Services Marketing 7th Edition Zeithaml Solutions Manual 1

Services Marketing 7th Edition
Zeithaml Solutions Manual

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SECTION 3
INSTRUCTION AIDS
Learning is the best of all wealth;

it is easy to carry, thieves cannot steal it, and tyrants cannot seize it;
neither fire nor water can destroy it;
and far from decreasing, it increases by giving.
--Naladiyar
The primary purpose of this section is to provide, for each chapter, the list of learning objectives, assorted
lecture tips and aids, suggested active learning activities, answers to the discussion questions at the end of
each chapter, web sites that might be used to supplement class discussion, and a list of appropriate cases
for that chapter. How these suggestions are used will depend on your individual teaching style. As you
will see from the active learning activities presented later in this section, we are strong advocates for
developing a learner-centered course. Thus, we introduce this idea before presenting instructional aids for
each chapter.
DEVELOPING A LEARNER-CENTERED COURSE
As the business sector places greater emphasis on such skills as oral and written communication, critical
thinking/problem solving skills, and teamwork, university classes will need to become increasingly “learner
centered” and collaborative in order to prepare students to function effectively in the contemporary business
environment.
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This will require additional emphasis on both delivery (i.e., pedagogy) and on the role of the teacher as an
active partner in the students’ learning experiences. As Boehm (1992) states, “We are beginning to
understand that how we teach is central; it is, in fact, the second content of every course” (p. 37). Learning
is a fundamentally social process that occurs when individuals work together to create shared understanding
and knowledge. According to Johnson, Johnson, and Smith (1991, p. 1-11), “Learning proceeds more
fruitfully when relationships are personal as well as professional. Long-term, persistent efforts to achieve
come from the heart, not the head, and the heart is reached through relationships with peers and faculty.”
Thus we as faculty must be able to create an environment where positive relationships can be formed and
the classroom can become a learning community. This charge may sound overwhelming to those who
haven’t yet tried a more collaborative approach to education. But it can result in some wonderful classroom
experiences as teachers and students experience the excitement of acting as partners in the learning process.
A widely publicized study offers seven principles for good practice in higher education (Chickering and
Gamson 1987). The following guidelines can help you create a truly learner-centered experience for your
students:
1. Encourage student-faculty contact.

2. Encourage cooperation among students.
3. Encourage active learning.
4. Give prompt feedback.
5. Emphasize active learning.
6. Communicate high expectations.
7. Respect diverse talents and ways of learning.
Using Active Learning in Your Class
There are many excellent ideas for active learning activities in the discussion questions and exercises at the
end of each chapter in the text. This resource manual also provides additional activities that can serve as a
foundation for your active learning experiences. As you design and deliver your course, be both creative
and courageous in including active learning exercises. You’ll be pleasantly surprised at how fun and
effective they are!
Basic Active Learning Structures
The following collaborative activities are designed for use with small groups (2-5 students). Most can be
adapted easily to meet your specific classroom needs. The descriptions were taken from The Handbook for
the Fourth R 111: Relationship Activities for Cooperative and Collegial Learning by Richard and Elaine
Solomon. More detailed descriptions of these exercises can be found in the materials listed later in this
section under “Additional Instructional Resources—Teaching and Learning.” Two especially helpful
resources are Active Learning: Cooperation in the College Classroom by Johnson, Johnson, and Smith
(1991) and Cooperative Learning by Spencer Kagan (1992).
Three Step Interview: Each member of the group chooses or is assigned another group member to be a
learning partner. For example, students 1 and 2 are a pair and students 3 and 4 are a pair. During the first
step, 1 interviews 2 while 3 interviews 4. (Interviewing involves asking clarifying questions, not sharing
one’s own information or opinions.) During step two, the members reverse roles so that 2 interviews 1
while 4 interviews 3. In the third step, each member shares his/her learning partner’s responses with the
group.
Think-Share-Pair: This is a three-step activity. During step one, each person individually and privately
thinks about a question posed by the instructor. In step two, two people are paired to exchange and discuss
their responses. Step three involves having each person share his/her response, his/her partner’s response,
a synthesis or something new with another pair or the entire class.
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Numbered Heads Together: Students in each group choose or are given a number (e.g., 1, 2, 3 or 4).
After the instructor poses several questions and says “Numbered Heads Together,” the group members get
together and make sure that each member can answer all of the questions. Each group then divides the
answers among its members according to numbers. After a predetermined time period, the instructor
restates the first question and announces a number (1, 2, 3 or 4). Students with the designated number in
each of the groups give their answers to the question. A second number is then called, and the procedure
continues until all of the questions are answered.
Roundtable Brainstorming: Each group is given one sheet of paper on which members write different
responses to a question posed by the teacher. Each member is asked to record one response to the teacher’s
question on the sheet of paper and then pass it on to another member. The paper is passed around the group
several times so that group members can read others’ responses and add new comments. A variation on the
brainstorming exercise is to pass around several different sheets of paper simultaneously with different
questions for group members to respond to.
Simple Jigsaw: The instructor divides an assignment into as many parts as there are group members. Each
member is responsible for learning and teaching his/her part of the assignment to his/her teammates.
Pre- and post-exercise quizzes can be given to test students’ mastery of the material.
Expert Jigsaw: This is a more complex exercise that includes the following steps. First, a task or a set of
materials is divided into several parts or topics. Next each group member is assigned one of the topics to
become an “expert” on. Members then meet with the corresponding “experts” from other groups to discuss
their topics, analyze and synthesize available data, and plan a strategy for presenting their information to
their teammates. Finally, members return to their original groups to teach the other members what they
have learned.
Group Consensus: Each group member shares information and listens carefully to what other members
share. After all members talk, the group has a discussion to determine what members believe in common
and where there are areas of disagreement.
Group Discussion with Talking Chips: Each group member is given a “talking chip” (e.g., a pen or
pencil, a square of colored paper, a crayon, etc.). The rule for sharing information in the group discussion
is that a member may speak only after placing his/her talking chip in the center of a designated table or
desk. Members may not share additional information until the chips of all other members have been turned
in. Then all members retrieve their chips. Any member may then speak again after relinquishing his/her
chip.
Three Minute Review: At any point during a lecture, the instructor gives each group three minutes to
review what has been shared, ask each other clarifying questions, and share answers. At the end of the
three minutes, members may ask the class and/or instructor for answers to question that have not been
sufficiently answered in the group.
Group Question and Answer: This activity is useful for reviewing class material. A student can pose a
question to the class or the instructor only when the members of his/her group don’t know the answer or
can’t agree on an answer. A variation on this activity is to require students to ask another group for an
answer (if their group does not have one) before asking the class or the teacher.
Send a Problem: The instructor, a student, or a group asks questions, creates case studies/scenarios or
poses problems which are sent to various groups for discussion. Each group reads, analyzes and discusses
what it has been sent and then writes a response which is either submitted to the teacher or shared with the
class.
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Word-Webbing: Each group is given a set of related concepts. The group must then create a visual
“picture” which depicts and describes the relationships between its assigned concepts.
Team-Webbing: Each group is assigned one fact or concept which is written on a large sheet of paper.
Using a pen, pencil or magic marker, each group member simultaneously records a related fact or concept
or writes a question on the paper. Each group thus develops a team web of questions and answers that can
serve as a foundation for a whole class discussion.
Suggestions for Getting Started
Here are a few basic suggestions to help you integrate collaborative learning into your course successfully
and without stress:
• Start with one of the simpler collaborative learning structures. Repeat this same format using
different course material several times so that both you and your students can get comfortable with
it. (Remember that you are asking students to switch from their more traditional, passive
“listening” roles to active involvement in the learning process. It may take them some time to adapt
to this change too). Make sure you provide very clear, step-by-step directions and check to see that
students understand both the structure and the purpose of the activity.
• You can then choose a second type of activity to introduce to your class. Continue adding active
learning exercises gradually throughout the duration of the course. You will probably become quite
comfortable with the process by the end of one semester, and you may find yourself spontaneously
“mixing and matching” active learning activities to fit your materials or learning objectives.
• Look for opportunities within your regular course structure to use in-class groups. Often, time that
you would have spent entirely on lecturing can be used for a combination mini-lecture and group
activity or active learning exercise.
• Don’t feel that you need to establish tight control in your class for weeks before starting active
learning activities. It will probably work better to start these exercises early in the course so that a
class culture of collaboration and active involvement can be established right from the start.
• Remember that active learning is a “messier” process than lecturing. You will have inherently less
“control” over the process because you are asking students to get involved in the creation of
knowledge rather than just delivering a prepackaged lecture. Try to relax, be flexible and have fun.
You’ll be excited by the enthusiasm and learning outcomes as your students get more actively
involved in creating their own educational experiences.
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ADDITIONAL INSTRUCTIONAL RESOURCES
Teaching and Learning
Alverno College Faculty (1994). Student Assessment-As-Learning at Alverno College. Milwaukee, WI:
Alverno College Institute.
Argyris, C. (1980). “Some Limitations of the Case Method: Experiences in a Management Development
Program.” Academy of Management Review. 5, (2): 291-298.
Astin, A. W. (1993). What Matters In College: Four Critical Years Revisited. San Francisco: Jossey-
Bass.
Barr, Robert B. and John Tagg (1995). “From Teaching to Learning: A New Paradigm for
Undergraduate Education.” Change. November-December: 13-25.
Boehm, L. (1992). “In Wake of Crisis: Reclaiming the Heart of Teaching of Teaching and Learning.” In
Critical Thinking, Interactive Learning and Technology: Reaching for Excellence in Business
Education, edited by T.J. Frecka. Arthur Andersen Foundation, 24-40.
Cross, K. Patricia (1991). “Effective College Teaching.” ASEE PRISM. October: 27-28.
DeZure, Deborah (1993). “Opening the Classroom Door.” Academe. September-October: 27-28.
Goodsell, Anne, Michelle Maher and Vincent Tito (1992). Collaborative Learning: A Sourcebook for
Higher Education. University Park, PA: National Center on Post-Secondary Teaching, Learning
and Assessment.
Johnson, David W., Johnson, Roger T. and Karl A. Smith (1991). Active Learning: Cooperation in the
College Classroom. Edina, MN: Interaction Book Company.
Kadel, Stephanie and Julia A. Keehner (1994). Collaborative Learning: A Sourcebook for Higher
Education, Volume II. University Park, PA: National Center on Post-Secondary Teaching,
Learning and Assessment.
Kagan, Spencer (1992.) Cooperative Learning. San Juan Capistrano, CA: Cooperative Learning.
Nicastro, Mary L. and David C. Jones (1994). Cooperative Learning Guide for Marketing Teaching Tips
for Marketing Instructors. Englewood Cliffs, NJ: Prentice-Hall.
Palmer, Parker J. (1995). “Good Talk About Good Teaching.” The Institute for Teaching and Learning.
1, (1): 5-11.
Shapiro, B. P. (1984). Hints for Case Teaching. Boston, MA: Harvard Business School Publications,
585-012.
Shulman, Lee S. (1993). “Teaching as Community Property.” Change. November-December: 6-7.
Solomon, Richard and Elaine (1992). The Handbook for the Fourth R III: Relationship Activities for
Cooperative and Collegial Learning. Columbia, MD: National Institute for Relationship
Training.
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Teams and Teamwork
Byrne, John A. (1993), “The Horizontal Corporation,” Business Week, December 20: 76-81.
Huey, John (1994). “The New Post-Heroic Leadership.” Fortune, February 21: 42-50.
Johnson, David W., Johnson, Roger T. and Karl A. Smith (1991). Active Learning: Cooperation in the
College Classroom. Edina, MN: Interaction Book Company.
Katzenbach, Jon R. and Douglas K. Smith (1993). The Wisdom of Teams. Boston, MA: Harvard
Business School Press.
Magnet, Myron (1994). “The New Golden Rule of Business.” Fortune, February 21: 60-64.
Parker, Glenn M. (1990). Team Players and Teamwork. San Francisco, CA: Jossey-Bass.
Shrage, Michael (1990). Shared Minds: The New Technologies of Collaboration. New York, NY:
Random House.
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RECOMMENDED SERVICES BOOKS
General Books on Services and Related Topics
Alexander, James A. and Mark W. Hordes (2003), S-Business: Reinventing the Services Organization,
New York: SelectBooks, Inc.
Barlow, Janelle and Paul Stewart (2004), Branded Customer Service, San Francisco: Barrett-Koehler
Publishers.
Bates, Sandra M. (2011), The Social Innovation Imperative: Create Winning Products, Services, and
Programs that Solve Society's Most Pressing Challenges, New York: McGraw Hill.
Berry, Leonard L. (1999), Discovering the Soul of Service, New York: The Free Press.
Berry, Leonard L. (1995), On Great Service: A Framework for Action, New York: The Free Press.
Bettencourt, Lance A. (2010), Service Innovation: How To Go From Customer Needs to Breakthrough
Services, New York: McGraw Hill.
Blau, Melinda and Karen L. Fingerman (2009), Consequential Strangers: Turning Everyday Encounters
Into Life-Changing Moments, New York: Norton.
Bliss, Jeanne 2006), Chief Customer Officer: Getting Past Lip Service to Passionate Action, San Francisco:
Jossey-Bass.
Bossidy, Larry and Ram Charan (2002), The Discipline of Getting Things Done, New York: Crown
Business.
Carbone, Lewis P. (2004), Clued In: How to Keep Customers Coming Back Again and Again, Upper Saddle
River, NJ: FT Prentice Hall.
Day, George S. and Christine Moorman (2010), Strategy from the Outside In: Profiting From Customer
Value, New York: McGraw Hill.
Dow, Roger and Susan Cook (1997), Turned On: Eight Vital Insights to Energize your People, Customers
and Profits, New York: Harper Business.
Frei, Frances and Anne Morriss (2012), Uncommon Service, Boston: Harvard Business Review Press.
Friedman, Thomas L. (2005), The World is Flat, New York: Farrar, Straus, and Giroux.
Fromm, Bill and Len Schlesinger (1993), The Real Heroes of Business, New York: Bantam Doubleday
Dell Publishing Group, Inc.
George, Michael L. (2003), Lean Six Sigma for Service, New York: McGraw-Hill.
Gupta, Sunil and Donald R. Lehmann (2005), Managing Customers as Investments, Upper Saddle River,
NJ: Wharton School Publishing.
Heskett, James, W. Earl Sasser, Jr. and Leonard A. Schlesinger (1997), The Service Profit Chain, NY: Free
Press.
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Heskett, James, W. Earl Sasser, Jr., and Leonard A. Schlesinger (2003), The Value-Profit Chain: Treat
Employees Like Customers and Customers Like Employees, New York: The Free Press.
Heskett, James L., W. Earl Sasser, and Joe Wheeler (2008), The Ownership Quotient: Putting the Service
Profit Chain to Work, Boston: Harvard Business School Publishing.
Kaplan, Robert S. and David P. Norton (1996), The Balanced Scorecard, Boston: Harvard Business School
Press.
Kowalkowski, Christian and Wolfgang Ulaga (2017), Service Strategy in Action:A Practical Guide for
Growing Your B2B Service and Solution Business, Service Strategy Press.
Lusch, Robert F. and Stephen L. Vargo (eds) (2006), The Service-Dominant Logic of Marketing: Dialog,
Debate, and Directions, New York: M.E. Sharpe, Inc.
Moulton-Reger, Sara (2006), Can Two Rights Make a Wrong?, IBM Press, Pearson Education.
Peppers, Don and Martha Rogers (1997), Enterprise One to One: Tools for Competing in the Interactive
Age, New York: Bantam Doubleday Dell Publishing Group, Inc.
Pfeffer, Jeffrey (1998), The Human Equation, Boston: The Harvard Business School Press.
Pine, G. Joseph II and James H. Gilmore (1999), The Experience Economy.
Rayport, Jeffrey F. and Bernard J. Jaworski (forthcoming), Best Face Forward, Boston: Harvard Business
School Press.
Reichheld, Frederick F. (1996), The Loyalty Effect, Boston, MA: Harvard Business School Press.
Reichheld, Frederick F. (2001), Loyalty Rules, Boston, MA: Harvard Business School Press.
Reichheld, Frederick F. (2011), The Ultimate Question 2.0, Boston, MA: Harvard Business School Press.
Rust, Roland T., Valarie A. Zeithaml, and Katherine N. Lemon (2000), Driving Customer Equity, How
Customer Lifetime Value is Reshaping Corporate Strategy, New York: Free Press.
Rust, Roland, Katherine N. Lemon and Das Narayandas (2005), Customer Equity Management, Upper
Saddle River, NJ: Pearson Prentice Hall.
Schneider, Benjamin and David E. Bowen (1995), Winning the Service Game, Boston, MA: Harvard
Schmidt, Bernd H. (1999), Experiential Marketing, New York: The Free Press.
Schmidt, Bernd H. (2003), Customer Experience Management, Hoboken, NJ: John Wiley and Sons.
Stauss, Bernd and Wolfgang Seidel (2004), Complaint Management, American Marketing Association,
Thomson Publishers.
Stickdorn, Marc and Jakob Schneider (2010), This Is Service Design Thinking: Basic Tools Cases,
Amsterdam: BIS Publishers.
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Triplett, Jack E. and Barry P. Bosworth (2004), Productivity in the U.S. Services Sector, Washington, D.C.:
Brookings Institution Press.
Vashistha, Atul and Avihash Vashistha (2006), The Offshore Nation, New York: McGraw-Hill.
Yellin, Emily, Your Call Is (not that) Important to Us, 2009, New York: Free Press.
Zeithaml, Valarie A., A. Parasuraman, and Leonard L. Berry (1990), Delivering Quality Service:
Balancing Customer Perceptions and Expectations, New York: The Free Press.
Zeithaml, Valarie A., Mary Jo Bitner and Dwayne Gremler (2009), Services Marketing: Integrating
Customer Focus Across the Firm, 5th edition, New York: McGraw-Hill.
Zeithaml, Valarie A., Stephen W. Brown, Mary Jo Bitner, and Jim Salas (2014), Profiting From Services
and Solutions: What Product-Centric Firms Need to Know, Business Expert Press.
Books about Great Service Companies
Berry, Leonard L. and Kent D. Seltman (2008), Management Lessons from the Mayo Clinic, McGraw-
Hill.
Gittell, Jody Hoffer (2003), The Southwest Airlines WAY, New York: The McGraw-Hill Companies, Inc.
Heracleous, Loizos, Jochen Wirtz and Nitin Panqarkar (2009), Flying High in a Competitive Industry:
Secrets of the World’s Leading Airline, revised edition, Singapore: McGraw-Hill (Asia).
Pottruck, Davis S and Terry Pearce (2000), Clicks and Mortar: Passion Driven Growth in an Internet-
Driven World (Charles Schwab), San Francisco: Jossey-Bass.
Schultz, Howard (1999), Pour Your Heart Into It: How Starbucks Built a Company One Cup At a Time,
New York: Hyperion.
Schultz, Howard and Joanne Gordon (2011), Onward: How Starbucks Fought for Its Life without Losing
Its Soul, New York: Rodale.
Zackheim, Adrian (1997), The Spirit to Serve Marriott’s Way, New York: HarperCollins.
Zane, Chris (2011), Reinventing the Wheel: The Science of Creating Lifetime Customers, Dallas:
BenBella.
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SUPPLEMENTAL READINGS FOR SERVICES MARKETING COURSES1
SERVICES STRATEGY
Alexander, James A. and Mark W. Hordes (2003), S-Business: Reinventing the Services
Organization, New York: SelectBooks, Inc.
Brown, Stephen W., Anders Gustafsson and Lars Witell (2009), “Beyond Products”, Wall Street
Journal, June 22, 2009.
Brown, Stephen W., Anders Gustafsson and Lars Witell (2010), “Service Logic: Transforming
Product-Focused Businesses,” CSL whitepaper will be handed out in class; in addition see CSL Web
page on Service Infusion: http://wpcarey.asu.edu/csl/knowledge/Service-Infusion.cfm
Fang, Eric, Robert W. Palmatier and Jan-Benedit E. M. Steenkamp (2008), “Effect of Service
Transition Strategies on Firm Value,” Journal of Marketing, September 2008, 1-14.
Francis X. Frei (2008), “The Four Things a Service Business Must Get Right”, Harvard Business
Review, April 2008, 70-81.
Neu, Wayne A. and Stephen W. Brown (2005), “Forming Successful Business-to-Business Services
in Goods-Dominant Firms”, Journal of Service Research, August 2005.
Porter, Michael E. and Mark R. Kramer (2011), “Creating Shared Value,” Harvard Business Review,
January-February, 63-77.
Reinhartz, Werner and Wolfgang Ulaga (2008), “How to Sell Services More Profitably”, Harvard
Business Review, 86 (5).
Sawhney, Mohanbir, Sridhar Balasubramanian and Vish V. Krishnan (2004), “Creating Growth With
Services”, Sloan Management Review, Winter 2004, 34-43.
Tuli, Kapil R., Ajay K. Kohli and Sundar G. Bharadwaj (2007), “Rethinking Customer Solutions:
From Product Bundles to Relational Processes”, Journal of Marketing, July 2007, 1-17.
Ulaga, Wolfgang and Werner J. Reinartz (2011), “Hybrid Offerings: How Manufacturing Firms
Combine Goods and Services Successfully, Journal of Marketing, November, 5-23.
Vargo, Stephen L. and Robert F. Lusch (2004), “Evolving to a New Dominant Logic for Marketing,”
Journal of Marketing, January 2004, 1-27 (includes invited commentaries). See also a follow-up
book: Lusch, Robert F. and Stephen L. Vargo (2006), The Service-Dominant Logic of Marketing:
Dialog, Debate, and Directions, New York: M.E. Sharpe. Also see Service Dominant Logic
website: www.sdlogic.net
FOCUS ON THE CUSTOMER
Anderson, Eugene W. and Vikas Mittal (2010), “Strengthening the Satisfaction-Profit Chain,”
Journal of Service Research, November 2000, 107-120.
1
This list was compiled by Mary Jo Bitner for use with her MBA “Services Marketing and Management” course at
Arizona State University.
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Dixon, Matthew, Karen Freeman and Nicolas Toman (2010), “Stop Trying to Delight Your
Customers,” Harvard Business Review, July-August, pp. 116-122.
Reichheld, Frederick (2001) “Lead for Loyalty,” Harvard Business Review, July-August 2001, 76-
84.
Rust, Roland T., Katherine N. Lemon, and Valarie A. Zeithaml (2004), “Return on Marketing: Using
Customer Equity to Focus Marketing Strategy,” Journal of Marketing, January 2004, 109-127.
Rust, Roland T., Valarie A. Zeithaml, and Katherine N. Lemon (2004), “Customer-Centered Brand
Management,” Harvard Business Review, September 2004.
Tax, Stephen S., Stephen W. Brown and Murali Chandrashekaran (1998), “Customer Evaluations of
Service Complaint Experiences: Implications for Relationship Marketing,” Journal of Marketing,
April 1998, 60-76.
Stephen S. Tax and Stephen W. Brown (1998), “Recovering and Learning from Service Failures,”
Sloan Management Review, Fall 1998, 75-88.
PROFITABILITY SEGMENTATION AND LIFETIME VALUE OF CUSTOMERS
Anderson, James C. and James A. Narus (2003), “Selectively Pursuing More of Your Customer’s
Business,” Sloan Management Review, Spring 2003, 43-49.
Gupta, Sunil and Donald R. Lehman (2005), Managing Customers as Investments, Upper Saddle
River, NJ: Wharton School Publishing.
Gupta, Sunil and Valarie Zeithaml (2006), “Customer Metrics and Their Impact on Financial
Performance,” Marketing Science, November-December 2006, 718-739.
Hogan, John E., Katherine N. Lemon, Barak Labai (2003), “What is the True Value of a Lost
Customer,” Journal of Service Research, Vol. 5, No.3, February 2003, pp. 196-208.
Loveman, Gary (2003), “Diamonds in the Data Mine,” Harvard Business Review, May 2003, 109-
113.
Reichheld, Frederick R. (2003), “The One Number You Need to Grow,” Harvard Business Review,
December 2003, 47-54.
Reinartz, Werner J. and V. Kumar (2000), “On the Profitability of Long-Life Customers in a
Noncontractual Setting: An Empirical Investigation and Implications for Marketing,” Journal of
Marketing, October 2000, 17-35.
Rosenblum, David, Doug Tomlinson and Larry Scott (2003), “Bottom-Feeding for Blockbuster
Business,” Harvard Business Review, March 2003, 52-59.
Rust, Roland T., Katherine N. Lemon and Das Narayandas (2005), Customer Equity Management,
Upper Saddle River, NJ: Pearson Prentice Hall.
Rust, Roland T., Christine Moorman, and Gaurav Bhalla (2010), “Rethinking Marketing,” Harvard
Business Review, January-February.
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Zeithaml, Valarie A., Roland T. Rust, and Katherine N. Lemon (2001), “The Customer Pyramid:
Creating and Serving Profitable Customers,” California Management Review, Vol. 43, No. 4,
Summer 2001, 118-142.
ALIGNING STRATEGY AND SERVICE DESIGN
Berry, Leonard L. and Neeli Bendapudi (2003), “Clueing in Customers,” Harvard Business Review,
February 2003, 100-107.
Bitner, Mary Jo, Amy L. Ostrom and Felicia N. Morgan (2008), “Service Blueprinting: A Practical
Technique for Service Innovation,” California Management Review, Spring 2008.
Bruggen, Elizabeth C., Bram Foubert and Dwayne D. Gremler (2011), “Extreme Makeover: Short
and Long-Term Effects of a Remodeled Servicescape,” Journal of Marketing, September, 71-87.
Carbone, Lewis P. (2004), Clued In: How to Keep Customers Coming Back Again and Again, Upper
Saddle River, NJ: FT Prentice Hall.
Carbone, Lewis P. and Stephan H. Haeckel (1994), “Engineering Customer Experiences,” Marketing
Management, Winter 1994.
George, Michael L. (2003), Lean Six Sigma for Service, New York: McGraw-Hill.
Pine, B. Joseph, II and James H. Gilmore (1999), The Experience Economy, Boston: Harvard
Prahalad, C. K. and Venkatram Ramaswamy (2003), “The New Frontier of Experience Innovation,”
Sloan Management Review, Summer 2003, 12-18.
Schmidt, Bernd H. (1999), Experiential Marketing, New York: The Free Press.
Schmidt, Bernd H. (2003), Customer Experience Management, Hoboken, NJ: John Wiley and Sons.
Stickdorn, M. and J. Schneider (2010), This is Service Design Thinking, Amsterdam.
Stuart, F. Ian (2006), “Designing and Executing Memorable Service Experiences: Lights, Camera,
Experiment, Integrate, Action!” Business Horizons, 49, 149-159.
DELIVERING AND PERFORMING SERVICE
Bendapudi, Neeli and Venkat Bendapudi (2005), “Creating the Living Brand,” Harvard Business
Review, May 2005, 124-132.
Bowen, David E. and Edward E. Lawler III (1995), “Empowering Service Workers,” Sloan
Management Review, Summer 1995, 73-85.
Heskett, James, et al. (1994), “Putting the Service-Profit Chain to Work,” Harvard Business Review,
March-April 1994, 164-174.
Heskett, James, W. Earl Sasser, Jr., and Leonard A. Schlesinger (2003), The Value-Profit Chain:
Treat Employees Like Customers and Customers Like Employees, New York: The Free Press.
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Mitchell, Colin (2002), “Selling the Brand Inside,” Harvard Business Review, January 2002, 99-105.
Prahalad, C.K. and Venkatram Ramaswamy (2000), “Co-Opting Customer Competence,” Harvard
Business Review, January-February 2000, 79-87.
Singh, Jagdip (2000), “Performance Productivity and Quality of Frontline Employees in Service
Organizations”, Journal of Marketing, Vol. 64, No. 2 (April, 2000), pp. 15-34
Smith, Jeff and Kristiane Blomqvist (2005), “Strange Bedfellows: Could HR be Marketing’s New
Best Friend?” Marketing Management, February 2005.
Tax, Stephen S., Mark Colgate and David E. Bowen (2006), “How to Prevent Customers From
Failing”, Sloan Management Review, Spring 2006, 30-38.
“The 100 Best Companies to Work For,” Fortune Magazine.

