CHAPTER 2

INTRODUCTION TO SERVICES MARKETING

2.1 Introduction

The turn of the century has seen profound changes in the global economy. Services

have played a crucial part in these changes, because services are becoming the way

organizations meet with their markets (Irons, 1997:4) Already organizations have

discovered that their survival no longer exclusively depends on the products they

offer, but also on the additional offerings they make to their customers that

differentiate them from their competitors. Innovative organizations, offering new

services as well as unique customer services, are now succeeding in markets where

established organizations have failed (Lovelock and Patterson, 1998:4).

Services marketing is not a self-enclosed task but is integral to service organizations

as a whole and the object of the activity is people, who are reactive, not passive as

compared with a product (Irons, 1997:18). Services marketing concepts, frameworks

and strategies were developed as the result of interlinked the forces of many

industries, organizations, and individuals who have realized the increasingly

important role services are playing in the current world economy. Initially the

development of services marketing focused on service industries. However,

INTRODUCTION TO SERVICES MARKETING 19

manufacturing and technology industries recognized services as a prerequisite to

compliment their products, in order to compete successfully in the market place.

Therefore it can be argued that, in most industries, providing a service is no longer an

option but a necessity.

Providing a service is a people business. The interaction between customers and

service employees is vital for the actual success of service delivery. Rendering

excellent quality service depends very much on the way service employees behave.

In this regard, service competencies and service inclination contribute towards the

success of services (Kasper, van Helsdingen, de Vries, 1999:513). Customers are

becoming more educated and demand not only quality products but also high levels

of services to accompany them. Service organizations therefore need to adapt to

customers’ views on services in order to assess whether the services they provide

are perceived by customers as better than those provided by other service providers

(Kasper et al., 1999:139).

The objective of this chapter is to address the issues surrounding services, services

marketing challenges and the human element of service processes. The chapter is

divided into three parts. Part one defines services and discusses the unique

characteristics that differentiate services from goods. These characteristics of

services present service marketers with unique marketing challenges. The second

part investigates the roles that the services marketing triangle and the service mix

play in addressing these challenges. Services are about people and for that reason,

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INTRODUCTION TO SERVICES MARKETING 20

part three concentrates on the roles which customers and service employees play in

services.

2.2 Service definition

A wide variety of activities labelled as services are practised by both profit-orientated

organizations and non-profit orientated organizations. The success of these

organizations depends on delivering excellent service quality and creating value to

customers (Kasper et al., 1999:13). Defining services is therefore not a simplistic

task. Over the years service marketing literature has provided readers with an

assortment of service definitions.

According to Irons, (1997:12) pure services are intangible but they do usually add

value to, or make available, a tangible product. They do not result in transfer of

ownership and may leave only memories.

Zeithaml and Bitner (1996) claim that in the simplest terms services are deeds,

processes, and performances. Their broader definition states that services include 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 that are essentially

intangible concerns of the purchaser.

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INTRODUCTION TO SERVICES MARKETING 21

Kotler (1996) defines service as an activity that one party offers another that is

essential intangible and does not result in the ownership of anything. Its production

may or may not be tied to a physical product.

Grönroos (1990) identifies a service as an activity or series of activities of a more or

less intangible nature that normally, but not necessarily, takes place in interaction

between the customer and service employees and/or physical resources or goods

and/or systems of the service provider, which are provided as solutions to customer

problems.

The conclusion derived from the above definition is that services deal with intangible

components. The purchase of services does not necessarily result in physical

transfer or ownership but still creates a bundle of benefits during or after the service

interaction or experience.

Distinguishing between the tangible and intangible components of a service is

extremely difficult. Therefore, separating the core service from the augmented

service helps to simplify this task. The core service represents the fundamental

benefits the service provide to satisfy customers’ needs. The augmented service

incorporates the core service in addition to the tangible elements and all additional

benefits of the service employed to satisfy customers’ needs. The core services are

mostly intangible because of their lack of physical attributes, while augmented

services provide the customer with the impression of the services’ tangibility

component, because it can be seen, touched, and transferred to the customer.

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INTRODUCTION TO SERVICES MARKETING 22

Mostly the result of the service interaction is a product of a tangible nature (Kasper et

al., 1999:139; Palmer, 1994:127).

The bundle of benefits is the customers’ expectations from the service. Customers

experience positive consequences of service processes as benefits, while negative

consequences are experienced as perceived risks. The bundle of benefits and the

way the services are delivered is aimed at creating customer satisfaction. In most

service processes, consumption and production of services take place at the same

time. This procedure requires interaction between the service provider and the

customer to complete the service process. The success of the service process is

subsequently dependent on the success of the interaction.

From the above discussion Kasper et al., (1999:13) have constructed a broad

definition of service in which the relevant topics will be recognized: Services are

originally intangible and activities which are relatively quickly perishable activities

whose purchase takes place in an interaction process aimed at creating customer

satisfaction, but this interactive consumption does not always lead to material

possession.

Over time, services and the service sector have been defined in many different ways,

which add to confusion and disagreement when discussing services and service

marketing. For the purpose of this study, the above-mentioned broad definition of

services will apply and it will be acknowledged that there are very few pure services,

in other words totally intangible offerings.

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INTRODUCTION TO SERVICES MARKETING 23

2.3 Characteristics of services

The inherent differences that exist between goods and services result in unique

management challenges for service organizations (Zeithaml and Bitner, 1996:18).

Services possess five unique characteristics; namely intangibility, perishability,

inseparability, variability, and lack of ownership, that differentiate them from goods.

These characteristics create distinctive challenges for service marketers in attracting

new customers, and keeping existing customers. These characteristics are explained

in the ensuing sections.

2.3.1 Intangibility

Intangibility is the dominant characteristic of services (Clemes, Mollenkopf and Burn,

2000:online) and is defined as the lack of tangible assets which can be seen,

touched or smelled prior to purchase (Kurtz and Clow, 1998:10). However, services

vary in the degree to which they are intangible and most services include some kind

of tangible element.

The tangibility spectrum (Figure 2.1) places highly tangible offerings at one end of the

continuum and intangible services on the opposite end of the continuum. It is clear

that very few offerings are totally tangible or intangible (Bebko, 2000: online).

The intangible characteristic of services present service marketers with several

problems. The lack of physical attributes of services makes it difficult to display or

INTERNAL MARKETING IN A SERVICE ORGANIZATION
INTRODUCTION TO SERVICES MARKETING 24

communicate services readily and easily to customers (Hill and Ghandi, 1992:online).

