Service Marketing Summary

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Summary Services Marketing
Services Marketing (Tilburg University)
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Downloaded by Nick Alwynson Tandayag (nmtandayag@up.edu.ph)
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1.2 Service dominant logic

Part 1. Foundations for services marketing Service dominant logic is another way to look at wat service means. Suggested is that all
products and physical goods are valued for the service they provide. Value derived from
1. Introduction to services physical goods is really the service provided by the good, not the good itself. Argument is
1.1 What are services that companies provide service solutions for customers and should offer the best
Services are deeds, processes and performances. Services are not tangible things that can combinations of service and products to create the solution. The value is a co-created
be touched, seen and felt, but are rather intangible deeds and performances. Over time process that requires the active participation of the producer, its customer and other
services and the service sector of the economy are defined in different ways. This because stakeholders. A service involves interaction between a service provider and a customer.
of the confusion or disagreements of people. Broad definition: Services are all economic Service dominant logic moves thinking away from the fallacy that products are different
activities whose output isn’t a physical product or construction, is generally consumed at from services because they only create value in a linear, sequential creation, exchange
the time it is produced, and provides added value in forms (such as convenience, and consumption set of stages. It is a much more complex and dynamic system of
amusement, timeliness, comfort, or health) that are essentially intangible concerns of its stakeholders, communications and technology that creates value and the context.
first purchaser. Services are 72% of European employment and 73% of GDP. Services industries, services as products, services as experiences and customer service
Lovelock classified services in four broad categories. A service can be defined broad or narrow but there are distinctions. A service can be
1. Services directed at people’s bodies divided in four distinct categories.
This services require the recipient to be physically present within the service system. 1. Service industries and companies
You are a key part of the delivery of the service and have to be present at the right Are industries and companies within the service sector whose core product is a
time and enact the role in the service experience. Passenger transportation, service. Organizations in these sectors provide or sell services as their core offering.
healthcare, spa treatments. 2. Services as products
2. Services directed at people’s tangible possessions Represents a range of intangible product offerings that customers value and pay for.
The customer doesn’t have to be present when the service is being delivered. But 3. Service as experiences
they may need to be present at the start and the end of the service. The Service companies evolve from providing a service to creating memorable events for
attractiveness of the design and convenience is less important since it is more to be their customers, with the memory of the experience becoming the product. The
on operational issues. Courier services, car repair, laundry/dry cleaning. company charges for the feelings that customers derive from engaging in the service.
3. Services directed at people’s minds 4. Customer service
Technology such as internet or broadcasting can deliver the service at a distance Customer service is the service provided in support of a company’s core products.
without the customer being present in the place where the service is produced. The Companies don’t charge for customer service. It can occur on-site, the telephone or
service can be produced, then stored for delayed use through the digital recording of via the internet. Quality customer service is essential to build customer relationships.
the performance. The service provider and customer don’t need to be active at the
same time. Education, entertainment, psychotherapy. 1.3 Why services marketing?
4. Services directed at people’s intangible possessions Many forces have led to the growth of services marketing. Many have defined the scope
Those services may involve no ongoing production activity after purchase unless of the concepts, frameworks and strategies that define the field. Marketing and managing
there is a claim. It is often difficult to differentiate such services and to communicate services presents issues and challenges not faced in the marketing of products you need
the value. This services can be delivered with very little direct interaction between new concepts and approaches for that. Frameworks, concepts and strategies have been
the customer and the organization. Could be almost fully automated in a different developed to address the fact that ‘service marketing is different’. New trends will be
location. Accounting, banking, legal services. shaped and accelerate the need for services marketing concepts and tools. A lot of
Intangibility is a key determinant of a service. Services tend to be more intangible than companies invested in service initiatives and promoting service quality as ways to
manufactured products, the products tend to be more tangible. A service can have many differentiate themselves and create competitive advantages. Successful businesses have
tangible components. Tangibility spectrum shows the ideas of (in)tangible services. There value-driven leadership, commitment to investment in employee success, and trust-based
are a few ‘pure services’ or ‘pure goods’. relationships with customers and other partners. Research tells us that service quality
may be more profitable than other strategies.

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1.4 Service and technology 1.5 Characteristics of services impacting on marketing activities
Technology is currently shaping the field and profoundly influencing the practice of Services got four basic characteristics intangibility, heterogeneity, inseparability an
services marketing. Together with globalization, the influence of technology is the most perishability. But the differences between goods and services are not black and white.
profound trend affecting today’s services marketing. Intangibility
1. Potential for new service offerings It is the most basic characteristic of a service. Services are performances or actions and
Technology has been the basic force behind service innovations. Automated cannot be seen, felt, tasted or touched. But services can have tangible components.
voicemail, mobile phone apps, ATMs. The internet has resulted in a host of new
Heterogeneity
services; the internet provides a way to offer new services.
Services are performances, frequently produced by humans, no two services will be
2. New ways to deliver service
precisely alike. Heterogeneity also results because no two customers are precisely alike:
In addition to providing opportunities for new service offerings, technology is
each will have unique demands or experience the service in a unique way. The
providing vehicles for delivering existing services in more accessible, convenient,
heterogeneity in services are largely the result of human interaction and all of the
productive ways. Technology provides an easy way for customers to learn and
vagaries that accompany it.
research. But could be a danger when the public is unsure which sites are giving
accurate information etc. Chat or telephone instead of face to face, transactions. Inseparability
3. Enabling both customers and employees Most goods are produced first, then sold and consumed, that isn’t with services. Services
Technology enables customers and employees to be more effective in getting and are mostly produced and consumed at the same time. That means frequently that the
providing service. Through self-service technologies, customers can serve themselves customer is present when the service is being produced and takes even part in the
more effectively. Via online or mobile banking or for employees can provide production process. Inseparability also means that customers will frequently interact with
tremendous support in making them more effective and efficient in delivering each other during the service production process and may affect other’s experiences.
service. This by customer relationship management and sales support software. It Perishability
allows employees to customize services to fit the customer’s needs. Perishability refers to the fact that services cannot be saved, stored, resold or returned.
4. Extending the global reach of services Although it should be noted that there are services such as education and entertainment
Technology infusion results in the potential for reaching out to customers around the where performances can be captured and replayed or rebroadcast time and time again.
globe. The internet has no boundaries, information, customer service and The services triangle
transactions can move across countries and continents. It allows employees of Services marketing is about promises (made and kept to customers). The service
international companies to stay in touch and share information etc. Technology marketing triangle shows the three interlinked groups that work together to develop,
facilitates the global reach as well as the effectiveness of service business. promote and deliver these promises. The key players are the company, customers and the
5. The internet is a service employees/technology. Between those three, three types of marketing must be
The internet is just ‘one big service’. All businesses and organization that operate on successfully carried out to succeed; external marketing, interactive marketing and interna
the internet are a service; information, customer service or transactions. Technology marketing. Anything or anyone that communicates to the customer before service
and internet are changing business offerings, but people still want basic service. They delivery can be viewed as part of external marketing. This are the customers’ expectations
want dependable outcomes, easy access, responsive systems, flexibility, apologies and promises that will be delivered. Interactive/real-time marketing is where promises
and compensation. They expect the same from technology-based businesses. are kept or broken by the firm’s employees, technology, subcontractors or agents. If
6. The paradoxes and dark side of technology and service promises aren’t kept, customers become dissatisfied and leave. In internal marketing the
There is a great potential for technology for support and services, but also negative management engages to aid the providers in their ability to deliver on the service
outcomes. Customers are concerning about their privacy and confidentiality. Not all promise: recruiting, training, motivating, regarding and providing equipment and
customers equally interested in using technology as a means of interacting with technology. All three sides of the triangle are essential to complete the whole, and the
companies. Also employees can be reluctant to accept and integrate technology into sides should be aligned (what is promised should be the same as what is delivered).
their work lives. With technology infusion comes a loss of human contact, which is for
a lot of people detrimental purely from quality of life and human relationships
perspectives. The payback in technology investments is often uncertain.

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1.6 Services marketing mix

The traditional marketing mix is composed of the four P’s: product, price, place
(distribution) and promotion. All variables are interrelated and depend on each other. But
because services are different and consumed and produced simultaneously, people,
physical evidence and process are also important elements.
People are 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. The way they’re dressed, appearance, attitudes and behave
influence the customer’s perception of the service.
Physical evidence is 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. Such as business cards, brochures, equipment etc. When
consumers have a little on which to judge the actual quality of service, they will rely on
these cues. Physical evidence cues provide excellent opportunities for the firm to send
consistent and strong messages regarding the organization’s purpose, the intended

market segments and the nature of service.
Goods Services Resulting implications
Process is the actual procedures, mechanisms, and flow of activities by which the service is
Tangible Intangible • Services cannot be inventoried delivered – the service delivery and operating systems. De delivery steps the customer
• Services cannot be easily patented experiences also give customers evidence on which to judge the service. Some services
• Services cannot be readily displayed or are very complex like highly bureaucratized services. Another aspect that can provide
communicated evidence is whether the service follows a production standardized approach or whether
• Pricing is difficult the process is an empowered/customized one.
Standardized Heterogeneous • Service delivery and customer satisfaction The new marketing mix elements are within the control of the firm and any or all of them
depend on employee and customer actions may influence the customer’s initial decision to purchase a service when they are satisfied
• Service quality depends on many or repurchase decisions. The impact is evident in the servuction system model. This
uncontrollable factors model breaks the service delivery process for customers in two parts, the visible one, and
• There is no sure knowledge that the service the invisible one. Invisible is the process element from the extended marketing mix
delivered matches what was planned and consisting of systems, backroom procedures and the technology or equipment needed to
promoted produce the service (in a restaurant the ingredients, cooking facilities and procedures).
Production Inseparability – • Customers participate in and affect the The visible part is broken into inanimate environment (physical evidence like lightning,
separate from simultaneous transaction place settings, colour schemes, costumes etc.) and the service providers (people, their
consumption production and • Customers affect each other behavior and characteristics).
consumption • Employees affect the service outcome
• Decentralization may be essential
• Mass production is difficult
Non-perishable Perishable • It is difficult to synchronize supply and
demand with services
• Services cannot be returned or resold


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2. Consumer behavior in services Perceived risk accompanies all purchase transactions, more risk by services because of
Service providers needs to understand how consumers choose, experience and evaluate the intangibility, variability and perishability. This could be in financial, time, performance
their service offerings. The chapter shows that services’ characteristics result in social, and psychological forms. More perceived risk at services because they’re not
differences in consumer evaluation processes compared to goods. accompanied by warranties, guarantees and not standardize but could be technical and
specialized consumers doesn’t have the knowledge or experience to evaluate whether
their satisfied. Accomplish risk reduction by reduce risk directly (guarantees) or
2.1 Search, experience and credence properties
addressing the factors that contribute to this perception (making service more tangible)
Economists distinguished two categories of evaluation properties of consumer products:
offering free/cost reduced trial, standardize offering so consumers learn to expect the
search qualities, attributes that a consumer can determine before purchasing a product
given level of quality.
(colour, style, price, smell, fit, feel; products like cars, clothing, furniture, jewellery); and
experience qualities, attributes that can be discerned only after purchase or during Evaluation of alternatives
consumption (taste and wearability; products like vacations, restaurant meals). Credence The evoked set of alternatives is smaller at services but frequently includes self-provision
qualities, characteristics that the consumer may find impossible to evaluate (insurance, of the service. In shops similar goods are displayed close to competing products, services
medical treatment and replacements on cars). are almost always offered only by a single ‘brand’ for sale. Another reason is that in a
geographic area it could be hard to find several businesses that are providing the same
services. But they could provide the service themselves as well instead of hiring someone
2.2 Consumer choice
(housekeeper or clean self, tailor or wash at home, daycare or staying home to take care).
Marketers are concerned with is how customers choose and
Self-services technologies are technological interfaces that allow customers to produce
make decisions and the steps that lead to the purchase.
services independent of direct service employee involvement. They’re popular when; they
Customers follow a process of six steps; need recognition,
bail them out of difficult situation, they’re better than the interpersonal alternative, they
information search, evaluation of alternatives, purchase,
work as they’re supposed to. But non popular when; they fail to work, they’re poorly
consumer experience, and post-purchase evaluation.
designed, the customer messes up and when there is no service recovery.
Need recognition
Service purchase
The process starts with the recognition that a need or want exists. This is the by the
Consumers make a decision to purchase a particular service or to do it themselves. By
Maslow hierarchy that consists of five need categories.
goods, consumers, prior to making their final purchase decision, can see and frequently
1. Physiological needs are biological needs such as food, water and sleep.
try the object that they will buy. At services much is still unknown at the point of purchase
2. Safety and security needs include shelter, protection and security.
because in many cases they’re produced and experienced at the same time. Services can
3. Social needs are for affection, friendship and acceptance.
be pay all or part of the purchase ahead of the service and the rest when it is produced fo
4. Ego needs are for prestige success, accomplishment and self-esteem.
them later. Because the inherent risk free or discounted trials or extensive tours of
5. Self-actualization involves self-fulfillment and enriching experiences.
facilities are designed by companies in order to reduce risk in the final purchase decision.
Information search In B2B trust is a paramount for long-term service contracts and they’re often spelled out
Once consumers recognize a need, they obtain information about it that might satisfy that in detail the service level agreements and penalties for non-performance.
need. This could be an extensive formalized process or quick and relatively automatic.
Consumers use opinion sources (friends, social media and reviews) and promotional
2.3 Consumer experience
sources (advertising and corporate website) for information. It’s a way of reducing risk.
The experience self often dominates the evaluation process because of the risky choice
Consumers rely more on opinion sources because promotional sources can convey
process. Services are experiences.
information about search qualities, but not about experience qualities. Another reason is
that many types of promotional sources of information are not as readily available for Services as processes
services, because they could be local, independent merchants without experience or Services involve a sequence of steps, actions and activities. The combination constitutes a
funds to advertise. Cooperative advertising (together by retailer and manufacturer) is process, a service experience that’s evaluated by the consumer. The customer experience
used infrequently by services. Personal influence becomes pivotal as product complexity comprises interaction with organizations. The diverse sets of experiences across the
increases and when objective standards to evaluate a product decrease. network of firms will influence the overall impression of a customers’ experience.

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Service provision as drama Attribution of dissatisfaction

Service as theatre is a framework for describing and analyzing service performances. It When services didn’t fulfil the intended needs, didn’t perform well or had no reliable
aims to create a desirable impression. It’s the way they appear and their commitment. price, consumers are disappointed, it’s the attribution of dissatisfaction. With services,
Service actors are critical when the degree of direct personal contact is high, when the consumers could attribute dissatisfaction to their own inability to specify or perform their
services involve repeat contact, and when they have discretion in determining the nature part of the service.
of the service and how it is delivered. To create the right impression loyalty, discipline and Positive or negative biases
circumspection are important. Sincere = when becoming one with the role, cynical = when Consumers remember negative events more than positive ones and are more influenced
you’re just getting paid for it. by them. If a consumer has good experiences, they tend to infer positive qualities to it.
Service roles and scripts Brand loyalty
Service roles are combinations of social cues that guide and direct behavior in a given De degree consumers are committed to a brand depends on; switching costs, availability
setting. Service employees need to perform their roles according to the expectations of of substitutes, social ties, perceived risk, and satisfaction of the past. When greater risks
the customers. A factor that influences it is the service script. It’s a logical sequence of are involved, consumers depend on brand names. Brand loyalty is described as
actions and events expected by the customer. economizing decision effort by substituting habit for repeated, deliberate decision,
The compatibility of service customers functions as a device for reducing the risk of decisions. Consumers are more loyal with
The way other customers behave on a customer’s experience has a strong impact on the services because the recognition of the need for repeated patronage in order to obtain
satisfaction and dissatisfaction of any given customer. Incompatibility could occur by satisfaction. Brand loyalty has two side; their own loyal customers, but it’s hard to get
differences in beliefs, values, experiences, ability to pay, appearance, age and health. A loyal customers from the competitors.
marketer must deal with heterogeneous persons and can bring them together. Customer
compatibility is a factor that influences customer satisfaction in high-contact services. 2.5 Understanding differences among consumers
Customer co-production Two differences among consumers; role of national and ethnic cultures in shaping
Service users also play a customer co-production role that can have profound influence behaviour, and unique differences in consumer decision-making.
on the service experience, the client co-produces the service. Global differences: The role of culture
Emotion and mood Culture represents the common values, norms and behaviour of a particular group and is
Moods and emotions are feeling states that influence people’s perceptions an often identified with nations or ethnicity it’s learned, shared, multidimensional and
evaluations of experiences. Moods distinguish from emotions at occur at a specific time in transmitted to generations. Major differences between people are between: values and
a specific situation. Emotions are more intense, stable and pervasive. They’re critical attitudes differ across cultures, manners and customs, material culture, and aesthetics.
factors of the perceived effectiveness of service encounters. Positive moods make Group decision-making
customers obliging and willing to succeed, they bias the way customers judge service Two or more individual who have im- or explicitly defined relationships such that their
encounters/providers, and affect the way information is absorbed and retrieved in behaviour is interdependent is called a group. This could be households or organizations.
memory. In households purchasing decisions, the needs and goals of the members must be
balanced so that the service delivers optimal satisfaction. Organizations have to make
2.4 Post-experience evaluation critical decisions on service purchases, they often rely on established (long-term) relation-
Customers form an evaluation that determines if they will return. Post-purchase and or partnerships. They rely on a small number of buyers, they are (in)formally organized
experience evaluations are important in predicting consumer behaviour and repurchase. into buying centres which includes all the involved people. Roles are: initiator,
Word-of-mouth communication gatekeeper, decider, buyer and the user. Organizational purchases tend to differ by
Consumers tell others about the service. Word-of-mouth is important because consumers magnitude and include; new task purchases (large purchases that need consideration),
are strongly influenced by personal opinions of others. You have to create a memorable straight rebuys (simple reorders), and modified rebuys (mix of new and straight rebuy).
and positive service experiences. Avoid to get negative word-of-mouth.


