SERVICES MARKETING

CUHT 402
CUHT 402
nzengeni@cut.ac.zw
 Lecture 1
• By the end of this lecture you should be
able to:
– Define the word marketing
– Interpret different definitions of services.
– Identify the key growth drivers in the service
economy.
– Outline and discuss the differences between
goods and services (Tangibility Spectrum)
– Identify and explain characteristics of services
– Outline and discuss the elements of the
extended services marketing mix (the 7Ps).
 Marketing
'Marketing' is the craft of linking the
producers (or potential producers) of a
product or service with customers, both
existing and potential. It is an inevitable
and necessary consequence of
capitalism.
 Marketing
However marketing is not limited to capitalist
countries. Marketing techniques are applied
in all political systems, and in many aspects
of life. Marketing methods are informed by
many of the social sciences, particularly
psychology, sociology, and economics.
 Marketing
Marketing research underpins
these activities. Though, it is also
related to many of the creative arts.
 What marketing involves

Contrary to the popular conception,

marketing is not just about
promotion -- it can be divided into
four/seven sections, often called the
“four Ps/7p’s for services” - list
them: Product, Place (Distribution
Mechanisms), Price and Promotion.
 Four Ps
They are:
• Product - The Product management aspect of
marketing deals with the specifications of the
actual good or service, and how it relates to the
end-user's needs and wants.
• Pricing - This refers to the process of setting a
price for a product, including discounts.
 Four Ps
• Promotion - This includes , publicity, word of
mouth, and personal selling, and refers to the
various methods of promoting the product,
brand, or company.
• Place or distribution refers to how the product
gets to the customer; for example, point of sale
placement or retailing.
– Extended Marketing Mix – People, Process, Physical Evidence
• People – Employees, The Customer and The Other Customer
• Process – SOPs
• Physical Evidence – Ambient Conditions, Spartial Layout &
Signs/Symbols/Artefacts
 Four Ps
These four/seven elements are often referred
to as the marketing mix. A marketer will use
these variables to craft a marketing plan. For a
marketing plan to be successful, the mix of the
four/seven "p's" must reflect the wants and
desires of the consumers in the target market.
 Four Ps
•Trying to convince a market segment to
buy something they don't need/want is
extremely expensive and seldom
successful.
•Marketers depend on marketing research
to determine what consumers need/want
and what they are willing to pay for.
 Four Ps
Marketers hope that this process
will give them a sustainable
competitive advantage.
Marketing management is the
practical application of this process.
 Evolution of marketing
• Marketing as we know it today began in
the 1870’s with the birth of the
"marketing orientation". During the first
stage of capitalism business had a
production orientation.
 Evolution of marketing
• Business was concerned with production,
manufacturing, and efficiency issues.
• Managers of production-oriented
businesses concentrate on achieving
high production efficiency, low costs, and
mass distribution.
• Production concept is also used when
marketers want to expand the market.
 Evolution of Marketing
• The product concept came after the production
concept. The concept proposes that consumers favor
products offering the most quality, performance, or
innovative features.
• Problem: managers are caught in a love affair with
their products, leading to the “better-mousetrap”
fallacy – a belief that a better product will by itself
lead people to beat a path to their door.
• A new/improved product will not necessarily be
successful unless it’s priced, distributed, packaged,
advertised and sold properly.
 Evolution of marketing
• By the mid 1950's a third stage emerged,
the sales orientation stage.
• Business's prime concern was to sell what it
produced.
• By the early 1970's a fourth stage, the
marketing orientation stage emerged as
businesses came to realize that consumer
needs and wants drove the whole process.
 Evolution of marketing
• Marketing research became important.
• Businesses realized it was futile putting a lot
of production and sales effort into products
that people did not want.
• Some commentators claim that we are now in
a fifth stage, one of a personal marketing
orientation.
 Evolution of marketing
• They believe that the technology is
available today to market to people on
an individual basis (see personalized
marketing, permission marketing, and
mass customization).
 Evolution of marketing
• They feel it is no longer necessary
to think in broad aggregated
terms like market segments or
target markets.
 Evolution of marketing

• Marketing has become an academic

discipline in itself, with tertiary
degrees in the field now routinely
awarded.
 Evolution of marketing
• Masters and Doctoral degrees can be obtained
in numerous subcategories of marketing
including: Marketing Research, Consumer
Behaviour, International Marketing, Industrial
Marketing (also called b2b marketing),
Consumer Marketing (also called b2c
marketing), Product Management, and e-
Marketing.
 Marketing orientation