*This is an annual cover story in Fortune, published and online in January or February every
year. There are typically several accompanying articles in the issue that are highly relevant as
well.
SERVICE AND TECHNOLOGY (ASU Research Only)
Bitner, Mary Jo, Stephen W. Brown and Matt Meuter (2000), “Technology Infusion in Service
Encounters,” Journal of the Academy of Marketing Science, Vol. 28, No 1, 138-49.
Bitner, Mary Jo, Amy L. Ostrom and Matthew L. Meuter (2002), “Implementing Successful Self-
Service Technologies,” Academy of Management Executive, November 2002, 96-109.
Cadwallader, Susan, Cheryl Burke Jarvis, Amy L. Ostrom and Mary Jo Bitner, “Frontline Employee
Motivation to Participate in Service Innovation Implementation,” Journal of the Academy of
Marketing Science, Vol. 38, No. 2, 251-, 2010.
Meuter, Matthew L., Amy Ostrom, Robert Roundtree and Mary Jo Bitner (2000), “Self-Service
Technologies: Understanding Customer Satisfaction with Technology-Based Services,” Journal of
Marketing, July 2000, 50-64.
Meuter, Matthew L., Mary Jo Bitner, Amy L. Ostrom, and Stephen W. Brown (2005), “Choosing
Among Alternative Service Delivery Modes: An Investigation of Customer Trial of Self-Service
Technologies,” Journal of Marketing, April 2005.
Wunderlich, Nancy, Florian von Wangenheim and Mary Jo Bitner, “High Tech and High Tough: A
Framework for Understanding Customer Attitudes and Usage Behaviors Related to Interactive
Remote Services,” Journal of Service Research, forthcoming.
MANAGING SERVICE PROMISES
Barlow, Janelle and Paul Stewart (2004), Branded Customer Service, San Francisco: Berret-Koehler.
Berry, Leonard L. and Manjit S. Yadav (1996), “Capture and Communicate Value in the Pricing of
Services,” Sloan Management Review, Vol. 37, No. 4, 41-51.
Berry, Leonard L. and Kent D. Seltman (2007), “Building a Strong Services Brand: Lessons from
Mayo Clinic,” Business Horizons, 50, 199-209.
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Dye, Renee (2000), “The Buzz on Buzz,” Harvard Business Review, Nov-Dec 2000, 139-154.
Hart, Christopher (1988), “The Power of Unconditional Service Guarantees,” Harvard Business
Review, July-August 1988, 54-62.
Hoffman, L. and Thomas P. Novak (2000), “How to Acquire Customers on the Web,” Donna
Harvard Business Review, May-June 2000, 179-188.
SERVICE SCIENCE
Bitner, Mary Jo and Stephen W. Brown (2006), “The Evolution and Discovery of Services Science in
Business Schools,” Communications of the ACM Journal, July 2006, 73-78.
Bitner, Mary Jo and Stephen W. Brown (2008), “The Service Imperative,” Business Horizons, 50th
Anniversary Issue, January-February 2008, pp. 39-46.
Center for Services Leadership Business Report (2010), Research Priorities for the Science of
Service, http://wpcarey.asu.edu/csl/knowledge/Research-Priorities.cfm
IfM and IBM (2008), Succeeding Through Service Innovation: A Service Perspective for Education,
Research, Business, and Government, Cambridge, UK: University of Cambridge Institute for
Manufacturing.
Ostrom, Amy L., Mary Jo Bitner, Stephen W. Brown, Kevin A. Burkhard, Michael Goul, Vicki
Smith-Daniels, Haluk Demirkan, and Elliot Rabinovich (2010), “Moving Forward and Making a
Difference,” Journal of Service Research, February 2010, 4-36.
Spohrer, Jim, Paul P. Maglio, John Bailey, and Daniel Gruhl (2007), Cover Feature Story, “Steps
Toward a Science of Service Systems,” published by the IEEE Computer Society, Jan 2007, 71-77.
Services Science, entire special issue of the Communications of the ACM Journal, July 2006. A
collection of articles written by authors from multiple disciplines, focused on the emerging discipline
of Service Science.
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CHAPTER 1:
INTRODUCTION TO SERVICES
CHAPTER TOPICS
• What are Services?

• Why Service Marketing?
• Service and Technology
• Characteristics of Services
• Service Marketing Mix
• Staying Focused on the Customer
• Technology Spotlight: The Changing Face of Customer Service
• Global Feature: The Migration of Service Jobs
• Strategy Insight: Competing Strategically through Service
CHAPTER OBJECTIVES
1. Explain what services are and identify important trends in services.
2. Explain the need for special service marketing concepts and practices and why the need has developed
and is accelerating.
3. Explore the profound impact of technology on service.
4. Outline the basic differences between goods and services and the resulting challenges and opportunities
for service businesses.
5. Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful
frameworks and themes that are fundamental to the rest of the text.
LECTURE TIPS & AIDS
1. The activity suggested here must be made at least one class period prior to the related in-class discussion
(it works best if it is done at the end of the first class meeting or very early in the course). Ask the
students to be “detectives” in their courses for the first few class meetings. They should attempt to
identify some of the “clues” they are using to assess the quality of each class they have signed up for
and be ready to discuss these in class. On the day of the in-class discussion, students can break into
small groups to discuss their observations for about 10-15 minutes. They should attempt to separate
their “clues” into “tangible” and “intangible” categories. (These may need to be defined briefly if this
assignment is made on the first day of class.)
After the groups meet, the instructor can start a discussion with the whole class by putting “Intangible”
and “Tangible” headings on the board and asking people to share what their groups put in each list.
Students will come up with lots of items for both lists. Their suggestions should lead to an interesting
discussion of how the intangible/tangible dimensions interact (e.g., while an instructor’s voice may be
tangible because it can be heard, what is inferred from the voice—enthusiasm, sternness, etc.—is more
intangible). A fun twist on this exercise is for the instructor to purposely wear very different clothing
for the class periods leading up to this discussion (e.g., professional dress vs. casual attire). Students
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can then be asked what impressions they have of the instructor and what impact the clothing had on
their reactions.
2. To introduce the topic of “goods vs. services,” the instructor divides the class into small groups (3-5
people) and gives each group a list of products, including those that are “mostly” goods, “mostly”
services, and “a combination of both.” The sample lists below are from Dawn Iacobucci (1992). “An
Empirical Examination of Some Basic Tenets in Services: Goods-Services Continua” In Advances in
Services Marketing and Management. JAI Press. 1: 23-52.
List 1 List 2 List 3

Blue Jeans Business Suit Appendix Operation
Car Casual Clothing Car Brake Relining
Dental Examination Condo Dress Shoes
Meal at Nice Restaurant Couch Eyeglasses
Golf Lessons Day Care Furniture
Haircut Dishwasher Greeting Card
Hotel Room Dry Cleaning Health Club Membership
Houseplant Fast Food Legal Representation
Ice Cream Cone Flu Shot Novel
Jewelry House Cleaner Psychotherapy
Laundry Detergent Life Insurance Rental Car
“Lean Cuisine” Dinner Plumbing Repairs Soft Drink
Running Shoes Poster Framing Tailored Clothing
TV Repair Socks Typing Service
Vacation Package Tax Consultant Xeroxing/Copying
Each group is to rank its list in terms of goods/services, starting with the product that is the best example
of a “good” at the top and ending with the product that is the best example of a “service” at the bottom.
Alternatively (or additionally) groups can rank their list in terms of the tangible/intangible continuum
(starting with “most tangible” at the far left of the continuum and ending with “most intangible” at the
far right of the continuum). This task should take approximately 15 minutes.
A member of each group then writes its rankings on the board or on an overhead. If more than one
group has the same list, these groups should record their rankings side-by-side. The following questions
can be asked during a whole class discussion to bring closure to the exercise:
• What do the products at the top of the list (or the left of the continuum) have in common?
• What do the products at the bottom (or the right of the continuum) have in common?
• What do the products in the middle have in common?
Students can also be asked about any difficulties that arose in ranking the products. It is likely they
will point out that many products have elements of both goods and services (or tangibility and
intangibility). This discussion would be a good lead-in to the concept of core and supplementary
benefits.
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QUESTIONS TO USE WITH CHAPTER OPENING VIGNETTE
Chapter 1: All Businesses are Service Businesses
1. Discuss the meaning of the statement, “all businesses are service businesses.” Can you think of any
exceptions? If so, justify your position.
2. What are some ways in which consumer product companies such as Apple and Samsung are also service
providers?
3. What are some other industries that are likely to experience the rise of disruptive collaborative service
such as those exemplified by Uber and Airbnb? Why?
ACTIVE LEARNING ACTIVITIES
1. After students have received the syllabus for your class (but before it has been discussed), you can have
them analyze it for tangible/intangible clues about the service delivery. By working in pairs for about
10 minutes, students should come up with a good list of clues. Then the instructor can initiate a whole
class discussion by asking the following questions:
• What things did you notice about the syllabus?

