INTRODUCTION TO SERVICE • Customers will have perceptions of single, transaction-specific encounters as well as overall Firm needs to begin the
single, transaction-specific encounters as well as overall Firm needs to begin the relationship development process by providing a good core service
Services are deeds, processes and performances provided, coproduced, or cocreated by one entity
or person for and/or with another entity or person.
• Deeds= preplanned actions
• Processes= steps required
• Performances= high quality
Tangibility Spectrum
Intangibility is a key determinant of whether an offering is a service.
• Very few products are purely intangible or totally tangible.
• Instead, services tend to be more intangible than manufactured products, and manufactured
products tend to be more tangible than services.
SERVICE DOMINANT LOGIC
Steve Vargo and Bob Lusch suggest the value derived from physical goods is really the service
provided by the good, not the good itself.
• For example, they suggest that a pharmaceutical product provides medical services, a razor
provides shaving services, and computers provide information and data manipulation services.
• Although this view is somewhat abstract, it suggests an even broader, more inclusive, view of the
meaning of service.
• The value is co-created in a process that requires the active participation of the producer, its
customers and possibly other stakeholders (of the producer and the customer).
SERVICE AND TECHNOLOGY
• POTENTIAL FOR NEW SERVICE OFFERINGS
•Technology enables both customers and employees to be more effective in getting and providing
service such as self-service technologies.
THE PARADOXES AND DARK SIDE OF TECHNOLOGY AND SERVICE
• Customer concerns about privacy and confidentiality raise major issues for firms as they seek to
learn about and interact directly with customers through the Internet.
• Employees can be reluctant to accept and integrate technology into their work lives – especially
when they perceive, rightly or wrongly, that the technology will become a substitute for human labor
and perhaps eliminate their jobs.
THE CUSTOMER GAP
- The customer gap is the difference between customer expectations and perceptions
- Customer expectations are standards or reference points or what a customer believes should or will
happen, that customers bring to the service experience, whereas customer perceptions are
subjective assessments of actual service experiences.
=> Ex: when you visit an expensive restaurant, you expect a high level of service, one that is
considerably superior to the level you would expect in a fast-food restaurant.
THE PROVIDER GAPS
The provider gaps occur within the organization providing the service and include:
- Gap 1: Not knowing what customers expect
Provider gap 1 is the difference between customer expectations of service and a company’s
understanding of those expectations.
Customer interviews, survey research, complaint systems and customer panels, structured
brainstorming and service quality gap analysis – must be used to stay close to the customer.
- Gap 2: Not selecting the right service quality designs and standards
Another prerequisite is the presence of service designs and performance standards that
reflect those accurate perceptions.
A recurring theme in service companies is the difficulty experienced in translating customer
expectations into service quality specifications that employees can understand and execute.
These problems are reflected in provider gap 2, the difference between company
understanding of customer expectations and development of customer-driven service designs and
standards.
They are operations standards set to correspond to customer expectations and priorities
rather than responses to company concerns such as productivity or efficiency.
To avoid provider gap 2, the service organization needs to clearly design services without
oversimplification, incompleteness, subjectivity and bias.
=> Ex: Consider Apple compared to every other PC laptop on the market today. PC laptops have
improved leaps and bounds, however the actual experience of upgrading and repairing a PC
compared to an Apple is extremely frustrating. Let’s say the customer buys his Lenovo laptop from
Harvey Norman. He gets a warranty from Lenovo to cover some parts and another warranty from
Harveys to cover other parts of the product. Where does the customer go to get his laptop fixed?
Compare this to Apple. He knows to always take his laptop to an Apple Store where he knows the
problem will be solved by helpful people.
- Gap 3: Not delivering to service designs and standards
Once service designs and standards are put in place, it would seem that the firm is well on
its way to delivering high-quality services.
The firm must have systems, processes and people in place to ensure that service delivery
actually matches (or exceeds) the designs and standards in place.
Even when guidelines exist for performing services well and treating customers correctly,
high-quality service performance is not a certainty
- Gap 4: Not matching performance to promises
Provider gap 4 illustrates the difference between service delivery and the service provider’s
external communications.
The discrepancy between actual and promised service therefore has an adverse effect on
the customer gap.
For example – a hospital printed on its brochure may have clean and furnished rooms but in
reality, it may be poorly maintained – in this case, the patient’s expectations are not met.
CUSTOMER PERCEPTIONS OF SERVICE
• SATISFACTION VERSUS SERVICE QUALITY
• Satisfaction is generally viewed as a broader concept, whereas service quality focuses specifically
on dimensions of service.
• Service quality is a component of customer satisfaction.
• Service quality is a focused evaluation that reflects the customer’s perception of reliability,
responsiveness, assurance, empathy and tangibles.
• Satisfaction, on the other hand, is more inclusive: it is influenced by perceptions of service quality,
product quality and price as well as situational factors and personal factors.
TRANSACTION VERSUS CUMULATIVE PERCEPTIONS
perceptions of a company based on all
• Customer loyalty most often results from the customer’s assessment of all his or her experiences,
not just from one single encounter.
CUSTOMER SATISFACTION
• Oliver defined: ‘Satisfaction is the consumer’s fulfillment response. It is a judgment that a product or
service feature, or the product or service itself, provides a pleasurable level of consumption-related
fulfillment.’