A marketing oriented firm is one

that allows the wants and needs of
customers and potential customers
to drive all the firm's strategic
decisions.
 Marketing orientation

The firm's corporate culture is

systematically committed to creating
customer value. In order to determine
customer wants, the company usually
needs to conduct marketing research.
 Marketing orientation

The marketer expects that this

process, if done correctly, will
provide the company with a
sustainable competitive
advantage.
 Marketing orientation
A marketing oriented firm will typically
show the following characteristics:

• extensive use of marketing research

• broad product lines
• emphasis on a product's benefits to customers
rather than on product attributes.
 Marketing orientation

• use of product innovation techniques

• the offering of ancillary services like credit
availability, delivery, installation, and warranty
 Marketing orientation

• The concept of marketing

orientation was developed in the
late 1960's and early 1970's at
Harvard University and at a hand-
full of forward thinking companies.
• Theodre Levitt.
 Marketing orientation

It replaced the previous sales

orientation that was prevalent between
the mid 1950's and the early 1970's,
and the production orientation that
predominated prior to the mid 1950's.
 Marketing Management
Marketing management is the practical
application of marketing techniques. It is the
analysis, planning, implementation, and
control of programs designed to create, build,
and maintain mutually beneficial exchanges
with target markets.
Management – Planning, Leading,
Organising & Controlling (PLOC) + 7P’s =
Marketing Management.
 Marketing Management

The marketing manager has the task

of influencing the level, timing, and
composition of demand in ways that
will achieve organizational objectives.
 Marketing Management Involves
• Understanding the economic structure of
your industry
• Identify segments within your market
• Identifying your target market
• Do marketing research to develop profiles
(demographic, psychographic, and
behavioural) of your core customers
 Marketing Management Involves
• Understand your competitors and their
products
• Develop new products
• Establish environmental scanning
mechanisms to detect opportunities and
threats
• Understand your company's strengths and
weaknesses
 Marketing Management Involves

• Audit your customers' experience of your

brand in full
• Develop marketing strategies for each of your
products using the marketing mix variables of
price, product, distribution, and promotion
• Create a sustainable competitive advantage
 Marketing Management Involves

• Understand where you want your brands to be

in the future, and write marketing plans on a
regular basis to help you get there
• Setup feedback systems to help you monitor
and adjust the process
 Public Relations Vs Marketing
• Public relations is the management function
that establishes and maintains mutually
beneficial relationships between an
organization and the publics on whom its
success or failure depends.
– Broom, 2009, Effective Public Relations, Page 7.
– Definition – The identification and anticipation of
customers’ needs and fulfilling of those needs
profitably –AMA (American Marketing
Association)
 1.1 What is Services Marketing
Background
• Background
• Definitions (Marketing/Services Marketing)
• Goods vs Services
• Characteristics of services
• Importance of services
• Growth of services industry
• Challenges of Services Marketing
 1.1 Background
• Services are increasingly assuming an
important role in world economies (service
economy/society)
• Concept as old as humanity (self service/ now
at a price)
• Underestimate of statistics in LDCs (hidden
service sector)
• Examples include transportation, education,
consultancy, IT, banking, hospitality,
entertainment, health care
 1.1 Background
• The concept of Services Marketing was initially
advanced by American Marketing Association
[AMA].
• Pioneering work of Lyn Shostack in 1977
“Breaking free from product marketing”
Journal of Marketing
• This meant that:
- New concepts necessary
- Advance from conventional marketing – 4P’s
- Growth in academic work since 1980s
 1.1 Background
• Growth in academic/research unearthing new
thematic areas
- Service quality
- Relationship marketing
- Internal marketing/ Interactive marketing
- Designing service packages
- Service encounters – Moment of Truth
- Service failures and recovery strategies
 1.1 Background
• IBM leading in services industry (Global
Services Division- product support service,
network service, repair service, training
services etc)
 1.2 What is Marketing?
• The shortest definition of Marketing Management is “meeting needs
profitably.”
• “.. the activity, set of institutions and processes for creating,
communicating, delivering, and exchanging offerings that have value for
customers, clients, partners and society at large” - AMA Board of
Directors
• The AMA’s formal definition – “marketing is an organisational function and
a set of processes for creating, communicating and delivering value to
customers and managing customers’ relationships in ways that benefit the
organisation and its stockholders”
• General definition – marketing management is the art and science of
choosing target markets and getting, keeping and growing customers thru
creating , delivering and communicating superior customer value.
• Social definition – marketing is a societal process by which individuals and
groups obtain what they need thru creating, offering exchanging products
and service of value with others.
 1.2 What is marketing? (Kotler,
Bowen & Makens, 2007)
• Marketing is a social and managerial process
by which individuals and groups obtain what
they need and want thru creating and
exchanging products and value with others.
Needs, wants, and
demands

