SERVICES MARKETING: People, Technology, Strategy 5/e

Christopher Lovelock and Jochen Wirtz

PRENTICE HALL, 2004

Slide 2004 by Christopher Lovelock and Jochen Wirtz

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20 Years of Services Marketing

1984 Lovelock, 1st edition 1991 Lovelock, 2nd edition 1996 - Lovelock, 3rd edition 2001 - Lovelock, 4th edition 2002 - Lovelock, Wirtz, and Keh, Services Marketing in Asia 2004 - Lovelock & Wirtz, 5th edition

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Whats New?

New co-author Jochen Wirtz New streamlined structure slimmed down from
18 chapters to 15, more tightly written

Coverage of latest research and developments New examples New readings 6 of 8 are new

in management practice (check the references!)

New cases 12 of 15 are new, balance all updated

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Jochen Wirtz, PhD

Associate Professor, National University of Singapore

Born in Germany PhD in services marketing, London Business School (chair: John Bateson) Winner of six best paper awards, including (with Patricia Chew) most outstanding article of 2002 in International Journal of Service Industry, 2002 Co-author, Services Marketing in Asia (Prentice Hall 2001) Six awards for outstanding teaching, including university-wide award, 2003

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Jochen and family at Awards Banquet for NUS Outstanding Educator Award, 2003
NUS Outstanding Educator Award, (university-wide) 2003 (Only two awards each year among 2,700 NUS faculty) Previous teaching Awards at NUS Business School, 1996, 1998, 1999, 2001, 2002
T

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Target Markets for SM5

Primary targets
MBA courses in services marketing, service management Upper division undergraduate courses (same)

Secondary targets (with supplementary readings and cases)

MBA courses in public and nonprofit marketing Courses in tourism, hotel and restaurant marketing Courses in marketing at other professional schools

(e.g., architecture, public health)

Can also be used in executive education courses

that emphasize services marketing/management

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Services Marketing 5/e: A Simple, Intuitive Structure Students Understand Right Away
Part I Part I I Part Understanding Service Products, Consumers & Markets Understanding Services, Consumers & Markets Understanding Services, Consumers & Markets
Introduction to Services Marketing Introduction to Services Marketing Consumer Behavior and Service Encounters Consumer Behavior and Service Encounters Positioning Services in Competitive Markets Positioning Services in Competitive Markets

Part II Part II Key Elements of Services Marketing Key Elements of Services Marketing
Creating the Service Product Creating the Service Product Designing the Service Communications Mix Designing the Service Communications Mix Pricing and Revenue Management Pricing and Revenue Management Distributing Services Distributing Services

Part III Part III Managing the Service Delivery Process Managing the Service Delivery Process
Designing and Managing Service Processes Designing and Managing Service Processes Balancing Demand and Capacity Balancing Demand and Capacity Planning the Service Environment Planning the Service Environment Managing People for Service Advantage g Managing People for Service Advantage

Part IV Part IV Part IV Implementing Services Marketing Implementing Services Marketing

Managing Relationships and Building Loyalty Managing Relationships and Building Loyalty Customer Feedback and Service Recovery Customer Feedback and Service Recovery Improving Service Quality and Productivity Improving Service Quality and Productivity Organizing for Service Leadership Organizing for Service Leadership

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Implementation in a Course

SM5 offers an integrative package:

15 chapters of text (with lots of examples) 8 readings 15 cases

Not built around a central conceptual framework that must be built through a pre-defined sequence of chapters Instead, offers a toolbox of important concepts and theoretical constructs that have practical application to management Very flexibleafter Part 1, chapters can be taught in multiple sequences; certain topics can be omitted in short courses Links research findings to good managerial practice End-chapter questions, cases study questions, and suggested student papers/projects get students to work through concepts, come
Services Marketing 5/E

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up with detailed analysis and practical solutions

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SM5 CONTENT HIGHLIGHTS

Chapters, Readings, Cases, Pedagogical Aids

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Part 1: Understanding Service Products, Consumers and Markets

1. Introduction to Services Marketing
Differences among services are as important as differences between goods and services Service success requires focus on both customers and competitive markets

2. Consumer Behavior in Service Encounters 3. Positioning Services in Competitive Markets

t

Positioning distinguishes a service brand from its competitors Using positioning maps to plot competitive strategy

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Four Categories of Services Employing Different Underlying Processes (Fig. 1.5)

What is the Nature of the Service Act?