• How does it differ from syllabi you have received in other classes?
• How is it similar?
• What do you think it tells you about this course or the instructor?
• What interests you in the syllabus? What worries you?
This exercise is an excellent way to do two tasks at once. It allows the instructor to reinforce the
important information in the syllabus in a way that gets students actively involved, and the discussion
can be a nice introduction to some of the basic service marketing concepts in Chapter 1. (Eight different
syllabi are provided as examples in Section 2 of this instructor’s manual.)
Student comments about the syllabus might include: “easy to follow layout;” “lots of ways to reach the
instructor–even email!;” “many different ways to show that you understand the material;” “only two
exams!;” “attendance is important” (this can lead to a discussion of creating a “class culture” over the
semester which will only happen if people are in class most of the time); or “good performance is
rewarded.”
If you are so inclined, you might have students identify the “House Rules” for the course which can
then be added to the syllabus. Examples might include:
• Please treat others like you would like to be treated!

• Don’t talk while people are presenting or asking questions.
• Respect everyone’s opinion.
• Come to class prepared and participate in class discussions.
• No note passing or chair rambling.
• If you come late to class and a presentation has already begun, please wait outside.
• Don’t pack up your stuff until class is dismissed.
• Leave the classroom as clean (or preferably cleaner) than you found it.
Allowing students to set House Rules helps them take ownership of the class very early in the term.
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2. Find an advertisement for a product in one of the major categories on the Continuum of Evaluation
(i.e., high in search qualities, high in experience qualities, and high in credence qualities). Write a
short paper explaining where you think the product falls on the Continuum and why. You should also
discuss the ways the ad either capitalizes on the predominant qualities of the product (e.g., search
characteristics) or attempts to overcome them in some way. Include the ad (or a copy) with your
paper.
[Note: A good example comes from the ad campaigns for milk. Milk is a very tangible product that is
high in search attributes. Rather than stressing the tangible aspects, though, the advertisers decided to
try to build on intangibles like glamour, fame, and fitness with their ads that show famous sports heroes,
models, TV celebrities, etc. with milk mustaches. By contrast, ads for credit card companies (whose
products are much more in the experience/credence realm) tend to show pictures of things customers
can buy or experience through the use of a credit card. These companies are interested in providing
consumers with tangibles that can be associated with their products.]
DISCUSSION QUESTIONS
1. What distinguishes service offerings from customer service? Provide specific examples.
Service offerings are intangible products offered for sale to customers. These can be services sold to
business customers (e.g., consulting services, shipping services, maintenance services) or to end
consumers (e.g., restaurant services, transportation, health care). Service offerings can be sold by
traditional service companies (e.g., Bank of America) as well as manufacturers (e.g., IBM). A company
does not need to be a “service company” in the traditional sense to sell services.
Customer service can also be offered by service, IT and manufacturing businesses. It is service
provided in support of a company’s core products, whether these core products are services or goods.
Customer service includes things like answering questions, billing, handling complaints, taking orders,
etc. There is typically no charge for customer service.
It is important to distinguish between these two types of service for several reasons. First, there is a
tendency in service marketing and management courses to become overly focused on customer service.
Some people even believe that is the entire focus of the field. Needless to say, it is not. Second, it is
important for students to realize early on that service marketing and management issues and strategies
are relevant for all types of businesses—service, manufacturing, and IT. All businesses are service
businesses in some form.
2. How is technology changing the nature of customer service and service offerings?
This question focuses on the major section of chapter 1 titled “Service and Technology” and its several
sub-sections: Technology-Based Service Offerings; New Ways to Deliver Services; Enabling Both
Customers and Employees; Extending the Global Reach of Services; The Internet Is A Service; The
Paradoxes and Dark Side of Technology and Service. The instructor could focus in depth on a
discussion of one or two of these sub-topics or choose to center the discussion more broadly on the
wide range of impacts that technology is having on service. The Technology Spotlight on the
“Changing Face of Customer Service” can also incorporated into the discussion. Since this discussion
will no doubt take place right at the beginning of the course, this would be a good time to point out that
each chapter of the book has a relevant Technology Spotlight to show how technology is having an
impact on the particular focus of each chapter. This important topic is a theme running throughout the
text.
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3. What are the basic characteristics of services compared with goods? What are the implications of these
characteristics for Marriott or General Electric?
Discussion of the basic differences between goods and services can be rather abstract without a specific
context to focus in on. The opening vignette can provide examples. For undergraduates, discussing
one of these companies or a local consumer service that they are familiar with may provide a more
manageable context. Alternatively, students can be broken into small groups to discuss the implications
of the differences for a specific assigned service or they can be allowed to pick a service company that
one of them has worked for as a context.
The types of questions to be addressed within the specific context could include: What are the
challenges in marketing a service like this? Why is it different from marketing a consumer product like
beer, shampoo, or a car? Discuss each of the basic differences (intangibility, heterogeneity,
simultaneous production and consumption, and perishability) in the context of this particular service.
What are the implications?
4. One of the underlying frameworks for the text is the service marketing mix. Discuss why each of the
three new mix elements (process, people, and physical evidence) is included. How might each of these
communicate with or help to satisfy an organization’s customers?
The instructor should focus on making sure the students have a clear understanding of each of the three
new P’s. This can be accomplished through general discussion and by asking students for examples of
how each of the elements has influenced them as consumers in specific contexts.
5. Think of a service job you have had or currently have. How effective, in your opinion, was or is the
organization in managing the elements of the service marketing mix?
This discussion question can focus on making sure the students have a clear understanding of the three
new P’s. Having them relate the material to a job they have held gives them a concrete context for
understanding the new P’s.
To allow all students a chance to share their examples, the instructor can begin with a general discussion
of the 7 P’s. Then the class can break into small groups to discuss how the new P’s apply to their jobs.
To keep the groups focused on the relevant discussion, two methods of “accountability” could be used.
If the class is small enough, each group could report one of their examples to the larger group.
Alternatively, each group could turn in a summary sheet describing their examples.
6. Again, think of a service job you have had or currently have. How did or does the organization handle
relevant challenges listed in Table 1.1?
This question could be used instead of Question 3 to focus students on the basic differences between
goods and services. A general overview of the differences could be provided, with students bringing
in their specific examples to make the abstract differences more concrete.
7. How can quality service be used in a manufacturing context for competitive advantage? Think of your
answer to this question in the context of automobiles or computers or some other manufactured product
you have actually purchased.
The purpose of this question is to get students to focus on the relevance of service for competitive
strategy in all types of businesses. When they can see the importance of service in their personal lives,
they begin to see how and why manufacturing firms need to focus on the service components of their
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offerings. When there are engineers or high-tech people in the class, this can be a particularly good
way to motivate them to see the value of service in their industries.
Another way to use this question is as a lead-in to a lecture on current service strategies of such
companies as IBM and Ford Motor Company, using current periodicals. A guest speaker from a
service-oriented manufacturer is also a good follow-up to this question.
8. Where does a college education fit on the continuum of evaluation for different types of products?
Where does computer software fit? Consulting? Retailing? Fast food? What are the implications for
consumer behavior?
A college education fits far to the right (close to the “difficult to evaluate” end of the continuum).
Computer software fits in the middle, since there are technically some physically tangible aspects of
software. Consulting fits far to the right, since it is almost entirely intangible. Retailing fits in the
middle; in retailing there are the physical products that customers buy from the retailer, who provides
accompanying services such as assorting, credit, display, and branding. Fast food is also in the middle,
with the food itself being tangible and such services as convenience, speed, and cleanliness being the
intangible components.
9. What are examples (other than those given in the chapter) of services that are high in credence
properties? How do high credence properties affect consumer behavior for these services?
Services high in credence properties include all those that are technical and difficult for novices to
evaluate. Automobile repair, higher education, consulting, medical services, legal services,
engineering, architecture and scientific services all qualify. A good way to decide whether a service is
high in credence properties is to ask whether those who use it must be experts (e.g., a lawyer for legal
services) in order to evaluate it.
POTENTIAL VIDEO CLIPS TO USE IN ILLUSTRATING CHAPTER 1 CONCEPTS
• “Dumb and Dumber” – At the very beginning of the movie, a chauffeur (Jim Carey) picks up a woman
and takes her to the airport, narrowly missing accidents along the way (he seems to fall in love). The
woman leaves a briefcase at the airport and the chauffeur runs in to pick up briefcase and hustles to the
gate to try to get it back to her (and thus provide “good service”).
• “Father of the Bride” – In this movie, the parents of a bride-to-be have discussions about planning a
wedding. In one scene early in the movie, the family is sitting around the dinner table discussing the
options for a wedding and reception. Then, the father George Banks (Steve Martin) and mother (Diane
Keaton) discuss reasons for hiring a wedding coordinator. The father eventually agrees to join the
mother and daughter in meeting with the wedding coordinator (Martin Short). This clip could be used
to illustrate the characteristics of service, as well as the three additional Ps of service (people, process,
and physical evidence).
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POSSIBLE WEB SITES FOR CHAPTER 1
Company Location
Amazon.com www.amazon.com
American Customer Satisfaction Index www.theacsi.org
Center for Service Leadership, ASU www.cob.asu.edu/csl
Charles Schwab & Company www.schwab.com
Cisco Systems www.cisco.com
EBay www.eBay.com
FedEx Corporation www.fedex.com
General Electric Company www.ge.com
IBM Global Services www.ibm.com/services
Mayo Clinic www.mayoclinic.com
Marriott International Inc. www.marriotthotels.com
PetSmart www.petsmart.com
Singapore Airlines www.singaporeair.com
Southwest Airlines www.southwest.com
Williams Sonoma www.williams-sonoma.com
Zane’s Cycles www.zanes.com
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APPROPRIATE CASES FOR CHAPTER 1
From previous Zeithaml, Bitner, and Gremler Services Marketing texts:
• Zappos.com 2009: Clothing, Customer Service, and Company Culture [included in the sixth
edition of this text: Zeithaml, Bitner, and Gremler (2013) Services Marketing: Integrating
Customer Focus Across the Firm, New York, NY: McGraw-Hill Companies]
• Michelin Fleet Solutions: From Selling Tires to Selling Kilometers [included in the sixth edition
of this text: Zeithaml, Bitner, and Gremler (2013) Services Marketing: Integrating Customer
Focus Across the Firm, New York, NY: McGraw-Hill Companies]
• People, Service, and Profit at Jyske Bank [included in the sixth edition of this text: Zeithaml,
Bitner, and Gremler (2013) Services Marketing: Integrating Customer Focus Across the Firm,
New York, NY: McGraw-Hill Companies]
• easyCar.com [included in the fourth edition of this text: Zeithaml, Bitner, and Gremler (2006)
Services Marketing: Integrating Customer Focus Across the Firm, New York, NY: McGraw-Hill
Companies]
• General Electric Medical Systems [included in the fourth edition of this text: Zeithaml, Bitner,
and Gremler (2006) Services Marketing: Integrating Customer Focus Across the Firm, New
York, NY: McGraw-Hill Companies]
• Starbucks: Delivering Customer Service [included in the fourth edition of this text: Zeithaml,
• Virgin Atlantic Airways [included in the third edition of this text: Zeithaml and Bitner (2003)
Companies]
• Northwest Airlines and the Detroit Snowstorm [included in the third edition of this text: Zeithaml
and Bitner (2003) Services Marketing: Integrating Customer Focus Across the Firm, New York,
NY: McGraw-Hill Companies]
• Chartered Bank of Canada [included in the first edition of this text: Zeithaml and Bitner (1996)
Services Marketing, New York, NY: McGraw-Hill Companies]
From other sources:
• Alaska Airlines: For the Same Price, You Just Get More... [Harvard Business School Case, 9-
800-004, 2000]
• Efteling: Growing a Miracle on Fairy Tales, by Rik Pieters and Paul Driessen, Tilburg University,
Tilburg, The Netherlands, a CD Rom Case, 2000. [Contact: f.g.m.pieters@kub.nl;
p.h.driessen@kub.nl.]
• Four Seasons Hotels and Resorts [Harvard Business School Case 9-800-385, 2000]
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• PeopleSoft (1996), available through ITSMA [Information Technology Services Marketing
association, One Militia Drive, Suite 4, Lexington, MA; (781) 862-8500]
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CHAPTER 2:
CONCEPTUAL FRAMEWORK OF THE BOOK:
THE GAPS MODEL OF SERVICE QUALITY
CHAPTER TOPICS
• The Customer Gap

• The Provider Gaps
• Putting It All Together: Closing the Gaps
• Technology Spotlight: Technology’s Critical Impact on the Gaps Model of Service Quality
• Global Feature: An International Retailer Puts Customers in the Wish Mode to Begin Closing the
Gaps
• Strategy Insight: Using the Gaps Model to Assess an Organization’s Service Strategy
CHAPTER OBJECTIVES
1. Introduce a framework, called the gaps model of service quality, which is used to organize this textbook.
2. Demonstrate that the gaps model is a useful framework for understanding service quality in an
organization.
3. Demonstrate that the most critical service quality gap to close is the customer gap, the difference
between customer expectations and perceptions.
4. Show that four gaps that occur in companies, which we call provider gaps, are responsible for the
customer gap.
5. Identify the factors responsible for each of the four provider gaps.
LECTURE TIPS & AIDS
1. One way to get the class more actively involved in the discussion of the Gaps model is to get them to
discuss the various pieces of the model. There are two ways to split the class for such a discussion,
depending on the size of the class. For relatively small classes, one way is to divide the class into five
groups and have them discuss each of the five gaps presented in the chapter. For larger classes, the
class could be split into 13 groups to cover each of the 13 chapters (Chapters 3 through 15) that are
further breakdowns of the Gaps model. An outline of the chapters and topics is provided below.
• The Customer Gap

Chapter 3 – Customer Expectations of Service
Chapter 4 – Customer Perceptions of Service
• Gap 1 – Not Knowing What Customers Expect (The Knowledge Gap)
Chapter 5 – Listening to Customers through Research
Chapter 6 – Building Customer Relationships
Chapter 7 – Service Recovery
• Gap 2 – Not Having the Right Service Quality Designs and Standards (The Service Design
and Standards Gap)
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Chapter 8 – Service Innovation and Design
Chapter 9– Customer-Defined Service Standards
Chapter 10 – Physical Evidence and the Servicescape
• Gap 3 – Not Delivering to Service Standards (The Service Performance Gap)
Chapter 11 – Employees’ Roles in Service Delivery
Chapter 12 – Customers’ Roles in Service Delivery
Chapter 13 – Managing Demand and Capacity
• Gap 4 – Not Matching Performance to Promises (The Communication Gap)
Chapter 14 – Integrated Service marketing Communications
Chapter 15 – Pricing of Services
Each group would be given three to eight minutes (depending on the number of groups) and asked to
discuss the following:
• Provide a review/summary of the topic assigned.