• Satisfaction is the customer’s evaluation of a product or service in terms of whether that product or
service has met the customer’s needs and expectations.
• Satisfaction can also be related to other types of feelings, depending on the particular context or
type of service.
• Finally, satisfaction may be associated with feelings of ambivalence when there is a mix of positive
and negative experiences associated with the product or service.
WHAT DETERMINES CUSTOMER SATISFACTION?
• Satisfaction is a dynamic, moving target that may evolve over time
• Particularly when product usage or the service experience takes place over time, satisfaction may
be highly variable depending on which point in the usage or experience cycle one is focusing on.
• In the case of very new services or a service not previously experienced, customer expectations
may be barely forming at the point of initial purchase; these expectations will solidify as the process
unfolds and the consumer begins to form his or her perceptions.
=> Customers enhance expectations through the service cycle.
• CONSUMER EMOTIONS
• These emotions can be stable, pre- existing emotions – for example, mood state or life satisfaction.
• Think of times when you are at a very happy stage in your life (such as when you are on holiday),
and your good, happy mood and positive frame of mind influence how you feel about the services
you experience.
• Alternatively, when you are in a bad mood, your negative feelings may carry over into how you
respond to services, causing you to overreact or respond negatively to any little problem.
ATTRIBUTIONS FOR SERVICE SUCCESSOR FAILURE
Attributions–the perceived causes of events–influence perceptions of satisfaction as well.
ENSURING HIGH CUSTOMER SATISFACTION
1. Be Customer Centric - ‘Fit service around me – knowing what I said, and calling me back when I
have got the time. That would show me I’m really valued, rather than just offering me a discount.’
2. Have Superior Staff – ‘Brand X is just let down by dreadful unknowledgeable weekend staff –
they have no idea what they’re talking about.’
3. Delight the Customer – ‘When my flowers from Brand Xarrived at my wife’s doorstep,Iphone The
company and they sent me £50 in vouchers. It was really good of them.’
4. Keep your Promises– ‘I was on hold with my insurance company and an automated message
tells me it will call me back in 10 minutes – and you know what, they actually did.’
5. Sort out Service Recovery–‘Everyone Understands That Things Go Wrong...The artishow
Putitright. Having a manager on hand so that you can speak to someone who actually knows what
they are talking about really does help.’ Inevitably, services or products sometimes fail. Dealing with
this promptly and effectively is paramount to maintaining a brand’s reputation.
6. Build a relationship – ‘With Brand X, you can never trace who you’ve spoken to and which
country they’re in. There’s no relationship at all, it’s confusing.’
OUTCOME, INTERACTION AND PHYSICAL ENVIRONMENT QUALITY
• Consumers judge the quality of services based on their perceptions of the technical outcome
provided, the process by which that outcome was delivered, and the quality of the physical
surroundings where the service is delivered.
Ex: In the case of a lawsuit, a client will judge the quality of the technical outcome, or how the court
case was resolved, and the quality of the interaction. Interaction quality would include such factors
as the lawyer’s timeliness in returning telephone calls, his or her empathy for the client, and his or
her courtesy and listening skills.
Ex: A restaurant customer will judge the service on his or her perceptions of the meal (technical
outcome quality), how the meal was served and how the employees interacted with him or her
(interaction quality). The decor and surroundings (physical environment quality) of the restaurant will
also impact on the customer’s perceptions of overall service quality.
SERVICE QUALITY DIMENSIONS
• Reliability: ability to perform the promised service dependably and accurately
• Responsiveness: willingness to help customers and provide prompt service
• Assurance: employees’ knowledge and courtesy and their ability to inspire trust and confidence
• Empathy: caring, individualized attention given to customers
• Tangibles: appearance of physical facilities, equipment, personnel and written materials.
TYPES OF SERVICE ENCOUNTERS
• There are three general types of service encounters: remote encounters, telephone encounters and
face-to-face encounters.
• Remoteencounters:
• Although there is no direct human contact in these remote encounters, each represents an
opportunity for the firm to reinforce or establish quality perceptions in the customer.
• In remote encounters, the tangible evidence of the service and the quality of the technical
processes and systems become the primary bases for judging quality.
• Telephoneencounters:
• Tone of voice, employee knowledge and effectiveness/efficiency in handling customer issues
become important criteria for judging quality in these encounters.
• Face-to-face encounters:
• Both verbal and non- verbal behaviors are important determinants of quality, as are tangible cues
such as employee dress and other symbols of service (equipment, informational brochures, physical
setting).
• In face-to-face encounters, the customer also plays a role in creating quality service for him or
herself through his or her own behavior during the interaction.
SOURCES OF PLEASURE AND DISPLEASURE IN SERVICE ENCOUNTERS
• Four common themes – service recovery (after failure), adaptability, spontaneity and coping – have
been identified as the sources of customer satisfaction/dissatisfaction in memorable service
encounters.
BUILDING CUSTOMER RELATIONSHIPS
Factors influence the development of strong customer relationships: customer’s overall
evaluation of a firm’s offering, bonds created with customers by the firm, and barriers that the
customer faces in leaving a relationship.
delivery that, at a minimum, meets customer expectations.
A company needs to know what is important to customers at each stage of the process and at each
‘touchpoint’ they experience.
Customer experience management is only effective when it is seen as a priority of senior
management and when an organization’s work processes, systems and structure change to best
serve the customer.