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3. Customer expectations of service Sources of adequate service expectations

Influences on adequate are short term and tend to fluctuate more than the factors that
3.1 Importance of customer expectations
influence desired. There are five factors that influence adequate service: temporary
Customer expectations are beliefs about service delivery that serve as standards, or
service intensifiers, perceived service alternative, self-perceived service role, situational
reference points, against which performance is judged. Customers compare their
factors and predicted service.
perceptions with these reference points in the evaluation.
1. Temporary service intensifiers consist of short-term, individual factors that make a

customer more aware of the need for service. In situations where temporary
3.2 Meaning and types of service expectations intensifiers are present, the level of adequate will increase and the zone of tolerance
Expectations are reference points against service delivery is compared. Everyone has an will narrow.
intuitive sense of the expectation and they can vary widely on the reference point. 2. Perceived service alternatives are other providers from whom the customer can
Expected service: Levels of expectations obtain service. The customer’s perception that service alternatives exist raises the
Focus on two different types of expectations about service. The highest is the desired level of adequate service and narrows the zone of tolerance.
service; the level of service the customer hopes to receive. Adequate service is the 3. Customer’s self-perceived service role is the customer perception of the degree to
threshold level of acceptable service; it is the minimum tolerable expectation. Customers which customers exert an influence on the level of service they receive. Customers’
assess service performance on basis of the boundaries, what they desire and wat they zones of tolerance seem to expand when they sense they are not fulfilling their roles.
deem acceptable. Levels of expectation why two organizations in the same business can When customers believe they are doing their part in delivery, their expectations of
offer far different levels of service and still keep customers happy. adequate service are heightened and the zone of tolerance contracts.
The zone of tolerance 4. Situational factors are service performance conditions that customers view as
Zone of tolerance is the extent to which customers recognize and are willing to accept the beyond the control of the service provider. Customers who recognize that situational
variation. If the service drops below adequate, customers will be frustrated and factors are not the fault of the service company may accept lower levels of adequate
dissatisfied. If the service exceeds the desired service, customers will be pleased and service in general and they are widening the zone of tolerance.
surprised this one is less subject to change. The zone of tolerance is the range within 5. Predicted service is the level of service that customers believe are likely to happen
which customers do not particularly notice service performance. Different customers during an impending transaction or exchange. It’s typically an estimate or calculation
possess different zones of tolerance. Some have narrow or greater zone of tolerance. The of the service that a customer will receive in an individual transaction rather than in
zone increases or decreases on multiple factors, as price. Customers’ tolerance zone also the overall relationship with the provider. It are prediction about individual service
vary for different service attributes or dimensions. The more important the factor, the encounters and are likely to be more concrete and specific than the types of
narrower the zone and a higher desire/adequate service level. expectation levels customer hold for adequate or desired service.
Service encounter expectations versus overall service expectations
3.3 Factors that influence customer expectations of service Customers hold expectations of the quality of each service encounter, just as they hold
Expectations play a critical role in customer evaluation, many forces that influence the expectation about the overall service quality of a firm. Individual service encounters are
expectation are uncontrollable. likely to be more specific and concrete than the expectations about overall service quality
Sources of desired service expectations Sources of both desired and predicted service expectations
Personal needs are states or conditions essential to the physical or psychological There are one internal and three external factors that influence desired and predicted
wellbeing of the customer, and are pivotal factors that shape what customers desire in service expectations: explicit service promises, implicit service promises, online and
service. There are many categories including physical, social, psychological and functional. offline word-of-mouth communications and past experience.
Lasting service intensifiers are individual, stable factors that lead the customer to a 1. Explicit service promises are personal and non-personal statements about the servic
heightened sensitivity to service. Derived service expectation are most important and made by the organization to customers. Personal when communicated by
occur when customer expectations are driven by another person or group. Other salespeople or other personnel, non-personal when they come from advertising,
intensifier is personal service philosophy, the customer is underlying generic attitude brochures and other written publications. They shape what customers desire and
about the meaning of service and the proper conduct of service providers. Personal predict will happen in the next service encounter.
service philosophies and derived service expectation elevate the level of desired service.


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2. Implicit service promises are service-related cues other than explicit promises that How does a company exceed customer service expectations?
lead to inferences about what the service should and will be, are dominated by prices Important to know if it is possible you can exceed customer expectations. Companies are
and the tangible. supposed to be accurate and dependable and provide the service they promised.
3. Online and offline word-of-mouth communication are personal and non-personal Developing a customer relationship is one approach. Other way is to deliberately under-
statements made by parties other than the organization convey to customers what promise the service to increase the likelihood of exceeding customer expectations.
the service will be like. It carries weight as an information source because it is Strategy is to under-promise and over-deliver. If a service promises less than what will
perceived as unbiased. eventually happen, customer can be delighted frequently. Firm should weigh two
4. Past experience are the customer’s previous exposure to service that is relevant to potential problems before using this strategy, first customer with whom a company
the focal service. It is relevant for prediction and be previous exposure to the focal interacts regularly are likely to notice the under-promising and adjust their expectations
firm’s service. Past experience may incorporate previous experience with the focal accordingly, negating the desired benefit of delight. Second, under-promising in a sales
brand, typical performance of a favorite brand, experience with the brand etc. situation potentially reduces the competitive appeal of an offering and must be tempered
The management of customer expectations by what the competition is offering. Final way to exceed expectations without raising
Managers need to know the pertinent expectation sources and their relative importance them in the future is to position unusual service as unique rather than standard.
for a customer population, segment and perhaps a particular customer. They need to Emphasizing that because special circumstances/situations, the service will deviate from
know the relative weight of the above internal and external factors. the norm (chef testing a new recipe/creation).
Do customer service expectations continually escalate?
3.4 Issues involving the management of customer service expectations Customer service expectations are dynamic; service expectations rise in step with service
The following five issues represent current topics of particular interest to service delivery or promises. Companies need to monitor adequate service expectations. Desired
marketers about customer expectations. service expectations are more stable; they’re driven by more enduring factors.
What does a services market do if customer expectations are ‘unrealistic’? How stays a service company ahead of competition in meeting customer expectations
Management and employees fear to ask the customers their expectation and think they Companies whose service performance falls short of the adequate level are at a
will be extravagant and unrealistic to fulfill. Main expectations of service are simple and competitive disadvantage, with the disadvantage escalating as the gap widens. Companie
basic, just fundamentals that are delivered as promised. Asking customers about must perform above the adequate service level, but could be temporary advantage.
expectations give them the belief that the company will do something with the Customers’ adequate service levels will rise rapidly when competitors promise and delive
information. Giving customers progress updates as service is improved to address their a higher level of service. To develop a customer franchise with customer loyalty,
needs and desires. Companies get credits for incremental efforts to improved service. companies must not reach the desired service level. Exceptional service can intensify
Observers recommend deliberately under-promising the service to increase the likelihood customers’ loyalty.
of meeting or exceeding customer expectations. It makes the expectation more realistic
and narrows the gap between expectation and perception.
Should a company try to delight the customer?
Delight refers to a profoundly positive emotional state that results From having one’s
expectations exceeded to a surprising degree. Basic function of the service are musts.
Satisfiers are features that have potential to further satisfaction beyond the basic function
op the product. Final level are delight or product features that are unexpected and
surprisingly enjoyable. The level of delight comes with an extra effort and costs to the
firm, benefits should be weighed. But how long can delights maintain consumer’s
attention, he could forget it immediately or remember it and adjust his level of
expectations upwards, then it will cost the company more to satisfy in the future. If a
competitor is unable to copy the delight strategy, it will be a disadvantage for him. When
a competitor can easily copy the delight strategy, neither firm benefits (only consumer).

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4. Customer perceptions of service 4.3 Ensuring high customer satisfaction

4.1 Customer perceptions Recent qualitative study looking at consumers’ satisfaction with brand identified the
following critical requirements in customer comments:
Satisfaction versus service quality
1. Be customer centric, look at each situation form a customer’s point of view and
Satisfaction and quality are fundamentally different in terms of causes and outcomes.
handle them as reasonable people. 24/7 access is important.
Satisfaction is a broader concept and is influenced by perceptions of service quality and
2. Have superior staff, basics and communication skills on the ground are essential.
perceptions of product quality, price, personal factors an uncontrollable situational
3. Delight the customer, over-delivering though excellent customer service or exceeding
factors like weather. Service quality focuses specifically on dimensions of service, is a
post-purchase expectations.
focused evaluation that reflects the customer’s perception of reliability, responsiveness,
4. Keep your promises, well-articulated promises set clear expectations and are a key.
assurance, empathy and tangibles. It is also influenced by perceptions of quality, product
5. Sort out service recovery, services could fail, dealing it promptly and effectively is
quality, and price. Perceived service quality a component of customer satisfaction.
paramount to maintain a brand’s reputation.
Transaction versus cumulative perceptions 6. Build a relationship, the one-stop-shop where the left hand of a company knows wha
Customers have perceptions of a single, transaction-specific encounters as overall the right is doing is essential.
perceptions of a company based on all experiences. Understanding perceptions at the
transaction-specific level is critical for diagnosing service issues and making immediate
4.4 Service quality
changes. Cumulative experiences are better predictors of overall loyalty to the company.
Outcome, interaction and physical environment quality
Consumers judge the quality of services based on perceptions of the technical outcome
4.2 Customer satisfaction provided, the process of the delivered outcome and quality of physical surrounding of the
What is customer satisfaction? delivered service. Critical element of customer perceptions, evaluations and satisfaction.
Satisfaction is the customer’s evaluation of a product or service in terms of whether that
Service quality dimensions
product/service has met the customer’s needs and expectations. When that fails, it’s
Customers judge quality based on relevant factors to the context, there are five specific
dissatisfaction. Satisfaction could be contentment, pleasure, delight, relief or
dimensions, they are measured by SERVQUAL.
ambivalence. Satisfaction is dynamic and variety of factors.
1. Reliability, ability to perform the promised service dependably and accurately.
What determines customer satisfaction? 2. Responsiveness, willingness to help customers and provide prompt service.
Satisfaction is influenced by specific product or service features (customers will make 3. Assurance, employee knowledge, courtesy and ability to inspire confidence and trust
trade-offs among different features), consumer emotions (could be stable pre-existing or 4. Empathy, caring, individualized attention given to customers.
fluctuating), attributions for service success or failure (perceived causes of events, they 5. Tangibles, appearance of physical facilities, equipment, personnel and written
look for the reasons that can influence their satisfaction), perceptions of equity and materials.
fairness (have I been treated fairly compared to others?) and other consumers, family Tangibles: representing the service physically and virtually
members and co-workers.
Tangibles provide physical and virtual representation or images of the serve that
National customer satisfaction indices customers will use to evaluate quality, growing importance in virtual tangibles. They are
National customer satisfaction indices aim to measure the quality of economic output, used to enhance image, provide continuity and signal quality.
whereas more traditional economic indicators tend to focus only on quantity. They intend
Dimensions in the Nordic model of service quality
to be complementary to productivity measures, with productivity reflecting the quantity
The Nordic model of service experience categorizes the dimensions into those relating to
of output and customer satisfaction view of output quality. To measure customer loyalty,
technical quality and those relating to functional quality. Interaction between buyer and
satisfaction an quality use Reichheld’s Net Promoter, customers are asked one question,
seller in a service setting are as important as the eventual outcome. The two dimensions
‘How likely is it that you would recommend company x to a friend or colleague?’. Answers
are developed in three components, service product, delivery an environment.
can be given on a 0-10 scale and are classified in three groups; Promoters (9 or 10) are

loyal and enthusiastic, continue buying and referent others. Passives (7 or 8) generally
satisfied but lack the enthusiasm, vulnerable for competitive offers. Detractors (6 or less)
are less happy with the provider and may communicative negative word-of-mouth.


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E-service quality 2. Telephone encounters are ones between an end customer and the firm over the
E-service quality is defined as the extent to which a website facilitates efficient and telephone. The judgement of quality in this encounter is different because of the
effective shopping, purchasing and delivery. Research identified seven critical dimensions greater potential variability in the interaction. Tone of voice, employee knowledge
for core service evaluation (four) and service recovery evaluation (three). Dimensions that and effectiveness/efficiency in handling issues are important judging criteria.
customers use to judges websites without questions or problems are: 3. Face-to-face encounters are direct contact between an employee and a customer.
1. Efficiency, find desired product and info, everything with minimal effort. Determining and understanding service quality in face-to-face contexts is the most
2. Fulfilment, products in stock, delivering in promised time, accuracy promises. complex. Verbal and non-verbal behaviour, tangible cues like clothes and other
3. Reliability, technical functioning website. symbols of service are important determinants of quality. The customer plays a role
4. Privacy, assurance that data are not shared and credit info is secure. in creating quality service for himself through his or her own behaviour during the
Three dimensions that customers use to assess recovery service when there are problems interaction in face-to-face encounters.
or questions are: Sources of pleasure and displeasure in service encounters
1. Responsiveness, ability to provide info when problems occur, online guarantees and Critical incident technique is a way used by researchers to get customers and employees
mechanisms for handling returns. to provide verbatim stories about satisfying and dissatisfying service encounters they hav
2. Compensation, degree receive money back and reimbursed for shipping and handling experienced. Technique says; “Think of a time when, as a customer, you had a particularly
costs. satisfying or not interaction with ….”. After analyzing stories four common themes;
3. Contact, availability of live customer service agents online or telephone. 1. Service recovery includes all incidents with a failure of the service delivery system
and an employee is required to respond to customer complaints and
4.5 Service encounters: The building block for customer perceptions disappointments. The content/form of response is what the customer remembers.
Service encounters or moments of truth are where promises are kept or broken and 2. Adaptability is how adaptable the service delivery system is when the customer has
where rubber meets the road. Customers build from these encounters their perceptions. special need or requests that place demands on the process. Customers judge service
Service encounters or moments of truth encounter quality in terms of the flexibility of the employees and the system.
The most vivid impression of service occurs in the service encounter. Service encounters 3. Spontaneity in delivering memorably good or poor service. Satisfying incidents
cascades are the moments that customers receive a snapshot of the organization’s service represent pleasant surprises for the customers, dissatisfying incidents represent
quality, each contributes to the overall satisfaction and willingness to do business again. negative and unacceptable employee behaviour.
For the organization each encounter presents an opportunity to prove the potential to 4. Coping is the behaviour generally required of employees to handle problem custome
increase customer loyalty. First 10 minutes are most important. encounters, response to uncooperative problem customers. This encounters are
satisfying from the customer’s point of view. Nothing could result in a pleased feeling
The importance of encounters

Any encounter can potentially be critical in determining customer satisfaction and loyalty.
When connecting for the first time, the customer has no other basis for judging the 4.6 The evidence of service
organization. Even if the technical quality of the firm is superior, the firm may not get the Because of the intangibility customers are searching for evidence of service in every
chance to demonstrate it if the (telephone) encounter drives the customer away. Many interaction they have with the organization. Three major categories of evidence for the
positive experiences add up to a composite image of high quality, negative interaction customers are; people, process and physical evidence. They represent the service and
have the opposite effect. When there is a combination the customer could feel unsure, provide evidence that makes it tangible. They’re critically important in managing service
doubtful of the firm’s quality and are vulnerable for competitors. encounter quality and creating customer satisfaction. All three types will operate in face-
to-face service encounters.
Types of service encounters
1. Process; flow of activities, steps in process, personalization versus standardization,
A service encounter occurs every time a customer interacts with the organization. There
and level of automation.
are three general types of service encounters; remote, telephone and face-to-face.
2. Physical evidence; tangible communication, servicescape, guarantees, technology,
1. Remote encounters are ones that occur without any direct human contact. Tangible
and website.
evidence of the service and the quality of the technical processes and systems
3. People; contact employees, the customer’s role, other customers.
become the primary bases for judging quality.


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5. The gaps model of service quality Gap 3: Not delivering to service designs and standards
This gap is the discrepancy between development of customer-driven service standards
5.1 The customer gap
and actual service performance by company employees. Standards must be backed up by
Viewing services in a structured, integrated way called the gaps model of service quality.
appropriate research (people, systems and technology) and have to be effective.
The customer gap (gap 5) is the difference between customer expectations and
Narrowing this gap by ensuring that all the resources needed to achieve the standards are
perceptions. Customer expectations are standards that customers bring to the service
in place, reduces the customer gap. Critical factors for this gap are:
experiences (what they believe should or will happen), customer perceptions are
1. Deficiencies in human resource policies;
subjective assessments of actual service experiences. Closing the gap between
Ineffective recruitment, role ambiguity and role conflict, poor employee-technology
expectations and perceiving are the basis for the gaps model and is critical.
job fit, inappropriate evaluation and compensation systems, lack of empowerment

perceived control and teamwork.
5.2 The provider gap 2. Customers who do not fulfil roles;
The provider gaps (the four others) need to be closed. They occur within the organization Customers who lack knowledge of their roles and responsibilities, customers who
providing the service. negatively impact each other.
Gap 1: Not knowing what customers expect 3. Problems with service intermediaries;
A primary cause for this is that firms lack accurate understanding what the expectations Channel conflict over objectives and performance, difficulty controlling quality and
are. Key factors for this gap are: consistency, tension between empowerment and control.
1. Inadequate marketing research orientation; 4. Failure to match supply and demand
Insufficient marketing research, research not focused on service quality. Failure to smooth peaks and troughs of demand, inappropriate customer mix,
2. Inadequate use of marketing research; overreliance on price to smooth demand.
Lack of upward communication, lack of interaction between management and 5. Inadequate service recovery;
customers, insufficient communication between contact employees and managers, Lack of encouragement to listen to customer complaints, failure to make amends
too many layers between contact personnel and top management. when things go wrong, no appropriate recovery mechanisms in place to service
3. Insufficient relationship focus; failures.
Lack of market segmentation, focus on transactions rather than relationships, focus Gap 4: Not matching performance to promises
on new customers rather than relationship customers. This gap illustrates the difference between service delivery and the service provider’s
Gap 2: Not selecting the right service quality designs and standards external communications. Promises made by a service company may raise customer
This gap is the difference between company understanding of customer expectations and expectations. Key factors of this gap are:
development of customer-driven service designs and standards. Customer-driven 1. Lack of integrated marketing communications;
standards differ from the conventional performance standards that companies establish Tendency to view each external communication as independent, absence of
for service. Reasons for this gap are: interactive marketing in communication plan (marketing between contact people and
1. Poor service design; customers), absence of strong internal marketing programme.
Unsystematic new service development process, vague undefined service designs, 2. Ineffective management of customer expectations;
failure to connect service design to service positioning. Absence of customer expectation management through all forms of communication,
2. Absence of customer-driven standards; lack of adequate education for customers.
Lack of customer-driven service standards, absence of process management focusing 3. Over-promising
on customer requirements, absence of formal process for setting service quality Over-promising in advertising, personal selling and through physical evidence.
goals. 4. Inadequate horizontal communications;
3. Inappropriate physical evidence and servicescape; Insufficient communication between sales and operations, and advertising and
Failure to develop tangibles in line with customer expectations, servicescape design operations, difference in policies and procedures across branches or units.
that does not meet customer and employee needs, inadequate maintenance and
updating of the servicescape.
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5.3 Putting it all together: Closing the gaps

The key to closing the customer gap is to close provider gaps 1 – 4 and keep them closed.
When one or more provider gaps exist, customers perceive service quality shortfalls. The
gaps model of service quality serves as a framework to improve quality service.