Markets Products

Exchange,
transactions, and
relationships
 1.2 What is Marketing?
Traditional Marketing Mix – 4Ps
“ Management process through which goods and services move
from concept to consumer” and consists of the coordination
of 4 elements called the 4 “Ps”
• Product
• Price
• Promotion
• Place
• All elements within the control of the firm that communicate
the firm’s capabilities and image to customers or that
influence customer satisfaction with the firm’s product and
services:
 What is marketed? – 10 types of
entities
• Goods • Places
• Services • Properties
• Experiences • Organisations
• Events • Information
• Persons • Ideas
 1.3 Services Defined
Expanded Marketing Mix
• People (All human actors who play a part in
service delivery and thus influence the buyer’s
perceptions: namely, the firm’s personnel, the
customer, and other customers in the service
environment).

• Process (The actual procedures, mechanisms,

and flow of activities by which the service is
delivered—the service delivery and operating
systems).
 1.3 Services Defined
Expanded Marketing Mix
• Physical Evidence – the servicescape
– The environment in which the service is
delivered and where the firm and customer
interact, and any tangible components that
facilitate performance or communication of
the service.
 1.3 Services Defined
Expanded Marketing Mix (7 Ps)
 1.3 Services Defined
Product vs Services
• A product is anything (tangible/intangible)
that can be offered to a market for attention,
acquisition, use or consumption that might
satisfy a want or need.
• Services are one of the many types of
products we may be called upon to market.
 1.3 Services Defined
Goods vs Services
• Search goods (packaged, seen, tried,
evaluated before purchase e.g. automobile)
• Experience goods (evaluated only after
purchase), e.g. holiday, travel, health care etc.
• Credence goods (difficult to evaluate before or
after consumption), e.g. education,
counselling.
 1.3 Services Defined
Goods vs Services
• Goods-services relationship is classified into 5
categories by Phillip Kotler.
1. Pure tangibles (identifiable, homogeneity,
difficult to identify with supplier e.g. agric.
goods, unbranded goods).
2. Tangible goods with accompanying service
(weight with tangible part, services given to
tangible goods forms part of assessment,
most manufactured goods, e.g. IT products).
 1.3 Services Defined
Product vs Services
3. Hybrid (equal weighting) e.g. patronising a
restaurant both for food and service. Proportions
may differ yet both remain important. E.g. 5 star
hotel, McDonalds
4. Service with accompanying tangible goods
Offer where intangible part is dominant. Customers
buy services, not tangible part used in the
production of such services e.g. buying mobility
service from transport organization which provides
tangibles such as cars/buses.
 1.3 Services Defined
Product vs Services
Though not buying tangibles, their assessment
(the physical evidence) is important in value
assessment. Most service products fall under
this category.
5. Pure Service
Consumers value only the service they receive
(e.g. teaching, consultancy, medical services).
 1.3 Services Defined
Product vs Services
• Demonstrate the Tangibility Spectrum (Phillip
Kotler)

Tangibility
vs
Intangibility
 1.3 Services Defined
Goods vs Services (Gen. Diffs)
 1.3 Services Defined
AMA (2007)
• Services refer to the “activities, benefits and
satisfactions which are offered for sale or
provided in connection with the sale of goods”
• Limited view because of lack of reference to
service aspect in production – focuses on the
end product.
 Professional
(pure service)