Customers often find it mentally difficult to grasp the service performance or

experience without tangible evidence, which makes it difficult to diffuse (Zeithaml,

1991: online). Services that rely intensely on customer involvement, present cost

calculation difficulties that lead to price setting inadequacies for service marketers

(Dearden, 1978:online).

FIGURE 2.1: THE TANGIBILITY SPECTRUM

Salt
Soft Drinks
Detergents
Automobiles
Cosmetics
Fast-food
Outlets
Intangible
Dominant

Tangible
Dominant Fast-food
Outlets
Advertising
Agencies
Airlines
Investment
Management
Consulting
Teaching

Source: Zeithaml, V.A. and Bitner, M.J. 2000 Services Marketing: integrating
customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p 23.

Kurtz and Clow, (1998:11) indicate that these problems can, to a certain extent, be

successfully resolved by reducing the intangibility of service offerings through

stressing the tangibility components of offerings, stimulating word of mouth

communication, creating a strong corporate image, encouraging employees to

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INTRODUCTION TO SERVICES MARKETING 25

communicate with customers, and using unique attributable cost and perceived value

pricing. Service providers must always take into account the fact that customers use

the tangible elements, such as the people who provide the service, the environment

in which the service encounter takes place, the equipment used, and the price of the

offering, to make assumptions about the quality of the service and to compare it to

the offerings of other service providers.

2.3.2 Variability

Variability refers to the unwanted or random variable levels of service quality

customers receive when they support an organization (Kurtz and Clow, 1998:10).

The primary reason for variability is the human element present in the service

process, accordingly sustaining the statement of Kotler (1991:608) that the quality of

service depends on the service provider. Because humans normally perform

services, the chance of two service performances being the same is highly unlikely.

Different service employees will perform the same service process differently and the

same service employee will provide a varying service under different circumstances

or at different times. Nevertheless, the recipients of the service are also human, with

their own unique demands and expectations of the service performance.

Service marketers find it difficult to control the quality of the service performances

because it is dependant on fallible employees as one of the main inputs (Bitner and

Zeithaml, 1997: online). The reliance on people’s performances causes

standardisation service processes to be almost impossible. The intentional or

INTERNAL MARKETING IN A SERVICE ORGANIZATION

INTRODUCTION TO SERVICES MARKETING 26

unintentional customisation of service processes and output performances by service

employees for individual customers makes promotion of services very difficult

(Clemes, Molenkopf and Burn,2000:online).

Customers in general perceive the person who delivers the service “as the service”.

As a result, service providers have the ability to alter the outcome and level of

customer satisfaction. Service marketers are confronted with the challenge of

controlling service quality because consistent quality service performances play a

vital role in the survival of organizations. Service quality is profoundly dependent on

the ability of customers to articulate their needs and level of service demands.

Equally, service quality depends on the ability, and willingness of the service provider

to satisfy customers’ needs and demands. Organizations can put into practice service

quality control and measurements by recruiting service-orientated employees and

training them to provide a service that will meet or exceed customers’ expectations.

2.3.3 Inseparability

Inseparability refers to the simultaneous production and consumption of a service

(Kurtz and Clow, 1998:10), thus it is often difficult to separate the service provider

from the service performance. Customers are normally present at and during the

service performance and play an active role in the service production process. The

quality of the service performance is dependent on the interaction between the

service provider and the customer.

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INTRODUCTION TO SERVICES MARKETING 27

The customer’s involvement in the production process of the service can influence

the outcome of the service positively or negatively (Hill and Ghandi, 1992:online).

Service marketers must recognize that the roles customers play in the service

production process influence the service outcome, not only for themselves but also

for other customers. The inter-client interaction between customers also plays an

integral part in the outcome of service experiences (Grönroos, 1978, Grove and Fisk,

1997: online). Service organizations must acknowledge the influential role that

service employees play in service processes. The service employees or the service

providers are often seen as the service itself (Wirtz and Bateson, 1995: online).

The inseparability of production and consumption means that very few service

offerings can be mass-produced, but almost every service offering can be

customised to customers’ needs and demands. Customisation is to the advantage of

service organizations, because customers use the degree of customisation of service

offerings to measure the quality of services.

2.3.4 Perishability

Perishability is the inability of a service to be inventoried or stored (Kurtz and Clow,

1998:10). This characteristic is of major concern to service marketers because it

inevitably leads to supply and demand problems. The capacity lost in services can

never be regained and to equalise supply and demand is a difficult task. These

distinct service problems present service marketers with the challenge of setting up

good recovery strategies for service process failures. Research has shown that

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INTRODUCTION TO SERVICES MARKETING 28

resolving customer problems effectively has a powerful impact on customer

satisfaction and loyalty. The perishability characteristic of services creates the

opportunity for the organization to develop creative planning for capacity utilisation

and management of future demand (Zeithaml and Bitner, 1996:21).

2.3.5 Ownership

Ownership is the last characteristic of services that distinguish it from goods.

Customers receive only the right to a service process when they purchase it.

Subsequently it is assumed that payment for services buys only the right of access to

a service and not physical transfer of ownership to customers.

Customers view the lack of ownership of a service as a perceived risk. Firstly they

are presented with the uncertainty as to whether the right service has been obtained

and secondly with the uncertainty about the consequences of the service purchase.

Since services are produced and consumed simultaneously, the option of “returning”

a service does not exist. The inability to own a service also has direct implications on

the distribution of services. Service customers usually only have use or access to a

facility where a service is performed.

Kotler (1991:609) suggests that services call for special marketing solutions. The

characteristics of services create problems for service marketers that are not

experienced by product marketers. If these problems are not carefully managed,

organizations may experience negative influences on service quality that will

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INTRODUCTION TO SERVICES MARKETING 29

ultimately reduce customer retention and organization profits (Wirtz and Bateson,

1995: online). In this regard, Zeithaml and Bitner (1996) have proposed a services

marketing triangle which will be discussed in the next section.

2.4 The services marketing triangle

Service marketers face marketing challenges which revolve around issues such as:

• understanding customers’ needs and expectations of services,

• making services tangible to customers and

• keeping and dealing with promises made to the customers (Zeithaml and

Bitner, 1996:14).

The services marketing triangle shown in Figure 2.2 helps service marketers to

address these challenges. The three points of the service triangle represent the

organization, the customers, and the employees. Between each of the three points of

the triangle different marketing processes such as external marketing, interactive

marketing and internal marketing must be successfully carried out for service

processes to succeed and to build and maintain relationships with the internal and

external customers.