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Part 2. Understanding customer requirements 6.3 Elements in an effective services marketing research programme
A good services marketing research programme include multiple types of information
This is about provider gap 1; the difference between customer expectations of service and source and research studies.
company understanding those expectations. Research approaches Primary objectives
Complaint solicitation • To identify/attend to dissatisfied customers.
6. Listening to customers • To identify common service failure points.
Many organizations miss the mark by thinking inside out, they believe they know what Complained solicitation requires rigorous recording of numbers and types of
customers should want and deliver that, rather than finding out wat they do want. A complaints through many channel, and then working to eliminate most frequent
better approach is thinking outside in, determining customer expectations and delivering problems. Good organizations take complaints seriously, listen and seek to them as
to them. It uses marketing research and data to understand customers’ requirements. communication to improve their service and performance of employees.
6.1 Customer databases and big data Critical incident studies • To identify ‘best practices’ at transaction level.
Data in a database can be categorized in three groupings: • To identify customer requirements as input for
1. Information on purchasing behaviour; services purchased, timing and method of quantitative studies.
purchase, trends. • To identify common service failure points.
2. Information on customer loyalty; relationship length, value, profitability. • To identify systematic strengths and weaknesses in
3. Information on customer response; to marketing communications, new products, customer-contact services.
price changes. Critical incident techniques have many benefits, data are collected from the
Databases information only describes what has happened, not why. It can provide an respondent’s perspective and vivid because they’re expressed in consumers’ own
objective and measurable assessment of customers’ behaviour in a true-life marketing words. It provides concrete info about the way the company and employees behave
environment. It only represents current customers and prospects. Big data is an all- and react. Research is useful when the topic or service is new and little other info
encompassing term for any collection of data sets so large and complex that is becomes exists. Well suited for assessing perceptions from different cultures, respondents share
difficult to process using traditional data processing applications. Data mining could be own perceptions.
software used to select, explore and model big data to uncover unknown relationships Researching customer • To identify customer requirements as input for
and patterns of behaviour. Through availability of databases and marketing research,
needs quantitative research.
organization adopt an integrated approach to collect, record, analyze and interpreting
It is a basic research and essential because it determines the type of questions that will
information on customers, competitors and markets.
be asked in service and improvement that will be attempted by the firm. Qualitative
6.2 Using marketing research to understand customer expectations techniques are appropriate to start with, quantitative could follow. Other approach is
Finding out through marketing research what customers expect is essential to provide to examine existing research about customer requirements in similar service industries.
service quality. The research must focus on service issues like; what features are The five dimensions of quality service are generalizable across industries.
important to customers, what level of features customers expect, what they think the Customer satisfaction • To monitor and track service performance.
company can and should do with problems. Services marketing research programmes surveys and SERVQUAL • To assess overall company performance compared with
help companies identify customer expectations and perceptions. surveys that of competition.
Research objectives for services • To determine links between satisfaction and
Defining the problem and research objectives is critical. It poses the question to be behavioural intentions.
answered and the problems to be solved with research. Each question requires a different • To assess gaps between customer expectations and
research strategy, objectives translate into action question. The objectives aim to assess perceptions.
customer requirements, dissatisfaction, and demand. Major focus in research involves Relationship surveys pose questions about all elements in the customer’s relationship
capturing human performance (employee, team, brand, organization or competition. with the company, it diagnoses its relationship strengths and weaknesses.
Potential for variation in service delivery always exists.
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Also effective in comparing company performance with competitors and best Database marketing • To identify the individual requirements of customers
performance as benchmark. Identifies which aspects need performance improvement, research using information technology and database information.
how much of that on each aspect and evaluating impact of improvement efforts. Best
way by surveys that measures customer evaluations of service. SERVQUAL one of first Exit surveys or post- • To obtain immediate feedback on performance of
measures to measure service quality; survey containing 21 service attributes into the transaction surveys service transactions.
five service quality dimensions. Asks customers to provide two different ratings on • To measure effectiveness of changes in service delivery.
each attribute; expected level from excellent companies and reflection their perception • To assess service performance of individuals and teams.
of delivered service from a specific company in that sector. The difference between the • To use as input for process improvements.
expectation and perception constitutes a quantified measure of service quality. The • To identify common service failure points.
data can be used for following purposes; Purpose is to capture information about one or all of the key service encounters with
1. To determine the average gap score for each service attribute. the customers in a short list of questions immediately after a particular transaction
2. To assess a company’s service quality along each of the five SERQUAL dimensions. about their satisfaction with the transaction and contact personnel with whom
3. To track customer’s expectations and perceptions over time. interacted. Are more effective than complaint solicitation because not only feedback
4. To compare a company’s SERVQUAL scores against those of competitors. from dissatisfied customers. Strong benefit of this method is that it often appears to
5. To identify and examine customer segments that differ significantly in their customers that the call is following up to ensure that they are satisfied; the call does
assessments of a company’s service performance. double duty as a market research tool and as customer service. It also serves as an
6. To assess internal service quality. incentive for employees to provide better service, because they know how being
There are also critics on the SERVQUAL method, relate to the instrument’s dimensions evaluated. Type of post-transaction survey that’s more familiar is on websites.
and shortcomings associated with the disconfirmation paradigm. Concerns that the Consumer makes a purchase, automatic message pops up and invites consumers to fill
attributes used in SERVQUAL are not appropriate for all service offerings and need to out a survey, consumers are asked about the ease of ordering, product selection,
be contextualized to reflect service activities. Care must be taken to ensure that the website navigation and customer support.
dimensions that are being measured are appropriate to the situation in which it is to be
Service expectation • To create dialogue with important customers.
used. The attributes from original SERVQUAL do provide a valuable starting point for
meetings and reviews • To identify what individual large customers expect and
the development of an appropriate tool.
then to ensure that it is delivered.
Disconfirmation paradigm, there are thee problems when measuring comparisons
Electing the expectations of the client at a specified time of the year and then following
between expectations and experiences over a number of attributes;
up later to determine whether the expectations were fulfilled. This research isn’t
1. If expectations are measures after the service experience, then what is measured
objective but initiated and facilitated by senior members of the account team so they
is not really expectation but something which has been influenced by the service
can listen carefully to the expectations. The format; asking clients what they expect in
experience.
terms of eight to ten basic requirements determined from focus group research,
2. It may not make sense to measure expectations prior to the service experience
enquiring what particular aspects of the requirements the account team performed
because the expectations that exist before a service is deliver may not be the same
well in the past and what aspects need improvement, and requesting that the client
as the factors that a person uses when evaluating their experiences.
rank the relative importance of the requirements. Then make a plan with the team and
3. A customer’s view of their experience in a service encounter is influenced by their
check it with client. After a year return to client and ask if it has been successful.
prior expectations. If expectations are measured and the experiences are
measured, then the measures are not independent of each other and expectations Market-oriented • To research customers in natural settings.
are being measured twice. ethnography • To study customers while they are in a service
Alternative way of measuring service quality is the SERVPERF instrument which encounter.
measures experiences only and does not ask respondents about their expectations. Are Ethnography allows researchers to observe consumption behaviour in natural settings.
measured over a range of attributes that a researcher has developed. It may be easier Goal is to enter the consumer’s world as much a possible by observing how and when a
to administer and the data may be easier to analyze. service is used in an actual home or consumption environment. Used techniques are
observation, interviews, documents and examination of material possessions.

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Netnography • To monitor changes in customer expectations over time Future expectations • To forecast future expectations of customers.
• To identify reasons for customer defection. research • To develop and test new service ideas.
• To research customers in natural settings. Expectations are dynamic and change rapidly in highly competitive markets. Features
• To determine links between satisfaction and research involves environmental scanning and querying of customers about desirable
behavioural intentions. features of services. Lead user research brings in opinion innovators and asks them
Netnography or online ethnography is the ethnographic study of online communities. requirements that are not being met by existing services. Synectics approach defines
The researching participates as full member of the community without customers lead users more broadly than standard lead user research. Often by debates in three
being aware of the researcher’s identity. There are ethical questions issues about that. groups, users alone, developers alone and users with a design expert.
Customers may speak more freely in an online community.
Mystery shopping • To measure individual employee performance for 6.4 Analyzing and interpreting marketing research findings
evaluation, recognition and rewards. Big challenge is to convert a complex set of data to a form that can be read and
• To identify systemic strengths and weaknesses in understood quickly by everyone who makes decisions, many people haven’t been train in
customer-contact services. statistics or have the time. When users think they understand the data, they’re more
Researchers send in and experience the service as if they were customers. They’re likely to apply it.
trained in the important criteria. Deliver objective assessments about service
Tracking of performance, gap scores and competition
performance. Mystery shopping is used by financial services, retailing, hotels,
Tracking performance could be shown in a graph with lines that views expectations,
government etc. It is to measure the process and facts. Are used for purposes to:
perception and the gap between them. Any attribute or dimension could be tracked like
1. Act as diagnostic tool, identifying failings and weak points in service delivery.
this.
2. Encourage, develop and motivate personnel by linking appraisal, training and
reward mechanisms. Zones of tolerance charts
3. Assess the competitiveness of organization’s service provision by benchmarking Companies can collect data on dual expectation levels like desired service and adequate
against offering of others in the industry. service, they can convey the info in zones of tolerance charts. Perception of the company
Customer panels performance could be indicated by circles. The desired service is at the top and adequate
• To monitor changes in customer expectations over time.
service at the bottom. The company is delivering service that are above customers’
• To provide a forum for customers to suggest and
minimum level of expectation when the circles are within or above the boxes. When
evaluate new service ideas.
below, the customers are dissatisfied with the company’s service.
Customer panels are ongoing groups of customers assembled to provide attitudes and
perceptions about a service over time. Offer companies regular and timely customer Importance/performance matrices
information. Example is to show a movie to panel before hitting the market. This matrix is one of the most useful forms of analysis. The chart combines information
Lost customer follow- • To identify reasons for customer defection. about customer perceptions and importance ratings. There are many variations of the
up matrices: some companies define x-axis as gap between expectations and perceptions, or
• To assess gaps between customer expectations and
perceptions. as performance relative to competition. The shading indicates the area of highest leverag
for service quality improvements where importance is high and performance low. The
Seeking out customers who have dropped the company’s service to inquire about their
other upper quadrants are attributes to be maintained. The lower two quadrants contain
reasons for leaving. Lost customer research asks open-ended, in-depth questions to
attributes that are less important, some perform well and others poorly. But they have
expose the reasons for defection and events that led to dissatisfaction. Asking by
less attention because customers aren’t concerned about these attributes as they are in
surveys specific reasons for defections and to describe the problems that triggered the
the attributes of the upper quadrants.
move. Benefit of this type is that it identifies failure points and service problems.

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6.5 Using marketing research information Objectives for upward communication

A firm must use the research findings in a meaningful way, to drive change or Objectives can be met by two types of interactive activities; designed to improve the type
improvement in the way service is delivered. Misuse/non-use can lead to a large gap in and effectiveness of communications between customers and management, and to
understand customer expectations. When customers participate in research they feel improve communication between employees and management. Objectives are:
frustrated and annoyed when they don’t see changes. Best way to use the info is to apply 1. To gain first-hand knowledge about customers.
what has been learned to the business and is the key to close the gap between customer 2. To gain in-depth information on end customers.
expectations and management perceptions. Research plan should specify the mechanism 3. To improve internal service quality.
which customer data will be used and should be actionable, timely, specific and credible. 4. To gain first-hand knowledge about employees.
5. To obtain ideas for service improvements.
6.6 Ethics in marketing research Research for upward communication
Ethics is important in marketing research as the industry is dependent upon: 1. Executive or management listening to customers; Common in B2B market.
4. Goodwill; Willingness of respondents to volunteer information on their awareness, 2. Research on intermediate customers; are people who the company serves and they
attitudes and behaviours. serve the end-customer. Researching them can be useful to improve service and
5. Trust; Decision makers trust researchers to provide accurate information. obtain info about the end-user.
Researchers trust decision makers to divulge information that have an impact on the 3. Research on internal customers; There is a strong and direct link between quality of
completion of the research study. internal service that employees receive and the quality of service they provide to
6. Professionalism; If respondents answer questionnaires in a serious and thoughtful their own customers.
manner, they feel that the research is going to be professional. 4. Executive or management listening approached to employees;
7. Confidentiality; Respondents are more willing to express their opinions when they 5. Employee suggestions; Suggestion systems are effective when employees are
know the info will be used confidentially. empowered to see their suggestions through and are active participant in
Behaviour of researchers is controlled by protection laws enforced by the government. improvement for their jobs. Nowadays the suggestions are facilitated by self-directed
work teams.
6.7 Monitoring user-generated content
User-generated content is material such as personal opinions, news, ideas, photos and
video published on the internet by users of social networks, blogs, online communities
and product/service review sites using the applications of web 2.0. Challenge for
organizations is to search through those comments, views and opinions and only analyze
the relevant material. By using automated systems, you may get struggles with inaccurate
spelling, grammar and punctuation. Another method is the use of public relations
research agencies like Nielsen and TNS.

6.8 Upward communication
Large organizations don’t always get the opportunity to experience at first-hand what
their customers want, the larger the company, the more difficult it will be to interact
directly with the customer and get less first-handed info about customer expectations. To
truly understand customer needs, management benefits from hands-on knowledge of
what really happens in stores, telephone lines, service queues and face-to-face
encounters.
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7. Building customer relationships 3. Passive relational expectations; customers looking for the knowledge that they could
contact the provider when they want. They’re seeking contact.
7.1 Relationship marketing
It’s important to be aware of the relationship expectations of customer if the most
There has been a shift from a transactions to a relationship focus in marketing. Customers
appropriate relationship management strategy is adopted.
become partners and the firm must make long-term commitments to maintaining those
relationships with quality, service and innovation. Relationship marketing represents a The goal of relationship marketing
shift within marketing; away from an acquisitions/transaction focus toward a The goal of relationship marketing is to build and maintain a base of committed
retention/relationship focus. Strategy that focuses on keeping and improving customers who are profitable for the organization. From a customer’s problem-solving
relationships with current customers. The bucket theory of marketing is a big bucket filled perspective, the formation of satisfaction, trust and commitment correspond to the
with sales, advertising and promotion programmes at the top, what is effective stays in customer’s willingness to engage in a relationship as an acquaintance, friend and partner.
the bucket. But there is a hole in it, when business is well, that hose is mall, when the Benefits for customers and firms
operation is weak and customers aren’t satisfied then the bucket hole is huge. Usually it’s Both parties can benefit from customer retention.
cheaper to keep a current customer than to attract a new one. 1. Benefits for customers; remain loyal when they receive greater value relative to what
The evolution of customer relationships they expect from competing firms. Value is a trade-off for the consumer between the
Marketing exchange relationships between providers and customer have potential to “give” and the “get” components. When firms consistently deliver value from the
evolve from strangers to acquaintances to friends to partners. customer’s point of view, the benefits have an incentive to stay in the relationship.
1. Customers as strangers; are customer who are not aware of or haven’t had any 2. Confidence benefits: these comprise feelings of trust or confidence in the provider,
transaction with a firm. Industry level: haven’t entered the market. Firm level: along with a sense of reduced anxiety and comfort in knowing what to expect.
customers of competitors. Goal to initiate communication to attract and acquire 3. Social benefits; customers develop a sense of familiarity and a social relationship with
them to their businesses. service providers. The close personal and professional relationships that develop
2. Customers as acquaintances; familiarity is established and the firm become between service providers and clients are the basis for customer’s loyalty. Risk is
acquaintances, creating the basis for an exchange relationship. Primary goal is to when a valued employee leaves and takes customers with him.
satisfy the customer. Firms that have acquaintance relationships can create value for 4. Special treatment benefits; include the benefit of the doubt, being given a special
them by learning al their transactions. deal or price, or getting preferential treatment. This is less important than other
3. Customers as friends; when a customer makes purchases from a firm and receive received benefits.
value in the exchange relationship, the firm can acquire specific knowledge of that 5. Benefits for firms; the firm receives cultivating close relationships a variety of
customer’s need. The provision of unique offering transforms the relationship from customer behaviour benefits and also HRM benefits.
acquaintance to friendship, it requires development of trust. Primary goal at this 6. Economic benefits; As customers get to know a frim and are satisfied with the quality
stage is customer retention. relative to that of its competitors, they give more of their business to the firm. Repea
4. Customers as partners; The creation of trust leads to the creation of commitment and purchases by established customers require as much as 90 per cent less marketing
that is the condition necessary for customers to extend the time perspective of a expenditure.
relationship. The deepening of trust, reduces the need to solve problems to find 7. Customer behaviour benefits; the company receives from long-term customers free
better alternatives. The key to success in this stage is to organize and use information advertising through word-of-mouth communication and endorsements like on online
about individual customers more effectively than competitors. reviews or blogs. Has added benefit of reducing the costs of attracting new
Not all customers are interested in forming relationships with their service providers, customers. But also customer voluntary performance (cleaning table). They also
depends on the service and level of interest. Grönroos divided customer expectations into provide social benefits to other customers in the form of friendships or
three types: encouragement. And they can serve as mentor because they have experience.
1. Transactional expectations; customer is look for solution for their needs and 8. Human resource management benefits; because of their experience and knowledge
acceptable price. Don’t appreciate contact from the provider between purchases. of the provider, loyal customer may be able to contribute to the co-production of the
2. Active relational expectations; customer is looking for opportunities to interact with service by assisting in service delivery. Also employees who regularly interact with the
the provider to get additional value. Disappointed by a lack of contact. same customers may also receive social benefits. And customer retention is
employee retention.
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7.2 Relationship value of customers The customer’s view of profitability tiers

It is a concept or calculation that looks at customers from the point of view of their Profitability tiers make sense for the company, but customers aren’t always
lifetime revenue and/or profitability contributions to a company. understanding/ appreciate being categorized. Customers are aware of unequal treatment
Factors that influence relationship value and many resist and resent it. But customers could be disappointed in the level of service
It is influenced by the length of an average ‘lifetime’, the average revenues generated per they receive and give firms poor marks for quality. Firms have to communicate with
relevant period, sales of additional services over time, and costs associated with serving customers so they understand the level of service and what they need to pay/do to
the customer. Lifetime value refers to lifetime revenue stream, but including costs it is receive personalized service.
called lifetime profitability. Making business decisions using profitability tiers
Estimating customer lifetime value Past customer purchasing behaviour can be misleading. What he spends today or
Documenting the value of loyal customers is to estimate the increased value or profits yesterday will not necessarily reflect what he will do in the future. Firms have two groups
that accrue for each additional customer who remains loyal to the company rather than they must consider; big spenders and consistent small spenders. Firms need to be
defecting the competition. A firm can document the value and costs of retaining cautious in blindly applying value calculations without thinking about implications.
customers with accounting systems.
Linking customer relationship value to firm value 7.4 Relationship development strategies
Customer base forms a large part of a company’s value. The market value can be Core service provision
determined by calculating customer lifetime value. Estimate the relationship value, A firm must provide a good core service delivery that at minimum meets customer
forecast future growth number of customers and figure it to determine the value. expectations. Therefore, managing the customer experience during service encounter inc
interactions with the organization, the facilities and interactions with representatives and
7.3 Customer profitability segments other customers is critically important. The company needs to know what is important to
Customers differ in relationship value and it isn’t practical or profitable to meet all customers at each stage of the process and at each touchpoint. Effective customer
customer’s expectations. Companies try do identify segments or better tiers of customers. experience management needs to involve the whole organization. For consistency of all
That goes beyond segmentation because it tracks costs and revenues for segments. touchpoints it is necessary to understand the customer journey while doing business with
an organization. Retention strategies have little long-term success unless the firm has a
Profitable tiers – the customer pyramid
solid base of service quality and customer experience management. The firm must be
Customers differ in profitability; 20 percent of the customer produce 80 per cent of sales
competitive and frequently better than that. All retention strategies are built on the
or profit. This 80/20 is a two-tier scheme. More tiers are precisely, use four-tier system:
assumption of competitive quality and value being offered. The excellence in the core
1. Platinum tier; company’s most profitable customers, typically heavy users of the
service offered is essential to a successful relationship approach.
product, not price sensitive, willing to invest new offerings and are committed.
2. Gold tier; profitability level less high, they want price discounts that limit margins, or Switching barriers
aren’t loyal. Could be heavy users who minimize risk by working with more vendors. Customer may face barriers that make it difficult to leave a service provider. Switching
3. Iron tier; loyalty and profitability are not substantial enough for special treatment. barriers influence consumers’ decisions to exit from relationships with firms and
Provide volume needed to utilize the firm’s capacity. therefore facilitate customer retention.
4. Lead tire; customers who are costing the company money. Want more attention than 1. Customer inertia; when it isn’t worth it to switch providers. Inertia is why some
they spend and aren’t profitability, are sometimes complaining problem customers. dissatisfied customers stay with a provider. To retain customer, firms must increase
This classification differs from traditional segmentation. First the customer pyramid the perceived effort required on the part of the customer to switch providers. When
profitable rather than usage defines all levels. Second, the lower levels articulate classes he believes great effort is needed to change, he is more likely to stay.
of customer who require a different sort of attention. Firm must work to make them more 2. Switching costs; these term are monetary and non-monetary costs involved in
profitable. By strengthening relationships with loyal customers, increasing sales with changing to a different firm. They include investment of time, money or effort that
existing customers and increasing profitability on each sale opportunity. make it challenging to move to another provider. Costs could be set-up-, search-,
learning- or contractual costs.