services

Intangible
dominant
Tangibility Spectrum

Teaching


Investment Services


Airlines/hotels


Advertising agencies

Fast-food Outlets


Fast-food Outlets

Automobiles
Cosmetics

Detergents


(commodity)
Soft Drinks

dominant
Tangible

Salt
 1.3 Services Defined
Kotler and Bloom (1984)
• A service may be defined as “any activity or
benefit that one party can offer to another
that is essentially intangible and does not
result in the ownership of anything. Its
production may or may not be tied to a
physical product”
• Kotler and Bloom (1984)
 1.3 Services Defined
Groonroos (1980)
• Services are “activities or series of activities of
more or less intangible nature that normally
take place in interactions between the
customer and employees and/or physical
resources or goods and/or systems of the
service provider which are provided as
solutions to customer problems”
• Inclusive of all issues related to services
management
 1.3 Services Defined
(Others)
• Lovelock et al. (2001) “act, performance or
experience…that provides time, place and
form utility”
• Bateson (1995) p8: “service benefits are
delivered through an interactive experience”
• Berry & Parasuraman (1991) “the core product
being marketed is a performance.”
• Zeithaml & Bitner (2000) “services are deeds,
processes, and performances” (e.g. IBM)
 1.3 Services Defined
(Prof. Rao of Andra Pradesh)
• “ …intangible activities performed by service
employees or machines or both for the
purpose of creating value perceptions among
customers”
• Implies the following:
- Intangibility
- Activities
- Benefits & Quality
 1.3 Services Defined
Related concepts defined
• Service industries and companies:
– Those industries and companies typically classified within the
service sector whose core product is a service.
• Service as a product:
– Represents a wide range of intangible product offerings that
customers value and pay for in the marketplace.
• Customer service:
– The service provided in support of a company’s core products.
• Derived service:
– Idea that the value of a physical good is really the service
provided by that good, not the good itself (car – transport).
• Service economy (Over 50% service domination)
 1.4 Characteristics of Services
• Intangibility (cannot be seen, felt, smelt, heard
before purchase). Feeling of uncertainty on
outcome of a service e.g. tourist. Buyers then
look for evidence of quality
- Providers need to manage the evidence/make
intangible tangible
• Inseparability (Can not be separated from service
provider/production, delivery, consumption
simultaneous.
- Minimum direct buyer-seller interaction (ATMs,
Credit Cards)
 1.4 Characteristics of Services
• Variability (same service from same seller is
rare. Experience of bus passengers vary with
seats, roads etc. Smiles of waitresses differ
with customers, moods etc. Wife/Husband
paradox.
- Standardization by producers key solution e.g.
introduction of packaging
• Perishability (Cannot be stored. Can’t use
unused capacity.)
 1.4 Characteristics of Services
• Customer participation (Not one sided affair.
Co-producers of service. Need for awareness
of production process and also should provide
feedback)
- Adopt customization strategy (orientation,
health clubs, hair salons)
• Lack of ownership (experience and not own
the service because of intangibility and
perishability)
 1.4 Characteristics of Services
• Service products are ephemeral and cannot
be inventoried.
 1.5 Value and Importance of
Services
• In 2005 services represented 71% of Australia’s GDP.
• Service industries employ 85% of Australian workers.
• Tourism and education are Australia’s two largest service
exports:
– In 2005 education brought in $7.5 billion to the Australian
economy (more than gold, wheat and beef).
• According to World Trade Organization, services account
for two thirds of global output, one third of employment,
and 20% of global trade.
• Bundling of Companies and outsourcing e.g. IBM’s
“Global Services Division brings more than half of its total
revenue
1.6 Growth of Services Marketing
(Drivers of growth)
• Competitive pressures (unbundling,
outsourcing, demand for specialized services).
IBM and PriceWatersCoopers
• Increase in affluence (need not carry money,
just luggage)
• More leisure time (more spent on education,
entertainment, outsourcing baby sitting etc.)
• Working woman. DINKs and demand for
home related services (dom. Work, crèche,
gym)
 1.6 Growth of Services Marketing
(Drivers of growth)
• Changes in government policy (eg
deregulation and trade agreements).
• Business trends:
– Manufacturers increasingly offering
services.
– Growth in chains and franchises.
– Pressures to improve quality and
productivity.
– More strategic alliances.
1.6 Growth of Services Marketing
(Drivers of growth)
• Growth in population of DINKs (spend
liberally on services) esp. in developed world.
Also in rising economies such as the “BRICS”
• Greater life expectancy (snr. citizens, nursing
homes, health care services)
• Product complexity (the need for
supplementary services eg IT gadgets,
publications managers visit clients)
1.6 Growth of Services Marketing
(Drivers of growth)
• Lifestyle complexity (need for supplementary
services (tax consultants, health advisers, legal
advice etc).
• Resource constraints (e.g. financial quagmire
may lead to increase in hiring services- transport,
estate matters etc).
• IT growth. (Explain)
• Migration (growth of cities leads to demand for
real estates, transportation, infrastructure
services, insurance services even funeral needs).
 1.7 Challenges of Service
Marketing
• Defining and improving quality
• Designing and testing new services
• Communicating and maintaining a consistent image
• Accommodating fluctuating demand
• Motivating and sustaining employee commitment
• Coordinating marketing, operations, and human
resource efforts
• Setting prices
• Finding a balance between standardization versus
personalization
• Ensuring the delivery of consistent quality
 So, what is Services Marketing?
Parting Words
“ Have a Happy Journey”
1. What is the difference between Air
Zimbabwe and Boeing?
2. What is the difference between
C.A.G and Yutong?
 Lecture 2
Exploring Role of Service Quality
• By the end of this lecture you should be able to:
– Define quality and outline the origins of the quality concept.
– Outline and discuss the issues associated with the management
of quality in service organisations.
– Identify the differences between technical and functional
elements of service quality.
– Outline and discuss the components of the gap model of service
quality.
– Outline and discuss the issues associated with productivity
improvements in service industries.
1.1 Background of Service Quality
• Quality has a long history as a business issue:
– European craft guilds (13th to 19th Century) set standards for
product and service standards. Controlled who could call
themselves silversmiths, blacksmiths etc. Personal
responsibility for quality.
– Early 20th Century – Frederick W. Taylor - Scientific Management
Theory.
– Give examples of heritage-based quality control mechanisms
• Post WW2 quality control became a major manufacturing
issue.
– Quality was critical to the success of Allied Forces in WWII.
– In Japan, quality management/control became a central pillar of
industrial reconstruction.
1.1 Background of Service Quality
• By 1970s Japan was winning the ‘quality war’.
• Regulatory pressures from product safety legislation
increased.
• Customer demands for quality also increased.
• In response, US, European and Australian manufacturers
copied many of the Japanese quality processes:
– For example TQM and Quality Circles.
• Today, quality is an accepted and expected part of
manufacturing.
• Development of ISO certification series: 9000, 9001,
14001, etc.
 1.2 Defining Quality
• From a manufacturing perspective, quality has
been variously defined as;
– Zero defects,
– Conformance with requirements,
– Fitness for use,
– Conformance to specifications.
• There is widespread use of quantitative
measures and objective standards to measure
quality.
 1.2 Defining Quality
• The notion of service quality emerged in
the 1980s.
• According to Barron & Harris (2003) service
quality has been the single most researched
area of services marketing.
• Delivering quality service is linked to customer
satisfaction, retention/patronage, competitive
advantage and long-term profitability – why
are we still loyal to Econet, DSTv, CBZ??
 1.3 What is Service Quality
• “An attitude formed by a long term, over-all
evaluation of a firm’s performance” (Hoffman
& Bateson, 2006).
• “A customer’s long-term, cognitive evaluations
of a firm’s service delivery” (Lovelock & Wirtz,
2006).
• “The customer’s evaluation of a service,
where they compare what they receive
according to the service’s characteristics with
their expectations regarding these
characteristics” (Bruhn & Georgi, 2006).
 1.3 What is Service Quality
• “The result of an evaluation process in which
the customer compares their perceptions of
service with their expectations” (McColl-
Kennedy, 2003).
• “Service quality represents a customer’s
overall judgment about a firm’s overall