Necessary to understand the “customer's journey”.
SWITCHING BARRIERS: khi khách hàng gặp những barriers, thì họ có xu hướng chuyển qua
những company's company.
→ how fix:
- Provide customer service that your competitors can't match.
- Use a rewards program to create more valuable experiences.
Customer inertia: kh thường có thói quen không thay đổi nhà cung cấp dịch vụ nếu không thực sự
cần thiết. Nhà cung cấp mới sẽ rất khó thuyết phục khách hàng từ bỏ nhà khai thác chủ đạo vốn đã
phục vụ họ trong nhiều năm.
Switching costs: Chi phí cần khi kh muốn chuyển qua 1 nhà cung cấp mới. (Customers develop
loyalty to an organization in part because of costs involved in changing to and purchasing from a
different firm.
These monetary and non-monetary costs, both real and perceived, are termed switching costs.),
include: time, money or effort – such as set-up costs, search costs, learning costs and contractual
costs
4 level để xây dựng mối quan hệ với KH:
- Financial bonds (gắn kết với KH thông qua những financial incentives): lower prices for greater
volume purchases or lower prices for customers who have been with the firm a long time.
- Social bonds: Build relationships through social and interpersonal. (social bonds that develop
among customers rather than between customers and the provider of the service ). (Social bonds
alone may not tie the customer permanently to the firm, but they are much more difficult for
competitors to imitate than are price incentives./In the absence of strong reasons to shift to another
provider, interpersonal bonds can encourage customers to stay in a relationship)
- Structural bonds: involve structural as well as financial, social and customization bonds between
the customer and the firm.
BENEFITS FOR CUSTOMERS AND FIRMS:
- For customers: Consumers are more likely to stay in a relationship when the gets (quality,
satisfaction, specific benefits) exceed the gives (monetary and non-monetary costs). ( GET > GIVE )
+ Confidence benefits: feelings of trust or confidence in the provider, along with a sense of reduced
anxiety and comfort in knowing what to expect ( kh tin tưởng vào nhà cung cấp)
+ Social benefits: customers develop a sense of familiarity and even a social relationship with their
service providers. ( cảm thấy belong to )
+ Special treatment benefits: get the benefit of the doubt, being given a special deal or price, or
getting preferential treatment. ( kh cảm thấy được treat rất tốt )
- For firms:
+ Economic benefits: Để maintain relationships with customers cũng tốn nhiều cost, nhưng nếu
relationship đc duy trì trong thời gian dài thì cost giảm (key: increased purchases over time→ costs
drop over time.)
+ Customer behavior benefits: có thể được free ads bởi khách hàng cũ( giới thiệu cho kh mới) khi họ
hài lòng.
+ HRM benefits: the experience of customers can contribute to the co-production of the service by
assisting in service delivery. (vd: kh đã từng sử dụng dvu chỗ khác, khi đến đây, nhận thấy chỗ này
chưa ổn → đưa ra lời khuyên cải thiện)
Customer intimacy: a true understanding of customer values and needs. It requires awareness of
customer perceptions and aligning business strategy accordingly.
CUSTOMER- NOT COMPANY-DEFINED STANDARDS
Once managers of service businesses accurately understand what customers expect, they face a
second critical challenge: using this knowledge to set service quality standards and goals for the
organization.
• Knowing customer requirements, priorities and expectation levels can be both effective and
efficient. Anchoring service standards on customers can save money by identifying what the
customer values, thus eliminating activities and features that the customer either does not notice
or will not pay for.
• Through precise measurement of expectations, the company often discovers that it has been
over- delivering to many customer needs.
TYPES OF CUSTOMER-DEFINED SERVICE STANDARDS
• Two major types of customer-defined service standards can be distinguished:
‘hard’ and ‘soft’
• HARD CUSTOMER-DEFINED STANDARDS
• “Do it right the first time" and ‘honor your promises’ .
• SOFT CUSTOMER-DEFINED STANDARDS
• In contrast to hard measures, soft measures are those that must be documented using perceptual
data, because soft standards are opinion-based measures and cannot be directly observed.
• They must be collected by talking to customers, employees or others.
• Soft customer-defined service standards provide direction, guidance and feedback to employees in
ways to achieve customer satisfaction and can be quantified by measuring customer perceptions
and beliefs.
ONE-TIME FIXES
• When customer research is undertaken to find out what aspects of service need to be changed,
requirements can sometimes be met using one-time fixes.
• One-time fixes are technology, policy or procedure changes that, when instituted, address customer
requirements.
DEVELOPING CUSTOMER-DEFINED STANDARDS:
• BƯỚC 1: XÁC ĐỊNH TRÌNH TỰ GẶP DỊCH VỤ HIỆN CÓ HOẶC MONG MUỐN
• Bước đầu tiên liên quan đến việc phác họa hành trình của khách hàng (bản thiết kế dịch vụ) thông qua
trải nghiệm dịch vụ sự liên tiếp.
• Lý tưởng nhất là công ty sẽ sẵn sàng khám phá hành trình khách hàng mong muốn của khách hàng,
khám phá những cách khách hàng muốn làm ăn với công ty.