• Provide examples (ideally new ones) to illustrate the concepts/issues from the assigned topic.
• Discuss how the assigned topic relates to the Gaps model.
• Suggest ways (key strategies) that could be used to close a gap in the model.
Chapter 2: Service Quality at Trader Joe’s: The Specialty Store with Spirit
1. What are the service expectations of a new customer to Trader Joe’s? Of a returning (loyal)
customer? Are there any differences in how these different customers might perceive the service
quality at Trader Joe’s? If so, how might Trader Joe’s and its employees deal with this?
2. Discuss some of the specific ways in which Trader Joe’s works to close:
a. Provider Gap 1, The Listening Gap
b. Provider Gap 2, The Service Design and Standards Gap
c. Provider Gap 3, The Service Performance
d. Provider Gap 4, The Communication Gap
1. Choose an organization to interview and use the integrated gaps model of service quality as a
framework. Ask the manager whether the organization suffers from any of the factors listed in the
figures in this chapter. Which factor in each Figure 2.2 through 2.5 does the manager consider the most
troublesome? What does the company do to try to address these problems?
2. Use the Internet to locate the Website of Walt Disney, Marriott, Ritz Carlton, or any other well-known
high quality service organization. Which of the provider gaps does it appear the company has closed?
How can you tell?
3. Interview a nonprofit or public sector organization in your area (it could be some part of your school if
it is a state school). Find out if the integrated gaps model of service quality framework makes sense in
the context of their organizations.
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1. Think about a service you receive. Is there a gap between your expectations and perceptions of that
service? What do you expect that you do not receive?
If students understand the concept of the customer gap—that is, expectations of service not matching
actual perceptions of the service received—then there should be no shortage of examples in discussing
this question. The focus of the discussion in the student examples should be on what their actual
expectations were in each case and how their perceptions of what occurred differed from those
expectations. The instructor might consider beginning the discussion with a personal example. Once
class discussion of this question begins it may be difficult to bring to bring it to a close, as students are
likely to have many gaps to share.
2. Consider the “wish mode” discussion about IKEA. Think about a service that you receive regularly
and put yourself in the wish mode. How would you change the service and the way it is provided?
This question is likely to be more challenging that the previous one. Students may have a difficult time
putting themselves in “wish mode” and articulating such thoughts. Some ideas that might be useful in
stimulating discussion include:
• I wish my oil change service could be done at my home, or where I work, so that I would not
have to drive to a specific location and wait in line.
• I wish my dry cleaning service would pick up clothes from my home and deliver them to my
home.
• I wish my bank would allow me to make additional mortgage payments (or, student loan
payments) online rather than having to physically go into the bank and execute a teller-assisted
transaction.
• I wish my gas station would check under the hood of my car like they used to do many years
ago.
3. If you were the manager of a service organization and wanted to apply the gaps model to improve
service, which gap would you start with? Why? In what order would you proceed to close the gaps?
The most efficient way to use the gaps model is to begin with provider gap 1, determining what
customer expectations are. This approach allows the company to concentrate on the factors that will
have the greatest impact on improving service quality. Following the gap 1 with gap 2, then gap 3 is
the best progression. Gap 2 ideally would result in service design and service standards that are based
on gap 1’s findings about customer expectations. Then gap 3, the most complicated gap to close, would
be informed by what is found in the first two gaps.
4. Can provider gap 4, the communication gap, be closed prior to closing any of the other three provider
gaps? How?
Gap 4, which deals with lowering customer expectations, can be closed at any time. While the first
three gaps are concerned with raising company performance to meet expectations, gap 4 aims to lower
customer expectations to meet perceptions. The two approaches to closing the customer gap operate
on different principles and therefore can occur independently. Incidentally, closing gap 4 can be more
economical than closing the other gaps.
5. Which of the four provider gaps do you believe is hardest to close? Why?
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Gap 3 is the hardest to close because it requires coordination of all of the human resources issues in a
company—training, incentives, communication, hiring, teamwork, and empowerment. Changing any
one of these is difficult but changing them all, and getting them coordinated with each other, is
extremely challenging. In addition to the employee factors that must be considered in closing gap 3,
the customer must be managed.
• “Clerks” – In a short clip from this movie, a female customer enters a small video store and asks clerk
what he has heard about two movies she has picked up in the store. The clerk, who is sitting on the
counter reading a newspaper, does not pay any attention to customer, and then is fairly rude to her. A
“customer gap” is clearly evident in this scene.
• “Meet the Parents” – Throughout this movie there are several clips where the main character (Ben
Stiller) has a series of interactions with an airline, including not allowing him to take his bag on the
plane, losing his bag, being placed on hold several times when he called in to check on the status of his
bag, waiting several days to deliver his bag, delivering the wrong bag, charging an extreme amount
when he wished to change his return date, making him wait for his row to be called at the gate to board
the plane (even though no one else was boarding), having a discussion on the plane about stowing his
bag, and finally getting thrown off the plane (literally). This clip could be used to discuss several
aspects of the Gaps model, and thus could also be used to illustrate points made in several chapters.
Company Location
IKEA www.ikea.com
Island Hotel (Cedar Key, FL) www.islandhotel-cedarkey.com
Marriott International www.marriotthotels.com
The Oaks at Ojai http://www.oaksspa.com
Ritz-Carlton www.ritzcarlton.com
United Parcel Service www.ups.com
The Walt Disney Company www.disney.com
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• Using Services Marketing to Develop and Deliver Integrated Solutions at Caterpillar in Latin
America [included in the sixth edition of this text: Zeithaml, Bitner, and Gremler (2013) Services
Marketing: Integrating Customer Focus Across the Firm, New York, NY: McGraw-Hill
Companies]
Companies]
Services Marketing: Integrating Customer Focus Across the Firm, New York, NY: McGraw-
Hill Companies]
• EuroDisney: The First 100 Days [included in the second edition of this text: Zeithaml and Bitner
(2000) Services Marketing: Integrating Customer Focus Across the Firm, New York, NY:
McGraw-Hill Companies]
3-28
CHAPTER 3:
CUSTOMER EXPECTATIONS OF SERVICE
CHAPTER TOPICS
• Service Expectations
• Factors that Influence Customer Expectations of Service
• Issues Involving Customers’ Service Expectations
• Technology Spotlight: Customer Expectations of Airport Services Using Technology
• Global Feature: Global Outsourcing of Personal Services: What Are Customers’ Expectations?
• Strategy Insight: How Services Marketers Can Influence Factors
CHAPTER OBJECTIVES
1. Recognize that customers hold different types of expectations for service performance.
2. Discuss the sources of customer expectations of service, including those that are controllable and
uncontrollable by marketers.
3. Acknowledge that the types and sources of expectations are similar for end consumers and business
customers, for pure service and product-related service, for experienced customers and inexperienced
customers.
4. Delineate the most important current issues surrounding customer expectations.
LECTURE TIPS & AIDS
1. To illustrate the notion of differing expectations, the instructor might want to provide an example other
than those at the beginning of Chapter 3 (related to restaurants). For example, university classes are
something with which students in the class should have extensive experience. One avenue of generating
class discussion might be to have students talk about differing expectations for various classes. For
example, students might compare and contrast expectations for an introductory marketing class versus
a bowling class. Or, alternatively, students could compare their expectations for the introductory
marketing class with an advanced marketing management class. Another route to go might be to talk
about differing expectations students have of various instructors, or differing expectations across size
of classes (e.g., 20 students versus 75 students).
Expectations could also be discussed in terms of specific components of a particular class. For example,
expectations about turn-around time on projects, papers, or exams could be discussed. Indeed the
students could talk about what their desired level of expectations on turn-around time for getting
feedback is, what is considered adequate, and what influences their expectations for both desire and
adequate levels.
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2. An alternative way to discuss the information in this chapter is to have students divide into teams of
two to four (depending on the size of the class) and have each team discuss the influencing factors on
both desired service and adequate service expectations. There are 11 different topics that could be
discussed, including:
• personal needs
• personal service philosophy
• derived service expectations
• perceived service alternatives
• situational factors
• explicit service promises
• implicit service promises
• word-of-mouth communication
• past experience
• predicted service
• perceived service
A particular service could be chosen to illustrate various points. For example, a hair cut or a trip to
Disney World could be selected as a focus for illustrating how these factors might come into play as
influencing customers’ expectations. By giving students the opportunity to become experts on one of
these twelve topics, they can take an active role in leading the class discussion without being burdened
with being responsible for too much information.
3. An interesting question posed in Chapter 3 is should a service provider simply try to meet customer
expectations or exceed them? Obviously there is no right answer to this question, so an interesting
topic for debate would be to have the students in the class discuss this. One easy way to do this would
be to divide the class in half and assign each a specific side on this issue. The class would then be given
five to ten minutes to prepare an argument supporting their view and a spokesperson would then present
the arguments for each side. Their arguments might include examples to illustrate the points each side
is trying to make.
Chapter 3: Expectations
1. Have you ever experienced a gap between your expectations and your perceptions of a service provider
while traveling in a different country or culture? Describe.
2. What are some things that the service provider you mentioned in #1 could have done to better manage
your expectations?
3. What are are some ways in which service providers who cater to customers from other countries or
cultures can better manage expectations? In general? For specific services?
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Think of a service encounter that you have had recently.
• What were your expectations going into the encounter?

• What were your desired expectations?
• What were your adequate expectations?
• What were your predicted expectations?
• Was your tolerance zone wide or narrow in this case? Why?
• Where did your expectations come from?
1. What is the difference between desired service and adequate service? Why would a services marketer
need to understand both types of service expectations?
Desired service expectations are the upper bound on customer expectations—the level of service the
customer hopes to receive, a blend of what the customer believes can be and should be. Adequate
service is the lower bound on customer expectations—the level of service the customer will accept. A
services marketer needs to understand both levels. Adequate service must be understood so that the
marketer makes certain that service levels never drop below this level because, by definition, the
customer will be very disappointed and will likely defect. Desired service must be understood as the
goal the company strives to attain. Going beyond the desired level is probably not a wise investment
of company resources.
2. Consider a recent service purchase that you have made. Which of the factors influencing expectations
were the most important in your decision? Why?
This question is designed to get students to personalize and apply to their own experience with the
various factors influencing expectations. The question should generate a lively discussion with students
mentioning different influences for different types of purchases. It is likely that word of mouth will be
included among most of the important factors, and the instructor may want to point this out.
3. Why are desired service expectations more stable than adequate service expectations?
Desired service expectations are ideal and do not change frequently because what one hopes for does
not change frequently. On the other hand, adequate service expectations are constantly in flux, most
likely rising incrementally as service is improved in a particular company or industry.
4. How do the technology changes discussed in the Technology Spotlight in this chapter influence
customer expectations?
Customers have traditionally been somewhat passive consumers of airline services when it comes to
the actual travel, expecting to have an airline employee do most of the work when it comes to checking
in, securing boarding passes, making seat assignments, etc. Advance check-in, electronic boarding
passes, and self-serve kiosks at airports may raise the expectations of customers, as they may expect to
be able to have control over more of the travel experience—such as choice of food on the flight,
arranging for ground transportation, emailing an updated itinerary to whomever at the time of check-
in, etc. Customers who are unwilling to accept more responsibility at the airport may be disappointed
and desiring of “the old days” when an airline employee did all of the work and the passenger merely
had to hand over a ticket and an ID.
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5. Describe several instances in which a service company’s explicit service promises were inflated and
led you to be disappointed with the service outcome.
Virtually all students can report on disappointments they experienced as a result of inflated promises.
Inflated promises about vacations and college courses are two examples that often arise in response to
this question. The instructor can ask the students why the company inflated the promises and what the
impact would have been of making realistic promises. This usually leads to the answer that promises
were inflated to make the sale and that companies felt they needed to inflate promises because their
competition did so. Two outcomes are possible without the inflated promises. First, the customer may
have chosen not to buy the service without the inflated promise (a negative outcome). On the other
hand, the customer may have chosen to buy the service anyway and would likely have been a more
satisfied customer upon receiving the service.
6. Consider a small business preparing to buy a computer system. Which of the influences on customer
expectations do you believe will be pivotal? Which factors will have the most influence? Which factors
will have the least importance in this decision?
Because this is a business decision, the factors that may be most important include perceived service
alternatives, explicit service promises, and enduring service intensifiers. Business purchase decisions
as a category are generally more rational than personal choices and it is likely that company promotional
material will be reviewed and that competing brands will be considered. Enduring service intensifiers
will be relevant when considering the individuals within the firm who will use the computer system.
Word of mouth is also likely to be influential because of the perceived risk inherent in purchasing a
computer. The least important influencers in a decision of this type would be transitory service
intensifiers and personal needs, although one could argue that personal needs are always an important
component of business purchase decisions.
7. What strategies can you add to the Strategy Insight in this chapter for influencing the factors?
The purpose of this question is to get students thinking about ways to influence customer expectations
of service and to become familiar with the ones presented in the Strategy Insight. Students should be
able to come up with additional strategies to address the factors.
8. Do you believe that any of your service expectations are unrealistic? Which ones? Should a service
marketer try to address unrealistic customer expectations?
This question is designed to initiate a discussion about elevated customer expectations. It is likely that
students will be able to identify services where their expectations are high because their personal needs
are strong. Whether or not service marketers should try to address unrealistic expectations is a topic
that will be debated. Some students will argue that companies should aim high, thereby exceeding the
performance of competition. But others will recognize the diminishing returns of achieving ever-higher
levels of performance. One way of viewing the debate may be to ask whether the costs of raising
performance levels are equal or greater than the expected returns in terms of new sales and long-term
customer loyalty.
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9. In your opinion, what service companies have effectively built customer franchises (immutable
customer loyalty)?
Examples include Walt Disney theme parks, Singapore Airlines, Federal Express, Marriott Hotels and
Resort Properties, and Nordstrom’s.
10. Intuitively, it would seem that managers would want their customers to have wide tolerance zones for
service. But if customers do have these wide zones of tolerance for service, is it more difficult for firms
with superior service to earn customer loyalty? Would superior service firms be better off to attempt
to narrow customers’ tolerance zones to reduce the competitive appeal of mediocre providers?
The wider customers’ zones of tolerance, the more willing they are to accept variations in service—
both from the companies they currently patronize and competing companies. Therefore, superior firms
might well be better off if they try to narrow customers’ tolerance zones by managing customer
expectations, educating customers, or otherwise demonstrating to customers the reasons why they
should not tolerate lower levels of service.
11. Should service marketers delight their customers?
Companies should always try to exceed the adequate service level, but exceeding adequate service will
not delight customers. Exceeding desired service will delight customers. But in our view, delighting
customers has a definite down side: it results in the escalation of customer expectations the next time
the customer seeks service. There are ways that the company can exceed desired service—particularly
in dimensions other than reliability—while at the same time alerting customers that the elevated service
performance cannot be delivered on a routine basis.
• “Jerry Seinfeld” television show – In a famous scene from the 1991 season (Episode 10, entitled “The
Alternate Side”) show, Jerry Seinfeld attempts to pick up a car he had reserved, but the car rental
company did not reserve a car for him woman goes behind glass door to “speak with her supervisor.”
It is a great example of what a customer expects when they reserve a car—that is, to have the reserved
car available for rental at the requested time. This clip could also be used for service recovery
discussions.
• “Just Married” – Young American newlyweds attempt to plug a device with an American plug into an
electrical outlet at a French chateau…causing damages to their room and a power outage at the chateau.
They expected there would be English signs (not just French signs) telling them what they could and
could not do in the hotel. The manager asks them to pay for damages; they refuse.
• “Couples Retreat” (2009). Clip length = 5:45. A couple on the brink of divorce, the Smiths, is
giving a slideshow presentation to try and convince their friends to join them on this couples retreat.
The group selects the 'Pelican Package' but realizes once they get to the resort, that it's not what they
thought it would be. Because there is confusion, the couples' escort explains that the resort will refund
their money but not the airfare. Illustrates customer Expectations
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Listed below are Web sites for companies known to have outstanding service. Students may be asked
to evaluate these sites in terms of whether the sites themselves meet their expectations for service, and
whether they signal that the companies creating the sites offer services that meet their desired or
adequate expectations.
Company Location
Amazon www.amazon.com
American Marketing Association www.marketingpower.com
Paytrust www.paytrust.com
Pebble Beach Resort www.pebblebeach.com
• Shouldice Hospital Limited (Abridged) [included in the fifth edition of this text: Zeithaml, Bitner,
• Hong Kong Disneyland ) [included in the fifth edition of this text: Zeithaml, Bitner, and Gremler
• Virgin Mobile USA: Pricing for the Very First Time [included in the fifth edition of this text:
Zeithaml, Bitner, and Gremler (2009) Services Marketing: Integrating Customer Focus Across
the Firm, New York, NY: McGraw-Hill Companies]
Companies]
• The Quality Improvement Customers Didn’t Want [included in the fourth edition of this text:
Companies]
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• Cederbrae Volkswagen—Quality of Service [included in the first edition of this text: Zeithaml
and Bitner (1996) Services Marketing, New York, NY: McGraw-Hill Companies]
From other sources:
800-004, 2000]
• Golden Arch Hotel: McDonald’s Adventure in the Hotel Industry [American Graduate School of
International Management (Thunderbird) Case, A02-05-0017, 2005]
3-35
CHAPTER 4:
CUSTOMER PERCEPTIONS OF SERVICE
CHAPTER TOPICS
• Customer Perceptions
• Customer Satisfaction
• Service Quality
• Service Encounters: The Building Blocks for Customer Perceptions
• Technology Spotlight: Customers Love Amazon
• Global Feature: Differences In Service Quality Perceptions and Rage Across Cultures
• Strategy Insight: Customer Satisfaction and the Bottom Line
CHAPTER OBJECTIVES
1. Provide a solid basis for understanding what influences customer perceptions of service and the
relationships among customer satisfaction, service quality, and individual service encounters.
2. Demonstrate the importance of customer satisfaction – what it is, the factors that influence it, and the
significant outcomes resulting from it.
3. Develop critical knowledge of service quality and its five key dimensions: reliability, responsiveness,
empathy, assurance, and tangibles.
4. Show that service encounters or the “moments of truth” are the essential building blocks from which
customers form their perceptions.
LECTURE TIPS & AIDS
1. One of the suggested exercises in the back of the chapter is to have students keep a journal of various
service encounters they have with different organizations. If you indeed do have students do a journal,
these can be used as reference points in discussing the various concepts in this chapter. Through their
service encounter experiences students can relate to the various topics being discussed and can easily
share illustrations of the various points being made in the chapter when called upon.
2. One approach to take in discussing the differences between remote service encounters and person-to-
person encounters would be to have students compare experiences for the same type of service with the
two types of encounters. For example, as suggested in Exercise 5 at the end of the chapter, students
might compare and contrast using Amazon.com to purchase a book versus going to a traditional
bookstore to do the same thing. Other student purchases may also be used, such as buying a car,
clothing, compact disks, etc. This discussion is probably better suited toward the end of the chapter
after service encounters have been discussed in detail to give students a point of reference for making
comparisons.
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Chapter 4: Zane’s Cycles
1. Which of the service strategies used by Zane’s Cycles gives you a real “wow?” Why?
2. Do you know of an “entrepreneurial” service provider that currently uses service strategies in a similar
way to provide exemplary customer service? Describe.
3. Is there a smaller or start-up service provider that you use or know about that could benefit from
implementing some of Zane’s Cycles’ service strategies? Describe the service provider, the specific
strategy or strategies and how the implementation would be of benefit.
1. Choose an example of an ideal service encounter that you have experienced recently.
• What was the source of satisfaction?