excellence or superiority” (Kang, 2006).
 1.3 What is Service Quality
• A 1st hybrid approach in defining quality would
be to look at service quality as an
administration term that describes the degree
of achievement of an ordered service – QC.
– E.g. How many minutes did it take to deliver room
service?
• Service quality can be related to service
potential and co-workers’ qualifications),
service process (speed of generated service
OR how much the performance matched the
customer’s wishes).
 1.3 What is Service Quality
• A 2nd hybrid approach would be to look at
service quality as a process that involves a
comparison of expectations with
performance.
– A “….measure of how well a delivered service
matches the customer’s expectations” (Lewis &
Booms, 1983).
 1.4 Service Quality
Subjectivity and Objectivity
• It is generally agreed in literature that quality should be a
customer defined concept.
• Service quality is a more subjective concept
• Problem - how do customers assess quality?
– Service quality is a measure of how well the service level
delivered matches customer expectations.
– Delivering service quality means conforming to customer
expectations on a consistent basis.
• Given this, we need to determine what components of
service influence consumer perceptions of quality.
 1.4 Service Quality
Subjectivity and Objectivity
• Note that quality measurement is divided into
subjective and objective processes.
• Measuring customer satisfaction is an indirect
way to measure quality.
 1.4 Service Quality
Subjectivity and Objectivity
• Subjectivity of service quality is the
customer’s perceived conformity of the
working result with the expected benefit.
• Objective service quality is the concrete
measurable conformity of a working result
with the previous defined benefit. Since the
measurability is dependent on accuracy, may
also be subjective
 1.4 Factors influencing Service
Quality
• It’s evident that the unique characteristics of services would also
influence the process of quality management – How?
• Intangibility
• Heterogeneity
• Inseparability
• Perishability
• Customer expectations
• Lack of ownership:
– Influenced by word-of-mouth, personal needs and preferences, past
experience, and marketing communications.
– Different customers will have different expectations.
– Customer perceptions of service quality change over time (dissonance
effect).
 1.4 Factors influencing Service
Quality
• However, broadly speaking factors that
influence the appearance of a gap were found
by Parasuraman, Zeithaml and Berry in 1985
as the following determinants of service
quality:
– (competence, courtesy, credibility, security,
access, communication, understanding, tangibles,
reliability and responsiveness) – 10 determinants
 1.4 Factors influencing Service
Quality
• Dimensions of Service Quality – RATER – SR.
1. Reliability
2. Assurance
3. Tangibles
4. Empathy
5. Responsiveness
6. Service Recovery (Gronroos’ 6th criterion)
 1.5 Service Quality Dimensions
• While for goods customers only assess the finished
product, in services customers look at the quality of
both the process and outcomes of service delivery.
• Gronroos (1984) distinguishes between technical and
functional quality:
– Technical quality = refers to what is being
provided (the outcomes of service).
– Functional quality = how the service is provided
(the process of service delivery).
• Customers assess service quality along both
dimensions.
 1.5 Service Quality Dimensions
• Parasuraman, Zeithaml & Berry (1985)
• Identified five dimensions of service quality:
– Tangibles - including the physical components of the service.
– Reliability - dependability of the service provider and accuracy of
performance.
– Responsiveness - promptness and helpfulness.
– Assurance - knowledge and courtesy of employees and their ability to
inspire trust and confidence.
– Empathy - caring, individualised attention given to customers.
• Can use the SERVQUAL instrument to assess and improve quality in
service organisations.
– SERVIQUAL and Model of Service Quality Gaps: A framework for determining
and prioritising critical factors in delivering quality services.pdf
• Criticism of SERVQUAL – overly focused on functional aspects of
quality.
 1.6 Models of Service Quality
Service Quality Models A Review.pdf
Two main Models
• Technical & functional model of Gronroos
(1984). It says the expectations of the
customer depends on 5 determinants:
1. Market communication
2. Image
3. Word of mouth
4. Personal needs
5. Customer learning
 Service Quality Model
(Grönroos 1984)

