. Four topics.

a. Forces that transform and impact the service economy

Five groups (Figure 1.6 and Table 1.1). Learn the five headings plus two examples each.

The chain these five set off, in order: new markets and product categories create increased demand for services → innovation in service products and delivery systems → consumers have more choices and exercise more power → success hinges on understanding customers and competitors, viable business models, and creation of value → increased focus on services marketing and management.

b. The nonownership framework: benefits without ownership

Lovelock and Gummesson: services involve a form of rental through which customers obtain benefits. You pay rent for using or accessing something for a defined period instead of buying it outright. Five broad categories, every one ticked in the photocopy:

Categories combine: a taxi rents you both a driver and a vehicle.

c. Four broad categories of services: a process perspective

Classification by what is being processed (people, physical objects, data) and whether the nature of the act is tangible or intangible. Tangible actions are performed on people's bodies or their physical possessions; intangible actions on people's minds or intangible assets.

d. Services pose distinct marketing challenges

Marketing concepts from manufacturing are often not directly transferable where no transfer of ownership takes place. The eight differences are useful generalizations but do not apply equally to all services: people are part of the experience in people-processing services but not in online banking. Hence the 4 Ps must be adapted and extended.

Zeithaml, Chapter 2

The customer gap

The customer gapThe difference between what a customer expected and what they perceived they received.An outcome, never a cause. In a case question you must also name which provider gap produced it. is the difference between customer expectationsThe reference standards a customer brings into the encounter: what they believe should or will happen.Split them by source when answering — marketer-controlled (price, advertising, promises) versus not (needs, word of mouth, competitors). and customer perceptionsThe customer's subjective assessment of the service as actually experienced.Subjective, so they can be factually wrong and still count. That is why managing perception is as legitimate as improving delivery..

Sources of expectations split into marketer-controlled factors (pricing, advertising, sales promises) and factors the marketer can barely affect (innate personal needs, word-of-mouth communications, competitive offerings). Closing this gap is the goal of the entire book.

Types of customer gap (from the lecture slides)

Factors contributing to customer gaps: a customer's background, lifestyle, personality, demographics and advertising; prior experiences with the product or service; market trends; product messaging.

The provider gaps

To close the all-important customer gap, four provider gaps, the gaps occurring within the organization providing the service, must be closed and kept closed.

Gap 1 · The listening gap

Between customer expectations of service and company understanding of those expectations. Firms fail because they lack an accurate understanding of what customers expect. Key factors:

• Inadequate customer research orientation: insufficient research, research not focused on service quality, inadequate use of market research.
• Lack of upward communication: little interaction between management and customers, poor communication between contact employees and managers, too many layers between contact personnel and top management.
• Insufficient relationship focus: lack of segmentation, focus on transactions rather than relationships, focus on new customers rather than relationship customers. (Relationship marketing vs. transactional marketing.)
• Inadequate service recovery: no encouragement to listen to complaints, failure to make amends, no recovery mechanisms for service failures.

Gap 2 · The service design and standards gap

Between company understanding of customer expectations and the development of customer-driven service designs and standards. Customer-driven standards differ from conventional performance standards: they are based on pivotal customer requirements visible to and measured by customers, not on company concerns such as productivity. Key factors:

• Poor service design: unsystematic new service development process, vague undefined designs, failure to connect design to service positioning.
• Absence of customer-driven standardsOperating standards written from what customers require and can observe, not from internal efficiency goals.'Answer within 20 seconds' qualifies. 'Handle 40 calls an hour' is a productivity target in disguise.: no customer-driven service standards, no process management focused on customer requirements, no formal process for setting service quality goals.
• Inappropriate physical evidence and servicescape: tangibles not in line with customer expectations, servicescape design that fails customers and employees, inadequate maintenance and updating.

Tool that closes it: service blueprintingA diagram of the whole service process that separates what the customer sees from what happens behind the scenes.Chapter 8's tool, but the answer to a gap 2 question. Its line of visibility is the servuction model's front/back stage boundary..

Gap 3 · The service performance gap

Between customer-driven service standards and actual service performance by employees. Standards must be backed by resources and enforced, with employees measured and compensated against them. Key factors:

• Deficiencies in human resource policies: ineffective recruitment, role ambiguity and role conflict, poor employee–technology job fit, inappropriate evaluation and compensation, lack of empowerment, perceived control and teamwork.
• Customers not fulfilling roles: customers lack knowledge of their roles and responsibilities; customers negatively impact each other.
• Problems with service intermediaries: channel conflict over objectives, performance, costs and rewards; difficulty controlling quality and consistency; tension between empowerment and control.
• Failure to match supply and demand: failure to smooth peaks and valleys, inappropriate customer mix, overreliance on price to smooth demand.