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Relationship bonds diminished or become obsolete. Another reasons are a provider that relocates to the
Switching barriers serve as constraints that keep customers in relationships because they other side of the city. A relationship ending may occur because of the customer isn’t
‘have to’. Relationship bonds encourage customers to remain because they ‘want to’. It is fulfilling his obligations. In every reason, firms should clearly communicate their reason
a framework for understanding the types of retention strategies that focus on developing for wanting to terminate it so that customers understand what is occurring and why.
bonds with customers. Relationship marketing can occur at different levels and each level Should firms fire their customers?
results in ties that bind the customer to the firm. There are four retention strategies. Companies are making these types of decisions based on the belief that troublesome
1. Level 1 – Financial bonds; volume and frequency rewards, stable pricing and bundling customers are less profitable and less loyal, attempting to retain their business may be
and cross-selling. Financial incentives do not generally provide long-term advantages, counterproductive. Another reason is the negative effect that the customers can have on
unless combined with another relationship approach, but they don’t differentiate the employee quality of life and morale. Firing customers isn’t simple and needs to be done
firm from competitors. without negative publicity or negative word-of-mouth. Raising prices or extra charging
2. Level 2 – Social bonds; continuous relationships, personal relationships, social bonds services can move unprofitable customers out of the company. Or helping the client to
among customers. Building long-term relationships though social and interpersonal as find a new supplier is another way.
well as financial bonds. Customers are client and become individuals whose needs
and want the firm seeks to understand. Sometimes relationships are formed with the
7.6 Relationships from the service dominant logic perspective
organization because of social bonds that develop among customers, that could be
The organization cannot create value on its own but can only offer value propositions
important factors that prevent them from switching.
through the use of resources and create value with the customer in service dominant
3. Level 3 – Customization bonds; customer intimacy, mass customization,
logic. The organization provides inputs for customer’s value-creating activities. The
anticipation/innovation. Two common used terms in this are mass customization and
customer provides a supply of money, help in promoting the service brand, offer new
customer intimacy, both suggest that customer loyalty can be encouraged through
ideas and feedback, or contribute to the atmosphere for other customers.
intimate knowledge individuals and development of one-to-one solutions. Mass

customization is the use of flexible processes and organizational structures to
produce varied and individually customized products and services at good price.
4. Level 4 – Structural bonds; shared processes and equipment, joint investments,
integrated information systems. Most difficult to imitate, they involve structural
financial, social and customization bonds between the customer and the firm. Are
created by providing services frequently right into the service delivery system for
them.
Downside is that customers may fear that tying themselves too closely to one provider
may not allow them to take advantage of potential price savings from others.

7.5 Relationship challenges
The customer is not always right
1. The wrong segment
2. Not profitable in the long term
3. Difficult customers
4. Some customers may not want relationships
Ending business relationships
Managers also have to know how to end service relationships. Depending on the type of
relationship, they end in different ways. In some situations, there is an established
agreement for a certain time period and then it ends after it is served. Sometimes
relationship has a natural ending, in such situations the need for the relationship has
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1. Major or radical innovations; new services for markets as yet undefined.

Part 3. Aligning service design and standards 2. Start-up business; new services for a market that is already served by existing
Action takes several forms; designing services based on customer requirements, setting products that meet the same generic needs.
service standards to ensure that employees perform as customer expect, and providing 3. New services for the currently served market; attempts to offer existing customer of
physical evidence that create the appropriate cues and ambiance for service. This part the organization a service not previously available from the company.
identifies gap 2: not selecting the right service quality designs and standards 4. Service line extensions; augmentations of existing service line (adding to menu)
5. Service improvements; changes in features of service that are already offered might
8. Service innovation and design involve faster execution, extended hours of service or added amenities.
Most dominant predictor of success for new introductions relate to: 6. Style changes; most modest innovations, often highly visible and have significant
1. Product/service characteristics; service meeting customer needs, service advantage effects on perceptions, emotions and attitudes. (changing colour scheme, logo).
over competing product, technology sophistication.
2. Strategy characteristics; dedicated human sources to support the initiative, dedicated 8.4 Stages in service innovation and development
research and development. Steps in service innovation and development is more challenging because it can involve
3. Process characteristics; marketing, pre-development, technological and launch coordinating human resources, technology internal processes and other facilities.
proficiencies. Frond-end planning Business strategy development or review
4. Marketplace characteristics; market potential.
New service strategy development

Idea generation Screen ideas against new service strategy
8.1 Challenges of service innovation policy
Concept development and evaluation Test concept with customers and employees
When services are delivered over a long period, their complexity increases. Boosting
innovation in services is central to improving performance of the service sect, the sector Business analysis Test for profitability and feasibility
has traditionally been seen as less innovative and plays only a supportive role. As the Implementation Service development and testing Conduct service prototype test
importance of service innovation becomes more and more apparent, significant initiatives
Market testing Test service and other marketing mix element
are beginning to emerge in countries around the world.
Describing service innovations Commercialization
There are risks inherent in describing services, those are; oversimplification, Post-introduction evaluation
incompleteness, subjectivity, and biased interpretation.
Front-end planning
8.2 New service development processes 1. Business strategy development or review; Firms can be distinguished by whether the
Products that are designed and introduced via the steps in a structured planning primarily pursue a cost-leadership, differentiation or focused strategy. Besides that,
framework have a greater likelihood of ultimate success than others. It is critical that there are four primary strategic orientations that are taken by companies:
innovation and the new-service development process involve employees and customers. a. Prospectors; seek to be innovative, searching out new opportunities and
Employees perform or deliver the service and are psychologically and physically close to taking on risks.
customers and can help identifying their needs. Customers often participate in service b. Defenders; experts in own area, tend not to seek new opportunities outside
delivery, customers can help design the service concept and delivery process. their domain of expertise.
c. Analyzers; maintain stability in certain areas of operation but are open to
experimenting and seeking out opportunities on the margin.
8.3 Types of new services
d. Reactors; seldom make adjustments unless forced to dos so by
New service options can run the gamut from innovations to minor style changes. Radical
environmental pressures.
innovations effectively redefine the customer’s role in user buyer or payer in a service

context (videoshop à Netflix).

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2. New-service strategy development; product portfolio strategy and a defined 8.5 Service blueprinting
organizational structure for a new service development are critical for success. This Keys to matching service specification to customer expectations is the ability to describe
could be shown in the corporate strategy framework from Ansoff. Companies can critical service process characteristics objectively and to depict them so that everyone
develop a growth strategy around current customers or for new customers and can know that the service is, their role in delivery and understand all the steps.
focus on current offerings or new service offerings. What is a service blueprint?
Offerings Market A service blueprint is a picture or map that accurately portrays the service system so that
Current customers New customers the different people involved in providing it can understand and deal with it objectively,
Existing services Share building Market development regardless of their roles or individual points of view. They’re useful at the design stage of
New services Service development Diversification service development. It’s a way to break down services into logical components and steps.
3. Idea generation; Many methods for idea generation common are formal A tool for simultaneously depicting the service process, the points of customer contact
brainstorming, solicitation of ideas from employees and customers, lead user and the evidence of service from the customer’s point of view.
research and learning about competitors’ offerings. Emphatic design is the Blueprint components
observation of customers and is effective in situations in which customers may not be A blueprint is built out of three lines and multiple components.
able to recognize or verbalize their needs. Crowdsourcing seeks out feedback and 1. Physical evidence; each point of contact the actual physical evidence listed.
ideas from the customers (example starbucks). A source of a new idea could be inside 2. Line of interaction; direct interaction between the customer and the organization.
or outside the company. a. Customer actions; the steps, choices, activities and interactions that the
4. Service concept development and evaluation; This service concept development and customer performs in the process of purchasing, consuming and evaluating
evaluation is made up of the core benefit provided to the customer, supported by a the service.
variety of tangible and intangible elements that assist in the delivery of the benefit. 3. Line of visibility; separates all service activities that are visible to the customer, from
Implementation the non-visible.
1. Service development and testing; To address the challenges of a new service a. Onstage contact employee actions; the visible steps and activities that the
development should involve all who have a stake in in the new service. The concept is employee performs.
refined in a detailed service blueprint that represents the implementation plan for 4. Line of internal interaction; separates contact employee activities from those of othe
the service. service support activities and people.
2. Market testing; is a stage of the development process, because they’re often a. Backstage contact employee actions; all non-visible the employees’ actions
intertwined with existing services, it is difficult to test them in isolation. Two that occur behind the scenes to support onstage activities.
solutions: service is offered to employees and their families for a time to assess 5. Support processes; internal services, steps and interactions that take place to suppor
responses to variations in marketing mix. Second the organization test variations in the contact employees in delivering the service.
pricing and promotion by presenting customers with hypothetical mixes. Extremely Blueprints for technology-delivered self service
important to do a pilot run to be sure operational details are functioning smoothly. When no persons are involved in the service, the contact person areas of the blueprint
3. Commercialization; the service goes live and is introduced in the market. The stage aren’t needed. The area above the line of visibility is used to illustrate the interface
has two objectives: first, to build and maintain acceptance of the new service of the between the customer and the computer, website or physical interaction with the kiosk.
service delivery personnel through internal marketing. Second is to monitor all You can label the are as onstage/visible technology. Backstage contact person actions are
aspects of the service during introduction and through the complete service cycle. irrelevant. When it is a combination of human and technology interfaces, the area can be
4. Post-introduction evaluation; the information gathered during commercialization of cut into two distinct spaces divided by a horizontal line.
the service can be reviewed and changes made to the delivery process, staffing or
marketing mix variables.

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Reading and using service blueprints 8.6 High-performance service innovations

Read the blueprint from left to right when you want to understand the customer’s view of There could be too many ideas to choose, question is which to pursue the one that will
the process or customer experience, but also when you want to understand contact likely be a major success.
employees’ roles. Read the blueprint vertically when you want to know the integration of Choose the right projects
the various elements of the service process or to identify where particular employees fit Success with new services is determined by two things; choosing the right projects and
into the bigger picture. When you want to redesign, look at the blueprint as a whole to doing the right projects. New service development process and blueprinting will help
assess the complexity of the process, how it might be changed and how changes from these goals. By portfolio management for new products companies manage their product
customer’s point of view would impact employees and other internal processes. Or to portfolio like they manage their financial portfolio. Helps to prioritize projects, determine
look at failure points or bottlenecks or to assess overall efficiency and impact of changes. best balance between risk vs return and maintenance vs growth and short term vs long
1. Providing a platform for innovation. term projects. This includes financial models, scoring models, checklists, mapping
2. Recognizing roles and interdependencies among functions, people and organizations. approaches and behavioural approaches.
3. Facilitating strategic and tactical innovations.
Integrate new services
4. Transferring and storing innovation and service knowledge.
New service introduction will affect existing systems and services. Important is
5. Designing moment of truth form the customer’s point of view.
recognition of potential impacts, planning integration people, processes and physical
6. Suggesting critical points for measurement and feedback in the services process.
evidence for success. This will help in deciding which project to pursue and knowing how
7. Clarifying competitive positioning.
to proceed with implementation.
8. Understanding the ideal customer experience.
Consider multiple measures of success
Building a blueprint
1. Financial performance; effect on revenue growth, profitability, market share and ROI
Through the process of developing many intermediate goals can be achieved; clarification
2. Relationship enhancement; effect on customer loyalty, image enhancement and
of the concept, development of shared service vision, recognition of complexities an
effect on success of other products and services.
intricacies and delineation or roles and responsibilities. The basic steps are:
3. Market development; degree the new service opens up new markets or customer
1. Step 1: Identify the process to be blueprinted; a firm can identify the process to be
segments.
mapped once it has determined the underlying purpose for building the blueprint.
2. Step 2: Identify the customer or customer segment experiencing the service; each Maintain some flexibility
segment’s needs are different and therefore will require variations. Firms must be cautioned about being too rigid in service innovation approach. Steps in th
3. Step 3: Map the process from the customer’s point of view; will help avoid focusing development process should contain some flexibility. Because of the complexibility some
on processes and steps that have no customer impact. creativity and ‘out of order’ decisions will be needed. The innovation and adoption of new
4. Step 4: Map contact employee actions, onstage and backstage, and/or technology services must be both a planned process and a happening.
actions; draw the lines of interaction and visibility and process activities.
5. Step 5: Link contact activities to needed support functions; internal service process
takes on added importance when viewed in connection with a link to the customer.
6. Step 6: Add evidence of service at each customer action step; to illustrate what the
customer sees and receives as tangible evidence of the service at each step.

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9. Customer-defined service standards Customer – not company-defined standards

Once accurately understanding what customers expect, it is necessary to use this Company defined service standards are established to reach internal company goals for
knowledge to set service quality standards and goals for the organization. productivity, efficiency, cost or technical quality. Example is the voice activated telephone
support, it doesn’t meet customer expectations to allow to speak to humans, but save
9.1 Factors necessary for appropriate service standards
companies money. Standards set by the company must be based on customer
Translation of expectations into service quality standards depends on the degree to tasks
requirements and expectations than just on internal company goals to close gap 2.
and behaviours can be standardized.
Customer-defined standards are operational standards based on pivotal customer
Standardization of service behaviours and actions requirements that are visible to and measured by customers. Chosen to match customer
Standardization of service can take three forms; expectations and to calibrate the way customers views an expresses them. Customer-
1. Substitution of technology for personal contact and human effort. defined standards are anchored in and steered by customer perceptual measures of
2. Improvement in work methods. service quality or satisfaction. Service standards that evolve from a customer perspective
3. Combination of these two methods above. are likely to differ from company-defined service standards.
Technology and work improvement methods facilitate the standardization of service
necessary to provide consistent delivery to customers. By providing tasks efficiently,
technology allows the firm to calibrate service standards like length of time, the accuracy 9.2 Types of customer-defined service standards
and number of occurring problems. Standardization reduces gap 2, but doesn’t mean the Customer-defined standards close provider gap 2 and are operational goals and measures
service is performed in a mechanical way. It ensures that the most critical elements of a based on pivotal customer requirements that are visible to and measured by customers
service are performed as expected, not every action in a service is executed in a uniform rather than on company concern such as productivity or efficiency. Firm need to control
manner, it can be compatible with employee empowerment. inventory from the customer’s point of view, not the company’s point of view. Design a
customer-focused measurement system to translate requirements into goals and
When is the strategy of customization better than standardization?
guidelines for employee performance.
In some places it is important to provide the same service to all or most customers, in this
situations, strong guidelines for technology and employees are established for consistency Hard customer-defined standards
and reliability. In others, standardization is neither appropriate or possible, and Customer expectations of reliability are high and most important concern of service
customization, providing unique types and levels of service to customers, is a deliberate customers. To address the need for reliability companies can institute a ‘do it right the
strategy. Standardization could be perceived as impersonal, inadequate and not in first time’ and ‘honour your promises’ value system by establishing reliability standards.
customer’s best interests. Hour rates compensates the time spend for customization. Hard customer-defined service standards are set to ensure the speed or promptness
When accounts are large and critical to a provider, most aspects of service provision are companies deliver products, handle complaints, answer questions, telephones and arrive
customized. Also consumer services are designed to be or appear very customized. on time. The firm must have well-staffed customer service departments. It could include;
1. Ship to target; percentage of order delivered on time with complete accuracy.
Formal service targets and goals
2. Initial field incident rate; frequency of customer problems.
Goal-setting in service business involve specific targets for individual behaviours or
3. On time first time fix; percentage of problems fixed on first visit at promising time.
actions. Just calling back in a short time as service goal is too vague, this could be one
hour but also two days. For the firm it is not possible to determine if an employee meet Soft customer-defined standards
the goals because the expression isn’t measurable. When the companies say two hours Not all priorities can be counted, timed or observed through audits. Soft customer-
and the employee does that, he meets the goal. Another formal goal setting involves the defined service standards provide direction, guidance and feedback to employees in way
overall department or company targets, across all execution of the behaviour or action. to achieve customer satisfaction and can be quantified by measuring customer
Firms that produce consistently excellent service have specific, quantified, measurable perceptions and beliefs. Important for person-to-person interactions.
service goals. One-time fixes
One-time fixes are technology, policy or procedure changes that, when instituted,
address customer requirements, company standards that can be met by an outlet making
a one-time change that does not involve employees’ motivations and monitoring.