Expexted service Perceived service quality Perceived service

Traditional marketing activities

-advertising, PR, Pricing,
branding, word-of-mouth etc Image

Technical quality Functional quality

What? How?

101
 1.6 Models of Service Quality
On the other hand experiences depend on the
technical quality (what/outcome) and
functional quality (how/process) which are
filtered through the image (who).
Both perceptions and experiences can create a
perception gap.
 1.6 Models of Service Quality
• The Gap Model of Service Quality was
developed by Parasuraman, Zeithaml & Berry
(1985)
• The model identifies ‘gaps’ that may occur
when an organisation attempts to provide
quality services.
• The model outlines the potential causes of
these gaps, and offers services marketers
remedies to close these gaps.
 1.6 Models of Service Quality
The model says the expected service is
influenced by:
1. Word of mouth
2. Personal needs
3. Past experience/Customer learning
4. External communication to customers
– In this case, a perception gap can appear
between expected service and perceived service
 1.6 Gap Model of Service Quality

• Strength of the Gap Model is that, it offers

generic insights and solutions that can be
applied across service industries.
• Weakness – the model doesn’t identify
specific quality failures that may occur in a
service organisation.
Seven Service Quality Gaps
Customer needs and CUSTOMER
expectations

1. Knowledge Gap
MANAGEMENT
Management definition
of these needs

2. Standards Gap

Translation into
design/delivery specs
4. Internal
3. Delivery Gap Communications Gap

Execution of 4. Advertising and sales

design/delivery specs promises

5. Perceptions Gap 6. Interpretation Gap

Customer perceptions Customer interpretation
of service execution of communications
7. Service Gap
Customer experience
relative to expectations
1.6 Gaps Model of Service Quality
• Customer Gap:
– difference between customer expectations and perceptions – Gap 5
• Provider Gap 1 (The Knowledge Gap/ marketing information gap):
– not knowing what customers expect
• Provider Gap 2 (The Service Design & Standards Gap):
– not having the right service designs and standards
• Provider Gap 3 (The Service Performance Gap):
– not delivering to service standards. Management perceptions of
customer expectations.
• Provider Gap 4 (The Communication Gap):
– not matching performance to promises/delivery
 Gap 1 (Knowledge)
• Provider Gap 1 (knowledge/marketing information gap)
is the difference between customer expectations and
company perceptions of customer expectations.
• Key factors leading to provider gap one:
– Inadequate marketing research orientation:
• Insufficient market research.
• Research not focused on quality.
• Inadequate use of market research.
– Lack of upward communication:
• Lack of interaction between management and customer.
• Insufficient communication between contact employees and
managers.
• Too many layers between contact personnel and managers.
 Gap 1 (Knowledge)
• Key factors leading to provider gap one (cont.):
– Insufficient relationship focus:
• Lack of market segmentation.
• Focus on transactions rather than relationships.
• Focus on new rather than existing customers.
– Inadequate service recovery:
• Lack of encouragement to listen to customer complaints.
• Failure to make amends when things go wrong.
• No appropriate recovery mechanism in place for service failure.
- Too many levels of management
 Gap 2 (Design/ wrong service
quality standards)
• Provider Gap 2 (Service Design & Standards gap) - is a result of the
difference between management perceptions of customer
expectations and the development of customer driven service
designs and standards.
• Key factors leading to provider gap 2:
– Poor service design:
• Unsystematic new service design processes.
• Vague and undefined service designs.
• Failure to connect service design to service positioning.
– Absence of customer-driven standards:
• Lack of customer driven service standards.
• Absence of process management to focus on customer requirements.
• Absence of formal process for setting service quality goals.
 Gap 2 (Design)
• Key factors leading to provider gap two
(cont.):
– Inappropriate physical evidence and servicescape:
• Failure to develop tangibles in line with customer
expectations.
• Servicescape design that does not meet customer and
employee needs.
• Inadequate maintenance and updating of the
servicescape.
- Inadequate task standardisation
- Absence of goal setting
 Gap 3 (Performance)
• Provider gap three (Service Performance Gap) is the result of
differences between customer-driven service designs and
standards and service delivery.
• Key factors leading to provider gap three include:
– Deficiencies in HR policies.
• Ineffective recruitment.
• Role ambiguity and conflict.
• Poor employee-technology job fit.
• Inappropriate evaluation and compensation system.
• Lack of empowerment , perceived control and teamwork.
– Customers who do not fulfill roles:
• Customers who lack knowledge of their roles and responsibilities.
• Customers who negatively impact each other.
 Gap 3 (Performance)
– Problems with service intermediaries:
• Channel conflict over objectives and performance.
• Difficulties controlling quality and consistency.
• Tensions between empowerment and control.
– Failure to match supply and demand:
• Failure to smooth peaks and valleys of demand.
• Inappropriate customer mix.
• Over-reliance on price to smooth demand.
- Lack of teamwork
 Gap 4 (Communication)
• Provider gap four (The Communication Gap) is the result
of differences between service delivery and external
communications to customers.
• Key factors leading to provider gap four include:
– Lack of integrated services marketing communications.
• Tendency to view each external communication as
independent.
• Absence of strong internal marketing program.
– Ineffective management of customer expectations:
• Absence of customer expectation management through all
forms of communication.
• Lack of adequate education for customers.
 Gap 4 (Communication)
– Overpromising:
• Overpromising in advertising, personal selling and physical
evidence.
– Inadequate horizontal communications:
• Insufficient communications between sales and operations.
• Insufficient communications between advertising and
operations.
• Differences in policies and procedure across branches or units.
 Customer Gap
• Gap 5 (Customer satisfaction)
- The Gap between customer expectations and
customer perceptions of service received.
- Depends on Provider Gaps 1-4
- The greater the gap, the lower the customer
satisfaction
Prescriptions to close Quality Gaps
• Customer Gap:
– Perceptions: Educate customers to see reality of service delivery
– Expectations: Pretest communications to make sure message is
clear and unambiguous.
• Provider Gaps:
– Knowledge Gap: Learn what customers expect--conduct
research, dialogue, feedback.
– Design and Standards Gap: Specify Service Quality standards that
reflect expectations.
– Performance Gap: Ensure service performance matches specs--
consider roles of employees, equipment, customers.
– Communications Gap: Ensure performance levels match
marketing promises.
 Tools to address service quality
problems
• Fishbone diagrams: A cause-and-effect
diagram to identify potential causes of
problems.