TANGIBLE ACTS

Who or What is the Direct Recipient of the Service?

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

People Processing
e.g., airlines, hospitals, haircutting, restaurants hotels, fitness centers

Possession Processing
e.g., freight, repair, cleaning, landscaping, retailing, recycling

INTANGIBLE ACTS

Mental Stimulus Processing

e.g., broadcasting, consulting, education, psychotherapy

Information Processing
(directed at intangible assets)

e.g., accounting, banking, insurance, legal, research

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Positioning after New Hotel Construction: Price vs. Service Level (Fig. 3.6)
Mandarin New Grand Heritage Marriott Continent al Expensive

Action? Regency PAL ACE Shangri -La No action? Atlantic Sheraton Italia

High Service

Moderate Service

Less Expensive

Castle Alexander I V

Airport Plaza

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Part 2: Key Elements of Services Marketing

4. Creating the Service Product
Flower of Service model of core and supplementary services

5. Designing the Communications Mix for Services 6. Pricing and Revenue Management
Activity based costing (ABC) Revenue management (+ Kimes & Chase reading + 2 cases) Ethical concerns and perceived fairness in pricing policies

7. Distributing Services
Place, cyberspace, and time Role of intermediaries, franchising (Aussie Pooch case) International distribution of services

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The Flower of Service: Categorizing Supplementary Services (Fig. 4-5)

Informati on Payment Consultation

Billing

Cor e

Order-Taking

KEY:

Exceptio ns

Hospitality

Facilitating elements Enhancing elements

Safekeeping

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Splitting Responsibilities for Delivering Supplementary Services (Fig. 7.2)

4

As created by originating firm

As enhanced by distributor

As experienced by customer

Core

Core

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Part 3: Managing the Service Delivery Process

8. Designing and Managing Service Processes
Detailed review and example of blueprinting The customer as productive co-producer vs. the Jaycustomer as abusive threat to profitability, quality, and safety

9. Balancing Demand and Capacity 10. Planning the Service Environment

Designing and managing the servicecape: role of music, scents, and colors (+ Haeckel, Carbone, and Berry reading) Role of architecture and other visual design elements, illustrated by photos

11. Managing People for Service Advantage

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Simplified Example: Blueprinting a Hotel Visit

(extract only)

Physical Evidence Stage

Hotel exterior, lobby, employees, key Make Customer reservation Actions Employee Actions Face-to-face Phone Contact Arrive, valet park Doorman greets, valet takes car Check-in at reception t Receptionist verifies, gives key to room

Elevator, corridor, room, bellhop Go to room

Line of Interaction Front

Line of Visibility Backstage

Rep. records, confirms Valet Parks Car Enter data Register guest data
Services Marketing 5/E

Make up Room

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Comparison of Hotel Lobbies

(Figure 10.1)

The servicescape is part of the value proposition!

Orbit Hotel and Hostel, Los Angeles

Four Seasons Hotel, New York

Part 4: Implementing Services Marketing

12. Managing Relationships and Building Loyalty
How to calculate customer lifetime value (+ Mass Audubon case) Customer relationship management systems

13. Customer Feedback and Service Recovery 14. Improving Service Quality and Productivity 15. Organizing for Service Leadership
Integrating marketing, operations, and human resources Moving up the service leadership ladder losers, nonentities, professionals, leaders Individual leadership qualities, culture and climate

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The Wheel of Loyalty (Fig. 12.7)

3. Reduce Churn Drivers
Conduct churn diagnostic Address key churn drivers
Enabled through: Frontline staff Account managers Membership programs CRM Systems