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9.3 Development of customer-defined service standards Developing customer-defined standards

Basing standards on the service encounter sequence General process for setting customer-defined service standards.
Component pieces that are needed to establish service standards are service encounters. Step 1. Identify existing or desired service encounter sequence
When knowing the priorities, a company can focus on them as the aspect of service Delineating the customer journey through the service encounter sequence. A blueprint
encounters for which standards should established. Firsts steps in establishing customer- may be used to identify the service encounter sequence and customer touchpoints.
defined standards is to delineate the service encounter sequence, this listing steps and Step 2. Translate customer expectations into behaviours and actions for each service
activities customers experience, or by blueprints, vertical lines from customer activities encounter
into lower level signal the point where service encounters take place. Some encounters Abstract customer requirements and expectations must be translated into concrete,
are more important than others, the start and specifically the finish of an encounter have specific behaviours and actions associated with each service encounter. Information on
a greater impact on overall satisfaction. Consistent performance throughout the behaviours and actions must be gathered and interpreted by an objective source.
encounter is not as effective as a pattern of improving performance with a strong finish. Step 3. Select behaviours and actions for standards
Expressing customer requirements as specific behaviours and actions Prioritizing the behaviours and actions into those for which customer-defined standards
Effective standards are defined in very specific ways that enable employees to understand will be established. Most important criteria for creation;
what they are being asked to deliver. These standards need to be set and measured in 1. The standards are based on behaviours and actions that are very important to
term of specific responses of human actions. customers.
• At a very abstract level are customer requirements too general to be useful to 2. The standards cover performance that needs to be improved or maintained.
employees; customers want satisfaction, value and relationships. 3. The standards cover behaviours and actions employees can improve.
• Level below consists general requirements (abstract dimensions of service quality 4. The standards are accepted by employees.
relationships); reliability, responsiveness, empathy, assurance and tangibles. 5. The standards are predictive rather than reactive.
• One level below attributes are more specific. 6. The standards are challenging but realistic.
• Lowest level are the specific behaviours and actions that are concrete and have a high Step 4. Decide whether hard or soft standards are appropriate
diagnosticity. Big mistake is to choose hastily a hard stand. The best way to decide this is first to
Measuring behaviours and actions establish a standard by means of follow-up surveys and then determine over time which
Measuring behaviours and action (hard) consist of counts or audits or timed actions that operational aspect most correlates to this soft measure.
provide feedback about the operational performance of a service standard. Different than Step 5. Develop feedback mechanisms for measurement to standards
soft measurement because they can be captured continuously and operationally without Hard standards typically involve mechanical counts or technology-enabled measurement
asking customer’s opinions. It is desirable to link hard measures with soft measures for a of time or errors. Soft standards require perceptual measurements through the use of
strong correlation and because hard measurements are not always intuitive or obvious. follow-up satisfaction surveys or employee monitoring. Critical aspect of developing
Satisfaction and relationships surveys can document customers’ opinions about feedback mechanisms is ensuring that performance captures the process from the
performances meet the established standards. Relationship and SERVQUAL surveys cover customer’s view rather than the company’s perspective.
all aspects of the customer’s relationship with the company, expressed in attributes and Step 6. Establish measures and target levels
completed once a year. Follow-up satisfaction surveys are administered continuously, There are multiple ways to quantify whether the standards have been met. This could by
short and specific service encounters. asking each customer his satisfaction with the performance in resolving the complaint.
Adapting standards globally or locally And later plot this information in a chard with the numbers of hours is takes. Another
Worldwide companies and brands have much to lose if their service standards vary a lot technique is a perception-action correlation study. When the service consists of repetitive
across countries, they have to find ways to achieve universally high quality and still processes, companies can relate levels of customer satisfaction with actual performance
allowing local differences. of a behaviour or task.

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Step 7. Track measures against standards

Measurements with an index from multiple research methods, or combine service quality
measures. Or giving weights to serious points, multiple total number of occurrences by
the points, totals the points and divide it by the number of working days to get an average
daily point value.
Step 8. Provide feedback about performance to employees
Data must be deployed quickly enough that the people who need it to make decisions
about service or processes can do so. Responsibility for meeting service requirements
must also be communicated throughout the organization.
Step 9. Periodically update target levels and measures.
Revising the target levels, measures and customer requirements regularly enough to keep
up with customer expectations.

Developing service performance indices
Service performance indices are comprehensive composites of the most critical
performance standards. Goals of index is to simply and clearly communicate business
performance in operational and perceptual terms. Developing and index starts with
identifying customer-defined standards that the company will use to drive behaviour.
Most build indices by;
1. Understanding the most important requirements of the customer.
2. Linking requirements to tangible and measurable aspects of service provision.
3. Using feedback from indices to identify and improve service problems.
Issues that companies must tackle when developing service performance indices are;
1. Number of components to be contained
2. What overall measures will be included
3. Whether the index should be (un)weighted.
4. Whether all parts of the business will be held to the same performance measures.

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10. The physical and virtual servicescape Servicescape complexity

Physical evidence is particularly importing for communication about credence services, Lean environments have a few spaces, pieces of equipment, elements and are simple.
but also important for other services that are dominated by experiences attributes. Complicated servicescape are elaborate environments and have many elements and
Facility is referred to servicescape. forms. Firms in the elaborate interpersonal service cell, face the most complex decisions.

10.1 Physical evidence 10.3 Strategic roles of the servicescape
What is physical evidence? Servicescape is one of the most important elements in positioning a service organization.
Customers rely on tangible cues to evaluate the service before its purchase and to assess A servicescape can play many strategic roles simultaneously.
their satisfaction during and after consumption. They include all aspects of the Package
organization’s physical facility (servicescape) as other forms of tangible communication. The servicescape and other elements of physical evidence essentially ‘wrap’ the service
Virtual servicescapes are more recent forms of physical evidence to communicate about and convey to customers an external image of what is ‘inside’. Product packages are
the service experience and makes it more tangible for customers over the internet. Digital designed to portray image and a particular sensory or emotional reaction. The
and internet technology provides tremendous opportunities for firms to communicate. servicescape is the outward appearance of the organization and critical in forming initial
How does physical evidence affect the customer experience? impressions or expectations. Important in creating expectations for new customers and to
Physical evidence has a profound effect on the customer experience, this is when the newly established service organizations to build an image. Smart companies spend a lot o
experience is mundane, personally meaningful or spectacular. It will influence their time and money relating their servicescape design to their brand, by strong visual
satisfaction and emotional connection with the organization of the experience. Clue metaphors and service packaging that conveys the brand positioning.
management refers to the process of clearly identifying and managing all the various Facilitator
clues that customers use to form their impressions and feelings about the company A servicescape can serve as a facilitator in aiding the performance of persons in the
(mechanics clues). environment. How the setting is designed can enhance or inhibit the efficient flow of
activities in the service setting making it easier or harder to accomplish goals for
10.2 Types of servicescapes employees and customers. Or using clear search facilities on a website.
Environmental psychology is a field that encompasses the study of human beings and Socializer
their relationships with built (human-made), natural and social environments. The design of the servicescape as a socializer services employees and customers that it
Servicescapes usage helps convey expected roles, behaviours and relationships. The design of this can suggest
to customers what their role is relative to employees, what parts they are welcome and
Organizations differ in terms of whom the servicescape will effect. There are three types
which not, how they should behave in the environment and wat types of interaction.
of service organizations that differ on this dimension;
1. Self-service; the customer performs most of the activities and few if any employees Differentiator
are involved. Firm can plan the servicescape to focus exclusively on marketing goals. The design of the physical facility can differentiate a firm from the competitors or areas
2. Remote service; has a little or no customer involvement but employee involvement and signal the market segment. A differentiator changes in the physical environment can
with limited interaction with customers. Facility set up to keep employees motivated be used to reposition and/or attracting new market segments. Price differentiation.
and facilitate productivity, teamwork, operational efficiency.
3. Interpersonal service; placed between the other two, represent situations in which
both the customer and employee are present and active in servicescape.
Servicescape must be planned to attract, satisfy and facilitate the activities of
customers and employees simultaneously. Special attention how the servicescape
affects the nature and quality of social interactions between those two.

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10.4 Framework for understanding servicescape effects on behaviour 3. Physiologically; physical responses may directly influence whether people stay in and
Making decisions about servicescape design requires an understanding of why the effects enjoy a particular environment (too loud noise, high temperature, air quality).
occur and how to manage them. Comfort of seating influences time spending there. Environmental design and related
The underlying framework – the physical servicescape physiological responses affect whether employees can perform job functions well.
The framework for understand servicescape effects on behaviour follows from basic Human physiological responses to ambient condition as well as physiological
stimulus-organism-response theory, that recognizes complex dimensions of the responses to equipment design are human factors design or ergonomics.
environment, impacts on multiple parties, multiple types of internal responses and variety Personality differences and temporary conditions as moods or the purpose for being ther
of individual and social behaviours that can result. The multidimensional environment is can cause variations in how people respond to the servicescape. Arousal-seekers enjoy
the stimulus, consumers and employees are the organisms that respond to the stimuli, and look for high levels of stimulation, arousal-avoiders the opposite. Screeners of stimuli
and behaviours directed at the environment are the responses. would be able to experience a high level of stimulation but not be affect by it. Non-
screeners are highly affected and might exhibit extremely responses.
Behaviours in the servicescape
Human behaviour is influenced by the physical setting in which it occurs. Behaviour Environmental dimensions of the physical servicescape
consists of individual behaviours and social interactions. Environmental dimensions of the physical surroundings can include all the objective
1. Individual behaviours; Individuals react to places with to forms of behaviours. Those physical factors that can be controlled by the firm to enhance employee and customer
are approach and avoidance. Approach behaviours are directed at a particular place. actions (lightning, colour, signage, textures, layout, wall décor, temperature etc.)
Avoidance behaviours are desires not to stay. Both are influenced by perceptions of Although individuals perceive discrete stimuli, it is the total configuration of stimuli that
the environment. The ability of employees to do their jobs is influenced by the determines their reactions to a place. The elements can be categorized into three
servicescape. Individual behaviours are; affiliation, exploration, stay longer, composite dimensions;
commitment, carry out plan. 1. Ambient conditions; background characteristics of the environment like temperature
2. Social interaction; all social interaction is affected by the physical container in which it lightning, noise, music, scent and colour. The factors affect how people feel, think and
occurs. The servicescape influences the nature and quality of customer and employee respond to a service establishment. Effects are noticeable when they’re extreme.
interaction, mostly directly in interpersonal services. Physical container can affect the 2. Spatial layout and functionality; Spatial layout refers to the ways in which machinery,
duration of interaction and actual progression of events. equipment and furnishings are arranged, the size and shape, and spatial relationships
among them. Functionality refers to the ability of the same items to facilitate the
Internal responses to the servicescape
accomplishment of customer and employee goals. Important in self-service
Employees and customers respond cognitive, emotionally and physiologically to
environments, in retail, hospitality and leisure settings can influence satisfaction.
dimensions of their physical surroundings. The perceived servicescape doesn’t directly
3. Signs, symbols and artefacts; explicit or implicit signals that communicate about the
cause people to behave in certain ways.
place to the users. Those can be used as labels, directional purposes, and to
1. Cognitive; perceive servicescape can effect on people’s beliefs about a place and
communicate rules of behaviour. Adequate signs have been shown to reduce
beliefs about the people and products found in that place. Object language is a form
perceived crowding and stress. Signs, symbols and artefacts are important in forming
of non-verbal communication.
first impressions and for communicating service concepts.
2. Emotionally; perceived servicescape can directly elicit emotional responses that
In the virtual servicescape, environmental dimensions could be different, but the
influence behaviours and moods. A place can make people feel happy, light-hearted,
perceived servicescape would create similar customer responses and behaviours. Ambien
relaxed, sad, depressed or gloomy. Not thinking but an unexplained feeling. Emotions
conditions are music/sound effects, colour schemes and font sizes. Spatial layout and
can be captured in two dimensions; pleasure/displeasure and degree of arousal
functionality procedures for signing in or progressing through the website, search facilitie
(amount of stimulation or excitement).
for navigations. Signs, symbols and artefacts will include photographs, auto-play videos,
Pleasure Displeasure
pop-up advertisements and the general style of the video.
Arousal Exciting Distressing
Non-arousal Relaxing Gloomy

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10.5 Guidelines for physical evidence strategy

Recognize the strategic impact of physical evidence
To make an evidence strategy effective, it must be linked to the organization’s overall
goals and vision. At minimum the basic service concept must be defined, the target
markets identified and the firm’s broad vision of its future must be known. Because of the
costly and permanent decisions, they must be planned and executed deliberately.
Blueprint the physical evidence of service
Effective way to depict service evidence is though the service blueprint. They can be
useful in visually capturing physical evidence opportunities includes people, process and
physical evidence. Firms can check the actions, complexity, points of human actions and
tangible representations at each step.
Clarify strategic roles of the servicescape
Decide if the firm uses self-service, interpersonal or remote service and then decide if the
firm is a lean or elaborate environment. Clarifying the roles played by the servicescape in
a particular situation will aid in identifying opportunities and deciding who needs to be
consulted in making facility design decisions. It also forces recognition of the importance
of the servicescape in creating customer experiences.
Assess and identify physical evidence opportunities
Once current forms and roles of the servicescape are understood, possible changes and
improvements can be identified. This can by viewing the blueprint and develop a strategy
to provide better physical evidence for example. Another approach if the current physical
evidence of service suits the needs and preferences of the target market. To check it use
the framework for understanding environment-user relationships.
Be prepared to update and modernize the evidence
Some aspects may require frequent or periodic updating and modernizing, even if the
vision, goals and objectives do not change. Time takes a toll on physical and virtual
evidence, they may need necessitating change and modernization.
Work cross-functionally
When presenting to consumers, the brand communicates a desired image with sending
consistent and compatible messages through all forms of evidence and types of service
evidence the customers want and understand. Decisions can of particular aspects can be
made by different people/departments, that’s the reason physical evidence of service
may not be consistent. Valuable tool for this could be blueprinting.

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Employee satisfaction, customer satisfaction and profits

Part 4. Delivering and performing service Satisfied employees make for satisfied customers and the other way around. Unless
This part is about provider gap 3, that is the discrepancy between customer-driven service service employees are happy, customer satisfaction will be difficult to achieve. A climate
standards and actual service delivery. for service and a climate for employee wellbeing are highly correlated with overall
customer perceptions of service quality. The service profit chain illustrates the underlying
11. Employees’ roles in service delivery connecting employee satisfaction and loyalty to customer satisfaction and loyalty and
The failure to deliver services as designed and specified can result from a number of ultimately profits. But the model doesn’t point out causality, the two are interrelated and
employee and human performance factors; ineffective recruitment role ambiguity and feed off each other. Focus on employee satisfaction and employee retention.
role conflict; poor employee-technology-job fit; lack of empowerment etc. The effect of employee behaviours on service quality dimensions
11.1 Service culture The five dimensions of service quality can be influence directly by service employees.
The behaviour or employees is heavily influenced by it organization, or the pervasive Reliability; delivering as promised, make sure everything works. Responsiveness; persona
norms and values that shape individual and group behaviour. Corporate culture is the willing to help and their promptness in serving customers. Assurance; employees’ ability
pattern of shared values and beliefs that give the members of an organization meaning to communicate their credibility and to inspire trust and confidence. Empathy; employees
and provide them with the rules for behaviour in the organization. Culture is the way we will pay attention, listen, adapt and be flexible in delivery what customers need.
do thing around here. Service culture is a culture where an appreciation for good service Tangibles; the way they dress along with other factors.
exists, and where giving good service to internal as well as ultimate, external customers is
considered a natural way of life and one of the most important norms by everyone. 11.3 Boundary-spanning roles
Exhibiting service leadership Front-line service employees are referred to as boundary spanners because they operate
A strong service culture begins with leaders who demonstrate a passion for service at the organization’s boundary, they provide a link between the external customer and
excellence. Successful leaders of firms have core values as integrity, joy and respect and environment and the internal operations of the organization. They have to understand,
they infuse the values into the fabric of the organization. Service leadership consist of the filter and interpret information and resources to and from the organization and external
regular and consistent demonstration of one’s values. Espoused values; what managers constituencies. The position requires extraordinary level of emotional labour in addition
say the values are, have less impact, employees believe values because of what they to mental and physical skills, an ability to handle interpersonal.
observe the management is doing. Culture is what employees perceive that management Emotional labour
really believes, then he understands what is important to the organization. Emotional labour goes beyond physical or mental skills. The employees are expected to
Developing a service culture align their emotions with organizationally desired emotional labour (smiles, eye contact
Over time, the human resource and internal marketing practices can help develop a showing interest). Friendliness, courtesy, empathy and responsiveness directed towards
service culture. Hundreds of little significant factors are required to build and sustain a customers require huge amounts of emotional labour.
service culture. Strategies for managing emotional labour
Transporting a service culture There are activities that help to foster and environment that helps the employees to deal
Transporting a service culture through international business expansion is challenging, it with the realities of emotional labour on the job.
can create additional issues. The service culture could clash with the national culture. If 1. Screen for emotional labour activities.
there are issues over what the values are and they’re core values critical for advantage, 2. Tech emotional management skills and appropriate behaviours.
then the company may not be successful in that setting. Many legal, cultural and language 3. Carefully fashion the physical work environment.
barriers become particularly evident for services that depend on human interaction. 4. Allow employees to air their views.
5. Put management on the front line.
11.2 The critical importance of service employees 6. Give employees a break.
Customer-contact service employees are the service, are the organization in customer’s 7. Hand off demanding customers to managers.

eyes, are the brand, perform the role of marketers. Investing in the employee means you
improve the service parallels a direct investment. Service employees are the brand.
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Sources of conflict Develop people to deliver service quality