• BƯỚC 2: BIẾN KỲ VỌNG CỦA KHÁCH HÀNG THÀNH HÀNH VI VÀ HÀNH ĐỘNG ĐỐI VỚI TỪNG
DỊCH VỤ BẮT GẶP
• Trong bước này, các yêu cầu và mong đợi trừu tượng của khách hàng phải được chuyển thành cụ thể,
cụ thể các hành vi và hành động liên quan đến mỗi lần gặp dịch vụ.
• Các yêu cầu trừu tượng (như độ tin cậy) có thể yêu cầu một hành vi hoặc hành động khác nhau trong
mỗi lần gặp dịch vụ, và những khác biệt này phải được thăm dò.
• Việc khơi gợi những hành vi và hành động này có thể yêu cầu nghiên cứu định tính bổ sung vì trong
hầu hết công ty dịch vụ, thông tin tiếp thị đã không được thu thập cho mục đích này.
• BƯỚC 3: SELECT BEHAVIORS AND ACTIONS FOR STANDARDS
• Sau đây là những tiêu chí quan trọng nhất để tạo ra các tiêu chuẩn.
1. Các tiêu chuẩn dựa trên các hành vi và hành động rất quan trọng đối với khách hàng.
2. Các tiêu chuẩn đề cập đến hiệu suất cần được cải thiện hoặc duy trì.
3. Các tiêu chuẩn bao gồm các hành vi và hành động mà nhân viên có thể cải thiện.
4. Các tiêu chuẩn được nhân viên chấp nhận.
5. Các tiêu chuẩn mang tính dự đoán hơn là phản ứng.
6. Các tiêu chuẩn mang tính thách thức nhưng thực tế.
• BƯỚC 4: DECIDE WHETHER HARD OR SOFT STANDARDS ARE APPROPRIATE
• Bước tiếp theo liên quan đến việc quyết định nên sử dụng tiêu chuẩn cứng hay mềm để nắm bắt hành
vi và hoạt động.
• Một trong những sai lầm lớn nhất mà các công ty mắc phải trong bước này là vội vàng chọn một tiêu
chuẩn khó.
• Cách tốt nhất để quyết định xem một tiêu chuẩn cứng có phù hợp hay không là trước tiên hãy thiết lập
một tiêu chuẩn mềm bằng cách của các cuộc khảo sát về sự hài lòng tiếp theo và sau đó xác định theo
thời gian khía cạnh hoạt động nào tương quan nhất với biện pháp mềm này.
BƯỚC 5: DEVELOP FEEDBACK MECHANISMS FOR MEASUREMENT TO STANDARDS
• Một khi các công ty đã xác định liệu các tiêu chuẩn cứng hay mềm là phù hợp và những tiêu chuẩn cụ
thể nào các tiêu chuẩn nắm bắt tốt nhất các yêu cầu của khách hàng, họ phải phát triển các cơ chế phản
hồi đầy đủ nắm bắt các tiêu chuẩn đó.
• Các tiêu chuẩn cứng thường liên quan đến số đếm cơ học hoặc phép đo thời gian hoặc sai số do công
nghệ hỗ trợ.
• Các tiêu chuẩn mềm yêu cầu các phép đo cảm tính thông qua việc sử dụng các cuộc khảo sát về mức
độ hài lòng tiếp theo hoặc giám sát nhân viên.
• BƯỚC 6: ESTABLISH MEASURES AND TARGET LEVELS
• Bước tiếp theo yêu cầu các công ty thiết lập các mức mục tiêu cho các tiêu chuẩn. Nếu không có bước
này công ty thiếu một cách để định lượng xem các tiêu chuẩn đã được đáp ứng hay chưa.
• BƯỚC 7: TRACK MEASURES AGAINST STANDARDS
• Các doanh nghiệp dịch vụ thành công như Ngân hàng Hoàng gia Scotland, London Underground và
Ritz-Carlton đã hệ thống dựa trên thực tế cẩn thận và toàn diện về hoạt động của họ.
• BƯỚC 8: PROVIDE FEEDBACK ABOUT PERFORMANCE TO EMPLOYEES
• Tất cả các bộ phận của tổ chức phải đo lường dịch vụ của họ đối với khách hàng nội bộ và cuối cùng là
đo lường hiệu suất đó liên quan như thế nào đến các yêu cầu của khách hàng bên ngoài.
• BƯỚC 9: PERIODICALLY UPDATE TARGET LEVELS AND MEASURES
• Bước cuối cùng liên quan đến việc thường xuyên xem xét lại các mức mục tiêu, các thước đo và thậm
chí cả các yêu cầu của khách hàng đủ để đáp ứng mong đợi của khách hàng.
STRATEGIC ROLES OF THE SERVICESCAPE
• PACKAGE
• Similar to a tangible product’s package, the servicescape and other elements of physical evidence
essentially ‘wrap’ the service and convey to consumers an external image of what is ‘inside’.
• The servicescape is the outward appearance of the organization, and thus can be critical in forming
initial impressions or setting up customer expectations – it is a visual metaphor for the intangible service.
• The packaging role extends to the appearance of contact personnel through their uniforms or dress and
other elements of their outward appearance.
• FACILITATOR
• The servicescape can also serve as a facilitator in aiding the performance of persons in the
environment.
• A well-designed, functional facility can make the service a pleasure to experience from the customer’s
point of view and a pleasure to perform from the employee’s. On the other hand, poor and inefficient
design may frustrate both customers and employees.