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INTRODUCTION TO SERVICES MARKETING 30

FIGURE 2.2: THE SERVICE MARKETING TRIANGLE

Management

Internal External
Marketing Marketing
enabling setting
promises promises

Employees Interactive Marketing Customers

keeping promises

Source: Zeithaml, V.A. and Bitner, M.J. 2000 Services Marketing: integrating
customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p 23.

2.4.1 External marketing

The link between an organization and its customers is the external marketing

process. External marketing represents the promises which organizations make to

their customers with reference to products or services they offer. Organizations make

promises to customers concerning their offerings and how delivery of the offerings

will be conducted. The external communication activities of the service provider play

a key role in the formation of customers’ expectations, because their expectations are

affected by the service provider’s direct and indirect marketing messages (Kasper et

al., 1999:216).

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INTRODUCTION TO SERVICES MARKETING 31

In goods as well as services, the traditional marketing activities facilitate external

marketing processes. Promises made in advertisements and through promotions are

used by customers to form service expectations. These can also positively or

negatively influence the customers’ initial expectations of the desired level of service

compared to the adequate level of service. Customers use price as an indication of

the quality of the offering, while the promise of availability and accessibility of an

offering has an impact on the customers’ service expectations (Kurtz and Clow,

1998:76). However, for service organizations, factors such as service employees,

organization image and visible structures, and the actual service process itself, form

the basis for customers’ expectations of the offering and the delivery thereof.

Customers’ expectations and experiences fuse, therefore much of their final belief is

drawn from the environment in which they receive the service and the personalities

and behaviour of the people they encounter during service processes (Irons,

1997:14).

The organization’s projected values and integrity must be the priorities that govern

the promises made to the customers during the external marketing process.

Customers expect consistent and realistic promises that will at all times be honoured

by the organization. Creating unrealistic customer expectations create dissatisfied

customers (Piercy, 1998:48). Misleading customers or over-promising to them can

negatively influence the relationship between the organization and the customer.

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INTRODUCTION TO SERVICES MARKETING 32

2.4.2 Interactive marketing

The interactive marketing process is about keeping the promises made by the

organization to the customer along with delivering a quality service to the customer.

Interactive marketing is the actual contact between the service employees and the

customers and is called the "moment of truth" or service encounter. It is the decisive

moment in the service process where organizations actually show what they can do

and how they meet the set expectations (Kasper et al., 1999:11). At these decisive

moments, everything about the service process can succeed or fail. The success or

failure can be temporary, complete, or final but the interaction can never be restaged

or controlled (Irons, 1997:46).

The marketing focus of service organizations has shifted from the offering to the

customers, to the interaction that takes place between the service employees and the

customers. Through their interactions with employees, customers form a perception

of the integrity of an organization’s service promises. They furthermore use the

interaction to assess the value of the offering, and to make the decision to purchase

or repeat the purchase of an offering. From a customer’s point of view, this is the

most important stage of the service delivery process as it is during this process that

they receive the value they actually desire.

Interactive marketing performs a vital function in the establishment of a relationship

between the organization and the customer. The customer’s perception of the service

is derived from the delivery of the service, and cannot be separated from the contact

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INTRODUCTION TO SERVICES MARKETING 33

they experience with service employees. Therefore, it can be argued that

relationships are an inevitable outcome of service delivery. However, it is important

for organizations to acknowledge the fact that relationships do not necessarily exist

between the organization and the customer, but to a greater extent between the

service employees and customers. The success of these relationships depends

profoundly on the attitude service employees have towards their employment and

their loyalty towards the organization. It is the responsibility of the organization to

recruit service-orientated employees very carefully, involve them in organization

activities, and motivate them to follow the examples set by the leaders of the

organization (Irons, 1997:53).

During interaction, employees and customers meet face to face and the actions of

service employees will be a major factor in influencing the customers’ expectations of

the service. Customers’ evaluation of services is based on their interaction with

service employees, therefore it is of the utmost importance that service organizations

continuously strive to improve the quality of interactions (Sundaram, 2000:online).

Newton (1992) states that people forget how fast you performed a service but they

remember how well you did it. Service organizations must therefore ensure that their

service employees have the skills and ability to perform the service to meet the

customers’ expectations (Kurtz and Clow, 1998:117). The reliability of services is

tested every time a customer interacts with the employees and the service provider

whom they represent.

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INTRODUCTION TO SERVICES MARKETING 34

2.4.3 Internal marketing

The marketing process that enables service marketers to deliver promises to

customers is called internal marketing. Through internal marketing, the organization

reveals that it consists of individuals and departments who are considered to be each

other’s customers (Kasper et al., 1999:371). Employees do not only provide a service

to the external customers but also to each other within the organization. Promises are

easy to make, but unless organizations have internal systems in place to ensure the

delivery thereof, service processes cannot succeed. The success of internal service

systems is dependent on the relationship between the organization and the

employees (Kasper et al., 1999:371).

Internal marketing hinges on the assumption that employee satisfaction and

customer satisfaction are interlinked, thus internal marketing must precede external

marketing. Organizations whose objective is to deliver constant high service quality

have to enable all employees to practice customer orientation and marketing. Service

organizations must recognize that achieving objectives and creating change can only

be achieved through employees. Service providers need to recruit, train, and provide

tools to employees to perform superior service. Kasper et al., (1999:480) state that

people are valuable assets to an organization. They should therefore be fully

equipped to provide the best service to the external and internal customers.

Employees who understand their functions within the organization are more likely to

create a harmonious work environment that will pave the way for less role ambiguity,

less conflict, and more satisfied employees in the workplace.

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INTRODUCTION TO SERVICES MARKETING 35

The examples set by management for their employees are critical factors for the

success of the internal marketing process. There is a direct link between internal

marketing and the actual delivery of the service, because customers believe that

“what you are is what matters not what you say”.

The success of services relies on the three marketing activities to be carried out

successfully and to be aligned with each other. Each of the activities presents a

challenge and it is important to find strategies that support them all. Successful

external relationships will be repeated internally (Irons, 1997:98).

2.4.4 Technology and the service triangle

The impact of technology on all the dimensions of service delivery has brought about

the expansion of the service triangle to include technology. This expansion will turn

the triangle into a pyramid, as shown in Figure 2.3. This pyramid suggests that

interactive marketing can be the result of interactive relationships between

employees, customers, and technology to produce the desired services. Changes in

information technology offer opportunities to organizations to perform services in

such ways that the customers’ physical presence is not always compulsory.