• Pareto charts: Separating the trivial from the

important. Often, a majority of problems is
caused by a minority of causes i.e. the 80/20
rule. 80 20 Rule.docx
 Tools to address service quality
problems

• Blueprinting: A visualization of service

delivery. It allows one to identify fail points in
both the front-stage and back-stage.
 Return on Quality
• ROQ approach is based on four assumptions:
– Quality is an investment
– Quality efforts must be financially accountable
– It’s possible to spend too much on quality
– Not all quality expenditures are equally valid

• Implication: Quality improvement efforts may benefit from being

related to productivity improvement programs
 Importance of Productivity on
Service Quality
• Productivity
• An economic measure of output per unit of input. Inputs include labor
and capital, while output is typically measured in revenues and other
GDP components such as business inventories.
• Helps to keep costs down
– lower prices to develop market, compete better
– increase margins to permit larger marketing
budgets
– raise profits to invest in service innovation
• May impact service experience (must avoid
negatives)
• May require customer involvement, cooperation.
 Efficiency, Effectiveness, and
Productivity
• Efficiency: comparison to a standard--usually time-based (e.g., how
long employee takes to perform specific task)
– Problem: focus on inputs rather than outcomes
– May ignore variations in quality or value of service

• Effectiveness: degree to which firm is meeting its goals

– Cannot divorce productivity from quality/customer satisfaction

• Productivity: financial valuation of outputs to inputs

– Consistent delivery of outcomes desired by customers should
command higher prices
 Productivity in a Service Context
• Productivity measures amount of output
produced relative to the amount of inputs.
• Improvement in productivity means an
improvement in the ratio of outputs to inputs.
• Intangible nature of many service elements
makes it hard to measure the productivity of
service firms, especially for information based
services.
Questions When Developing Strategies to
Improve Service Productivity
• How to transform inputs into outputs
efficiently?
• Will improving productivity hurt quality?
• Will improving quality hurt productivity?
• Are employees or technology the key to
productivity?
• Can customers contribute to higher
productivity?
 Operations-driven vs. Customer-driven
Actions to Improve Service Productivity
Operations-driven strategies
Control costs, reduce waste
Set productive capacity to match average demand
Automate labor tasks
Upgrade equipment and systems
Train employees
Leverage less-skilled employees through expert
systems
 Operations-driven vs. Customer-driven
Actions to Improve Service Productivity
Customer-driven strategies
Change timing of customer demand
Involve customers more in production
Ask customers to use third
parties/intermediaries
Backstage and Frontstage Productivity
Changes: Implications for Customers
• Backstage improvements can ripple to the front stage
and affect customers
– e.g., new printing peripherals may affect appearance of bank
statements.
• Front-stage productivity enhancements are especially
visible in high contact services.
– Some may just require passive acceptance by customers
– Others require customers to change their scripts and behavior.
Overcoming Customers’ Reluctance to Accept Changes
in Environment and Behavior

• Develop customer trust

• Understand customers’ habits and expectations
• Pretest new procedures and equipment
• Publicize the benefits
• Teach customers to use innovations and promote
trial
• Monitor performance, continue to seek
improvements
THE END