Ex: Citizen M boutique hotels located in the Netherlands and the UK provide all guests with a Phillips
moodpad which is described as a technological personal assistant. It wakes you up, opens the blinds,
turns on the lights, controls the television and adapts the room to your chosen theme in terms of color,
digital art, and music.
• SOCIALIZER
• The design of the servicescape serves as a socializer of both employees and customers in the sense
that it helps convey expected roles, behaviors and relationships.
• DIFFERENTIATOR
• The design of a physical setting can also differentiate one area of a service organization from another.
FRAMEWORK FOR UNDERSTANDING SERVICESCAPE EFFECTS ON BEHAVIORS:
Follow from basic stimulus-organism-response theory
⇒ impacts on multiple parties (customers, employees and their interactions), multiple types of internal
responses (cognitive, emotional and physiological) and a variety of individual and social behaviors that
can result. 1. Behaviors in the servicescape:
Individual behaviors:
● Individuals react to places with two general, and opposite, forms of behaviour: approach and
avoidance.
● Approach behaviours include all positive behaviours that might be directed at a particular place,
such as desire to stay, explore, work and affiliate.
● Avoidance behaviours reflect the opposite – a desire not to stay, to explore, to work or to
affiliate.
● Each individual comes to a particular service organization with a goal or purpose that may be
aided or hindered by the setting.
Social interactions:
● In addition to its effects on their individual behaviours, the servicescape influences the nature and
quality of customer and employee interactions, most directly in interpersonal services.
● Environmental variables such as physical proximity, seating arrangements, size and flexibility can
define the possibilities and limits of social episodes such as those occurring between customers
and employees, or customers and other customers.
Internal responses to the servicescape:
● Employees and customers respond to dimensions of their physical surroundings cognitively,
emotionally and physiologically, and those responses are what influence their behaviours in the
environment
● Environment and cognition:
● The perceived servicescape can have an effect on people’s beliefs about a place and their beliefs
about the people and products found in that place.
● In a sense the servicescape can be viewed as a form of nonverbal communication, imparting
meaning through what is called ‘object language’.
Environment and emotion:
● In addition to influencing beliefs, the perceived servicescape can directly elicit emotional
responses that, in turn, influence behaviors.
● Just being in a particular place can make a person feel happy, light-hearted and relaxed, whereas
being in another place may make that person feel sad, depressed and gloomy. The colors, decor,
music and other elements of the atmosphere can have an unexplainable and sometimes
subconscious effect on the moods of people in the place.
Environment and Physiology:
The perceived servicescape may also affect people in purely physiological ways. Noise that is too loud
may cause physical discomfort, the temperature of a room may cause people to shiver or perspire, the air
quality may make it difficult to breathe, and the glare of lighting may decrease ability to see and may
induce physical discomfort.
Environmental Dimensions of the Physical servicescape:
● There is an endless list of possibilities: lighting, color, signage, textures, quality of materials, style
of furnishings, layout, wall decor, temperature, and so on.
● Categorized into 3 composite dimensions:
● Ambient conditions (5 senses)
1. Spatial layout and functionality:
Spatial layout refers to the ways in which machinery, equipment and furnishings are arranged, the size
and shape of those items, and the spatial relationships among them.
Functionality refers to the ability of the same items to facilitate the accomplishment of customer and
employee goals.
1. Signs, symbols and artifacts:
● Signs displayed on the exterior and interior of a structure as labels (name of company, name of
department, and so on), for directional purposes (entrances, exits) and to communicate rules of
behavior (no smoking, children must be accompanied by an adult).
● Symbols and artifacts such as quality construction materials, artwork, certificates and
photographs, floor coverings, and personal objects may communicate less directly than signs,
giving implicit cues to users about the meaning of the place and norms and expectations for
behavior in the place.
CUSTOMERS’ ROLES IN SERVICE DELIVERY
The Importance of Customers in Service Co-creation and Delivery:(A) How Customers Widen the
Service Performance Gap?
(1)Lack of understanding of their roles
(2)Not being willing or able to perform their roles
(3)No rewards for “good performance”
(4)Interfering with other customers(5)Incompatible market segments.
(B)Customer Participation across Different Services: level of customer participation - low, medium or
high (refer table 12.1).(C)Fellow Customers: customers can detract from satisfaction:
(1)Disruptive behaviors
(2)Overly demanding behaviors
(3)Excessive crowding(eg:quality of internet can be suffered on special holidays
(4)Incompatible needs/ customers can enhance satisfaction:
(1)Mere presence
(2)Socialization/friendships
(3) Roles: assistants, teachers, supporters, mentors
Customers’ Roles:
(A)As productive source:they can be thought of as “partial employees” (Contributing effort, time, or
other resources to the production process);customer inputs can affect organization’s productivity
(B)as Contributors to Service Quality and Satisfaction:Customers can contribute to:Their own
satisfaction with the service/By performing their role effectively/By working with the service provider|
The quality of the service they receive:By asking questions/By taking responsibility for their own
satisfaction/By complaining when there is a service failure
(C)as Competitors:Customers may “compete” with the service provider| Internal exchange vs.
external exchange| Internal/external decision often based on: Expertise capacity/Resource
capacity/Time capacity/Economic rewards/Psychic rewards/Trust/Control
Self-Service Technologies – The Ultimate in Customer Participation: SSTs are services produced
entirely by the customer without any direct involvement or interaction with the firm’s employees.