The subordinate service role, employees may perceive themselves performing roles that To grow and maintain a customer oriented an quality oriented workforce, an
give them a status below that of the customer. They may feel the customer has more organizations must develop its employees to deliver service quality.
control and as a result, some employees develop their own approach to get even and 1. Train for technical and interactive skills
overcome the perceived inequality between the both of them. Frustrations in this can 2. Empower employees; giving employees the desire, skills, tools and authority to serve
lead to stress, job dissatisfaction, diminished ability to serve customers and burnouts. the customers. Suitable for; business strategy is one of differentiation and
There are three kinds of conflicts; customization, long-term relationships with customers, technology is non-routine or
1. Person/role conflicts; service employees may feel role conflict when they are complex, business environment is unpredictable and managers and employees have
required to subordinate their feelings or beliefs or when there is a conflict between high growth, social needs and strong interpersonal skills.
role requirements and the self-image or self-esteem of the employee. a. Benefits; quicker online responses to customer needs during delivery and
2. Organization/client conflict; a conflict between their two bosses, the organization and dissatisfied customers during service recovery, Employees feel better about
the individual customer. Employees who depend on tips or commissions are likely to their jobs and themselves. Employees will interact with customers with more
face greater levels of organization/client conflict because when identifying with the warmth and enthusiasm. Empowered employees are a great source of
customer he gets more incentives. When thinks organization is wrong, client right. service ideas. Great word-of mouth advertising from customers.
3. Inter-client conflict; incompatible expectations and requirements arise from two or b. Costs; A potentially greater investment in selection and training, higher
more customers. Occurs when serving customers in turn or many customers labour costs, potentially slower or inconsistent service delivery. May violate
simultaneously. customers’ perceptions of fair play. Employees may ‘give away the store’ or
Quality/productivity trade-offs make bad decisions.
Front-line employees need to be effective and efficient; expected to deliver satisfying 3. Promote teamwork
service and at same time to be cost-effective and productive, trade-offs between quality Provide needed support systems
and quantity, this place real-time demands and gives pressures. Quality of job 1. Measure internal service quality
performance is susceptible to burnout and job stress. Support from managers that control 2. Provide supportive technology and equipment
over job tasks can help employees in making quality and productivity trade-offs. 3. Develop service-oriented internal processes
Technology can increase productivity of service workers. Customer relationship systems Retain the best people
hold great promise, they have challenges. They can require major monetary and human 1. Include employees in the company’s vision
investments. 2. Treat employees as customers
3. Measure and reward strong service performers
11.4 Strategies for delivering service quality through people
Strategies for enabling service promises are referred to as internal marketing. Urgent 11.5 Customer-oriented service delivery
business challenge is finding and keeping great people. Primary goal is to motivate and Firms that have a strong service culture clearly put an emphasis on the customer and the
enable employees to deliver successfully customer-oriented promises. Four themes to customer’s experience. Firms must also create an environment that staunchly supports
build a customer-oriented, service-minded workforce; hire the right people, develop the customer-contact employee because, in the organization, this person is frequently the
people to deliver service quality, provide the needed support systems and retain the best most responsible for ensuring that the customer’s experience is delivered as designed. In
people. this approach we can turn the marketing triangle (from chapter 1) and put customers on
Hire the right people top (because they’re most important), below that the employees who have direct contact
To deliver service quality effectively, there should be a focus on recruiting and hiring with the customers, and the management can be placed on the bottom.
service employees. There three ways about hiring the right people;
1. Compete for the best people
2. Hire service competencies and service inclination
3. Be the preferred employer 12. Test

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13. Delivering service through electronic channels and intermediaries 13.3 Other forms of service distribution
13.1 Delivering service through electronic channels Because of inseparability of production and consumption in service, providers must be
Electronic channels have expanded the opportunities for goods and services marketers to present themselves when customers receive service or find ways to involve others in
distribute their offerings. They differ because they don’t require direct human interaction, distribution. Challenge for service companies is attaining service excellence and
they do require predesigned service and an electronic vehicle. The more a service relies consistency when intermediaries represent them to customers. Many of the primary
on technology and/or equipment for service production and the less it relies on face-to- functions that distribution channels serve have no meaning in services, allowing the
face contact with service providers, the less the service is characterized by inseparability service principal to deliver the service directly to the customer.
and non-standardization. Delivery of service through intermediaries
Benefits of electronic channels Two distinct service marketers are involved in delivering service through intermediaries;
1. Consistent delivery for standardized services 1. Service principal, or originator; the entity that creates the service concept.
2. Low cost 2. Service deliverer, or intermediary; the entity that interacts with the customer in the
3. Customer convenience actual execution of the service.
4. Wide distribution Intermediaries often deliver services and perform several important functions, they co-
5. Customer choice and ability to customize produce the service, fulfilling service principals’ promises to customers. Primary types of
6. Quick customer feedback intermediaries that are used in service delivery are franchisees, agents and brokers.
1. Franchisees; are service outlets licensed by a principal to deliver a unique concept it
Challenges in distributing service through electronic channels
has created or popularized.
1. Price competition
2. Agents and brokers; are representatives who distribute and sell the service of one or
2. Inability to customize because of standardized nature of the service
more service suppliers.
3. Lack of consistency due to customer involvement
Goods retailers are also service organizations, intermediaries for goods and services.
4. Changes in consumer behaviour
Retailer can advise customers but when he does wrong, it will damage the manufacturer’
5. Security concerns
information. Service principals depend on their intermediaries to deliver service to their
6. Competition from widening geographies
specifications, it’s where the customer evaluates the quality of the company.

13.2 Delivering service through mobile channels 13.4 Direct or company-owned channels
Smartphone applications Major benefit of distributing though company-owned channels is that the company has
Apps are applications for smartphones and tablets, they are providing in information the complete control over the outlets because they own them, they can maintain
access to emails, personal calendars but also reservation systems, communication consistency in service provision. Standards can be established and carried out as planned
channels, entertainment and games, financial services, monitoring health and fitness and because of self-monitoring it and reward proper execution. Has benefit of controlling ove
many more. It allows people to access information and services whilst they are on the hiring, firing and motivating employee and the company owns the customer relationship.
move, they don’t need to be in the service provider’s premises or homes. Simplicity and At company owned channels, the company owns the store and the employee and has
functionality are critical and need a seamless link with other delivery channels because therefor complete control over the customer relationship. There are disadvantages, the
there are no manuals or service personnel. Smartphones allow the provider to provide company must bear all the financial risk, must find capital when expanding. Choosing
location-based services based on the GPS information, can highlight location of local between geographical expansion or advertising etc. Second, large companies are rarely
services or use for promotional offers. experts in local markets, they know business but not all markets. At adjustments they may
be unaware of other cultures or countries. In this situation partnering of joint venturing is
mostly preferred to company owned channels. Partnership when both want to offer a
service but neither have the full financial capability or expanding outside country and
partnership for local market knowledge. Same as company owned but then by multiple
owners, shared risk and effort but control and returns are distributed among them both.

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13.5 Franchising Benefits of agents and brokers

Franchising is the most common type of distribution in services. Franchisors licensing There are three main categories of travel intermediaries; tour packagers, retail travel
their brand names, business processes or formats, unique products, services or agents and speciality channellers. Industry convention terms the travel companies as
reputations in return for fees and royalties. brokers and the individuals who work as travel agents or sales associates. Industry is
The franchisor’s perspective changing rapidly because of electronic channels. Online travel agents (OTA) uses two
A franchisor typically expands business through this method because it expects the different models;
following benefits; 1. Agent model; website has direct access to the hotel’s inventory of rooms and sells
1. Leveraged business format for greater expansion and revenues. them, gaining a commissions. Hotel collects the payment before forwarding to OTA.
2. Consistency in outlets. 2. Merchant model; hotels sell their rooms at discounted rates to OTA which mark them
3. Knowledge of local markets. up, at contract-specified margins and sell to public. Ota collects payment and remits
4. Shared financial risk and more working capital. the discounted price to the hotel.
Franchising isn’t without challenges, the disadvantages for franchisors are; Agents and brokers online and offline offer significant benefits. Those are;
1. Difficulty in maintaining and motivating franchisees. 1. Reduced selling and distribution costs.
2. Highly publicized disputes between franchisees and franchisors. 2. Intermediary’s possession of special skills and knowledge.
3. Inconsistent quality. 3. Wide representation.
4. Customer relationship controlled by the franchisee rather than the franchisor. 4. Knowledge of local markets.
5. Customer choice.
The franchisee’s perspective
Benefits for franchisees; Challenges of delivering service through agents and brokers
1. An established business format. 1. Loss of control over pricing.
2. National or regional brand marketing. 2. Representation of multiple service principals.
3. Minimized risk of starting a business.
Challenges or disadvantages for franchisees; 13.7 Common issues involving intermediaries
1. Encroachment of other outlets into franchisee territory. Key problems with intermediaries could include conflicts over four subjects.
2. Disappointing profits and revenues. Channel conflict over objectives and performance
3. Lack of perceived control over operations. All involved could disagree how the channel should operate. Channel conflict can occur
4. High fees. between the service provider and service intermediary, among intermediaries in a given
area, and between different types of channels used by a service provider. This could be
13.6 Agents and brokers different goals, competing roles and rights, conflicting performances.
Agent is an intermediary who acts on behalf of a service principal or a customer and is Difficulty controlling quality and consistency across outlets
authorized to make agreements between the principal and the customer. Selling agents Difficulty is the inconsistency and lack of uniform quality that can result when multiple
have contractual authority to sell a principal’s output, because the principal lacks the outlets deliver services. When a single outlet performance poorly, the principal suffers
resources or desire to do so. Purchasing agents help buyers in evaluating and making because the entire brand and reputation are jeopardized. This is most in highly specialized
purchases. A broker is an intermediary who brings buyers and sellers together while and complex services.
assisting in negotiation, they’re paid by the party who hires them. Both do not take title to
services but deliver the rights to them, have legal authority.

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Tension between empowerments and control Partnering strategies

Unless an intermediary delivers service exactly the way the successful company outlets Strategy with the highest potential for effectiveness involves partnering with
provide it, the service may not be as desirable to customers. From the principal the name intermediaries to learn together about end customers, set specifications, improve deliver
and reputation are on the line in each outlet, making careful control a necessity. Control and communicate honestly. Capitalize skills and strengths and has a sense of trust that
can have negative ramification within intermediaries. Many franchisees are improves the relationship. Successful approach is aligning company and intermediary
entrepreneurial and want service franchising because they can own and operate own goals in the beginning. They have individual goals to achieve when they now that, they
businesses. When delivering according to consistent standards, their independent ideas begin the relationship with a target in mind. Consultation and cooperation does result in
must be integrated into and pass practices and policies of the principal Franchisees could intermediaries participating in decisions. In this approach the principal makes a point of
feel less freedom than they have anticipated as owners of own businesses. consulting intermediaries and asking for their opinions and views before establishing
Channel ambiguity policy.
Channel ambiguity; when control is not the chosen strategy, doubt exists about the roles
of the company and the intermediary. Who will do market research, who determines
standards for service delivery, who trains representatives? Roles of principal and
intermediaries are here unclear, it leads to confusion and conflict.

13.8 Strategies for effective service delivery through intermediaries
Service principals want to manage their service intermediaries to improve service
performance, solidify images and increase profits and revenues. Big issue is how to view
the intermediaries as extensions of the company, as customers or as partners. There are
three categories of intermediary management strategies; control, empowerment and
partnering strategies.
Control strategies
The service principal believes that intermediaries will perform best when it creates
standard for revenues and service performance, measures results and compensates or
rewards on the basis of performance level. Franchisors maintain control by ongoing
measurement programmes that feed data back to the principal. The manufacturer can
reward some stores or punish others. The manufacturer retains control but trust and
goodwill can be eroded if they feel that the measurements are used to control and
punish. Other franchisers control through terminations, non-renewals, quotas and
restrictive supplier sources.
Empowerment strategies
The service principal allows greater flexibility to intermediaries based on the belief that
their talents are best revealed in participation rather than acquiescence. The principal
provides information, research or processes to the intermediaries. What helps is; help the
intermediary develop customer-oriented service processes, provide needed support
systems and change to a cooperative management structure.

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14. Managing demand and capacity Optimal versus maximum use of capacity
For some businesses, demand is predictable, for other demand is less predictable. For understand capacity issues, you need to know the difference between optimum and
Fluctuating based on customer needs and business cycles. Over- or underuse of a service maximum use of capacity. At optimum level resources are fully employed but not
can directly contribute to gap 3, failure to deliver what was designed and specified. overused and customers are receiving quality service in a timely manner. Maximum
capacity represents the absolute limit of service availability, could result in excessive
14.1 The underlying issue: Lack of inventory capability waiting. When an individual service provider’s maximum capacity has been exceeding, the
result is likely to cause decreased service quality, customer dissatisfaction, and employee
Underlying issue of supply and demand management is the lack of inventory capability in
burnout and turnover, but those may not be immediately observable. When employees
services. In many services, a capacity is fixed; thus capacity can be designated by a flat
go beyond maximum capacity, it gives potential costs in terms of reduced quality,
horizontal line over a certain period. Demand for service frequently fluctuates, that’s a
customer and employee dissatisfaction.
curved line. There are four basic scenarios that can result from different combinations of

capacity and demand;
1. Excess demand; demand exceeds maximum capacity. Customers turned away, quality 14.3 Demand patterns
may not match because of crowing or overtaxing over staff and facilities. The recording of demand patterns
2. Demand exceeds optimum capacity; no one turned away, but quality may suffer The organization needs to record the level of demand over relevant time periods, when
because of overuse, crowding or staff being pushed beyond abilities. using good computerized customer’s information systems, you can record information
3. Demand and supply are balanced at the level of optimum capacity; staff and facilities accurately. Daily, weekly, monthly and seasonality demand levels should be followed.
occupied at ideal level, no one overworked, facilities maintained and customers Graphs could be drawn.
receive quality service without undesirable delays. Predictable cycles
4. Excess capability; demand is below optimum capacity. Productive resources of labour, In a graph of demand levels, predictable cycles may be detected. If a predictable cycle is
equipment and facilities are underutilized. Results in lost productivity and lower detected, know what the underlying causes are. When predictable patterns exist,
profits. generally one or more causes can be identified.
To identify effective strategies for managing supply and demand fluctuations, an
Random demand fluctuations
organization needs a clear understanding of the constraints on its capacity and the
Sometimes patterns of demand are random, there is no apparent predictable cycle, but
underlying demand patterns.
causes can often be identified. Weather for shopping etc. Births and accidents for hospita

services. Level of demand cannot generally be determined in advance.
14.2 Capacity constraints Demand patterns by market segment
Depending on type of service, critical fixed capacity factors can be time, labour,
Organization that has record on customer transactions could be able to disaggregate
equipment, facilities, or a combination of these.
demand by market segment, revealing patterns within patterns. Or analyses may reveal
Time, labour, equipment, facilities that demand from one segment is predictable, whereas demand from another segment is
1. Time; if the service worker isn’t available or his time is not used productively, profits relatively random. Business customers visit a bank daily at a predictable time, but
are lost (hairdresser, lawyer, consultant). personal account holders may visit the bank at seemingly random intervals.
2. Labour; companies may face the reality that at certain times demand for their
organizations’ services cannot be met because staff are already operating at peak
14.4 Strategies for matching capacity and demand
capacity.
When an organization has a clear grasp of its capacity constraints and an understand of
3. Equipment; For transport etc the lorries needed to service demand may be the
demand patterns, it is in a good position to develop strategies for matching capacity and
capacity limitation, during busy days’ delivery service providers face this issue.
demand. There are two general approaches for accomplishing this match; first, to smooth
4. Facilities; hotels have a finite number of rooms to sell, also airlines. The capacity is
the demand fluctuations themselves by shifting demand to match existing supply (peaks
restricted to a maximum number.
and valleys of demand curved will be flattened to match as closely possible the horizontal
Understanding the primary capacity constraint, or combination of factors that restricts
optimum capacity line). Second is to adjust capacity to match fluctuations in demand
capacity, is a first step in designing strategies to deal with supply and demand issues.
(moving the horizontal capacity lines to match the ups and down of the demand curve.
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Shifting demand to match capacity Align capacity with demand fluctuations

An organization seeks to shift customers away from periods in which demand exceed Known as chase demand strategy, by adjusting service resources creatively, organizations
capacity, perhaps by convincing them to use the service during periods of slow demand. can in effect chase the demand curves to match capacity with customer demand patterns
Customers who cannot shift cannot be accommodated will represent lost business for the 1. Use part-time employees.
firm. During periods of slow demand, the organization seeks to attract more and/or 2. Outsource.
different customers to utilize its productive capacity. There is a variety of approaches to 3. Rent or share facilities or equipment.
shift or increase demand to match capacity, common used a combination of approaches; 4. Schedule downtime during periods of slow demand.
1. Reduce demand during peak times. 5. Cross-train employees.
2. Communicate with customers. 6. Modify or move facilities and equipment.
3. Modify timing and location of service delivery. Combining demand and capacity strategies
4. Offer incentives for non-peak use. Many firms use multiple strategies. Firms face complex problems in trying to balance
5. Set priorities. demand across all the different offering with an eye to quality and profitability.
6. Charge full price.
Increase demand to match capacity 14.5 Revenue management
Other approaches in matching capacity and demand focus on increasing demand for Revenue management also referred to as yield management, is a term that has become
service during times when the service is at less than full capacity. attached to a variety of methods, some very sophisticated, matching demand and supply
1. Stimulate business from current market segments. in capacity-constrained services. By using, organizations find the best balance at a point in
2. Vary how the facility is used. time among the prices charged, the segments sold and the capacity used. Goal is to
3. Vary the service offering. produce the best financial return from a limited available capacity.
4. Differentiate on price. (revenue management) Yield = actual revenue: potential revenue.
Adjusting capacity to meet demand Actual revenue= actual capacity used x average actual price.
Matching supply and demand focuses on adjusting capacity. Fundamental idea is to Potential revenue = total capacity x maximum price.
adjust, stretch and align capacity to match customer demand. During periods of peak Expert revenue managers work on capacity and pricing issues simultaneously to maximize
demand, the organization seeks to stretch or expand its capacity as much as possible. revenue across different customer segments.
During periods of slow demand, it tries to shrink capacity so as not to waste resources. Implementing a revenue management system
There are four primary service resources (time, people, equipment and facilities). Existing For implementing an organization needs detailed data on past demand patterns by
capacity can often be expanded temporarily to match demand. In such cases new market segments and methods of projecting current market demand. The data can be
resources could be added, people, facilities and equipment are asked to work harder and analyzed with an outcome of the best allocation of limited capacity at a particular point in
longer to meet demand; time. The allocations could remain fixed or change weekly, daily or hourly. Traditional
1. Stretch time temporarily; revenue management approaches are most profitable when;
2. Stretch labour temporarily; 1. They have relatively fixed capacity.
3. Stretch facilities temporarily; 2. They have perishable inventory.
4. Stretch equipment temporarily; 3. They have different market segments or customers, who arrive or make their
Using these types of stretch strategies, the organization needs to recognize the wear and reservations at different times.
tear on resources and the potential for inferior quality of service that may go with the use. 4. They have low marginal sales costs and high marginal capacity change costs.
Strategies should be used for relatively short period ins order to allow for later 5. The product is sold in advance.
maintenance. 6. There is fluctuating demand.
7. Customers who arrive or reserve early are more price sensitive than shoes who arrive
or reserve lat.