However, when customers interact only with technology, they will need the skills,

abilities, and motivation to receive the service in this manner. The success of this will

depend entirely on the willingness of the customers to participate in a service process

without human interaction. Technology driven services may hinge upon introducing

more technology in service delivery processes that can either extend the service

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INTRODUCTION TO SERVICES MARKETING 36

process or shorten the actual delivery process. Technology can be used to create

new services, which enable organization to serve customers better and distinguish

themselves from their competitors (Zeithaml and Bitner, 2000:23).

FIGURE 2.3: THE SERVICE MARKETING TRIANGLE AND

TECHNOLOGY

Management

Internal External
Marketing Marketing
enabling setting
promises Technology promises

Employees Interactive Marketing Customers

keeping promises

Source: Zeithaml, V.A. and Bitner, M.J. 2000 Services Marketing: integrating
customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p 23.

A multitude of new service concepts has exploded onto the market because of the

advances of information-based technology. Fax, cellular phones, and electronic mail

are but a few of the technology-based services which have replaced traditional

services. The Internet has made it possible for customers to access services via their

computers and to some extent replace, and enhance the services of traditional

sellers. In all the above, marketing of the service has played an essential role in

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INTRODUCTION TO SERVICES MARKETING 37

educating customers about service concepts (Zeithaml and Bitner, 1996:9).

Educating customers and communicating the benefits of a service both present

continuing challenge for service marketers.

2.5 Services marketing mix

The traditional marketing mix is the most basic concept in marketing and is defined

as elements which organizations control and use to satisfy or communicate with

customers (Zeithaml and Bitner, 1996:23). The components of the traditional

marketing mix are the four P’s: product, price, place, and promotion. Careful

management of these components is essential for the successful marketing of goods

and services in both long-term and short-term marketing strategies of organizations.

Conversely, the traditional marketing mix components have been found to be too

limited in their application of services. The intangibility of service offerings is not

taken into consideration because the focus is on the tangibility of products. The price

component overlooks the fact that many services are produced without a price being

charged to the final customers, and customers frequently use price as an indication

of service quality. Equally, the simultaneous production and consumption of service

offerings make the distribution component difficult to implement and control. While

the promotion component of the traditional marketing mix concerns itself with

advertising, sales promotions and publicity, services marketing involves service

employees and customers in the real time marketing of services during the

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interaction process. The limitations of the traditional marketing mix have lead to

exploitation by service marketers of additional components which services can utilise

to satisfy and communicate with customers, resulting in the adoption of the service

mix. The elements off this new concept are: service offerings (product), price,

distribution (place), promotions, people, physical evidence, and processes.

The three new components address the uniqueness of three of the service

characteristics. They focus, firstly, on the inseparability of service marketers from

customers, secondly, on the inability to hold service in inventory which makes it

critical for the service process to flow smoothly and lastly, on the fact that a highly

intangible service offering must appear tangible (Goncalves, 1998:37). The additional

components of the service mix can be fully controlled by the service organization and

play a vital role in ensuring that marketing is customer focused, not product focused

(Irons, 1997:24). The ensuing sections will provide a detailed description of the

service mix.

2.5.1 Service offerings (Product)

A product is anything that an organization offers to customers that might satisfy a

need, whether it is tangible or intangible (Palmer and Cole, 1995:15). In contrast, the

decisions that face service marketers concerning service offerings are very different

from those related to goods. An analysis of service offerings shows that it can be

divided it into two distinct components namely, a core service offering that represents

the intangible core benefits of services and a secondary service offering that

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represents the tangible and augmented elements of the service offerings. The core

service offerings are developed with customers’ benefit in mind and place the

emphasis on the customers’ perception of services. The secondary service offerings

illustrate the additional benefits that the service offers to meet customers’ additional

needs, and serve to differentiate the offerings from those of competitors’. These

benefits can combine both the tangible and intangible elements of service offerings

that facilitate the customer to comprehend the core service.

Because of its intangibility, services are difficult to control and display to customers.

Consequently, service marketers often emphasise the tangible elements of service

offerings. The more intangible a service, the greater is the need for tangible

evidence. Tangible evidence includes packaging, brand name, corporate image,

service delivery, and service employees.

2.5.2 Price

In the determination of price, service marketers deals very much with the same price

issues as goods marketers. Subsequently, the differences presents itself when the

intangible characteristic of services specifies that price becomes a quality indicator.

The art of successful pricing is to establish a price level that is low enough for the

exchange to represent good value to customers, but high enough to allow service

providers to achieve their financial objectives (Palmer and Cole, 1995:222). The

perishable nature of services makes it important to control the demand and supply of

the service offerings. The price component is the easiest to change and normally

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INTRODUCTION TO SERVICES MARKETING 40

provides the quickest results. Manipulation of the price can influence and control

quantity demand. An increase in price will reduce the demand and/or cause a shift to

lower usage periods. Equally, a decrease in price will cause an increase in demand

and stimulate new demand for the service (Kurtz and Clow, 1998:240).

The price of service offerings is often used by customers as an input into their

expectations, purchase decisions, and evaluation of service quality. It is seen as a

tangible cue in services with a high risk and experience properties, to form

expectations of the service. Price is used as an indicator of quality by customers.

Thus, the assumption is formed that the higher the price of service offerings, the

more is expected of it by customers.

2.5.3 Distribution (Place)

The distribution decision refers to the availability and accessibility of service offerings

to customers. Availability from the customers’ point of view signifies that services are

on hand when they want them, while accessibility is the relative ease with which

customers can conduct service processes with the service providers (Palmer,

1994:33). For pure services, the distribution decision is of little relevance, though

most services involve a tangible component. As a result, the distribution decision

involves physical locations and decisions which intermediaries use to provide the

services.

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2.5.4 Promotions

The promotion mix for the traditional marketing mix is usually broken down into four

components namely advertising, sales promotions, public relations, and personal

selling. However, with the promotion of services, there is a greater need to

emphasise the tangible elements of services such as packaging, brand name,

corporate image, service delivery, and service employees (Palmer and Cole,

1995:16).

The distinctive promotional needs of services stem directly from some of the unique

characteristics of services. The intangibility characteristic of services results in

customers perceiving them as high-risk purchases, with a need for tangible

components as evidence of the service. The inseparability characteristic of services

emphasises the fact that the promotion of service offerings cannot be isolated from

service providers. Therefore, the visible production process, especially the part

played by service employees during interaction, is a critical element in the promotion

process. Berry (1989) states that the service promotion challenge is to transform

invisibility into visibility, vagueness into sharpness, uncertainty into evidence and risk

into benefit (Fugate, 1998: online).