Proliferation of Self-Service Technologies:ATMs/Pay at the pump/Airline check-in/Hotel check-in,
out/Automated car rental/Blood pressure machines/Tax prep software/Self-checkout/Online
banking/Online vehicle registration/Online auctions/Home and car buying online/Package
tracking/Internet shopping/IVR phone systems/Distance education
Strategies for Enhancing Customer Participation:
(A)Define customers’ roles:Helping oneself/Helping others/Promoting the company
(B)Recruit, educate, and reward customers:Recruit the right customers/Educate and train customers
to perform effectively/Reward customers for their contributions/Avoid negative outcomes of
inappropriate customer participation
(C)Manage the customer mix(compatibility management)
MANAGING DEMAND AND CAPACITY:
3 pricing structures: cost-based, competition-based, and demand-based pricing. CAPACITY
CONSTRAINTS: The service performance gap can occur when organizations fail to smooth the
peaks and valleys of demand, overuse their capacities, attract an inappropriate customer mix in their
efforts to build demand or rely too much on price smoothing demand. Critical fixed capacity factors
can be time, labor, equipment, facilities or (in many cases) a combination of these. For some service
businesses, the primary constraint on service production is time. Equipment may be the critical
constraint. For road transport or air freight delivery services, the lorries or airplanes needed to
service demand may be the capacity limitation. Understanding the primary capacity constraint, or the
combination of factors that restricts capacity, is a first step in designing strategies to deal with supply
and demand issues.
STRATEGIES FOR MATCHING CAPACITY AND DEMAND:
SHIFTING DEMAND TO MATCH CAPACITY: With this strategy an organization seeks to shift
customers away from periods in which demand exceeds capacity, perhaps by convincing them to
use the service during periods of slow demand. This change may be possible for some customers
but not for others. During periods of slow demand, the organization seeks to attract more and/or
different customers to utilize its productive capacity.
ADJUSTING CAPACITY TO MEET DEMAND: Low demand: Perform maintenance, renovations,
schedule vacations, employees training, layoff, modify or move facilities; High demand: Use
part-time employees, request overtime, cross-train, outsource.
Yield= Actual Revenue/Potential Revenue
E.g. 200-room hotel with maximum room rate of €100 per room per night.
Potential revenue = 100 x 200 = 20,000 euros per night
Assume: the hotel charges its full rate of 100 euros for 40 percent of its rooms and then gives a
discount of 50 euros for the remaining 120 rooms.
Yield = [(100x80)+(120x50)]/20,000 = 70%
PRICING OF SERVICES:
A reference price is a price point in memory for a good or a service; it can
consist of the price last paid, the price most frequently paid or the average of all prices customers
have paid for similar offerings.
If you feel quite uncertain about your knowledge of the prices of services, and
the reference prices you hold in memory for services are not generally as accurate as those you hold
for goods, there are many reasons for this difference:
SERVICE VARIABILITY LIMITS KNOWLEDGE
Because services are not created on a factory assembly line, service firms have great flexibility in the
configurations of services they offer.
Firms can conceivably offer an infinite variety of combinations and permutations, leading to complex
and complicated pricing structures.
PROVIDERS ARE UNWILLING TO ESTIMATE PRICES
Another reason customers lack accurate reference prices for services is that many providers are
unable or unwilling to estimate price in advance.
=> Ex: Car servicing and legal services providers are rarely willing – or even able – to estimate a
price in advance. The fundamental reason is that they do not know themselves what the services will
involve until they have fully examined the car or the client’s situation, or until the process of service
delivery (such as mechanical repairs or a court trial) unfolds.
INDIVIDUAL CUSTOMER NEEDS VARY
Another factor that results in the inaccuracy of reference prices is that individual customer needs
vary.
Ex: Some hairstylists’ service prices vary across customers on the basis of hair length, type of
haircut and whether a conditioning treatment and styling are included. In a similar vein, a service as
simple as a hotel room will have prices that vary greatly: by size of room, time of year, type of room
availability and individual versus group rate.
COLLECTION OF PRICE INFORMATION IS OVERWHELMING IN SERVICES
Still another reason customers lack accurate reference prices for services is that customers feel
overwhelmed with the information they need to gather.
Advertising actual prices for services the customer is not used to purchasing may reduce uncertainty
and overcome a customer’s inflated price expectations for some services.
Ex: A marketing research firm’s advertisements citing the price for a simple study (such as 7,500
euros) would be informative to business customers who are not familiar with the costs of research
studies and therefore would be guessing at the cost. By featuring price in advertising, the company
overcomes the fear of high cost by giving readers a price anchor.
PRICE AS AN INDICATOR OF SERVICE QUALITY
In some situations, when quality is hard to detect or when quality or price varies a great deal within a
class of services, consumers may believe that price is the best indicator of quality.
In high-risk situations, many of which involve credence services such as dental check-up or
management consulting, the customer will look to price as a surrogate for quality.
=> Service prices must be determined carefully because:
Pricing too low can lead to inaccurate inferences about the quality of the service.
Pricing too high can set expectations that may be difficult to match in service delivery.
FOUR MEANINGS OF PERCEIVED VALUE
One of the most appropriate ways that companies price their services is basing the price on the
perceived value of the service to customers.
When consumers discuss value, they use the term in many different ways and talk about myriad
attributes or components.