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Challenges and risks in using revenue management The length of the queue and perceived cost of waiting are not only influences on staying
Revenue management programmes can significantly improve revenues, but it isn’t line. The larger the number of customers queuing behind a consumer, the more likely tha
without risks. By becoming focused on maximizing financial return through differential consumer is to stay in the queue and wait for the service.
capacity allocation and pricing, an organization may encounter these problems; Establish a reservation process
1. Loss of competitive focus. When waiting cannot be avoided, a reservation system can help to spread demand. The
2. Customer alienation. idea behind it is to guarantee that the service will be available when the customer arrives
3. Overbooking. A reservation time has added benefit of potentially shifting demand to less desirable time
4. Employee morale problems. periods. Inevitably there will be customers who reserve a time but do not show up. Some
5. Incompatible incentive and reward systems. organizations deal with this by overbooking the capacity on the basis of past records of
6. Lack of employee training. no-show percentages. This is okay when predictions are accurate, but when predictions
7. Inappropriate organization of the revenue management function. are inaccurate customers may have to wait or aren’t served at all. Victims of overbooking
Measuring the effectiveness of revenue management activities may be compensated for their inconvenience in such cases. To minimize no-shows,
Within each service sector, measures will be used to ascertain how well capacity has been organizations charge customers who doesn’t show up or cancel reservations within a
utilized and revenue has been maximized. Main measures could be; certain time frame.
1. Occupancy rate. Differentiate waiting customers
2. Average daily rate. Not all customer necessarily need to wait the same length of time for service, think of
3. Revenue per occupied room. priority. Known as queue discipline, such differentiation reflects management policies
4. Revenue per available room. regarding whom to select next for service (first come, first serve). Factors based on;
5. Total revenue per available room. 1. Importance of the customer.
6. Gross operating profit per available room. 2. Urgency of the job.
3. Duration of the service transaction.
14.6 Queuing strategies: When demand and capacity cannot be matched 4. Payment of a premium price.
Sometimes customers have to wait, waiting customers are a fact of life at some point. Make waiting pleasurable or at least tolerable
Waiting can occur on the telephone and in person but also through mail. Waiting is not When customers have to wait, they can be more or less satisfied depending on how the
something most people tolerate, pressure on people’s time is greater than ever. wait is handled by the organization. The actual length of the wait will affect how
Customers are looking for efficient, quick service with no wait. Waiting time satisfaction is customers feel about their service experience, but how customers feel about the wait and
nearly as important as service delivery satisfaction with respect to customer loyalty. To their perceptions have an impact on customer satisfaction. The type of wait can also
deal effectively with the inevitability of wait, organizations can utilize a variety of queuing influence how customers will react. The psychology of queuing has implication for how
strategies. organizations can make waiting more pleasurable or at least tolerable. Some facts;
Employ operational logic 1. Unoccupied times feels longer than occupied time.
When customer waits are common, first step to analyze the operational processes to 2. Pre-process waits feel longer than in-process waits.
remove any inefficiencies. Queue configuration refers to the number of queues, their 3. Anxiety makes waits seem longer.
locations, their spatial requirement and their effect on customer behaviour. In the 4. Uncertain waits are longer than known, finite waits.
multiple-queue, the customer arrives at the service facility and must decide which queue 5. Unexplained waits are longer than explained waits.
to join and whether to switch later if the wait appears to be shorter in another line. In the 6. Unfair waits are longer than equitable waits.
single-queue alternative, fairness of waiting time is ensured in that the first-come, first- 7. The more valuable the service, the longer the customer will wait.
served rule applies to everyone, can also reduce the average time customers spend 8. Solo waits feel longer than group waits.
waiting overall. But customers may leave if they perceive the line is too long or have no
opportunity to select a particular service provider. The take-a-number option, customers
take. Advantages are similar to single-queue with additional benefit customers are able to
mill out, browse and talk. Disadvantage that customer must be alert when number called.
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15. Service recovery they feel a social obligation to complain. A very small number have ‘complaining’
Service failure is inevitable, to fully understand and retain customers, firms must know personalities and like to do it. Customers who do nothing see often complaining as a
what customers expect when service failures occur, and must implement effective waste of time and effort. Or sometimes people do not know how to complain. Or
strategies for service recovery. customers may feel that the failure was somehow their fault and that they do not deserve
redress. Customer is more likely to complain when the failure is really important, has
critical consequences or has much ego involvement. Are more likely to complain about
15.1 Impact of service failure and recovery
services that are expensive, high risk and ego-involving than about less expensive,
A service failure is a service performance that falls below a customer’s expectations in
frequently purchased services. Even though an experience may not be important at that
such a way that leads to customer dissatisfaction. Service recovery refers to the actions
moment, a dissatisfying encounter can drive him to a competitor next time. It’s also more
taken by an organization in response to a service failure. Failures bring negative feelings
likely to complain when there are remote channels set up to provide feedback (SM).
and responses from customers, but only a portion (45%) complains to the employees
serving them, less than 5% does it at the headquarter. This phenomenon refers as ‘tip of Types of customer complaints actions
the iceberg’ that every complaint the management receives represents 20-100 other who Customer complaint actions can be of various types. Best scenario for the company is
had the same experience. when a dissatisfied customer complains on the spot to the provider, then he has a second
chance at that moment to satisfy the customer. Others could choose to do not complain
Service recovery effects
at the moment but do it later by telephone, writing, via websites, or company’s social
Resolving problems effectively has a strong impact on customer satisfaction, loyalty,
media accounts. These proactive types are voice responses or seeking redress. Others
word-of-mouth communication and bottom-line performance. Customers who
spread negative word of mouth about the company and can be extremely detrimental.
experienced failures but are satisfied thanks to recovery will be more loyal than those
The company has no chance to recover unless it is complaint directly to the company.
whose problems are not resolved. Customers who are dissatisfied with the recovery
Web-based consumer opinion platforms have been created to facilitate customer
process after complaints, are less likely to repurchase than those who do not complain.
feedback and have provided customers with the opportunity of spreading negative word-
Poor recovery customers can become terrorists, they actively pursuing opportunities to
of-mouth. Customers can complain to third parties such as the consumers association.
openly criticize the company using online review sites and online social media. People
who are satisfied with recovery talk to 8 people, people who are dissatisfied with it talk to Types of complainers
19 people. There are four categories of response types. The proportion of the types of complainers is
likely to vary across industries, these types will be relatively consistent. Categories are;
The service recovery paradox
1. Passives; least likely to take any action, unlikely to say anything to the provider, less
An initially disappointed customer who has experienced good service recovery might be
likely to spread negative word of mouth, and don’t complain to a third party. They
even more satisfied and loyal as result, that is the service recovery paradox. Companies
doubt the effectiveness of complaining and feel uncomfortable doing it.
should plan to disappoint customers so they can recover well and gain even greater
2. Voicers; Actively complain to the service provider, but less likely to spread negative
loyalty from them. But there are problems with this approach because not every
word of mouth, or go to third parties. These ones should be viewed as the service
customer complains when experiencing a problem, it is expensive to fix mistakes, it is
provider’s best friends. Actively complain and thus give the company a second
ludicrous to encourage service failures, repurchase intentions and image perceptions do
chance. They tend to believe complaining has social benefits and do not hesitate to
not increase, there is no guarantee that the customer actually will be more satisfied. The
voice their opinions.
recovery paradox is highly dependent on the context and situation. Customers weigh their
3. Irates; are more likely than others to engage in negative word-of-mouth
most recent experiences heavily in their determination of whether to buy again.
communication with friends and relatives and to switch providers, but unlikely to

complain to third parties. They are angrier with the provider although they believe
15.2 How customers respond to service failures that complaining can have social benefits. Less likely to give second chance, instead o
Customers who experience service failures can respond in a variety of ways, negative that they will switch to a competitor and spreading the word to friends.
emotions could be; anger, discontent, disappointment, self-pity and anxiety. 4. Activists; have above average propensity to complain on all dimensions, complain to
Why people do (and do not) complain provider, tell others, and are more likely to complain to third parties, it fits with their
There are customers who believe that complaining has positive consequences for them, personal forms. Have a very optimistic sense of the potential positive consequences
they believe they should will be provided compensation for service failure. In some cases, of all types of complaining.
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15.3 Customers’ recovery expectations 3. Procedural justice; Western countries hassle-free and fast recovery procedures that
Customers have high recovery expectations when they take the time and effort to lead to compensation for any losses or inconveniences triggered by a service failure
complain. are preferred by customers. Asians want genuine apology from a manager, it allows
Understanding and accountability customers to regain face in the eyes of their family and friends. They also want to
Customers are looking to understand what happened and for firms to be accountable for have a sense of control, so management have to inform them constantly what they
their (in)actions. There are 8 common remedies; 3 of them are about the service/product do to rectify.
for free, reimbursed or repair. The other 5 are non-monetary remedies apology,
explanation, assurance, thank you, opportunity, they consist primarily of affording 15.5 Switching versus loyalty following service recovery
employees the opportunity to communicate with customers. Customers value After a handled service failure and the customer’s reaction it can influence his future
communication because non-monetary remedies are positively related to satisfaction decision to remain loyal or to switch. Factor in this is the magnitude and criticality of the
with the complaint process, continued loyalty and positive word-of-mouth. failure, more serious the failure the more likely the customer is to switch. Another factor
Fair treatment is the nature of the customer’s relationship with the firm, less in a true relationship,
Customers want justice and fairness in handling complaints. Three kinds of justice that higher in the others. True relationship; customer repeated contact over time with the
customers are looking for; same provider. First-time encounter; customer had only one contact on transaction basis.
1. Outcome justice; the results that customers receive from their complaints. Pseudo-relationship; customer has interacted many times with same company but with
2. Procedural justice; refers the policies, rules and timeliness of the complaint process. different service providers each time. Demographic factors and individual factors will
3. Interactional justice; focuses on the interpersonal treatment received during influence the customer continuous or switches. Service switching can be viewed as a
complaint process. process resulting from a series of decisions and critical service encounters over time
rather than one specific moment in time when a decision is made. Service failure and poo
service recovery are often a cause of switching. To minimize impact of service failure, an
15.4 Cultural differences in customers’ recovery expectations
excellent service recovery is needed. Causes behind service switching are; pricing,
International firms need to be sensitive to the cultural diversity and differing expectations
inconvenience, core service failure, service encounter failure, responsive to service
of service and service recovery. Companies need to be sensitive to the fact that culture
failure, competition, ethical problems and involuntary switching.
and other factors play a role. Customers in all cultures expect strong service recovery but

preferences for the type of recovery or which fairness dimension to emphasize may vary.
15.6 Service recovery strategies
Differing attribution expectations
Excellent service recovery is a combination of a variety of strategies that work together.
The view is different in every culture. Different views of;
1. Outcome justice; western more interested in tangible compensation than Asians. Make the service fail-safe – do it right the first time
Offering compensation effective American, they’re concerned with outcome justice., When you do it right for the first time, recovery is unnecessary, customers get what they
more assertive and more used to asking for reparation. At western, compensation expect and the costs of redoing the service and compensating for errors can be avoided.
has a positive effect on post-recovery satisfaction and loyalty. East Asia tend high on Total quality management is aimed at zero defects. Firms with TQM notion of poka yoke
uncertainty avoidance, prefer other types of remedies, focus on avoidance of losses, (fail safing or mistake proofing) improve service reliability.
emphasize the need to fit in with others and avoid conflict and confrontation. Encourage and track complaints
2. Interactional justice; in western cultures offering explanations for failure might shift Critical is to encourage and track complaints. It isn’t difficult or impossible to know service
away from thinking provider is incompetent, uncaring or lazy, pay more attention on failure when customers inform the company. So you have to get them complain failures.
cause of failure. East Asians be aware of situational constraints, seek to maintain So there are a few issues a firm can do to elicit complaints;
social harmony and avoid causing loss of face. Providing and treating east Asians in a 1. Develop the mind-set that complaints are good.
courteous formal and empathetic manner is more important than the compensation. 2. Make complaining easy.
3. Be an active listener.
4. Ask customers about specific service issues.
5. Conduct short surveys.
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Act quickly 15.7 Service guarantees

Complaining customers want quick responses, if the company welcomes, encourages Guarantee is a type of recovery tool, it is a pledge or assurance that a product offered by
complaint is must be prepared to act on them quickly. When problems can be handled by firm will perform as promised and, if not, then some form of reparation will be
first contact, customers are satisfied with the firm’s response 46% of the time. Employees undertaken by the firm. Companies are finding that effective service guarantees can
must be trained and empowered to solve problems as they occur. Service employees complement the company’s service recovery strategy.
have a specific and real need for recovery training, need the skills, authority and Benefits of service guarantees
incentives to engage in effective recovery. It isn’t only a marketing tool but also for defining, cultivating and maintaining quality
Provide adequate explanations throughout an organization. The benefits to the company are numerous;
Customers look to try to understand why the failure occurred. Explanations can help to 1. A good guarantee forces the company to focus on its customers.
defuse negative reactions and convey respect for the customer. When you want the 2. An effective guarantee sets clear standards for the organization.
explanation to be perceived as adequate, it must possess appropriate and the style of 3. A good guarantee generates immediate and relevant feedback from customers.
delivery is important. 4. When the guarantee is invoked there is an instant opportunity to recover.
Treat customers fairly 5. Information generated through the guarantee can be tracked and integrated into
Customers expect to be treated fairly in terms of the outcome they receive, the process continuous improvement efforts.
by which the service recovery takes place and the interpersonal treatment received from 6. Studies of the impact of service guarantees suggest that employee morale and loyalty
employees attempting to address the service failure. can be enhanced as a result.
Cultivate relationships with customers 7. For customers, the guarantee reduces their sense of risk.
If the firm fails in service delivery, those customers who have a strong relationship with Types of service guarantees
the firm are often more forgiving of service failures and more open to the firm’s service Service guarantees can be unconditional satisfaction guarantees or service attribute
recovery efforts. Cultivation of strong customer relationships can provide an important guarantees. Unconditional satisfaction guarantees are always. In other cases, firms offer
buffer to service firms when failures occur. guarantees for particular aspects of the service that are important to customers.
Learn from recovery experiences Guarantees are not just for external customers, but internal service guarantees are
Problem-resolution situations are also a valuable sources of diagnostic, prescriptive effective ways of aligning internal service operations.
information for improving customer service. Managers can learn about systematic Characteristics of effective guarantees are;
problems in the delivery system that need fixing. By root-cause analysis, firms can identify 1. Unconditional.
the sources of the problems and modify processes. 2. Meaningful.
3. Easy to understand.
Learn from lost customers
4. Easy to invoke.
Reasons customers left can assist in preventing service failures in the future, this type is
difficult, and painful for companies. Examination is essential for preventing the same When to use (or not use) a guarantee
mistakes and losing more customers in the future. Information can be obtained effective Service guarantees are not always appropriate; they are not the right strategy when;
by in-depth interviews done by senior people. 1. Existing service quality in the company is poor.
2. A guarantee does not fit the company’s image.
Act quickly before being forced to do so through legislation 3. Service quality is truly uncontrollable.
When not responding to complaints, national or European governmental bodies can step
4. Potential exists for customer abuse of the guarantee.
in and impose regulations and legislation to ensure the protection of the customer. Air
5. Costs of the guarantee outweigh the benefits.
passenger are entitled to compensation in the case of arrivals delayed by over 3 hours.
6. Customers perceive little risk in the service.

7. Customers perceive little variability in service quality among competitors.

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Service intangibility
Part 5. Managing service promises The difficulties associated with intangibility can be divided in five properties;
This part is about the difference between service delivery and the service provider’s 1. Incorporeal existence; service doesn’t occupy space, but service the delivery
external communications. It is providers gap 4. mechanism may use facilities that occupy space.
2. Abstractness; service benefits do not correspond directly with object, making them
16. Managing external and internal communications difficult to visualize and understand.
Customer expectations are shaped by both uncontrollable and company-controlled 3. Generality; refers to a class of things, persons, events or properties, whereas
factors. Accurate, coordinated and appropriate company communication is essential to specificity refers to particular objects, people or events. Many service and service
delivering services that customers perceive as high in quality. promises are described in generalities, making them difficult to differentiate from
those of competitors.
16.1 The need for coordination in online and offline marketing communication 4. Non-searchability; services often cannot be previewed or inspected in advance of
purchase because service is a performance.
channels
5. Mental impalpability; services are often complex, multidimensional and difficult to
A company cannot control outside sources, bus ensuring that messages from all company
grasp mentally.
sources provide a consistent message about the service brand is a major challenge for
These five aspects make customers feel more uncertain about their purchases, and
marketers of services. In the service marketing triangle, the customer is the target of two
evidence indicates that the greater the risk that customers perceive in purchasing
types of the organization; External marketing communication includes traditional
services, the more they will seek and rely on online or offline WOM communications.
channels such as advertising, corporate websites, sales promotion and public relations.
Second is interactive marketing communication involves the messages that employees Management of service promises
give to customer through channels like personal selling, customer service interactions, A problem occurs when companies fail to manage service marketing communications and
service encounter interactions and servicescapes. Internal marketing communication service falls short of what is promised. This occurs because the part of the company that
must be managed so that information from the company to employees is accurate, makes promises lacks the information necessary to make accurate statements. Demand
complete and consistent with what customers are hearing or seeing. Integrated marketing and supply variations make service provision possible at some times and difficult to
communication build a strong brand identity in the marketplace by tying together and predict. Companies need to communicate about promises and delivery difficult internally
reinforcing all your images and messages. IMC means that all your corporate messages, Management of customer expectations
positioning and images, and identity are coordinated across all venues. It means that your Marketing must accurately reflect what happens in actual service encounters and
PR materials say the same things as your direct mail campaign, and your advertising has operations must deliver what is promised in communications. If advertising, websites,
the same ‘look and feel’ as your website. External communication must be coordinated, personal selling or any other external communication sets up unrealistic expectations,
but external and internal communication channels must be integrated to create customers will be disappointed by the actual encounters. The greater the extent to which
consistent service promises. When internal marketing communication channels are a service firm feels pressured to generate new customers, and perceives that the industry
managed so that employees and the company are in agreement about wat is norm is to over-promise, the greater is the firm’s propensity to over-promise. Raising
communicated to the customer than it is integrated services marketing communications. expectations to unrealistic levels may lead to more initial business but invariably foster
customer disappointment and discourages repeat business.
16.2 Key service communication challenges Customer education
Discrepancies between what is communicated about a service and what a customer Companies must educate the customers, if they are unclear about how the service will be
receives can powerfully affect consumer evaluations of service quality. Factors that provided, what their role in delivery involves and how to evaluate services they have
contribute to these communication challenges include; service intangibility, management never used before, they will be disappointed. Errors in services still lead customers to
of service promises, management of customer expectations, customer education and defect. In complex cases customers defect because they can neither understand the
internal marketing communication. process nor appreciate the value received from the service.