Gap 4 · The communication gap

Between service delivery and the provider's external communications. Promises made through advertising, the sales force and other communications raise expectations, the standard against which quality is judged. Key factors:

• Lack of integrated services marketing communications: treating each external communication as independent, excluding interactive marketingThe marketing that happens inside the encounter itself, between contact staff and the customer.Completes the services triangle with external and internal marketing. Gap 4 opens when the three disagree. (marketing between contact people and customers) from the plan, no strong internal marketing program.
• Ineffective management of customer expectations: not managing expectations through all forms of communication, not adequately educating customers.
• Overpromising: in advertising, in personal selling, through physical evidence cues.
• Inadequate horizontal communications: between sales and operations, between advertising and operations; differences in policies and procedures across branches.
• Inappropriate pricing: high prices that raise expectations; prices not tied to customer perceptions of value. Customers often have no internal reference price for a service before purchase.

Identifying gaps from a case ✱✱✱must know

The applied version of this chapter: you are given a scenario and must name which gap is open and justify it. Work it in three steps.

1. Locate where the breakdown sits in the chain: expectation → company understanding → standards → delivery → communication.
2. Name the gap and quote its definition.
3. Name the key factor from that gap's list, then prescribe the fix.

Lovelock, Chapter 2

The most heavily marked chapter in the suggestion copies.

The three-stage model of service consumption ✱✱important

Service consumption divides into three principal stages. The nature of the steps varies by whether the service is high-contact (great degree of interaction between service employees and customers, typical of people-processing services) or low-contact (little to no face-to-face contact, common for information-processing services delivered at arm's length).

Stage 1 · Pre-purchase

Begins with need arousalThe moment a customer becomes aware of a need, which starts the pre-purchase stage.Three triggers: unconscious, physical, external. Only the third is under a marketer's control., the prospective customer's awareness of a need. Needs may be triggered by unconscious minds (personal identity and aspirations), physical conditions (hunger), or external sources (a firm's marketing activities).

Information search follows. The alternatives that come to mind form the evoked setThe small group of brands a customer actually considers, drawn from memory or from search.Not every option available. Getting into it is a communications problem; winning inside it is positioning. (also called the consideration set), the set of products or brands a customer may consider in the decision-making process, derived from past experience or external sources.

Service attributes: the three types

All products sit on a continuum from easy to evaluate to difficult to evaluate. Most physical goods sit left (high in search attributes); most services sit centre-to-right (high in experience and credence attributesFeatures a customer cannot confidently judge even after consumption: a diagnosis, an audit, legal advice.Why professional firms lean on credentials and guarantees — the customer buys the signals instead of the work.). Do not overgeneralize: an experienced customer evaluates differently from a first-time user.

Perceived risk: seven types

The harder a service is to evaluate before purchase, the higher the perceived riskThe customer's sense of possible loss from a purchase they cannot fully assess in advance.Seven types and the order is easy to lose. Two F's, two P's, then the rest: Functional, Financial, Temporal, Physical, Psychological, Social, Sensory.. Customers are risk averse and, everything else equal, choose the service with the lower perceived risk.

How customers reduce risk: seek information from trusted personal sources; use the web to compare offerings and read independent reviews; rely on a firm with a good reputation; look for guarantees and warranties; visit facilities or try the service, examining tangible cues; ask knowledgeable employees about competing services.

How firms reduce customers' perceived risk: encourage previews through brochures, websites and videos; encourage visits to facilities in advance; offer free trials for services high in experience attributesFeatures that can only be judged during or after consumption: a meal, a flight, a haircut.Free trials work here and nowhere else, since they cannot resolve a credence attribute at all.; advertise; display credentials; use evidence managementDeliberately organising every tangible signal a customer meets so they add up to the intended image.Berry and Bendapudi's term. Treat it as the operational form of 'tangible cues', with a checklist attached., an organized approach presenting coherent evidence of the company's targeted image and value proposition, including furnishings, equipment, facilities, employee dress and behavior; institute visible safety procedures; give online access to order status; offer service guarantees.

Service expectations: four components

The zone widens or narrows with competition, price and importance of specific attributes. Adequate service levels move readily; desired levels move up only slowly. Predicted service is probably the most important level for the consumer choice process.

Purchase decision: after comparing attributes, assessing perceived risk and forming desired, adequate and predicted expectations, the customer selects the preferred option. Frequently purchased services are decided quickly; complex decisions involve trade-offs, with price often the key factor.

Stage 2 · The service encounter ✱✱✱must know

A service encounterAny period in which a customer interacts directly with a service provider.Duration is irrelevant to the definition: a 15-second call and a four-day hospital stay both qualify. is a period of time during which a customer interacts directly with a service provider. Some are very brief (a taxi ride, a phone call); others extend over a longer time frame and involve multiple actions (a hospital visit lasting several days). High-contact services supply a greater array of clues to service quality than low-contact services.

1 · Service encounters are "moments of truth"

Richard Normann borrowed the metaphor from bullfighting: perceived quality is realized at the moment of truthThe instant of contact at which the customer forms their judgement of quality.Normann took it from bullfighting, where the phrase means the kill. Quote Carlzon's arithmetic: 10 million customers, 5 staff, 15 seconds., when the service provider and the service customer confront one another in the arena. At that moment they are very much on their own: it is the skill, motivation and tools of the firm's representative and the expectations and behavior of the client which together create the service delivery process.