Value is Low Price
Some consumers equate value with low price, indicating that what they have to give up in terms of
money is most salient in their perceptions of value, as typified in these representative comments
from customers:
For dry cleaning: ‘Value means the lowest price.’
For carpet steam-cleaning: ‘Value is price – which one is on sale.’
For a fast-food restaurant: ‘When I can use coupons, I feel that the service is of value.’
For airline travel: ‘Value is when airline tickets are discounted.’
Value is whatever I Want in a Product or Service
Rather than focusing on the money given up, some consumers emphasize the benefits they receive
from a service or product as the most important component of value. In this value definition price is
far less important than the quality or features that match what the consumer wants.
Service customers describe this definition of value as follows:
For an MBA degree: ‘Value is the very best education I can get.’
For dental services: ‘Value is high quality.’
For a social club: ‘Value is what makes me look good to my friends and family.’
For a rock concert or music festival: ‘Value is the best performance.’
Value is the Quality I Get for the Price I Pay
Other consumers see value as a trade-off between the money they give up and the quality they
receive.
For a hotel for a vacation: ‘Value is price first and quality second.’
For a hotel for business travel: ‘Value is the lowest price for a quality brand.’
For a computer services contract: ‘Value is the same as quality. No – value is affordable quality.’
Value is What I Get for What I Give
Finally, some consumers consider all the benefits they receive as well as all sacrifice components
(money, time, effort) when describing value.
For a housekeeping service: ‘Value is how many rooms I can get cleaned for what
the price is.’
For a hairstylist: ‘Value is what I pay in cost and time for the look I get.’
For executive education: ‘Value is getting a good educational experience in the shortest time
possible.’
PRICING STRATEGIES THAT LINK TO THE FOUR VALUE DEFINITIONS
Pricing Strategies When The Customer Means ‘value Is Low Price’
- Discounting: Service providers offer discounts or price cuts to communicate to price sensitive
buyers that they are receiving value.
Ex: Airlines such as British Airways, easyJet and Ryanair advertise short periods of two to three
months when ticket prices within Europe will be discounted. Ryanair occasionally advertises free
seats where the passenger only pays taxes and administration charges for a flight. These attract
customers to try their flights and help fill planes during off-peak periods. It also brings traffic to the
company’s website which may result in flights other than the free ones being booked.
- Odd Pricing: Odd pricing is the practice of pricing services just below the exact amount to make
buyers perceive that they are getting a lower price.
Ex: Dry-cleaners charge 2.98 euros for a shirt rather than 3.00 euros, health clubs have membership
fees priced at 33.90 euros per month rather than 34 euros, and haircuts are 19.50 euros rather than
20.00 euros. Odd prices suggest discounting and bargains and are appealing to customers for whom
value means low price.
- Synchro-Pricing: Synchro-pricing is the use of price to manage demand for a service by
capitalizing on customer sensitivity to prices. Pricing can play a role in smoothing demand and
synchronizing demand and supply. Time, place, quantity and incentive differentials have all been
used effectively by service firms:
- Place differentials are used for services in which customers have a sensitivity to location. Ex:
The front row at concerts, center court in tennis or basketball, beach-side rooms in hotels – all
these represent place differentials that are meaningful to customers and that therefore command
higher prices.
- Time differentials involve price variations that depend on when the service is consumed. Ex:
Off-peak rail fares, airline tickets that include a Saturday night stay, and health spas in the
off-season are time differentials that reflect slow periods of service. By offering lower prices for
underused time periods, a service company can smooth demand and also gain incremental
revenue.
- Quantity differentials are usually price decreases given for volume purchasing. This pricing
structure allows a service company to predict future demand for its services. Ex: Customers who
buy a booklet of coupons for a tanning salon or facial, a quantity of tokens for toll roads or ferries,
or packages of advertising spots on radio or television are all responding to price incentives
achieved by committing to future services.
- Differentials as incentives are lower prices for new or existing clients in the hope of
encouraging them to become regular users or more frequent users. Ex: Some professionals –
lawyers, dentists and, even, some chiropractors – offer free consultations at the front end,
usually to overcome fear and uncertainty about high service prices. Other companies stimulate
use by offering regular customers discounts or premiums during slow periods.
- Dynamic pricing: a form of technology-led synchro-pricing frequently used as part of a revenue
management/yield management model. It involves the buying and selling of goods and services in
markets in which prices move quickly in response to supply and demand fluctuations. Ex: Airlines
adjust their fares for a particular flight frequently, sometimes several times a day, as the flight’s
departure date nears, to reflect customer demand and the time remaining until the departure date.
- Penetration Pricing: Penetration pricing is a strategy in which new services are introduced at low
prices to stimulate trial and widespread use. The strategy is appropriate when (1) sales volume of
the service is very sensitive to price, even in the early stages of introduction; (2) it is possible to
achieve economies in unit costs by operating at large volumes; (3) a service faces threats of strong
potential competition very soon after introduction; and (4) there is no class of buyers willing to pay a
higher price to obtain the service.
Pricing Strategies When The Customer Means ‘Value Is Everything I Want In A Service.’
- Prestige Pricing: Prestige pricing is a special form of demand-based pricing by service marketers
who offer high-quality or status services. Ex: For example, for hotel guests who crave pampering,
many chains offer club floors that add high-end amenities into their offerings for large price
increases. Some Ritz-Carltons offer free lunch foods such as sandwiches and salads with these
high-priced rooms. In prestige pricing, demand may actually increase as price increases because the
costlier service has more value in reflecting quality or prestige.