• Why was the encounter so special? What did the employee do?
• What were your expectations?
• What could the company do to ensure that this kind of encounter is the “rule” rather than the
“exception” (if you think it should ensure this)?
2. Choose an example of a very bad service encounter that you have had recently.
• What was the source of dissatisfaction? Can you categorize the encounter according to the four
common themes?
• What did the employee do to make this such a bad encounter? What were your expectations?
• What should the employee have done?
• Using the GAPS model of service quality, can you identify likely gap(s) that may have caused
this service failure?
3. Choose a local company to visit with the following questions in mind:
• How do you think customers evaluate the services of this company? (e.g., what is important to
them in choosing this kind of service, and how will they know if they have received quality
service?)
• Think about the five dimensions of service quality: reliability; tangibles; responsiveness;
assurance; and empathy. How do they apply to this company? Which dimensions might be the
most/least important?
• Assume you measured service quality (i.e., comparing customer perceptions of service against
their expectations) for this company and found it low compared to competitors. Why might this
be occurring? (Use the GAPS model to help think about this question.)
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1. What is customer satisfaction, and why is it so important? Discuss how customer satisfaction can be
influenced by each of the following: product attributes and features; customer emotions; attributions
for success or failure; perceptions of fairness; and family members or other customers.
According to the chapter, satisfaction is “the customer’s evaluation of a product or service in terms of
whether that product or service has met their needs and expectations.” Failure to meet needs and
expectations is assumed to result in dissatisfaction. Customer satisfaction is important because, in the
long term, without satisfied customers a firm will not survive. At the heart of the marketing concept is
the notion that the most successful firms are those that satisfy their customers better than their
competitors do. Some public policy makers are convinced that customer satisfaction is an important
indicator of national economic health, well being, and quality of life.
At the firm level, Figure 4.3 illustrates the critical linkages between satisfaction and customer loyalty.
While there is not a perfect correlation between satisfaction and loyalty (see chapters 6 and 16 for more
on this), the underlying relationship is critical. Businesses cannot be sustained or grow with only
dissatisfied customers!
Product and service features and attributes, customer emotions, attributions, and perceptions of fairness,
and other consumers, family members, and co-workers can all influence customer satisfaction.
Discussions of each of these categories of factors are provided in the chapter. The important point to
illustrate with this question is that satisfaction is determined by factors beyond actual features and
attributes of the product/service. The other sets of factors (emotions, attributions, fairness perceptions,
other people) can sometimes be equally, if not more, important in determining satisfaction.
2. What is the ACSI? Do you believe that such national indicators of customer satisfaction should be
included as benchmarks of national economic well-being similar to Gross Domestic Product (GDP),
price indicators, and productivity measures?
The ACSI is the American Customer Satisfaction Index, developed by researchers at the National
Quality Research Center at the University of Michigan. The measure tracks customer perceptions
across 200 firms representing all major economic sectors. For each company, approximately 250
interviews are conducted with current customers to gauge customer satisfaction levels. The results of
2010 ACSI data by industry are shown in Table 4.1. It is also interesting to note that the ACSI is
gaining credibility and is cited often in The Wall Street Journal and other business publications as an
indicator of firm or industry quality. Figure 4.2 shows the ACSI stock portfolio consistently
outperforming the S&P 500.
An interesting discussion can be lead regarding the pros and cons of the various measures listed as
indicators of economic well-being. The unique feature of the ACSI is that it is based on customer
perceptions as opposed to the other indicators (GDP, price indicators, and productivity measures) that
are based on hard, quantitative data. Some will argue that the ACSI is a better measure, or at least an
important complementary measure of well-being and quality of life. Others will argue that only
“objective” quantitative measures should be used to benchmark the economy. With advanced graduate
students, or PhD students, the validity of the ACSI could also be discussed.
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3. Why do service companies generally receive lower satisfaction ratings in the ACSI than nondurable
and durable product companies?
Several possible reasons for the lower satisfaction ratings are cited in the text. Perhaps it is the trend
in recent years toward downsizing that has resulted in lower quality being provided on the front lines.
Perhaps it is the tight labor market that results in lower skilled, less well-trained employees delivering
service. Perhaps it is rising customer expectations rather than declining service that cause the lower
ratings. All of these possibilities are conjecture, worthy of discussion. Students and other professors
may have additional thoughts. The results of annual ACSI data may show other trends that could be
explored.
4. Discuss the differences between perceptions of service quality and customer satisfaction.
This question is rather esoteric for most student groups. However, if the instructor is comfortable with
the debates in the literature (cited at the end of the chapter, Note 2) the question can provide a good
base for discussion. The basis of the discussion from the students’ perspective can be found on pages
79-92 of the text and in Figure 4.1. From a practical perspective the question is important since many
organizations measure either or both of these constructs but may not be clear about what they are
measuring. Thus they may sometimes use the two labels interchangeably or incorrectly.
5. List and define the five dimensions of service quality. Describe the services provided by a firm you do
business with (your bank, your doctor, your favorite restaurant) on each of the dimensions. In your
mind, has this organization distinguished itself from its competitors on any particular service quality
dimension?
The five dimensions and their brief definitions are found on pages 87-91. By applying the dimensions
to a service they are familiar with, students begin to see their relevance in real situations. Table 4.2
provides examples that help students with this question. The last part of the question allows students
to see how organizations can distinguish or position themselves on the dimensions of service quality.
6. Describe a remote encounter, a phone encounter, and a face-to-face encounter that you have had
recently. How did you evaluate the encounter, and what were the most important factors determining
your satisfaction/dissatisfaction in each case?
This question allows students to see the variety of ways service encounters occur and how different
factors may be important across different types of encounters. This question could be used in
combination with a lecture/discussion on either: (1) the sources of pleasure and displeasure in service
encounters (recovery, adaptability, spontaneity, and coping, pp. 99-104); or (2) the evidence of service
(people, process, and physical evidence).
7. Describe an “encounter cascade” for an airplane flight. In your opinion, what are the most important
encounters in this cascade for determining your overall impression of the quality of the airline?
Using the format in Figure 4.4, an airline encounter cascade could be described as:
• order tickets via phone

• receive tickets in the mail
• park at the airport
• check-in/check bags at ticket counter
• board the plane
• receive food/drink in flight
3-39
• deplane
• receive bags from carousel
• leave airport area.
At any point in this encounter cascade, the passenger may interact with airline personnel; thus, each
encounter may potentially affect the customer’s perceptions of the airline. Student opinions may vary
in terms of which encounters are most important. One way to approach this part of the question is to
ask:
• If there were any failures at any point in this cascade, which failures would be most critical–
resulting in extreme dissatisfaction for you?
This can be followed with a more positive approach to the question:
• Which encounters, if done extremely well (exceeding your expectations), could result in
increased satisfaction for you?
8. Why did the gentleman described in Exhibit 4.1 leave his bank after thirty years? What were the
underlying causes of his dissatisfaction in that instance, and why would that cause him to leave the
bank?
The true story related in Exhibit 4.1 always engenders a good (short) discussion and makes a lasting
impression on students. The story illustrates how sometimes just one service encounter can make a
profound difference in a customer’s perceptions of a firm. In this case the impression was negative and
resulted in the customer ending a thirty-year relationship with his bank. While the specifics of this
example are somewhat unusual, most of us can think of cases where one encounter destroyed any
chance of our returning to a particular organization. The point to be made from this example is that
from the organization’s perspective we never know when such a “critical encounter” may be occurring;
thus, it is important to aim for customer satisfaction in every encounter. This is FedEx’s approach.
They never know which package is the “golden package”; therefore, they aspire to deliver 100%
customer satisfaction in all service interactions. (However, this does not preclude organizations from
segmenting customers and treating some as “more equal” in terms of level of service provided.)
9. Assume you are a manager of a health club. Discuss general strategies you might use to maximize
customers’ positive perceptions of your club. How would you know if you were successful?
Most students are very familiar with health clubs so this context is a good one for getting them to think
about customer satisfaction strategies. Two sections of the chapter can be particularly useful here.
First, the students could build a strategy around the concepts shown in Figure 4.1 and the related
discussion in the text. This would focus on dimensions of service quality and other factors in the health
club setting that could influence satisfaction—including customers’ emotions, attributions and
perceptions of fairness. A second approach to this question would use the material in the last few pages
of the chapter to develop a strategy. It is important to point out here that subsequent chapters in the
book will provide specific ideas and strategies for helping managers maximize customers’ positive
perceptions. This chapter is just the very beginning.
It is important to note here that monitoring customer perceptions will be critical to knowing if the
strategy is successful. Chapter 5 will provide specifics on how and what to measure.
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• “Five Easy Pieces” – Jack Nicholson and three women friends attempt to order items not exactly on the
menu at a restaurant. The waitress will not allow them to order anything that is not explicitly listed on
the menu, displaying poor “adaptability” (a source of dissatisfaction in this service encounter).
• “Saturday Night Live Goes Commercial” (specifically, two “Giving Change” clips) – A commercial
spoof of MetroBank, a bank who specializes in giving correct change. This clip could be used to discuss
the difference between satisfaction and service quality. Customers using MetroBank may be satisfied
with the bank’s ability to make correct change, but if this were indeed their positioning strategy
customers would not likely have high perceptions of service quality.
• “The Wedding Planner” – In a scene that begins with a wedding toast that is assisted by the wedding
planner (Jennifer Lopez), a potential (very wealthy) client comes with her parents to meet with the
wedding planner and see how a wedding for her might be conceptualized. The wedding planner shares
a vision for an extravagant wedding. In the brief three minutes the potential clients are with her, she
convinces them that she has the expertise, knowledge, and ability to create a wonderful wedding—thus
illustrating the assurance dimension of service quality.
• “The Cable Guy” – In this movie there is a scene where customer Steve’s cable goes out while on a
date (at his house) with his girl. He remembers that he has a preferred customer card from an employee
(Jim Carey) at the cable company and all he has to do is page him when he has any problems. The
service man arrives in expedient time (as soon as the phone number is dialed) and “fixes” the cable
connection problem in minutes…an (extreme) example of responsiveness.
• “For Love or Money” (1993). (In Chapter 2 within the first 15 minutes or so.) The clip begins with
Michael J. Fox’s character walking down the corridor and into a bar, just before he says, “Hey, Vincent!
What’s happening in your sordid little world today?” The clip ends with the Michael J. Fox character
saying “If I’m worth it.” to Michael Tucker (after being offering a tip of $5). This illustrates the
anticipation of needs, spontaneity and recovery in a service encounter.
• “Dunston Checks In” (1995). 3 scenes: 03:49-04:35 (length 00:46); 66:36-66:52 (length 00:16); 71:55-
72:53 (length 00:58). The scenes show several episodes taking place in a five star hotel that wants to
earn a sixth star, but fails to deliver the appropriate service as it focuses too much on one specific
mystery consumer instead on all of its guests.
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Company Location
American Customer Satisfaction Index www.theacsi.org
BizRate.com www.bizrate.com
Doubletree Hotels www.doubletree.com
Enterprise Rent-a-Car www.enterprise.com
German Customer Satisfaction Barometer www.servicebarometer.de
Gomez, Inc. www.gomez.com
Harrah’s Entertainment www.harrahs.com
L. L. Bean www.llbean.com
Nordstrom www.nordstrom.com
Xerox Corporation www.xerox.com
Zane’s Cycles www.zanes.com
• Hong Kong Disneyland ) [included in the fifth edition of this text: Zeithaml, Bitner, and Gremler
3-42
Companies]
Companies]
• AT&T (A): Focusing the Services Salesforce on Customers; AT&T (C): Employees as Customers
[included in the second edition of this text: Zeithaml and Bitner (2000) Services Marketing:
Integrating Customer Focus Across the Firm, New York, NY: McGraw-Hill Companies]
From other sources:

• Canyon Ranch [Harvard Business School Case 9-805-027, 2005]
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CHAPTER 5:
LISTENING TO CUSTOMERS THROUGH RESEARCH
CHAPTER TOPICS
• Using Customer Research to Understand Customer Expectations

• Elements in an Effective Service Marketing Research Program
• Analyzing and Interpreting Customer Research Findings
• Using Marketing Research Information
• Upward Communication
• Technology Spotlight: Conducting Customer Research on the Web
• Global Feature: Conducting Customer Research in Emerging Markets
• Strategy Insight: Big Data Provides New Tools to Research Consumers
CHAPTER OBJECTIVES
1. Present the types of and guidelines for marketing research in services.
2. Show how customer research information can and should be used for services.
3. Describe the strategies by which companies can facilitate interaction and communication between
management and customers.
4. Present ways that companies can and do facilitate interaction between contact people and management.
LECTURE TIPS & AIDS
1. After talking about the various ways to conduct research on the service quality dimensions, an instructor
might consider illustrating these points by conducting research in the classroom. In particular, students
might be “surveyed” as to the relative importance of various service quality dimensions of this class.
For example, students might be asked to allocate 100 percentage points across the five service quality
dimensions. Results could be collected at the end of one class and then presented at the beginning of
another class period. In so doing, the instructor could illustrate overall class perceptions and point out
where service delivery could be altered to positively influence future service delivery.
Chapter 5: Customer Journeys
1. List and describe the six actions that McKinsey Consulting has identified as critical to managing
customer experience journeys.
2. Identify a particular customer journey that you have taken with a particular service provider. This
could be anything such as deciding on a service to use, beginning to use a service, upgrading a
service, or renewing a subscription service. With your own experience and knowledge of service
marketing as guides, write up a description of your customer journey based on actions 1 through 4 as
recommended by McKinsey and Company. Then, write up your recommendations to the service
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provider for actions 5 and 6. Finally, conclude your write up with a paragraph that emphasizes the
benefits to the service provider and the customer of examining customer journeys rather than focusing
on individual touchpoints.
1. Working in a small group, choose a service that your university offers for students that most people in
the class will be familiar with (e.g., food services, library services, computer labs, advising, career
placement, etc.). Adapt the SERVQUAL scale to fit your service and then administer your survey to
the class. Analyze the data and provide the class with a summary of your results. (This can be done in
either written or oral form.)
2. Working in a small group, choose a service that your university offers for students that most people in
the class will be familiar with (e.g., food services, library services, computer labs, advising, career
placement, etc.). Use the Critical Incident Technique described in Chapters 4 and 5 to gather data from
customers. You may use some of your classmates as participants, but you should also interview people
who are not business majors so that you’ll get a more representative sample. Provide the class with a
summary of your results. (This can be done either in written or oral form.) What are the benefits of
using this kind of research technique? What are some of the disadvantages?
3. Find a service business that will allow you to administer a brief survey to its internal customers
(employees). After observing the business and/or interviewing management to get a basic
understanding of the business, customize the SERVQUAL instrument and administer it to the internal
customers. Analyze your data. Write a report to be submitted to both the instructor and the business
discussing your analysis of the results.
4. To gain first hand experience in using one of two of the more popular research tools used in service
marketing, your team (if odd numbered) will be assigned the SERVQUAL research project or (if even
numbered) the Critical Incident Technique research project. Each of these projects is described below.
SERVQUAL Research Project

You are to select a service that your university offers to students and that most students will be
familiar with (e.g., recreation center, health center, library, food service at the student union, etc.).
Your task is to adapt the SERVQUAL scale, located in Exhibit 5.2 (pp. 126-127), to fit the service
you select and then administer your survey to a sample of students. (A reasonable number for this
assignment would be for each student to collect 3-5 responses.) Then your team is to analyze the
data and provide the class a verbal summary of your results. You should prepare either a handout
for the class or PowerPoint slide(s) to visually display your results. Your analysis should include
the mean rating for each dimension. What implications are there for the manager of the student
service you selected? Finally, what are some of the advantages and disadvantages to using this
type of research method?
Critical Incident Technique Research Project

You are to select a service that your university offers to students and that most students will be
familiar with (e.g., recreation center, health center, library, food service at the student union, etc.).
You are to use the Critical Incident Technique, described in Chapter 5 (p. 124), to gather data about
this service from a sample of students. (A reasonable number for this assignment would be for
each student to collect 3-5 responses.) Then your team is to analyze the data and provide the class
a summary of your results. You should prepare either a handout for the class or PowerPoint slide(s)
to visually display your results. Your analysis should include sample quotes from your CIT
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respondents to illustrate key themes you have identified from the data. What implications are there
for the manager of the student service you selected? Finally, what are some of the advantages and
disadvantages to using this type of research method?
Presentations and debriefing of project finding will be made to the entire class at the designated time.
During this meeting the entire class will compare and contrast the different methods and discuss the
types of information that can be discovered.
1. Give five reasons research objectives must be established before marketing research is conducted.
Research objectives must be established in order to:

• avoid spending inefficiently
• make certain that the implicit questions that led to the research are answered
• assure that the appropriate form of research is conducted (because the appropriate type of
research depends on the objectives)
• decide whether qualitative research is needed before quantitative research is conducted
• get all the parties involved to come to consensus about the research so that the output is useful
to all of them.
2. Why are both qualitative and quantitative research methods needed in a service marketing research
program?
Qualitative research is needed to frame the questions to be asked in quantitative research. It allows the
firm to hear the voice of the customer without bias. Qualitative research also fleshes out issues that
have surfaced in quantitative research. However, qualitative research alone is insufficient because it
does not select a random sample of respondents so that results can be generalized to a given population
of customers. For this reason and others, quantitative research is also necessary.
3. Why does the frequency of research differ across the research methods shown in Exhibit 5.1?
Frequency of research depends on several things, among them how frequently respondents are willing
to participate in a given type of research and how rapidly performance changes and therefore needs to
be monitored. When a given pool of respondents is repeatedly monitored over the years, as is true with
relationship questionnaires, they are rarely willing to complete questionnaires more frequently than
once a year. Therefore, the frequency of this research is once per year. With transaction-based
questionnaires, however, we sample from the pool of respondents that includes all those who experience
a particular transaction–a much larger pool than for relationship questionnaires. For this reason, and
also because transaction-based questionnaires are typically very short and very focused, they can be
conducted on a continuous basis. The chance of a given respondent being sampled frequently is low.
Furthermore, because service research monitors service performance, something that has the potential
to vary far more than the performance of goods, the frequency of research must coincide with the
variability. The more a given service performance varies, the more frequently the research must be
conducted to monitor it.
4. Compare and contrast the types of research that help a company identify common failure points (see
column 2 in Exhibit 5.1). Which of the types do you think produces better information? Why?
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The three types of research used to help a company identify common failure points include complaint
solicitation, critical incident studies, and trailer calls. Complaint solicitation is voluntary on the part of
customers and does not draw equally from the full population of customers. For that reason, it possesses
some sample bias. If trailer calls are executed correctly, this form of research will not have sample
bias, making it more representative of the full population. Critical incident studies are the best of the
three for conducting qualitative research to understand what is expected in service encounters with the
customer. Because researchers ask the questions in critical incident studies, they can be more
comprehensive and inclusive than in complaint solicitation where customers report on the particular
aspects about a service that they want to discuss.
5. In what situations does a service company need requirements research?
A service company needs requirements research when it is creating a questionnaire, when it is

developing new services, and at any other time that it does not understand the needs and requirements
of customers.
6. What reasons can you give for companies’ lack of use of research information? How might you
motivate managers to use the information to a greater extent? How might you motivate front-line
workers to use the information?
The three main reasons managers do not use market research information are: (1) they do not understand
it; (2) it fails to support their view of the situation or issue; and (3) they are too busy. One of the best
ways to motivate managers to use the information to a greater extent is to make sure that the translation
has been clearly made between research findings and practical insights stemming from those findings.
Both types of employees (managers and front-line workers) need to have the information presented
simply and clearly. The main reason front-line workers do not use research information is that they are
not exposed to it. Companies do not frequently pass the information to the group of people that it will
help the most—the front-line workers. The reasons that they do not are the same three reasons
presented above: lack of understanding; lack of validation of previously held beliefs; and lack of time.
7. Given a specific marketing research budget, what would be your recommendations for the percentage
to be spent on customer research versus upward communication? Why?
The percentage spent on customer research should be considerably higher than that spent on upward
communication because customer research provides an outside-in view whereas upward
communication offers an inside-out view. Going straight to the customer is more effective than filtering
the information though employees. Upward communication has its place and is less costly than
customer research, but its effectiveness is considerably lower than customer research.
8. What kinds of information could be gleaned from research on intermediate customers? What would
intermediate customers know that service providers might not?
When a company has intermediate customers, the intermediate customers are the ones who interact
directly with end customers. Therefore, the intermediate customers observe end customers using the
service and receive direct feedback about the service’s strengths and weaknesses. Among the types of
information that can be gleaned are whether the service is easy to use, whether the service meets the
needs of customers, and what can be done to correct problems associated with the service.
9. For what types of products and services would research on the Internet be preferable to traditional
research?
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First, products and services sold primarily through the Internet would be ideal candidates for research
through that vehicle. Users of electronic media would be very comfortable with the medium and would
view the research as a novelty rather than as a burden. Second, service companies that need quick
turnaround on information would find that collecting information electronically has the benefit of speed
over traditional methods. Finally, products and services whose target markets consist of young,
affluent, educated, and computer-savvy customers would be ideal candidates. Obviously, this includes
high-tech products and services, entertainment services, and educational services.
• “Saturday Night Live: Jacuzzi Life Guard” – In a skit during the May 18, 1996 episode, a customer
(Will Ferrell) is relaxing at a hotel’s Jacuzzi. His peaceful moment is interrupted by a life guard (Jim
Carey) who is going on duty to look after this tiny Jacuzzi. At one point, the customer rubs his toe, and
the life guard (incorrectly) interprets this behavior as a life-threatening health situation…despite the
customer’s repeated statements that there is no problem. In so doing the life guard creates a very
unpleasant experience for the customer. This is a good (and funny) illustration of the Listening Gap.
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Company Location
American Marketing Association www.marketingpower.com
Comcast www.comcast.com
Domino’s Pizza www.dominos.com
Hallmark www.hallmark.com
Harrah’s Entertainment Inc. www.harrahs.com
Hilton Hotels www.hilton.com
Information Resources www.infores.com
Kantar TNS www.tnsglobal.com
Maritz Marketing Research www.maritzresearch.com
Nielsen www.nielsen.com
Starwood Hotels www.starwoodhotels.com
Trader Joe’s www.traderjoes.com
Vail Resorts www.vailresorts.com
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• ISS Iceland [included in the sixth edition of this text: Zeithaml, Bitner, and Gremler (2013)
Companies]
Companies]
• Custom Research Inc. (A) [included in the fourth edition of this text: Zeithaml, Bitner, and
Gremler (2006) Services Marketing: Integrating Customer Focus Across the Firm, New York,
• Ernst & Young LLP [included in the third edition of this text: Zeithaml and Bitner (2003)
Companies]
From other sources:
Cleveland Clinic [Harvard Business School Case 9-607-143, 2007]
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CHAPTER 6:
BUILDING CUSTOMER RELATIONSHIPS
CHAPTER TOPICS
• Relationship Marketing
• Relationship Value of Customers
• Customer Profitability Segments
• Relationship Development Strategies
• Relationship Challenges
• Technology Spotlight: Customer Information Systems Help Enhance the Customer Relationship
• Global Feature: Developing Loyal Customers at Airbnb
• Strategy Insight: “The Customer Is Always Right”: Rethinking an Old Tenet
CHAPTER OBJECTIVES
1. Explain relationship marketing, its goals, and the benefits of long-term relationships for firms and
customers.
2. Explain why and how to estimate customer relationship value.
3. Introduce the concept of customer profitability segments as a strategy for focusing relationship
marketing efforts.
4. Present relationship development strategies – including quality core service, switching barriers, and
relationship bonds.
5. Identify challenges in relationship development, including the somewhat controversial idea that “the
customer is not always right.”
LECTURE TIPS & AIDS
1. Figure 6.5 summarizes various retention strategies discussed in the chapter. One way to cover this
material in class would be to divide the class into four groups and have each group be responsible
for providing examples (beyond those in the textbook) of firms that are creating each of these types
of bonds with their customers. In addition to discussing the advantages of each type of bond,
students might also be asked to discuss the drawbacks of each type of bond from both the
customer’s and the service provider’s point of view.
2. To drive home the importance of relationships with customers, have students calculate the lifetime
value of a customer in various services industries. Student could be divided into teams of 2-4
persons and asked to calculate the lifetime value of a customer to a typical firm in whatever industry
they choose (or are assigned) using the questions listed below as a framework. Students may need
to make assumptions in order to do this, but one of the questions asks students to explicitly state
those assumptions. Students could work through the following questions on a worksheet and, after
completing them, be asked to present and defend the calculations (and assumptions) to the class:
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1. Who is the “customer” you are focusing on? Describe the average customer using relevant
characteristics.
2. What is the average “lifetime” of a customer in this industry? Explain your response.
3. Do the customer’s spending patterns change over a lifetime? Why or why not?
4. What would be a relevant time period to use in calculating customer revenue? What is the
typical revenue (per loyal customer) over this time period?
5. Are there costs involved in serving the loyal customers? If so, what are these? Should these
costs be considered in the lifetime value calculations? Why or why not?
6. What is the likely number of referrals that come directly as a result of the lifetime customer’s
recommendations? (Be realistic.) Explain your response.
7. What assumptions are you making in order to do your calculations? List all assumptions that
are applicable. (It is very likely you will be making multiple assumptions for each number
you use in your calculations.)
8. Use all of the relevant numbers (based on your assumptions) together to calculate the Lifetime
Value of a customer in this industry.
9. Based on your calculations and assumptions, what is the lifetime value of a customer to an
organization in this industry?
3. One topic that students may disagree with is “the customer isn’t always right.” Students who have
taken several business (particularly marketing) classes may have been overwhelmed with the notion
THE CUSTOMER IS ALWAYS RIGHT. In order to generate lively class discussion, the instructor
might get a sense of whether the class agrees or disagrees with this statement and then take an
adversarial point of view. One way to introduce the topic would be to bring in a video clip from a
television show of a particularly poorly executed service encounter or one where the customer may not
be right (sitcoms and movies are often good sources). (Several such clips are listed later in this section
for Chapter 6.) After viewing the clip, students could discuss who is right, the customer or the service
provider.
Chapter 6: USAA
1. Based on the information in the opening vignette, describe some of the strategies and tactics that
USAA uses to build long-term relationships with its customers.
2. Now, research the company online through its social media presence and on its website. What
evidence can you find on these sites that further demonstrates USAA’s emphasis on building
relationships with its customers? Be as specific as you can.
3. Could other service providers benefit from having their employees engage in an intense empathy-
building program similar to that used by USAA? Which ones? Why?
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1. Think of a service organization to which you are loyal. What does it mean to be a loyal customer in
the context you are thinking of? That is, what are your thoughts, attitudes, and actions with respect to
this business? Why are you loyal to this organization?
2. What impact have the Internet and the World Wide Web had on the ability of companies to individualize
both their communications and their product offerings? Give specific examples. Do you think this
leads to greater customer loyalty? Why or why not?
1. Discuss how relationship marketing or retention marketing is different from the traditional emphasis
in marketing.
The traditional focus in marketing has been on getting new customers and building the customer base
through adding more first-time customers. While it is still important to attract new customers, the costs
of customer churn and the maturity of many industries suggest that this can no longer be the primary
or sole source of growth for most organizations. Much of the research suggests that it is more
cost-effective to keep a current customer than to attract a new one. Relationship marketing thus focuses
on attracting, satisfying, keeping, and even enhancing customers over their “lifetimes” with specific
companies.
Strategies supporting a relationship focus will affect everything from service design to segmentation,
as well as all elements of the service marketing mix. For example, one of the challenges in developing
a true relationship strategy is to align employee incentives and recruitment toward customer satisfaction
rather than simply making a sale. All of the strategies presented in the text are intended to reinforce a
relationship philosophy as opposed to a traditional sales and new-customer oriented philosophy.
2. Describe how a firm’s relationships with customers may evolve over time. For each level of
relationship discussed in the chapter, identify a firm with which you have that level of relationship and
discuss how its marketing efforts differ from other firms.
Four different relationships are discussed in the chapter, including:

• Customers as Strangers - Those customers who are not aware of or, perhaps, those who have
not yet had any transactions (interactions) with a firm.
• Customers as Acquaintances – Those customers where awareness and trial with the provider
have been achieved and familiarity is established, creating the basis for an exchange
relationship.
• Customers as Friends – Those customers who continue to make purchases from a firm and to
receive value in the exchange relationship. The transition from acquaintanceship to friendship
requires the development of trust.
• Customers as Partners – At the partnership stage the firm has the ability to organize and use
information about customers more effectively than competitors. Thus the relationship has
advanced from having the purpose of merely meeting customers’ needs to a situation in which
both parties sense a deep appreciation of each other. However, in order to continue to receive
such benefits, these customers generally must be willing to pay a price premium or to commit
to the firm for an extended period of time.
In answering this question, students should be able to identify different providers for which they have
varying levels of relationships. The degree of the customer’s trust in, and commitment to, each provider
should increase as examples of relationships from each level progress.
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3. Think about a service organization that retains you as a loyal customer. Why are you loyal to this
provider? What are the benefits to you of staying loyal and not switching to another provider? What
would it take for you to switch?
This question makes a very nice in-class exercise. Students can be asked to answer the three questions
posed above in writing. (It takes five minutes or so for people working individually to do this.) Then a
general discussion can be facilitated by the instructor, followed by a more structured lecture/discussion
around the benefits of long-term relationships from the customer’s perspective (pp. 151-153). The
point to be made is that there are often benefits beyond satisfaction with the core service that keep
customers loyal to the organization.
[Note: For a more in-depth discussion of such benefits, see Gwinner, Kevin, Dwayne D. Gremler, and
Mary Jo Bitner (1998), “Relational Benefits in Services Industries: The Customer's Perspective,”
Journal of the Academy of Marketing Science, 26 (Spring), 101-114.]
4. With regard to the same service organization, what are the benefits to the organization of keeping you
as a customer? Calculate your “lifetime value” to the organization.
This question focuses students on the benefits to organizations of retaining customers (pp. 153-154):
increasing purchases over time; lower costs; free advertising through word-of-mouth; and employee
retention. Before asking students to calculate their own lifetime value to the organization, the instructor
should review with them the material on pp. 154-156. In calculating their lifetime value, students will
need to make certain assumptions regarding the probable length of their “lifetime” with the company,
whether they will spend more each year, and how many loyal customers they may attract through
word-of-mouth. Even with the assumptions, these calculations are rather simplistic. Students
(especially MBAs or older students) will note this and want to take into account costs and other
variables. This is fine, but the primary point to be made is not the detailed accuracy of the calculations,
but rather the magnitude of the value an individual customer can bring to an organization over a typical
customer life. Although many organizations are now starting to think in relationship terms, most have
not actually calculated, even in a simple way, the lifetime value of their customers. When they do, they
are convinced even more of the importance of adopting relationship strategies. Lifetime value of
customers and the importance of keeping customers are excellent topics for a guest speaker since many
organizations are focusing efforts in these areas.
5. Describe the logic behind “customer profitability segmentation” from the company’s point of view.
Also discuss what customers think of this practice.
From the company’s point of view “customer profitability segmentation” is extremely logical.
Essentially the idea is that not all customers are equally profitable, and determining the profitability of
different market segments can help the firm to decide where to invest its limited resources to build
loyalty with high lifetime value customers. Similarly, this type of segmentation can be used to
determine levels of service provided—more profitable segments are typically given more personal or
customized service. The difficult part for firms is to be confident in the numbers (costs and potential
revenues) used to determine segment profitability, and to decide whether to focus on short- or long-
term profitability. For example, a particular customer or customer segment may not be profitable today,
but their long-term potential may warrant a short-term investment.
From the customer’s point of view, profitability segmentation, while logical, may not seem fair.
Customers may resent receiving a lower level of service (e.g., automated) than they had previously
received, knowing that others are still getting customized and personal service. This is particularly true
3-54
if they perceive that they are receiving less service than before, or if they are being asked to pay for
service they previously received for free.
A productive discussion can be focused around the logic of segmenting customers based on
profitability, how to determine who is profitable, and how to handle communication and
“downgrading” of service to less profitable segments. Students will no doubt have their own personal
examples of times when they have been downgraded, and can discuss their feelings, reactions, and
behavior toward the firm. The idea of potentially needing to “fire” some customers who will never be
profitable is also a good point for discussion.
6. Describe the various switching barriers discussed in the text. What switching barriers might you face
in switching banks? Mobile telephone service providers? Universities?
Customer inertia is one of the switching barriers discussed in the text. This is the idea that some
customers do not want to exert any energy or effort in switching firms. Sometimes consumers
simplistically state that “it’s just not worth it” to switch providers; people do not like to change their
behavior. It is this resistance to change that creates a barrier for switching.
Switching costs are costs both real and perceived that customers believe they would incur in switching
providers. Such costs, which also serve as barriers for switching, can be either monetary or
nonmonetary and include perceived investments of time, money, or effort that are expected to be
incurred in changing providers. Four types of switching costs are mentioned in the text (several others
have been discussed in the literature), including setup costs, search costs, learning costs, and contractual
costs. Any cost that is perceived to make it challenging for the customer to move to another provider
is a switching cost.
For banks, some switching barriers could include paperwork required in closing accounts, paperwork
required in opening new accounts, notifying all companies where automatic payments (or deposits) are
made of the switch, learning new procedures for taking out loans, and ordering new checks (and for
their arrival). Or, more simply, customers may not want to exert the energy it would take to switch
banks and find a suitable alternative (i.e., customer inertia).
For mobile telephone services, switching barriers might include a fee for early termination of the
contract (i.e., contractual costs), purchase of a new telephone (i.e., setup costs), notifying friends and
family of a new telephone number (if the old number cannot be transferred over to the new service),
and potential lost calls from moving to a new service provider and having a new number. Students will
likely be able to generate a much longer list, as most of them have probably incurred (or at least
considered) barriers that make it difficult to switch mobile phone services.
For universities, switching barriers might include application fees (i.e., setup costs), higher tuition costs,
loss of credits that do not transfer between universities (and, thus, a requirement to take additional hours
to finish a degree), loss of friendships and time required to develop new relationships, moving expenses,
and perhaps having to change other service providers (including banks and mobile telephone services
if these same services are not available at the new university).
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7. Describe the four levels of retention strategies, and give examples of each type. Again, think of a service
organization to which you are loyal. Can you describe the reason(s) you are loyal in terms of the
different levels? In other words, what ties you to the organization?
The four levels of retention strategies (see Figure 6.6) are: Level 1—Financial Bonds; Level 2—Social
Bonds; Level 3—Customization Bonds; Level 4—Structural Bonds. Clearly the higher levels forge
stronger bonds with customers and are more difficult for competitors to imitate. Often students
misunderstand the financial bonds (Level 1) strategy and assume that it simply means that the
organization charges lower prices. This is not the case. A retention strategy based on financial bonds
is one that rewards more purchases or customer longevity financially—e.g. frequent buyer, frequent
flyer programs. A Level 2 strategy combines these financial incentives with social or interpersonal
bonds between the customer and the organization’s employees.
A Level 3 strategy focuses on building ties through service customization. The assumption is that
customers who receive individualized service, suited to their own particular needs and circumstances,
will be more satisfied and less vulnerable to competitors. The investment of time on their part to
educate a new provider regarding their needs also makes it more difficult to switch.
A Level 4 strategy is the hardest to imitate, and the most difficult from which a customer can disengage,
since it also includes a structural component often based on shared systems or technology. Concrete
examples of all four types of retention strategies are provided in the text.
It should be emphasized that firms often employ multiple relationship strategies, possibly at all levels,
simultaneously.
8. Have you ever worked as a front-line service employee? Can you remember having to deal with difficult
or “problem” customers? Discuss how you handled such situations. As a manager of front-line
employees, how would you help your employees deal with difficult customers?
A discussion of this question can be injected into a lecture/discussion of the idea that “The Customer
Is Not Always Right” (pp. 166-170). This general topic is an important one to cover since many
organizations still refuse to acknowledge this fact. It is important that students understand that not all
customers make good relationship customers and that every customer is not right all of the time. Most
students have worked in front-line service jobs at one time in their lives and many will hold such
positions concurrent with going to school. The question regarding difficult customers is thus very easy
for them to answer. A discussion, facilitated by the instructor, can help students to see the subtle
differences between difficult customers who need to be accommodated and appeased, and those who
are truly not right for the organization and who should be “fired.”
A fun story to tell in this context relates to Nordstrom. If Nordstrom notes from its credit card records
that a particular customer is buying and returning expensive clothing on a regular basis (obviously
wearing the outfit once for a special occasion and then returning it), the company will “fire” the
customer by canceling their credit and not allowing them to purchase clothing in the store. Most of us
have never heard about someone being “fired” by Nordstrom since it is not something a customer would
be proud of!
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• “Jerry Maguire” – At the beginning of the movie, Jerry Maguire (Tom Cruise) writes a mission
statement that suggests focusing on customers. The movie dialog include this quote: “the key to this
business is personal relationships.” This clip could be used to emphasize the importance of relationship
marketing.
• “Pretty Woman” – Julia Roberts, playing a hooker, enters a plush clothing store in Hollywood, only to
be asked to leave. In a later scene she returns, having spent an enormous amount of money in another
store, to tell the clerk (who works on commission) that not serving her was a “big mistake!” This clip
can be used to illustrate relationship marketing and the relationship value of a customer.
• “As Good As It Gets” – Jack Nicholson, play an eccentric writer, is extremely rude to a couple who is
sitting at his regular table at this regular restaurant. In a later scene, after being rude to the “new”
waitress (not his “regular” one), he is asked to leave the restaurant by the manager and to never return.
This clip could be used to illustrate that perhaps the customer is NOT always right.
• “Falling Down” – The main character (Michael Douglas) enters a fast-food restaurant and orders
breakfast 3 minutes after the firm stopped serving breakfast. The employees tell him he must order
from the lunch menu, leading him to state that “the customer is always right.” He eventually pulls out
a machine gun and demands breakfast (but, eventually, changes his mind and decides to get lunch).
• “Summer Rental” – Early in the movie a family of five is waiting in line at a restaurant in a summer
tourist town. The father (John Candy) gets upset when his family, who has been waiting quite a while
for a table, is told they will get the next table—only to be bypassed by another group of five. This
group includes a very prominent, local businessman—obviously a preferred customer of the restaurant.
This clip can be used to illustrate the concepts of customer profitability segments and profitability tiers.
It could also be used to supplement a discussion of the article Business Week article, “Why Service
Stinks.” [Brady, Diane (2000), “Why Service Stinks,” Business Week, October 23, 118-128.]
• “The Jerk” – In the middle of the movie, the main character Navin (Steve Martin) takes his wife to an
expensive restaurant. He asks the waiter for some “good” Champaign (new stuff, not the “old” stuff).
Then he notices that there are snails on his wife’s plate (he did not know that “escargot” means snails).
He immediately decides that having the snails on her plate is not appropriate, even though wife ordered
escargot. He makes a big scene and disrupts others in the restaurant…this clip is an illustration of the
idea that the customer is NOT always right.
• “Up in the Air” (2009). Chapters: Customer Motions, Customer Loyalty Hotel/Air, and Customer
Loyalty Reward. A loyal American Airlines customer (George Clooney) is shown in the airport moving
through it. The clip shows how easy the airline has made traveling for its most loyal customers. This
customer has a goal in the movie to become the seventh person ever to reach 10 million miles. Illustrates
customer loyalty, customer and firm benefits, and customer profitability segments.
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Company Location
Airbnb www.airbnb.com
Cardinal Health www.cardinal.com
Caterpillar www.caterpillar.com
FedEx www.fedex.com
Harley Davidson www.harley-davidson.com
Hilton Hotels www.hilton.com
Quicken www.quicken.com
USAA www.usaa.com
From previous Zeithaml, Bitner, and Gremler Services Marketing text:
• Merrill Lynch: Supernova [included in the sixth edition of this text: Zeithaml, Bitner, and
Companies]
• Giordano: Positioning For International Expansion [included in the fifth edition of this text:
• General Electric Medical Systems – [included in the fourth edition of this text: Zeithaml, Bitner,
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From other sources:
• Canyon Ranch [Harvard Business School Case 9-805-027, 2005]
• Carnival Cruise Lines [Harvard Business School Case 9-806-015, 2005]
• Hilton HHonors Worldwide: Loyalty Wars [Harvard Business School Case 9-501-010, 2005]
• “Are Some Customers More Equal Than Others?” by Paul F. Nunes and Brian A. Johnson, HBR
Case Study, in November 2001, Harvard Business Review, 37-50.
• Building Brand Community on the Harley-Davidson Posse Ride [Harvard Business School Case
9-501-015, 2000; Teaching Note 5-501-052; Video 9-501-801]
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CHAPTER 7:
SERVICE RECOVERY
CHAPTER TOPICS
• The Impact of Service Failure and Recovery

• How Customers Respond to Service Failures
• Service Recovery Strategies: Fixing the Customer
• Service Recovery Strategies: Fixing the Problem
• Service Guarantees
• Switching versus Staying Following Service Recovery
• Technology Spotlight: Cisco Systems—Customers Recover for Themselves
• Global Feature: Service Recovery across Cultures
• Strategy Insight: Eliciting Complaints and Reports of Service Failure
CHAPTER OBJECTIVES
1. Illustrate the importance of recovery from service failures in keeping customers and building loyalty.
2. Discuss the nature of consumer complaints and why people do and do not complain.
3. Provide evidence of what customers expect and the kind of responses they want when they do complain.
4. Present strategies for effective service recovery, including ways to “fix the customer after a service
failure and to “fix the problem.”
5. Discuss service guarantees—what they are, the benefits of guarantees, and when to use them—as a
particular type of service recovery strategy.
LECTURE TIPS & AIDS
1. The instructor might ask students, “What do you do when you receive poor service?” Figure 7.3 can
then be used to have students in the class do a self-profile of their own response to service failures. The
instructor asks each student to profile his/her own behavior and determine which of the various actions
suggested in the figure he/she typically takes. After students have had a chance to examine and share
their own typical response to service failure, other questions could follow up that activity. For example,
“Under what conditions are students likely to respond differently than what they normally do?” Also,
“What are the consequences of responding the way you normally do to a complaint?”
Alternatively, the instructor might ask for examples from just two students about a service failure they
have recently had. After having the two students briefly discuss their experiences, the instructor could
probe further (if necessary) to find out what action each took, if any, and use that as a way to introduce
Figure 7.3. Generally speaking, students who have had service failure experiences are more than
willing to share what happened to them. The instructor might also ask about the consequences of each
experience.
2. To facilitate discussion of the “recovery paradox” included in the chapter, the instructor might ask for
a student to share an experience where the service firm originally failed in their service delivery, and
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yet recovered very well. Ideally, the student will share that his/her experience, in spite of the failure,
actually has made him/her more loyal to the organization and more satisfied with the services being
provided. If such an example is shared, it can be used to illustrate the recovery paradox. (As discussed
in the chapter, the recovery paradox implies that firms should indeed fail in service delivery in order to
recover, and therefore make customers more satisfied.) After this discussion the question might be
posed to the class as to whether creating a service failure and then providing good recovery is an
appropriate strategy for a firm to pursue, particularly given the experience of the student in class who
was more satisfied after the failure and subsequent recovery than before.
3. In order to discuss service switching, and the reasons customer switch service providers, students might
be asked to think of an experience they have had where they have switched providers. Then, using
Figure 7.7, students may identify one or more causes behind why they switched providers. Asking
students to share their service switching experiences and the causes behind that can help to illustrate
the points being made in that figure.
4. Service guarantees can be a critical part of firm’s service recovery procedures. As discussed in the
chapter, however, guaranteeing service delivery is often difficult for service providers. To stimulate
discussion on the topic, the instructor might ask students about the viability of an instructor offering a
student satisfaction guarantee in the classroom (perhaps in a services marketing class). Given that
students are indeed “experts” in educational services, this should generate some lively discussion.
Some discussion questions include:
• What should be guaranteed?

• Is a service guarantee appropriate in an educational setting?
• How should such a guarantee be written?
• How should such a guarantee would be administered and paid out?
• What is appropriate compensation?
• What are the advantages of providing a guarantee to students?
• What are the advantages of providing a guarantee to the instructor?
• What are the advantages of providing a guarantee to the university?
• What are the disadvantages of providing such a guarantee?
• Why is it that universities typically do not offer such guarantees?
Note: Two instructors have actually guaranteed student satisfaction in two of their marketing classes.
[This guarantee is discussed in McCollough, Michael A. and Dwayne D. Gremler (1999),
“Guaranteeing Student Satisfaction: An Exercise in Treating Students as Customers,” Journal of
Marketing Education, 21 (August), 118-130.] The guarantee provided on the next page provides an
example of a version of the guarantee that was based on the one they constructed for use in their classes.
Copies of this guarantee could be distributed to the class and then critiqued using the criteria provided
in Chapter 7.
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Sample Student Satisfaction Guarantee:
Chapter 7: JetBlue and the Valentine’s Day Ice Storm
1. Research JetBlue online. What is JetBlue’s situation today? How have they recovered from their
Valentine’s Day service failure in 2007? Have they grown? What is their reputation? Are they keeping their
promises to customers? Are there any residual effects – good or bad – from the 2007 incident? If so,
describe.
2. Based on your research, is JetBlue an airline that you would like to fly? Would recommend to others? Why
or why not?
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1. Write a letter of complaint to a service organization (or voice your complaint in person) where you
have experienced less-than-desirable service. What do you expect the organization to do to recover?
(Later, report to the class the results of your complaint, whether you were satisfied with the recovery,
what could/should have been done differently, and whether you will continue using the service.)
2. Choose a service you are familiar with. Explain the service offered and develop a good service
guarantee for it. Discuss why your guarantee is a good one, and the benefits to the company of
implementing it.
3. Re-read Technology Spotlight in this chapter, featuring Cisco Systems. Visit Cisco System’s web site
(www.cisco.com). Review what they are currently doing to help their customers solve their own
problems. Compare what Cisco is doing with the self-service efforts of another service provider of
your choice.
4. Interview five people about their service recovery experiences. What happened and what did they
expect the firm to do? Were they treated fairly based on the definition of recovery fairness presented
in this chapter? Will they return to the company in the future?
5. Interview a manager about service recovery strategies used in his/her firm. Use the strategies shown
in Figure 7.4 to frame your questions.
1. Why is it important for a service firm to have a strong recovery strategy? Think of a time when you
received less-than-desirable service from a particular service organization. Was any effort made to
recover? What should/could have been done differently? Do you still buy services from the
organization? Why or why not? Did you tell others about your experience?
In a services course, students need a strong understanding of the importance of service recovery.
Because service failures are inevitable in even the best of firms, recovery is essential for customer
retention and for preventing harmful negative word-of-mouth. As noted in Chapter 3, when a
customer’s expectations have been failed, they have even higher expectations and a narrower zone of
tolerance for the recovery effort. Following a short lecture on the importance of recovery, this question
works well in allowing students to share recovery stories. The stories and the students’ ideas on what
could/should have been done differently lead nicely into a more structured lecture/discussion of the
essential ingredients for an effective recovery strategy as presented on pp. 188-201. This discussion
can be tied back to the discussion of recovery incidents and related Do’s and Don’ts presented in
Chapter 4, Table 4.3.
A strong recovery strategy can positively influence customer satisfaction and loyalty and also improve
bottom-line performance. Research has shown that dissatisfied customers whose problems are resolved
will be more loyal than those whose problems are not resolved. Careful analysis of the data provided
in Figures 7.1 and 7.2 supports this point. A strong recovery can also generate positive word of mouth.
Further, if service failures and recovery efforts are carefully tracked, they can provide solid information
for continuous improvement.
The downsides of an ineffective recovery strategy further support its importance. Failures, particularly
repeated failures, can drive customers away and generate harmful word of mouth and even “terrorism.”
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Employees are also aggravated by not having ways to deal effectively with service failures, which can
result in low employee morale.
A discussion of personal service recovery experiences can provide a lively way to effectively learn and
apply ideas regarding how failures should be handled. (This discussion can be held later in the term in
cases where the professor has assigned the “complaint letter” as a class assignment.)
2. Discuss the benefits to a company of having an effective service recovery strategy. Describe an instance
where you experienced (or delivered as an employee) an effective service recovery. In what ways did
the company benefit in this particular situation?
The benefits to the company of an effective service recovery strategy are: (1) increased customer
satisfaction and loyalty; (2) discovering valuable information that can be applied in continuous
improvement efforts, ultimately leading to fewer failures; and (3) better employee morale because
employees don’t like to be faced with repeated failures with no way to resolve them.
As in Question 1, a lively discussion can be facilitated by having students focus on their personal
experiences with service recovery. In this case, the focus is on what the company gained by the
effective recovery.
3. Explain the recovery paradox, and discuss its implications for a service firm manager.
Some have suggested that customers who are dissatisfied, but experience a high level of excellent
service recovery, may ultimately be even more satisfied and more likely to repurchase than are those
who were satisfied in the first place. This is known as the “recovery paradox” because it implies those
who are dissatisfied can be made more loyal than those who were satisfied in the first place. The
problem with this “logic” is that it implies service firm managers might want to plan to fail so they can
provide an excellent service recovery and thereby increase satisfaction and loyalty. The complexities
behind this simple logic are explained in the text, concluding that “doing it right the first time” is still
the best bet. Research suggests that unless the recovery effort is absolutely superlative, it cannot
overcome the initial negative impression enough to build loyalty beyond where it would be with no
initial failure.
4. Discuss the types of actions customers can take in response to a service failure. What type of
complainer are you? Why? As a manager, would you want to encourage your customers to be voicers?
If so, how?
The types of actions customers can take in response to a service failure are captured in Figure 7.3 and
discussed in the text. Those experiencing a failure can either take action or do nothing. Those who
take action can do several different things including complaining to the provider, complaining to family
and friends and/or complaining to a third party. Ultimately, either type of customer will decide whether
to switch providers or stay with the offending provider. Students can be asked what they typically do
in response to a service failure—what actions have they taken if any?
Four different types of complainers are described: passives, voicers, irates, and activists. The type of
action a person is most likely to take in response to service/product failures determines his “type” to
some extent. A lively discussion of complaining types and how students categorize themselves can
provide a good learning vehicle.
Customers can be encouraged to be “voicers” by letting them know the firm welcomes their complaints
and suggestions and by providing easily accessible avenues for complaining. Customers should not be
made to feel guilty when they complain, nor should the process be difficult.
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5. Explain the logic behind these two quotes: “a complaint is a gift” and “the customer who complains
is your friend.”
This question gets students to focus on the positive outcomes of encouraging complaints and the
negative outcomes of doing the opposite. Traditionally firms have tried to avoid complaints and have
even prided themselves on how few complaints they received. The risks of this traditional approach
can be discussed. By considering a complaint “a gift” and a complaining customer a “friend” this
traditional view is turned around 180 degrees.
6. Choose a firm you are familiar with. Describe how you would design an ideal service recovery strategy
for that organization.
This question allows students to focus on recovery strategies in a real context. It forces them to
understand the strategies and make their ideas concrete. Figure 7.4 can be used as a guide for
developing a comprehensive strategy. If students are organized into teams to work on a company
project, this question could be discussed in their teams focusing on those companies.
7. What are the benefits to the company of an effective service guarantee? Should every service
organization have one?
This question allows students to fully understand, in their own words, the benefits of service guarantees
as discussed in the text in the section “Benefits of Service Guarantees”. Benefits to customers could
also be discussed. In discussing this question it may be helpful to have several examples of actual
service guarantees to look at.
A guarantee may not always be a good idea. Questions that should be answered or considered prior to
offering a guarantee are shown in Exhibit 7.5. The following conditions, discussed in the text, suggest
situations when a guarantee may not be appropriate:
• existing service quality in the company is poor