In bullfighting the life of the bull or the matador is at stake; in services it is the life of the relationship. The goal of relationship marketingBuilding and retaining long-term customer ties rather than maximising individual transactions.Always define it against transactional marketing. In gap 1 the failure is chasing new customers over current ones. is to prevent one unfortunate (mis)encounter from destroying a mutually valued long-term relationship.

Jan Carlzon (SAS) used the metaphor to transform SAS from an operations-driven business into a customer-driven airline: 10 million customers × 5 employees × 15 seconds = 50 million "moments of truth" a year, the moments that ultimately determine whether SAS succeeds or fails.

2 · Levels of customer contact ✱✱✱must know

Figure 2.7 groups services into three levels of customer contact, representing how much customers interact with service personnel, physical service elements, or both. Contact level is really a spectrum, but it is useful to examine the high and low ends.

3 · The servuction system

Coined by Pierre Eiglier and Eric Langeard (service + production) to describe that part of the service organization's physical environment that is visible to and experienced by customers. It consists of a technical coreThe back-stage part of the operation where inputs are processed and the service is produced.Customers do not care what happens here until it leaks forward, which is why the misread kitchen order is the textbook illustration., invisible to the customer, and a service delivery systemThe visible front stage where the service is assembled and handed over: premises, equipment, staff, other customers.High-contact services have a large one; low-contact services push nearly everything backstage. How much is visible is the design lever., visible to and experienced by the customer.

The model also shows Customer A and Customer B interacting: other customers present during the encounter can create value (a pleasant environment, interesting people) or destroy it (someone blocking your view in a movie theatre). Firms have to "engineer" all interactions.

The proportion visible to customers varies with contact level: high-contact services have a substantial visible component and many moments of truth to manage; low-contact services keep most of the operations back-stage, with front-stage limited to mail and telecommunications.

4 · Theater as metaphor for service delivery

Because service delivery is a series of events customers experience as a performance, theater is a good metaphor, particularly for high-contact providers and businesses serving many people at once.

• Service facilities are the stage on which the drama unfolds. The setting can change from one act to another: airline passengers move from terminal entrance to check-in to boarding gate to aircraft. Some stages have minimal props (a taxi), others elaborate ones (resort hotels).
• Personnel are the cast, playing roles as actors in a drama, supported by a back-stage production team. Costumes matter: hotel doormen's uniforms, UPS brown, Disney's grooming standards and its rule against beards except in costumed roles.

5 · Role and script theories

The servuction model is static: it describes a single encounter, one moment of truth. Real service processes are a series of encounters (reserving → checking in → flying → collecting bags), so role and script theories are needed to understand, design and manage both employee and customer behavior.

Tightly scripted dramas (formal upscale restaurants) reduce variability and ensure uniform quality; scripts are more flexible for highly customized services: designers, educators, consultants. The dental example (Figure 2.9) scripts 31 steps across three players: patient, receptionist and dental hygienist.

The two complement each other: role theory says what a professor and a student are; script theory says what specific actions each takes and in what order. Excellent service marketers proactively define, communicate and train employees and customers in both.

Stage 3 · Post-encounter

Customers evaluate the service performance they experienced and compare it with their prior expectations.

Satisfaction is an attitude-like judgment following a consumption experience. The essential determinant is the confirmation or disconfirmation of preconsumption expectations, measured against the predicted service level:

Customers are reasonably satisfied as long as perceived performance falls within the zone of toleranceThe band between desired and adequate service within which variation passes unnoticed.Widens and narrows by customer and occasion. Price narrows it sharply — a premium fare buys a much thinner zone., above the adequate service level. As perceptions approach or exceed desired levels customers are very pleased, leading to repeat purchase, loyalty and positive word of mouth. Falling short leads to complaints, suffering in silence, or switching providers.

Are expectations always the right comparison standard?

No. In noncompetitive markets, or where switching costs are prohibitive, defining satisfaction against prior expectations is risky: if expectations are low and delivery meets that dismal level, customers hardly feel they received good quality. Better then to use needs or wants as the comparison standard. With high-credence services, customers use tangible cues and experience factors as proxies, producing a halo effectLetting one attribute the customer can judge colour their assessment of the quality they cannot.Why hospital food ratings track perceived clinical quality: customers judge what they are able to, then generalise. where perceptions of quality are driven by process and tangibles rather than core attributes.

Customer delight

Oliver, Rust and Varki: delight is a function of three components: (1) unexpectedly high levels of performance, (2) arousal (surprise, excitement) and (3) positive affect (pleasure, joy, happiness). High satisfaction alone is only positively disconfirmed expectations plus positive affect. Delight therefore requires focusing on what is currently unexpected, more than the "zero defects" strategy of just avoiding problems.

The caution: once customers have been delighted, their expectations are raised, and it takes more effort to delight them next time. Fornell and colleagues warn that continually trying to exceed expectations reaches the point of diminishing returns.

The lists you must be able to write out from memory

Cover the answer, say the list out loud, then open to check. Everything expands when printed.