The development of a promotional mix for services relies on the detailed specification

of promotion objectives to ensure that that appropriate messages are chosen and

effectively channelled in a cost effective manner to reach the target market. Typical

service promotional objectives are:

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INTRODUCTION TO SERVICES MARKETING 42

• to develop an awareness or interest in the organization and its services

• to communicate the benefits of purchasing a service

• to build a positive image of the organization

• to differentiate the organization from its competitors

• to remind customers of the existence of the service and the service

organization (Palmer and Cole, 1995:260).

The services promotion mix uses a combination of channels to convey messages to

the target market. These messages are received from sources within the organization

and externally. External sources include word of mouth communications or press

editorials, while internal communications originate from the traditional marketing mix

and from the frontline employees. The combination of communication channels

depends on the characteristics of the target market, the size of the service, the nature

of the service and the cost of the various channels (Palmer and Cole, 1995:260). The

promotional mix of a service organization involves the transmission of messages to

past, present and future customers. The ultimate aim is to make future customers

aware of the service and influence them towards purchase.

2.5.5 People

People as an element in the service mix include all the human actors - the firm’s

employees (internal customers), the buyers (external customers), and other

customers - who play a part in service delivery and accordingly influence the buyers’

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perception of choice in the service environment (Zeithaml and Bitner, 1996:26).

Service employees interact with customers during service delivery processes and

provide cues to external customers concerning the services. Hence, it can be said

that service employees’ competence, attitude, and appearance influence customers’

perception of services. Customers often experience service employees as

synonymous with the service and no matter how small or large a part they play in the

actual delivery of the service, they are still the focal point of the service for

customers. It is crucial that service organizations stipulate very specifically to their

employees what is expected of them during interactions with customers. To achieve

the desired standards of service, service organizations’ recruitment and training

cannot be left to the human resources department only, but should form an integral

part of the service mix decisions. Kheller believes that the heart of the organization is

the people and hiring the right people means hiring people with a service attitude

(Irons, 1997:139). Within successful service organizations, the human resources

department, and the marketing department work together to establish hiring criteria,

training needs, and promotion activities to attract and retain employees who can

deliver the quality service expected by the organizations’ target market.

The marketing department plays an important role in influencing the experience that

both internal customers and external customers will have. External customers choose

to visit a service organization because of the messages relayed through the service

mix, or word of mouth messages communicated by other customers. External

customers who encounter an unacceptable level of service from internal customers,

convey negative word of mouth messages about the service received to other

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customers. Consequently, it is crucial that marketing departments and human

resources departments work together to ensure that the quality of service delivery by

internal customers leads to positive word of mouth messages to external customers

(Gonçalves, 1998:38).

Every employee in an organization must serve other employees in some way or

another. Therefore, just as external customers are needed, so are quality employees

(internal customers) needed. The responsibility lies with service marketers to involve

all employees in the marketing process of an organization. A high level of employee

involvement and motivation is directly linked to an improvement in sales, profitability

and customer loyalty.

2.5.6 Processes

Processes are the actual procedures, mechanisms, and flow of activities by which

services are delivered (Zeithaml and Bitner, 1996, 21). Customers judge services on

the operational flow or on the actual delivery thereof. The inseparability characteristic

of services requires customers to follow a series of extensive or complicated actions

to complete the process. Often the logic of these actions escapes the customers.

Whether the service process is standardised or customised, it is used as evidence by

customers to judge service quality. Standardised services will follow a production-line

approach, while customised services command a greater degree of empowerment.

Nonetheless, the moment of truth where customers experience the evidence, is not a

once-off event but an ongoing process.

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The main ingredients of services processes are the people who participate in it.

Services are of an integrated nature and the organization’s employees continuously

fuse with the external customers. The production and consumption usually takes

place at the same time and research into customers’ attitudes towards service

organizations suggests that customers see a service as an integral process in which

they are intensely involved (Irons, 1997:37). The difference between service

processes and manufacturing processes are that:

• the customers are participants in the service processes,

• service processes are difficult to structure,

• the outcome of services is dependent on internal and external factors,

• the output of service processes leaves only promises and memories and

• service processes play an integral part in customer satisfaction (Gonçalves,

1998:39).

As a rule, services cannot be fixed to a definite time span, because depending on the

nature of the service, it can take anything from a moment to months to complete. A

service can be a well-defined process, where all participants are aware of the

process but a service can also be ill-defined or not obvious to the participant in the

process. Services that offer high degrees of customisation are usually ill-defined.

When service processes progress smoothly, they are hardly noticed by the

customers, who are under the assumption that the process will occur without any

problems every time it is performed. However, when the service process is not

completed successfully, both the internal and external customers are frustrated and

distrustful of the service organization. The success of service processes depends on

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the loyalty and trust- relationships organizations can build with customers. Marketing

and the other organizational functions should work together to determine the needs

of the internal and external customers and satisfy those needs by designing and

refining effective and efficient customer-friendly service delivery processes

(Gonçalves, 1997:41).

The actual service delivery process can be performed in three locations namely,

• the customer’s environment,

• at a store or an office or

• electronically or via telecommunications.

Management have a great deal of control over the last two service delivery

processes.

A service can also be performed on customers, objects, and technological

equipment. Knowing this helps to understand the perceived risk for customers

attached to the service purchase. Service organizations must consider the

importance of communication strategies, appearance, skills, and attitude of service

employees. The physical evidence of delivery processes, such as the delivery

vehicles, print matter and delivery employees must also support a service

organizations’ image. The perishability characteristic of services influences the

service delivery process through the difficulty it presents in managing supply and

demand. Supply and demand cannot be readily adjusted but techniques such as

flexible service hours, price advantages for customers who buy during low demand

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periods, special offers that can only be redeemed during slack time, and refinement

of delivery processes, can provide solutions to service organizations.

2.5.7 Physical evidence

The environment in which the service provider delivers the service and where the

customers and the organization interact, as well as any tangible component that

facilitates performance or communication of the service, is referred to as physical

evidence (Zeithaml and Bitner, 1996, 26). Service organizations need to provide

tangible evidence of the service to develop an image in the mind of current and

prospective customers. Often physical evidence overlaps with the promotion and

distribution mix of the service mix. All tangible representations of services, such as

brochures, letterheads, business cards, report formats, signage, equipment, and

physical facilities where service are rendered, represent the physical evidence of

services.