1. Build a Foundation for Loyalty

Segment the market Be selective in acquisition Use effective tiering

Implement complaint handling & service recovery Increase switching costs

Customer Loyalty
2. Create Loyalty Bonds
Give loyalty rewards
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Build higher level bonds

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of service. Del iver qua lity ser vice .

onship

D e e p e n t h e r e l a ti
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Courses of Action Open to a Dissatisfied Customer (Figure 13.1)

Complain to the Complain to the service firm service firm Take some form Take some form of public action of public action Service Encounter Service Encounter is Dissatisfactory is Dissatisfactory Take some form Take some form of private action of private action Take no action Take no action Complain to aa Complain to third party third party ake legal action Takelegal action to seek redress to seek redress Defect (switch Defect (switch provider) provider) egative word-ofN Negativeword-ofmouth mouth

Any one or aacombination of Any one or combination of these responses is possible these responses is possible

Cause and Effect Chart for Airline Departure Delays (Fig. 14.3)
Facilities, Equipment Frontstage Personnel Procedure

Arrive late Oversized bags

Gate agents Aircraft late to gate cannot process Mechanical fast enough Failures Late pushback

Delayed check-in procedure Acceptance of late passengers

Customers

Late/unavailable airline crew

Delayed Departures Other Causes

Weather Air traffic Late food service Late baggage Late fuel Late cabin cleaners Poor announcement of departures Weight and balance sheet late

Materials,

Supp

lies

Backstage Personnel

Information

Eight Readings Important Insights from Thoughtful Practitioners and Leading Researchers

Selected for readability and potential to

stimulate classroom discussion

On average, shorter than those in previous edition Two carried over from 4th edition, six new Academic authors featured are:
Len Berry, Dick Chase, Marc Epstein, Ray Fisk, Steve Grove,

Sherri Kimes, Kay Lemon, Roland Rust, Tony Simons, Robert Westbrook, Valarie Zeithaml

Topics: service theater, competing in a weak industry,

service brand equity, yield management, leading the customer experience, investing to build customer equity, why service stinks, action-profit linkage model
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15 Terrific Classroom-Tested Cases, Offering Instructors Lots of Choice and Flexibility

Number of cases has been increased to 15 (including a th

3-part case series) up from 10 in 4 edition edition and updated

12 cases are new to this edition, 3 carried over from 4th Students will appreciate an exceptionally up-to-date
selection all 2000 or later, most 2003 or 2004

A mix of lengths and levels of difficulty Cases drawn from Harvard, Yale, and INSEAD collections,
as well as new cases from Lovelock and Wirtz

A broad cross-section of service industries and situations Teaching notes provide detailed analysis and teaching
suggestions to help instructors do a great job in class

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Most Cases Can Be Used for Class or Written Assignments; Depict a Wide Array of Situations

Fast food High tech Car insurance e-Service Restaurant Environmental

organization

Car sales and repair Telecommunications Retail banking Apparel retailing Hotels Franchised dog washing

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Aussie Pooch Mobile: When the Client is a Dog, CB means Canine Behavior

APM franchisee Elaine Beal washes Zak the Rottweiler outside his owners home in suburban Brisbane

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Pedagogical Aids in the Book

Introduction to each chapter highlights key issues and

questions

Four types of boxed inserts

Best Practice in Action (application of best practices) Research Insights (summaries of research findings) Service Perspectives (in-depth examples illustrating key concepts) Management Memo (reviews of key concepts)

Review questions and application exercises Suggested study questions for all cases Good selection of graphics (many also as PowerPoints)
F

Occasional cartoons use humor to make a point

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Instructors Resource Material

Detailed instructors manual on course website

Summaries of chapters with teaching hints Answers to study questions Sample course outlines Summaries of readings with teaching hints 16 student exercises and 5 comprehensive projects Advice on how to succeed in case teaching Outstanding teaching notes for cases

More than 280 PowerPoint slides, organized into

15 chapter-specific files

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