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Internal marketing communications b. Search engine optimization

Because service advertising and personal selling promise what people do, frequent and c. Traditional advertising
effective communication across functions is critical. If internal communication is poor, d. Online advertsing.
perceived service quality is at risk. If promises are developed without input from i. Banner clutter
operations, personnel may not be able to deliver service that matches the image ii. Boring banners
portrayed in marketing efforts. To deliver excellent customer service, firms must be iii. Built-in banners.
certain to inform and motivate employees to deliver what their customers expect. It’s e. Social media advertising
important to provide service excellence consistent in policies and procedures across f. Mobile apps.
departments and branches. g. Sales promotion
h. Public relations.
16.3 Five categories of strategies to match service promises with delivery i. Direct marketing
The goal is to deliver service that is greater than or equal to promises made. All three j. Viral marketing
sides of the marketing service triangle must be addressed. Also the five major approaches; k. Personal selling
Address service intangibility Manage customer expectations
Approaches to address service intangibility include advertising and other communication Accurately promising when and how service will be delivered is one of the most important
strategies that clearly communicate service attributes and benefits to consumers, and ways to close the communication gap. Most effective strategies to manage customers’
strategies designed to encourage word-of-mouth and social media communication. When expectations are;
recognizing the challenges of intangibility there are many strategies that could be used 1. Make realistic promises.
which focuses on ways to make the message dramatic and memorable. 2. Offer service guarantees.
1. Use narratives to demonstrate the service experience. 3. Offer choices.
2. Present vivid information. 4. Create tiered-value service offerings.
3. Use interactive imagery. 5. Communicate the criteria and levels of service effectiveness.
4. Focus on the tangibles. Manage customer education
5. Use brand icons to make the service tangible. Customer must perform their roles properly for services to be effective. Therefore,
6. Use association, physical representation, documentation and visualization. communication to customers can take the form of customer education.
7. Feature service employees in communication. 1. Prepare customers for the service process.
8. Feature satisfied customers in the communication. 2. Confirm performance to standards and expectations.
9. Encourage word-of-mouth communication. 3. Clarify expectations after sale.
10. Leverage social media. 4. Teach customers to avoid peak demand periods and seek slow demand periods.
11. Make use of video-sharing networks. Manage internal marketing communication
Manage service promises Vertical communications are downward, from management to employees or upwards the
In services, sales and marketing departments make promises about what other employees other way. Horizontal communication are those across functional boundaries in an
will fulfil. Because what they do cannot be standardized, greater coordination and organization.
management of promises are required. It can be accomplished by creating strong service 1. Create effective vertical communications.
brand and coordinating all of the company’s marketing communications. a. Sell the brand inside the company.
1. Creating a strong service brand. 2. Create effective upward communication.
a. Company’s presented brand. 3. Create effective horizontal communications.
b. Word of mouth and other external publicity. 4. Aligh back-office and support personnel with external customer through interaction
c. Customer experience with the company. or measurement.
2. Coordinate external communication. a. Interaction and measurement.
a. Websites 5. Create cross-functional teams.
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17. Pricing of services Cost-based pricing

There are three key differences between customer evaluation of pricing for services and The company determines expenses from raw materials and labour, adds amounts or
goods; percentages for overhead and profit and thereby arrives at the price. Widely used in
1. Customers often have inaccurate or limited reference prices for services. industries for utilities, contracting, wholesaling and advertising.
2. Price is a key signal of quality in services. Price= direct costs + overhead costs + profit margin.
3. Monetary price is not the only price relevant to service customers. Major difficulty involves defining the units in which a service is purchased. That’s why
many services are sold in terms of input units rather than unites of measured output.
17.1 Three key ways that service prices are different for consumers Challenges for cost-based pricing are;
1. Costs are difficult to trace.
Service companies must understand how pricing works and must understand how
2. Labour is more difficult to price than materials.
customers perceive prices and price changes.
3. Costs may not equal the value that customers perceive the services are worth.
Customer knowledge of service prices Some examples of cost-based pricing strategies used in services are;
A reference price is a price point in memory for a good or a service, it can consist of the 1. Costs-plus pricing; component costs are calculated and a mark-up added. Mostly used
price last paid, the price most frequently paid or the average of all prices customers have when cost must be estimated in advance.
paid for similar offerings. There are many reasons for not knowing prices for services. 2. Fee for service; strategy used by professionals it represents the cost of the time
1. Service variability limits knowledge; the high degree of variability often exists across involved in providing the service. This method doesn’t promote efficiency.
providers of services.
Competition-based pricing
2. Providers are unwilling to estimate prices;
Competition-based pricing does not always imply charging the identical rate others charge
3. Individual customer needs vary;
but rather using other’s prices as an anchor for the firm’s price. Predominantly used when
4. Collection of price information is overwhelming in services.
services are standard across providers an in oligopolies characterized by few large service
5. Prices are not visible;
providers. Challenges for this method are;
The role of non-monetary costs 1. Small firms may charge too little to be viable.
Non-monetary costs represent other sources of sacrifice perceived by consumers when 2. Heterogeneity of service limits comparability.
buying and using a service. Non-monetary costs often enter into the evaluation of 3. Prices may not reflect customer value.
whether to (re)buy a service, maybe more important than monetary price. Customer will Examples of competition-based pricing strategies in services industries are;
trade money for these costs. Non-monetary costs are; 1. Price signalling; any price offered by one company will be matched by competitors to
1. Time costs; avoid giving a low-cost seller a distinct advantage.
2. Search costs; 2. Going-rate pricing; charging the most prevalent price the market.
3. Convenience costs;
4. Psychological costs;
Demand-based pricing
Demand-based pricing involves setting prices consistent with customer perceptions of
Monetary costs; price.
value: prices are based on what customers will pay for the service provided. Challenges
People do have non-monetary cost priorities, want reducing non-monetary costs and have
for demand-based pricing are;
price as an indicator of service quality.
1. Monetary price must be adjusted to reflect the value of non-monetary costs.

2. Information on service costs is less available to customers hence price may not be a
17.2 Approaches to pricing services central factor.
Services prices and pricing differ from the customer’s and the company’s perspective. Appropriate way a company price their service is basing it on the perceived value of the
There are three pricing structures; cost based, competition-based and demand-based customers. Customers define value in four ways;
pricing. 1. Value is low price; indicating that what they have to give up in terms of money is
most salient in their perceptions of value.
2. Value is whatever I want in a product or service; customers emphasize the benefits
they receive from a service or product as the most important component of value.
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3. Value is the quality I get for the price I pay; trade-off between money they give up operating at large volumes, a service faces threats of strong potential competition
and the quality they receive. very soon after introduction and there is no class of buyers willing to pay a higher
4. Value is what I get for what I give; all benefits they receive as well as all sacrifice price to obtain the service. But can lead to problems when companies select the
components when describing value. regular price. Don’t give customers the feeling that the regular price is outside the
The four consumer expressions of value can be captured in one overall definition range of acceptable prices.
consistent with the concept of utility in economics; perceived value is the consumer’s Pricing strategies when the customer means ‘value is everything I want in a service’
overall assessment of the utility of a service based on perceptions of what is received and The more desirable intrinsic attributes a given service possesses, the more highly valued
what is given. Customers will make a purchase decision on the basis of perceived value. To the service is likely to be and the higher the price the market can set. Two strategies;
translate customer’s value perception in a price, the marketer must answer what benefits 1. Prestige pricing; special form of demand-based pricing by service marketers who offe
the service provide, how important the benefits are, how much it worth is to the high-quality or status services, for them a higher price is charged for the luxury end of
customer to receive a particular benefit and what price the service will be economically business. Some customers may value the high price because it represents prestige or
acceptable to potential buyers. Company have to estimate the value to customers of the quality image or for getting special benefits. Demand increase when price increases.
company’s services. 2. Skimming pricing; strategy in which new services are introduces at high prices with
large promotional expenditures, effective when services are major improvements.
17.3 Pricing strategies that link to the four value definitions Pricing strategies when the customer means ‘value is the quality I get for the price I
Approaches to services pricing that are particularly suited to each of the value definitions. pay’
Pricing strategies when the customer means ‘value is low price’ When customers consider quality and monetary price. Strategies are;
Companies focus on price when monetary price is dominant the most important 1. Value pricing; giving more for less. Involves assembling bundle of services that are
determinant of value. Marketer must know what extent customers know the objective desirable to wide group customers and price lower than would cost separately.
prices of services in the category, how they interpret various prices and how much too 2. Market segmentation pricing; marketer charges different prices to groups of
much is of a perceived sacrifice. Specific pricing approaches in value of low price are; customers for what are perceived to be different quality levels of service. Based on
1. Discounting; offer discounts to communicate to price sensitive buyers. the premise that segments show different price elasticities of demand and desire
2. Odd pricing; pricing services below the exact euro amount to make buyers perceive different quality levels. Pricing by client category (students, retired) or service version
that they are getting a lower price. (not all want the basic level of lowest price).
3. Synchro-pricing; use of price to manage demand for a service by capitalizing on Pricing strategies when the customer means ‘value is all that I get for all that I give’
customer sensitivity to prices. This can play a role in smoothing demand and For some, value is not just the benefits but also the time, money and effort they put into a
synchronizing demand and supply. Time, place, quantity and incentive (lower price service. Pricing strategies for this group are;
and hope to be frequent) differentials have all been used effectively by service firms. 1. Price framing; Many customers don’t possess accurate reference prices for services,
4. Dynamic pricing; involves buying and selling of goods and services in market in which so marketers are more likely to organize price information so they know how to view
prices move quickly in response to supply and demand fluctuations. Can also be 2. Price bundling; appropriate strategy when customers find value in a package of
offered through third-party sites like comparison websites (aggregators) or group services that are interrelated. Bundling is pricing and selling grouped rather than
buying sites. Comparison/aggregates are website portal or search utilities that enable individual services. Allows the customer to pay less when buying separate.
clients to gain several quotes or prices via an electronic e-quote form. Group buying 3. Complementary pricing; can when services that are highly interrelated can be
sites work on the concept that the greater the number of people who want to buy a leveraged. Includes three strategies; captive pricing, two-part pricing and loss
service, the lower the price will be for everyone. leadership. This because service price is broken in into fixed fee plus usage fees.
Online auction sites are used for auctioning products and services. Customer with the 4. Results-based pricing; used in industries in which outcome is very important but
highest bid at the end of the auction period gets it for that price. Customer pay what uncertainty is high, most relevant aspect is the result. Most prevalent for of this is
they are willing and compete with each other on the service they desire. contingency pricing, is major way that personal injury and certain consumer’s cases
5. Penetration pricing; strategy in which new services are introduced at low prices to are billed, clients are ensured that they pay no fees until they receive a settlement. In
stimulate trial and widespread use. Appropriate strategy when sales volume of the this the economic value of service is hard to determine before the service, providers
service is very sensitive to price, it is possible to achieve economies in unit costs by develop a price that allows them to share the risks and rewards of delivering value.
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Lower costs
Part 6. Service and the bottom line Attracting a new customer is five times as costly as retaining an existing one. Customer
Discussing if excellent service is profitable to an organization. defections have a stronger effect on a company’s profits than market share, scale, unit
costs and other factors. Companies can increase profits 25% - 85%.
18. The financial impact of service quality Volume of purchases
Firms that adopt primarily a revenue expansion emphasis perform better and have higher Customers who are satisfied are likely to increase the amount of money they spend with
return on quality than firms that emphasize either cost reduction or both revenue that company or the types of services offered.
expansion and cost reduction together. Price premium
18.1 Service and profitability Customer who notices and values the services provided by a company will pay a price
Profits and service premium for those services. Most service quality leaders command higher prices.
The links among customer satisfaction, service quality and firm performance resulted in Word-of-mouth communication
several important recurring findings across studies. Customer satisfaction is a broader Word-of-mouth communication is more credible than other sources of information, the
concept, but service quality is almost always an important driver of customer satisfaction. best type of promotion for a service. It brings new customers to the firm and the financial
There are so many studies about this, writers have multiple conclusions; value of this form of advocacy saves promotional costs and gets the revenues from new
1. Generalization 1: Improvement in customer satisfaction has a significant and positive customers.
impact on firms’ financial performance. 1. Loyal customer;
2. Generalization 2; The link between satisfaction and firm performance is asymmetric. 2. Role of service in defensive marketing;
Asymmetric relationship means that increases in customer satisfaction do not always 3. Levels of service provision need to retain customers;
have the same impact on frim performance as decreases in customer satisfaction. 4. Aspects of service most important for customer retention;
3. Generalization 3; The strength of the satisfaction-profitability link varies across 5. How to identify defection-prone customers;
industries as well as across firms within an industry.
18.4 Customer perceptions of service quality and purchase intentions
18.2 Offensive marketing effects of service: attracting more and better Evidence shows that customer satisfaction and service quality perceptions affect
customers consumer intentions to behave in other positive ways. That are behavioural intentions like
Service quality can help companies to attract more and better customers through praising firm, preferring the company over others, agreeable paying a premium price and
offensive marketing. Offensive effects involve market share, reputation and price increasing volume of purchases. Repurchase intention is strongly related to stated
premiums those three points will influence sales and thus profits. Companies offering satisfaction across all product categories. Link between service quality and more specific
superior service achieve higher than normal market share growth and that service quality behaviour intentions.
influence profits through increased market share and premium prices as well as lowered
costs and less rework. Satisfied customers spread positive word of mouth, which leads to 18.5 The key drivers of service quality, customer retention and profits
the attraction of new customer and then to higher market share. Understand the relationship between overall service quality and profitability is important
but it’s useful to identify specific drivers of service quality that most relate to profitability
18.3 Defensive marketing effects of service: customer retention Service is multifaceted, consisting of a wide variety of customer-perceived dimensions
Defensive marketing is about keeping the customers of a firm. Customer defection is including reliability, responsiveness and empathy, resulting from innumerable company
costly to companies because new customers must replace lost customers and strategies. Reliability is most critical, but because dimensions and attributes are delivered
replacement is expensive. Getting new ones is expensive at advertising, promotion and in many cases with different strategies, resources must be allocated where most needed.
sales and are unprofitable in beginning. The longer a customer remains with a company,
the more profitable the relationship is for the organization. The longer a company keeps a
customer, the more money it stands to make. Money from retention comes from; lower
costs, volume of purchases, price premium and word-of-mouth communication.
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18.6 Customer equity and return on marketing 18.7 Company performance measurement: the balance performance scorecard
Marketing decreased its emphasis on short-term transactions and focus on long-term Financial measures emphasize profitability of inert assets over any other mission of the
customer relationships. Service tends to be more relationship based, the structural shirt in company. They do not recognize the emerging leverage of the soft stuff – skilled people
the economy resulted in more attention to relationships and more attention for and employment of information – as the new keys to high performance and near-perfect
customers. Customer-centred view reflected in concepts and metrics that drive marketing customer satisfaction. If the only mission a measurement system conveys is financial
management. Customer equity is important. discipline, an organization is directionless. Companies realized that balanced score cards
Customer equity is the total of the discounted lifetime values summed over all the are need, that are strategic measurement systems that capture other areas of
firm’s customers performance. It’s a set of measures that gives top managers a fast but comprehensive
Customer equity is obtained by summing up the customer lifetime values of the firm’s view of business. That complements, and the organization’s innovation and improvement
customers. The shift from product-centred thinking to customer-centred thinking implies activities – operational measures that are the drivers of future financial performance. The
the need for an accompanying shift from product-based- to customer-based metrics. scorecard consists of; financial, customer, operational and learning perspective.
Using customer equity in a strategic framework Changes to financial measurement
Determining customer lifetime value, or customer equity is the first step, but the more Defections should be a key performance measure for senior management are a
important step is to evaluate and test ideas and strategies using lifetime value as the fundamental component of incentive systems. Can also measure actual increases or
measuring stick. At every basic level, strategies for building customer relationships can decreases in revenue from retention or defection of customers by capturing the value of a
affect five basic factors; retention rate, referrals, increased sales, reduced direct costs and loyal customer. Financial measures are; price premium, volume increases, value of
reduced marketing costs. Customer equity is a new approach to marketing and corporate customer referrals, value of cross-sales and long-term value of customer.
strategy that finally puts the customer at the heart of the organization. Researchers Customer perceptual measures
identified the drivers of customer equity (value equity, brand equity and relationship Customer perceptual measures are leading indicators of financial performance, they
equity) and explain how these drivers work, independently and together to grow reflect customer beliefs and feelings about the company and its services, it can predict
customer equity. Service strategies are prominent in value and relationship equity. Within how the customer will behave in the future. Perceptual measures are; service perceptions
each of these drivers are specific incisive actions that the firm can take to enhance its and expectations, perceived value and behavioural intentions.
overall customer equity. Operational measures
Why is customer equity important? Operational measures involve the translation of customer perceptual measures into the
It’s the total of the discounted lifetime values of all the firm’s customers, but it will not be standards or actions that must be set internally to meet customer’s expectations. Can be
responsible for the entire value of the firm, the firm’s current customers provide the most measured by; right first time, right on time, responsiveness, transaction time, throughput
reliable source of future revenues and profits. Growing customer equity is most time, reduction in waste and process quality. It is customer-linked operational measures,
important, and doing it well can lead to significant competitive advantage. through customer expectations and calibrated the way a customer views and expresses.
Calculating return on marketing using customer equity Innovation and learning
Return of marketing enables companies to look at all competing marketing strategy This measures a company’s ability to innovate, improve and learn. It is difficult to make
options and trade them off on the basis of projected financial return. It allows companies quantitatively but can be accomplished using performance-to-goal percentages. Consist
not just to examine the impact of service on financial return but also compare the impact of; number of new products, return on innovation, employee skills, time to market and
of service with the impact of branding, price changes and other strategies. By the time spent talking to customers.
customer equity model, a firm can analyze the drivers that have the greatest impact, Effective non-financial performance measurements
compare their performance with competitors and project return on investment from Companies make four major mistakes.
improvements in the drivers. The approach enables firms to focus marketing efforts on 1. Not linking measures to strategy.
strategic initiatives that generate the greatest return. 2. Not validating the links.
3. Not setting the right performance targets.
4. Measuring incorrectly.
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Summary Services Marketing

Services Marketing (Tilburg University)

Studocu is not sponsored or endorsed by any college or university

1.2 Service dominant logic

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1.6 Services marketing mix

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Service provision as drama Attribution of dissatisfaction

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3. Customer expectations of service Sources of adequate service expectations

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4. Customer perceptions of service 4.3 Ensuring high customer satisfaction

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5.3 Putting it all together: Closing the gaps

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6.5 Using marketing research information Objectives for upward communication

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7.2 Relationship value of customers The customer’s view of profitability tiers

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1. Major or radical innovations; new services for markets as yet undefined.

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Reading and using service blueprints 8.6 High-performance service innovations

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9. Customer-defined service standards Customer – not company-defined standards

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9.3 Development of customer-defined service standards Developing customer-defined standards

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Step 7. Track measures against standards

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10. The physical and virtual servicescape Servicescape complexity

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10.5 Guidelines for physical evidence strategy

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Employee satisfaction, customer satisfaction and profits

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Sources of conflict Develop people to deliver service quality

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13.5 Franchising Benefits of agents and brokers

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Tension between empowerments and control Partnering strategies

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Shifting demand to match capacity Align capacity with demand fluctuations

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Act quickly 15.7 Service guarantees

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