Physical evidence provides service organizations with excellent opportunities to send

strong, consistent, and positive messages regarding the nature of service offerings to

customers. Physical evidence is most successful if it is integrated throughout the

organization, meaning that it should be included in an organizations’ strategic

planning. Once it has been accepted by management, it is the responsibility of the

marketing department to implement it throughout the entire organization.

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The more intangible a service is, the more it relies on physical evidence to convey an

appropriate message to customers. Physical evidence elements are employed to

reduce the level of perceived risk experienced by customers. Due to the intangibility

characteristic of services, it is hard to evaluate services in advance or to know the

outcome of service experiences. Customers are forever looking for tangible cues by

which to judge service quality. They tend to reduce the risk attached to the service

offering by comparing the physical evidence of services to the offerings of

competitors, use their previous experience as a framework, or rely on the opinion of

others. Extremely intangible services do not necessarily provide the greatest risk to

the customers. Only when a price is attached to service offerings, can customers

truly evaluate the risk attached to it.

The unique characteristics of services cause customers to search for evidence of the

service in each of their interactions with the organization. The new elements of the

service mix, namely people, process, and physical evidence, provide customers with

that evidence and allow them to form their own judgement.

2.6 Customers’ perception of services

Services are characterised by the interaction between service providers and

customers, therefore the quality and the capability of service providers have a direct

and significant effect on the delivery processes and customer satisfaction (Lau,

2000:online). Customers perceive services in terms of service quality, customer

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satisfaction, and value (Zeithaml and Bitner, 1996:116). Dynamic service

organizations realize that these three components help to differentiate them from

their competitors and guarantee that they compete more effectively in the

marketplace.

2.6.1 Service quality

Service quality is a major factor contributing to customer satisfaction, however,

excellent service quality is a prerequisite to satisfy customers completely and create

customer loyalty (Kasper et al., 1999:139). Service quality is defined as the delivery

of excellent or superior service relative to customers’ expectations (Zeithaml and

Bitner, 1998:116). The basic principles that underlie the concept of service quality

indicate certain factors.

• It is more difficult for customers to evaluate the quality of services than the

quality of goods.

• Service quality is based on customers’ perception of the outcome of the

service and their evaluation of the process by which the service was

performed.

• Service quality perceptions result from a comparison of what the customer

expected before the service and the perceived level of service received (Kurtz

and Clow, 1998:98).

Consequently, it can be said that service quality is used by customers to evaluate

service organizations, service processes and to differentiate between competing

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services. Customers’ expectations play an essential role in the judgement of service

quality, therefore, a service that fails to meet the expectations of one customer might

satisfy another customer whose expectation level of the service was not as high. As

a result, it is important that service providers develop meaningful ways by which

customers can judge the quality of the service offerings.

2.6.1.1 Components of service quality

Grönroos (1984a) identified technical quality, functional quality, and corporate image

as significant components of service quality (Palmer, 1994:174).

Technical quality, or what is delivered to customers, refers to the relative quantifiable

aspect of services. It is an essential basis for judging quality because both the

customer and the service provider can determine whether or not the service was

performed correctly, on time and as promised.

The inseparability characteristic of services indicates that the outcome of service

processes is dependent on the interaction between service providers and customers.

Functional quality, or how a service is performed, is not objectively measurable, but

provides a clear indication of customers’ thoughts and feelings concerning the

service performance. The attitude of the employees, the appearance of the

employees and the atmosphere of the service environment will influence customers’

perception of the service delivery. As a result, functional quality signifies the influence

which technical quality had on customers (Palmer, 1994:175).

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Corporate image is based on both the technical quality and the functional quality of

services. It focuses on the actual service performance, the surroundings in which the

service was provided and the image conveyed by service providers. The focal point

of service organizations is to influence customers to remember the corporate image,

as organizations intend them to remember it (Palmer, 1994:175).

2.6.1.2 Dimensions of quality

Research has indicated that customers consider reliability, responsiveness,

assurance, empathy and tangibles as the five quality dimensions that apply

specifically to service organizations (Walker, Boyd and Larréché, 1995:263). These

dimensions reflect customers’ subjective judgement on the value they received from

services.

• Reliability refers to the ability to perform the promised service dependably and

accurately. Organizations which honour their promises on service delivery,

service provision, problem resolution, and pricing are the preferred

organization to do business with, in the eyes of customers. According to

Zeithaml and Bitner,(1999:31) organizations need to be very aware of

customers’ expectations of reliability, since this is regarded as the most vital

determinant of the perception of service quality.

• Responsiveness signifies the willingness of service providers to help

customers and provide them with prompt service. The dimension of

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responsiveness requires organizations to handle complaints and problems that

result from a lack of enforcement of this dimension. Responsiveness is

communicated to customers by the length of time they have to wait for

assistance form the service employees, answers to questions and/or attention

to their problems. This dimension accentuates the necessity of flexibility and

ability within the organization to customise service delivery to customers’

needs. Organizations which wish to excel in this dimension need to view

service delivery from the customers’ point of view and not that of the

organization. Standards for responsiveness need to be set according to

customers’ requirements because their notion of what constitutes speed and

promptness might be different from the organization’s. The structuring of

service employees’ jobs, clear job descriptions and training form a firm basis

for responsiveness success (Zeithaml and Bitner, 1999:31).

• Assurance is experienced in the employees’ knowledge, courtesy, and ability

to inspire trust and confidence. This dimension of quality is critical to

customers, especially if the service presents them with a high degree of risk.

Customers’ uncertainty about the outcome of services and their inability to

evaluate services increases the perceived risk. Service employees who

perform the actual services are responsible for instilling trust and loyalty in the

customer through the quality of the interaction. Recruiting and employing

personnel with a positive attitude towards quality is of the utmost importance

to service organizations. Their degree of friendliness, credibility,

trustworthiness, and competence will be reflected in customers' perception of

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service quality (Sunduram, 2000:online). Service employees interact with

customers and their attitude toward quality is therefore very important.

Organizations can enforce the assurance dimension in the minds of the

customers by providing strong tangible evidence of the service, especially in

the early stages of the relationship (Walker et al., 1995:261).

• Empathy stipulates the caring, individualised attention given to customers. The

essence of empathy is conveying, through personalised or customised

services, that customers are unique and special. Customers want to feel

understood by and important to organizations. Small organizations gain a

competitive advantage over large organizations through their ease in collecting

information about their customers’ personal issues, needs, and desires.

Subsequently this provides them with the opportunity to develop personalised

and customised services for individual customers.

• Tangibles are the appearance of physical facilities, equipment, employees,

and written materials. Customers, especially new customers, use these

elements to evaluate the quality of services. Service organizations which

customers call on for a service should emphasise the tangible elements.