- Skimming Pricing: Skimming, a strategy in which new services are introduced at high prices, is an
effective approach when services are major improvements over past services. • In this situation,
customers are more concerned about obtaining the service than about the cost of the service,
allowing service providers to skim the customers most willing to pay the highest prices. Ex: Services
related to anti-aging, such as Botox injections and laser liposuction, often are introduced at high
prices, thereby attracting customers who are willing to pay more to obtain the services in the short
term rather than wait until a later time, when the prices might be reduced.
Pricing Strategies When the Customer Means “Value Is the Quality I Get for the Price I Pay”
- Value Pricing: The widely used term value pricing has come to mean “giving more for less.” In
current usage, it involves assembling a bundle of services desirable to a wide group of customers
and then pricing them lower than they would cost alone. Ex: Southwest Airlines also offers value
pricing in its airline service: a low cost for a bundle of desirable service attributes such as frequent
departures, friendly and funny employees, and on-time arrival. The airline offers consistently low
fares with bare-bones service.
- Market Segment Pricing:
● With market segmentation pricing, a service marketer charges different prices to groups of
customers for what are perceived to be different quality levels of service. This form of pricing is
based on the premise that segments show different price elasticities of demand and desire
different quality levels. Ex: Service marketers often price by client category, based on the
recognition that some groups find it difficult to pay a recommended price. Health clubs located in
college communities typically offer student memberships, recognizing that this segment of
customers has limited ability to pay full price. In addition to the lower price, student memberships
may also carry with them reduced hours of use, particularly in peak times. The same line of
reasoning leads to memberships for “seniors,” who are less able to pay full price but are willing to
patronize the clubs during daytime hours, when most full-price members are working.
● Companies also use market segmentation by service version, recognizing that not all segments
want the basic level of service at the lowest price. àWhen they can identify a bundle of attributes
that are desirable enough for another segment of customers, they can charge a higher price for
that bundle. Companies can configure service bundles that reflect price and service points
appealing to different groups in the market. Ex: Hotels offer standard rooms at a basic rate but
then combine amenities and tangibles related to the room to attract customers willing to pay
more for the concierge level, jacuzzis, Wi-Fi, additional beds, and sitting areas.
Pricing Strategies When the Customer Means “Value Is All That I Get for All That I Give”
- Price Framing: Because many customers do not possess accurate reference prices for services,
service marketers are more likely than goods marketers to organize price information for customers
so they know how to view it. Customers naturally look for price anchors as well as familiar services
against which to judge focal services. If they accept the anchors, they view the price and service
package favorably. Ex: Samsung ra mắt mẫu TV bản nhỏ hơn với giá rẻ hơn cho cùng 1 loại TV.
- Bundle Pricing:
● Some services are consumed more effectively in conjunction with other services; other services
accompany the products they support. When customers find value in a package of interrelated
services, price bundling is an appropriate strategy. Customers find that bundling simplifies their
purchase and payment, and companies find that the approach stimulates demand for the firm’s
service line, thereby achieving cost economies for the operations as a whole while increasing net
contributions. Bundling also allows the customer to pay less than when purchasing each of the
services individually, which contributes to perceptions of value.
● => The effectiveness of price bundling depends on how well the service firm under- stands the
bundles of value that customers or segments perceive and on the complementarity of demand
for these services.
● The services selected for bundling should be those with a relatively small sales volume without
the bundling to minimize revenue loss from discounting a service that already has a high sales
volume.
- Elementary Pricing:
● Services that are highly interrelated can be leveraged by using complementary pricing. This
pricing includes three related strategies—captive pricing, two-part pricing, and loss leadership. In
captive pricing, the firm offers a base service or product and then provides the supplies or
peripheral services needed to continue using the service. In this situation the company could
off-load some part of the price for the basic service to the peripherals.
● ⇒ Ex: Cable services often drop the price for installation to a very low level, then compensate by
charging enough for the peripheral services to make up for the loss in revenue. With service
firms, this strategy is often called two-part pricing because the service price is broken into a fixed
fee plus variable usage fees (also found in telephone services, health clubs, and commercial
services such as rentals).
● Loss leadership is the term typically used in retail stores when providers place a familiar service
on special largely to draw the customer to the store and then reveal other levels of service
available at higher prices.
● ⇒ Ex: Cleaners will offer a special low price to launder men’s shirts to draw customers in to pay
the higher regular prices for other items.
- Result-Based Pricing: In service industries in which outcome is very important but uncertainty is
high, the most relevant aspect of value is the result of the service
⇒ Ex: In personal injury lawsuits, clients value the settlement they receive at the conclusion of the
service. From tax accountants, clients value cost savings. From trade schools, students most value
getting a job upon graduation. From Hollywood stars, production companies value high grosses. In
these and other situations, an appropriate value-based pricing strategy is to price on the basis of
results or outcome of the service.
⇒ Ex: Results-based pricing is demonstrated clearly in the online “pay-per-click” advertising industry.
Rather than buying media with estimated audiences, companies that buy advertisements on Google
and Yahoo! pay only for users who actually respond to their ads. Some public relations firms are also
moving from charging fixed fees for obtaining media exposure for their clients to a results-based
approach.