Tangibles are used to enhance the image of organizations, provide continuity,

and signal quality to customers. Most service organizations will combine the

tangible dimension with one or more of the other quality dimensions to create

a service strategy. Therefore, it can be argued that organizations which do not

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incorporate the tangible dimension in their quality strategy can fail to develop a

good strategy.

Walker et al., (1995:263) argue that customers perceive all five dimensions of quality

to be key elements in their evaluation of service quality, regardless of the kind of

service being evaluated.

2.6.2 Customer satisfaction

Customer satisfaction is seen as a combination of service quality, product quality,

and price, in addition to the influences of situational and personal factors. While the

perception of service quality can be evaluated in the absence of the actual

experience. This is not possible with customer satisfaction. Customer satisfaction can

only be assessed after an experience with the service provider (Zeithaml and Bitner,

1996:124).

Because customers are more knowledgeable these days, they consistently tend to

seek out new services that will provide them with more satisfaction. As a result,

service providers are expected to increase the value of their service offerings to

customers to stop them from defecting to other organizations. Research on the

impact of customer satisfaction on customer loyalty concluded that customer

satisfaction influences purchase intentions and post-purchase attitudes.

Organizations must bear in mind that customer loyalty contributes an exceptionally

high portion of sales and profit growth within service organizations (Lau, 2000:online).

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2.6.3 Perceived value

Zeithaml and Bitner (1997) define value as the customers’ overall assessment of the

utility of a product based on perceptions of what is received and what is given. Value

is therefore very closely tied to customers’ perception of price. Although customers

may perceive the quality of the service as good, and may be generally satisfied with

the service delivery, the value of the service in terms of money, time and effort may

not be of benefit to them. Often customers perceive the value of a service by

comparison with similar experiences or past experiences. Once again, the influence

of highly skilled and well-trained service employees, who perform service processes

efficiently and accurately, can positively influence customers’ perceived value of

service offerings.

Service quality, customer satisfaction, and service value are important components of

the success of a service organization. Customer satisfaction is the customer’s own

experience of the service and is accordingly evaluated in terms of the value that was

received by the customer. Value-orientated customers seek service quality that

exceeds the price and acquisition costs they incurred for the service. Customers who

believe they received a high service value and a quality offering from a service

provider are likely to display customer loyalty and are excellent sources of “word of

mouth advertising” (Lau, 2000:online). Ultimately, satisfied customers are the goal of

service organizations.

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However, service employees constitute a very important component of service

offerings. In the next section the importance of service employees in the organization

will be discussed.

2.7 The service employees

Ogilvy once claimed that an organization’s most valuable assets go down in the lift

each night (Irons, 1997:216). In the service environment service employees are

inevitably regarded by customers as:

• the service organization and

• the marketers of the service (Zeithaml and Bitner, 1996:304).

If employees are removed from the service picture service organizations are left with

very little means of gaining a competitive advantage.

The five dimensions of service quality discussed earlier are directly influenced by

service employees. Reliability of services is totally within the control of service

employees. They play a vital role in service recovery by determining the best options

to adopt in case of service failure or error. The willingness and promptness that

frontline employees display during the service interaction unequivocally influences

customers’ perception of responsiveness. Service employees’ ability to communicate

credibility and inspire trust and confidence refers to the assurance dimension of

service quality. This dimension is important, especially to new or unknown entrants

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into the service environment. Empathy implies that employees will pay attention,

listen, adapt, and be flexible during the delivery of services. The tangible dimension

of service quality focuses on the appearance and dress of service employees. It is

also linked to other tangible aspects such as the service facilities, the service delivery

environment, and communication materials (Zeithaml and Bitner, 2003:321).

Zeithaml and Bitner (1997:304) indicate that it has been shown that happy

employees make for satisfied customers. Accordingly, satisfied customers reinforce

employees’ job satisfaction. Service organizations depend on the employees who

deliver the service for the success of service processes. To build a customer-

orientated, service-minded workforce, who will ensure quality service delivery,

organizations need to:

• recruit the right employees,

• train and develop employees to deliver service quality,

• provide the needed support to employees and

• retain employees who deliver satisfying service to customers.

2.7.1 Recruit the right employees

Recruitment is the way organizations secure their human resources. Therefore, the

focal point of recruitment should be to attract and retain the right employee for the

right job within the organization (Palmer, 1994:178). Traditionally recruitment has

been the function of personnel specialists in the human resources department.

Nevertheless, these days the focus is on integrated recruitment where the human

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resources department and the department in need of an employee liase to procure

the best employee for the position.

Organizations must increasingly compete vigorously for the best people. They need

to identify the specific skills and abilities needed from the employees and

communicate these specifications to recruitment specialists. Well-defined job

descriptions ensure that the actual sourcing of possible employees, internally and

externally is made easier. Leather, (2001: online) pronounced: “Hire carefully, so that

the people who come aboard fit your organization.” Increasingly service

organizations aspire to hire employees for their service competencies and service

inclination. Service competencies refer to the skills and knowledge needed by the

employees to perform the job. Professional services, for example will validate

competencies according to degrees and qualifications, while in other service

industries competencies might relate to intelligence or physical requirements.

Employees should, however, be screened for their service inclinations, implying their

attitude toward a service job. Research has shown that service effectiveness is

directly linked to a service-orientated personality, with qualities such as helpfulness,

thoughtfulness, and social inclinations (Zeithaml and Bitner, 1996:314). An ideal

service employee will be one who scores high on all of these features.

2.7.2 Train and develop employees

Organizations which wish to grow and maintain their workforces ought to train and

develop their employees to deliver quality service. Training and development are

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essential elements in ensuring the effective and profitable performance of

employees. Through training, employees acquire specific knowledge and skills to

ensure that they perform their jobs more effectively. Service employees need

ongoing training in technical as well as interactive skills. Technical skills training

refers to the familiarisation and training of employees with equipment and standard

routines. Usually this training is done as on the job training. Interactive skills training

are more complex and focus on teaching employees problem solving, communication

and interpersonal skills. Technical and interactive skills training programmes should

not be limited to frontline employees, but should be conducted for managers and

back office staff too. After all, training should be an ongoing process, throughout the

whole organization.

Organizations which wish to initiate change will find that it more acceptable to

employees if it is accompanied by training. Through training, employees can be made

aware off future changes that may occur to ensure that the organization competes

successfully in the market place. They will also be given the opportunity to

experience first hand the pressure from the external environment that organizations

experience to change,

In service organizations, marketing is integrated into the job of every employee,

making every employee a part-time marketer of the organization. With the aid of good

training programmes, every part-time marketer should be made aware of the

behaviour and specific tasks that are expected from them to allow them to meet or

exceed customer expectations.

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2.7.3 Provide support

Without customer focused internal support systems, it is impossible for service

employees to deliver a quality service. Organizations can encourage supportive

internal services by measuring and rewarding them. Organizations which

acknowledge that internal service quality exists will succeed in developing an internal

quality culture.

Service employees must be provided with the right equipment in order for them to

deliver a quality service. Internal processes should also be designed with customer

satisfaction in mind. Thus, it can be said that the internal procedures will support

quality service performances. Many organizations’ internal processes are driven by

tradition, therefore this can be the most difficult change strategy to implement.

Organizations realize that in order to be truly responsive to customers’ needs they

have to empower employees to accommodate customers’ requests and rectify errors

in cases of service failures. Grönroos (1990) argues that front-line employees should

ideally have the authority to make prompt decisions (Rafiq, 1998: online).

Empowerment gives employees the desire, skills, tools, and authority to serve

customers (Zeithaml and Bitner, 1996:319). It leads to quicker response by

employees to the needs of customers and in situations where customers’ needs are

very variable, it allows employees to customise service delivery (Rafiq, 1998: online).

However, it is not enough to give employees the authority to make decisions; it is vital

that they have the knowledge and tools to make those decisions. Empowerment

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encourages people to think and make decisions about what they do best. After job

changes Shumate (Rosenfeld, 1999: online) suggests that it is not the job change

that makes the difference but the amount of voice given to the employee in the

decision- making process. Organizations should always support the decisions made

by empowered employees in order to show support for empowerment.

The nature of service jobs suggests that customer satisfaction is enhanced if service

employees work in teams. Because service jobs are demanding, frustrating and

challenging, a team environment provides support to help relieve some of the stress

and strains that service workers experience. Teams add variety, challenge and

encouragement to service performers during stressful times.

2.7.4 Retain employees

Once an organization has hired the right employees, trained and developed them

and provided the needed support, it is important that they retain them. It is very

discouraging to customer satisfaction, employee morale, and service quality if service

organizations experience a high staff turnover.

The recruitment and retention of employees is directly influenced by the quality of the

reward offered. Peters states: “An organization should be a cool place to work for.

And it doesn’t hurt if the money is good, and it doesn’t hurt in the least if they have a

gym and day-care” (Rosner, 2000:online). The purpose of reward is to provide

employees with something they consider of value in return for their performance. The

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value of the reward is influenced by the nature of each individual employee’s

contribution, therefore it can be argued that a standardised reward system does not

provide maximum motivation among individual employees.

Reward can be divided into two categories namely, monetary and non-monetary

rewards. Monetary reward is directly used to improve employee performances and

act as a principal motivator. Basic hourly wages, fixed salary, annual bonuses, and

profit sharing are usually stipulated in the employees’ contract with the organization.

Non-monetary reward can be in the form of subsidies, special facilities, or public

recognition for work performance. These rewards are seen as the root of the

employee-employer relationship. It is not about the reward but about employees’

knowledge that in giving a reward the organization shows interest in employees’ well-

being. Mueller alleged: “We thought that if we create a place where people like to

work, we’d achieve our goals” (Rosenfeld, 1999: online).

Service reward should be linked to the vision of the organization. Leather (2001:

online) states: ”Forward thinking companies will have a distinct and focused vision.

Secure employees will not only identify with that vision, but also prescribe to

company values. An employer of choice will weave its employees into its business

plans and build a compelling work place.” Employees who are included in their

organization’s vision have a clearer understanding of the organization’s goals.

Therefore, they remain more motivated in their jobs, because they know how they fit

into the bigger picture. Organizations should emphasise to their employees that it is

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not always the major accomplishments that contribute to the success of the

organization, but rather the everyday performances.

2.8 Summary

Services have become an integral part of the world economy. Over the past decade

the role of services marketing has become a dominant feature in the service industry.

The continuous shift to an information society lead to an increase in service demand

from customers, meaning that organizations no longer regard services as an option

but rather as a necessity to gain a competitive advantage.

A broad definition of services implies that it is originally intangible and relatively

quickly perishable activities whose buying takes place in a process of interaction

aimed at creating customer satisfaction, but during this interactive consumption it

does not always lead to material possession.

Services have five unique characteristics that are not founds in goods, namely

intangibility, inseparability, variability, perishability and ownership. The intangibility

characteristic of services seems to be the dominant one in the definition of services.

These unique characteristics create numerous challenges for service marketers to

attract new customers and retain current customers.

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The service marketing triangle and the service mix are but two concepts used to

address the challenges of service marketing. The service marketing triangle focus on

three marketing processes that need to be successfully carried out to ensure service

success. Firstly, external marketing takes place between the organization and the

customers and represents the service promises the organization makes to

customers. Secondly, interactive marketing implies the actual contact between

service employees and customers and represent the fulfilment of the promise made

by the organization. Thirdly, internal marketing enables the service marketer to

deliver promises made to customers and is the result of interaction between the

organization and its employees.

The service mix concept has been developed because of the limitation of the

traditional marketing mix components in their application to services. The

components of the service mix are; service offerings, price, distribution, promotions,

people, process and physical evidence. The three new components of the service

mix, i.e., people, process and physical evidence, have the advantage that they can

be fully controlled by the organization.

The success of services relies on the success of the interaction between service

providers and customers. Customers perceive services in terms of service quality,

customer satisfaction and value. Very few organizations have succeeded without

taking customer needs into consideration. Individual customers have individual

expectations of services. From the customers’ point of view the interaction with the

service provider is the most vivid impression they have of the service quality,

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therefore the initial interaction of customers with the service employees can be critical

for the organization in any repeat purchase and in achieving a reputation for superior

quality.

Customers consider reliability, responsiveness, assurance, empathy, and tangibles

as the most essential dimensions in their assessment of service quality. Customer

satisfaction includes service quality, product quality, and price. Customer satisfaction

cannot be determined without an actual experience with the organization. The

customers’ perception of value relates to the benefits received from the offering in

term of money, time, and effort.

Service organizations are dependent on service employees and it is, therefore,

imperative that they recruit, train, support and retain good service employees.

Service employees must have the skills, abilities, and attitude to provide customers

with quality service.

Service organizations realize the importance of the role that service employees play

in the success of the service process. Therefore, it is important that they understand

the value employees add to an organization. This concept will be discussed in full in

Chapter three.

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