• a guarantee doesn’t fit the company’s image
• service quality is truly uncontrollable
• potential exists for customer abuse of the guarantee
• costs of the guarantee outweigh the benefits
• customers perceive little risk in the service
8. Describe three service guarantees that are currently offered by companies or organizations in addition
to the ones already described in the chapter. (Examples are readily available on the Internet.) Are
your examples good guarantees or poor guarantees based on the criteria presented in this chapter?
Students should be encouraged to bring to class examples of service guarantees. Alternatively, the
professor can collect and bring in copies of service guarantees. Students can discuss the different
guarantees in small groups, analyzing them according to the criteria discussed in the chapter. A few
can then be shared with the entire group. This discussion works well with question 8, either before or
after that discussion.
An interesting application of a service guarantee in an academic context was published in the Journal
of Marketing Education (August 1999, Vol. 21, No. 2, 118-130) in an article by Mike McCollough and
Dwayne Gremler. This article could be used as background for the professor or as one of the actual
service guarantee examples to be evaluated.
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• “Heartbreaker” – At a hotel, a customer purposely falls in order to get a free stay. In particular,
Sigourney Weaver’s character trips her daughter (and then sprays water on the floor) at an expensive
hotel in order to get a free room. The firm provides excellent recovery, even though it was not at fault.
This clip illustrates the fear some companies may have about customers taking advantage of, or abusing,
a firm.
• “Ferris Bueller’s Day Off” – Similar to the previous clip, this scene begins with Ferris Bueller looking
at the guest book when the host is not looking in order to use a name to get a seat (without having made
a reservation) at an expensive restaurant. The waiter eventually agrees to seat Ferris and his two
friends...fearing that he is who he said he is. The firm recovers well and the customers end up with a
great table.
• “Father of the Bride” – After agreeing to hire a wedding coordinator, George Banks (Steve Martin), his
wife, and his bride-to-be daughter are in the coordinator’s office discussing potential wedding plans
and the ordering of a wedding cake. The clip can be used to illustrate how the servicescape and other
types of physical evidence (specifically, a book with pictures of wedding cakes) can influence the
customer’s experience.
• “Tommy Boy” – In one scene near the middle of the movie, an automobile parts salesman (Chris Farley)
attempts to convince a company to sell his brake pads. They have a brief discussion on service
guarantees.
• “Fast Times at Ridgemont High” – In one scene a customer approaches a fast-food counter and asks
for his money back for what he calls a poor breakfast. (In the background a banner states “100%
Guaranteed Breakfast.”) The employee (Judge Reinhold) wants to do things by the book, and requests
the customer fill out a form (which he cannot find) in order to receive $2.75 back. The clip can be used
to lead into the discussion of the characteristics of a good service guarantee.
• “Stuck on You” – This movie begins with a scene at a diner/café. A sign outside of the restaurant
promises to have meals prepared within three minutes or they are free. In this scene the waitress takes
the orders from a table of six and then sets a three-minute timer. Two twin brothers (Matt Damon and
Greg Kinnear), who have been physically attached to each other since birth, proceed to prepare all six
orders behind the counter as the table of six roots against them. Although the word “guarantee” is not
used, it is clear what the promise (and compensation) is. This clip could be used to discuss the
characteristics of an effective service guarantee.
• “Failure to Launch” (2006). Two clips: Clip 1 scene - 12:33-14:26; clip 2 scene - 38:55-41:14. The first
clip from the movie is about a woman named Paula, who is an interventionist, to help get grown up
adults to move out of their parents’ homes. The parents are the ones who hire Paula to date their sons,
and the sons have no idea that she is hired so that they move out. This is a service she offers and she
has always had success. She meets her clients, whose son is 35 year-old Tripp. The parents in this
scene are discussing what Paula can do for them and if they want to hire her or not. The next clip is
while Paula is performing her services. She has been seeing Tripp for a while and finds herself at his
house, where she has to "meet" his parents (whom she already knows). She then learns from the parents
that her service is failing and that Tripp is about to dump her. Not wanting to let her service fail, Paula
takes it to the next level to do whatever she can to make sure she is succeeding and making her
customers who paid for her happy. Illustrates service failure and recovery (also the five dimensions of
service quality.)
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• “The Office,” Season 3, Episode 20. Original air date – April 26, 2007. Morning Conference Meeting
(3:07-5:26). Angela on Customer Service (10:20-10:55 and 13:23-13:53). Michael’s Press Conference
(11:15-12:33 and 13:53-15:10). Product Recall – an unfortunate drawing has ended up on a
plethora of reams of paper that is sent out to customers. The office now faces the dilemma of
apologizing to all of its customers and fixing the problem. The phones are ringing off the hook and
they have to do something immediately to fix the problem. Illustrates service recovery, reliability,
empathy.
Company Location
British Airways www.britishairways.com
ClubMed www.clubmed.com
Hampton Inn & Suites Hotel (for guarantee) www.hamptoninn.com
JetBlue Airways www.jetblue.com
Lands’ End (for guarantee) www.landsend.com
ProStaff www.prostaff.com
Starbucks www.starbucks.com
• United Breaks Guitars [included in the sixth edition of this text: Zeithaml, Bitner, and Gremler
• JetBlue: High Flying Airline Melts Down in Ice Storm [included in the sixth edition of this text:
Companies]
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• Getting the Bugs Out [included in the first edition of this text: Zeithaml and Bitner (1996)
From other sources:
• “Carnival Triumph: The Cruise From Hell,” by Felicia N. Morgan, Valarie A. Zeithaml, and
Richard R. Hawkins (2014); available from lead author: fmorgan@uwf.edu
• Trend Micro (A): Responding to Service Failure [Kellogg School of Management Case,
Northwestern University, KEL 274, 2007]
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CHAPTER 8:
SERVICE INNOVATION AND DESIGN
CHAPTER TOPICS
• Challenges of Service Innovation and Design

• Important Considerations for Service Innovation
• Types of Service Innovations
• Stages in Service Innovation and Development
• Service Blueprinting: A Technique for Service Innovation and Design
• Technology Spotlight: Facebook: A Radical Service Innovation
• Global Feature: The Global Service Innovation Imperative
• Strategy Insight: Strategic Growth through Services
CHAPTER OBJECTIVES
1. Describe the challenges inherent in service innovation and design.
2. Present an array of different types of service innovations, including service offering innovation,
innovating around customer roles, and innovation through service solutions.
3. Discuss the importance of engaging customers and employees and employing service design
thinking in service innovation.
4. Present the stages and unique elements of the service innovation and development process.
5. Demonstrate the value of service blueprinting as a technique for service innovation and design and
how to develop and read service blueprints.
LECTURE TIPS & AIDS
1. An interesting way to begin a discussion of this chapter is to ask if anyone has considered starting their
own business. Most students have at some point. A good discussion can revolve around how they
would go about this—what would they need to know, what steps would they follow? This can lead
nicely into a lecture/discussion of the new service development steps and blueprinting.
Another good way to structure this discussion is around a major assignment. This can be a team,
individual, or pair assignment. The following directions lay out this type of an assignment for
undergraduates.
This assignment gives you the opportunity to design a new service or redesign an existing
service based on your newly acquired service marketing expertise. You may choose to do
this assignment on your own or with a partner.
There are many things to consider when designing a service. You should first decide which
market segment(s) you want to target and how you want to be positioned relative to the
competition. Then you will need to describe the service. You should use appropriate
service marketing concepts to describe your service and your proposed marketing strategy.
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You should also illustrate the service you have created (or re-created) by developing a
blueprint of it. If you are redesigning an existing service, you should also include a
blueprint of the original service.
Your report should be typed, professionally presented, and be between 8-10 pages. You
will also have the opportunity to present your new service to the class. Each person (or
partners) will give a short presentation (10 minutes) describing the key elements of his/her
service and the related service marketing concepts. Think of the presentation as a brief
pitch you are giving to get funding for your new service idea or to convince your boss of a
needed redesign in the company's service.
A more extensive assignment, appropriate for upper level undergraduates or graduate students follows:
New Service Development Project: Using the new service development process described
in Chapter 8 as a guide, design and develop a new service offering. This could be a new
service for a team member’s company, or an entrepreneurial service. Use tools and
frameworks from class to assist your development efforts. It would normally not be
possible in the class time frame to conduct extensive primary research with customers to
support the new service, however the need for such research should be acknowledged and
informal customer interviews may be part of this project. A service map/blueprint of the
service must be included.
3. Another excellent way to explore this topic is through guest speakers, particularly managers who are
responsible for new service development in their companies. Or, an entrepreneur who has successfully
developed a new service could be invited to share his/her approach and experiences.
Chapter 8: PetSmart
1. If you live near a PetSmart brick and mortar store, drop by for a visit. What services are offered at the
store? Be as specific as you can. Carefully observe the design and layout of the store facilities. How
does the physical evidence of the store facilitate the actions of employees, human customers, and
pets? Be as specific as you can.
2. If you cannot visit one of PetSmart’s brick and mortar stores, research the company online via their
website and social media pages. What evidence of new and innovative services being offered by
PetSmart can you find? Be as specific as you can.
3. What are some ways in which PetSmart can continue to innovate its offerings for pet parents and their
pets?
1. This exercise requires a field trip to observe a local service business. The instructor can allocate one
class period to complete the field trip and another for presentations. Alternatively, the field trip can be
done outside of class so that only one class session is used. The instructor and/or the class choose a
type of service business with many local competitors so that different service delivery options are
available (services like specialty coffeehouses, automobile oil changing services, and hair salons are
ideal for this assignment). Small groups of students will then visit a service business of their choice
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within the designated industry (e.g., every group must visit a specialty coffeehouse). The exercise
consists of the following activities:
• With your group, visit the business you have chosen. You will need to gather enough
information to do a blueprint of the service. Create a blueprint of the service that can be
presented to the class. Make sure all of the blueprinting elements are complete.
• Each group then presents its blueprint to the class. Don’t be afraid to be creative in your
presentation -- role playing, short videos or story telling can make your blueprint “come to
life!” The class votes on the best blueprint, and a prize is awarded to the winning team.
• After the “contest,” the instructor and the class can analyze similarities and/or differences in
the delivery of the services the groups have blueprinted.
2. Compare two services on the Internet. Discuss the design of each in terms of whether it meets your
expectations. How could the design or the service process be changed? Which one is most effective
and why?
3. Create a photo essay that captures a service delivery process and all of the physical evidence
(including the servicescape) and the impact it has on customers. (A photo essay is a group of
photographs with a common theme, used as instruction through its presentation, accompanied by
narration.) The photo essay should not be merely a collection of pictures, but should reflect theory,
capture customer (and perhaps employee) emotions, provide perspectives and insight, and allow
for discovery of information in following a firm’s service delivery process.
4. Class members will be working in small groups to complete this service blueprinting exercise. The
activity involves the following steps:
• Each group creates a blueprint for one of the services described on the next two pages, either
“Diets to You” or “Azure River Tubers.” Groups should refer to textbook for the basic steps
for designing a blueprint, the generic map, and the sample blueprints.
• Groups then share their blueprints with the class, and the class discusses the content of the
blueprints and the process of developing them. To conclude the exercise, the class brainstorms
potential uses of blueprinting.
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“DIETS TO YOU” DELIVERS TO HOMES*
The paperboy delivers the paper. The mailman delivers the mail. And Diets to You
delivers diet foods–about 900 calories each. So the day begins for 100 dieters who pay
on average $75 a week for fresh, low-calorie, low-fat meals delivered to their homes or
offices five days a week.
Carolyn Adamson began this business in 1991. She and her partner recently ironed out
the bugs and began talking to potential franchisers. “I’m surprised I don’t have any
competition,” says Ms. Adamson. The idea seemed so obvious to her, and customers
agree.
Three years ago, Ms. Adamson and her partner were working as technical writers in an
engineering firm, and hating it. “We were both on diets but never had enough time to
cook low-cal, low-fat meals at home,” she recalled. If only someone delivered fresh
food to the door!
Advertising such a service in the local newspaper, the two attracted eight customers
and quit their jobs to work on the business full time out of a caterer’s kitchen they had
subleased. Ms. Adamson has not advertised since; for fear of attracting too many
customers too soon, but finally she’s ready. Ms. Adamson has hired a publicist and
expects business to double this year.
“I’m eating their breakfast right now,” says Charles Baldwin, a cheery-sounding
customer of Diets to You. Putting down his blueberry muffin, the referee explained
that he signed on two years ago, lost twenty pounds, and never gained them back.
The menus only repeat every six weeks and include such fare as lasagna, quiche, soups,
Mexican food and pizza. “It’s basically not diet food,” Ms. Adamson said. “We just
use diet ingredients and cut the portions.” The meals come in 900, 1200 and 1600
calorie servings, with no more than 20 percent of the calories coming from fat. The
bigger the portion, the more you pay. At the Garcia household, Angela Garcia orders
1200 calorie meals for herself and 1600 for her husband, three times a week. Since both
spouses work, she said, “It really fits our lifestyle.”
Today’s breakfast: muffins, vanilla yogurt and a pear. Lunch: home-style turkey soup,
bagels and fruit. Dinner: baked Greek shrimp and noodles in tomato-garlic sauce,
broccoli, salad, and for dessert, lemon cookies.
[*Note: The service described here is fictitious but is adapted from: Lenore Skenazy (1988). “Dieting
Service Delivers to Homes.” Advertising Age. March 14.]
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Azure River Tubers
Azure River Tubers (Tubers), which has an exclusive concession agreement with the
State Department of Natural Resources, offers tubing trips down the Azure River from
Scenic Bend to Lookout Bridge, a distance of 12 miles. The Azure River is located
about 15 miles south of Capitol City and runs through a series of canyons. The journey
offers outstanding views and the chance to enjoy an undeveloped and unspoiled natural
environment.
Most customers are college students and young adults from Capitol City who enjoy
spending an afternoon in the sun floating down the scenic Azure River. Because it is
hot and sunny, customers need to be prepared. They are advised by Tubers in its
brochures, advertisements and website to bring sunscreen, hats and long-sleeved shirts
to wear over their bathing suits. Many tubers forget at least one of these essential items.
The Tubers Rental Shack at the river stocks a complete line of accessories for anyone
who has forgotten something.
Customers start their journey down the Azure River at Scenic Bend, where they park
their vehicles in a parking lot owned and maintained by Tubers. Parking costs $5 for
all day, but is free for those who spend at least $20 in the Tubers Rental Shack.
Before they begin their tubing trip, customers must rent a tube at the Tubers Rental
Shack. Tubers inventories over 200 tubes in a backroom of the rental shack. Two
college students work there part-time, filling the tubes with air and maintaining them.
Each tube is checked for air pressure and leaks before it is rented to a customer.
Customers can either bring their own refreshments or buy food and drink from the
Tubers Rental Shack. In addition, Tubers will sell or rent small floating coolers to keep
snacks cold. The coolers can be attached to a tube with a hooked rope.
Many tubers like to stop during the trip and go ashore. They have picnics, swim and
enjoy the scenery.
At the end of the 3-4 hour trip, customers arrive at Lookout Bridge, where they exit the
river. If they wish, they can take a shower at the Tubers Deck House next to the bridge.
A Tubers van takes them back to their vehicles at Scenic Bend where they started.
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4. An alternative, and more extensive, written project could be used to provide students with more
experience in service blueprinting. An assignment that might be appropriate for such an assignment is
the following:
Class members will be working in small groups. Each team will choose a service that is easily
accessible and familiar to the team, or to a subset of the team’s members. This can be an on-campus
service, a local service establishment, a service where one of the group members (or a family
member) is employed, or a firm where one of the team members was previously employed. The
focus can be a service provided to external customers or an internal service provided to employees
inside an organization. It can be a service that stands on its own, or a service that supports a
manufactured product. In choosing a focus, keep in mind the various components of the project as
some contexts will be more amenable to the assignment than others.
The requirements of the project are as follows.
(1) Describe the service you have chosen in terms of its brand positioning and target customers.
(2) Develop a blueprint of the service, drawing on the material in chapter 8 of the text on
service blueprinting. Many people find that Visio software is the best software to use for
actually creating the blueprint, although PowerPoint software can also be used. Analyze
the blueprint (2-3 pages, double spaced) in terms of its alignment with the service brand
position.
(3) Document and analyze the servicescape and/or other physical evidence of the service,
drawing on the material in chapter 10 of the text, and related readings. Collect, photograph,
or video tape all elements of physical evidence for this service. Turn in these materials
together with an analysis (2-3 page double-spaced) of the servicescape and/or physical
evidence. Does the servicescape/physical evidence reinforce the brand position?
(4) Write a management memo. Assume you are consultants to the managers who are
responsible for the service you have chosen. Write a memo (using appropriate memo
format) addressed to them that explains the blueprint, the servicescape and/or physical
evidence, and your analysis. Highlight key insights from the blueprint and your
servicescape and physical evidence analysis that reinforce or contradict the brand
positioning. In the memo, discuss at least two ways the blueprint could be used and
suggest recommendations based on your analysis. The memo should be no longer than 2
pages, single-spaced. Assume these managers are not familiar with service blueprinting.
1. Why is it challenging to innovate, design, and develop services?
A primary objective of this chapter is to have students understand the complexities and challenges of
innovating, designing and developing services. The inherent challenges in so doing relate back to
several of the basic characteristics of services (as discussed in Chapter 1): intangibility, heterogeneity,
simultaneous production and consumption. This question and/or Question 2 provide good lead-ins to
the presentation of blueprinting as a tool that can help address the challenges.
Because services are intangible, they are difficult to describe and communicate. This characteristic
creates challenges at all stages of service design but particularly for communicating and fleshing out
the concept, and testing the concept with customers and employees. With manufactured products, we
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can show customers a picture of the proposed product or even a model or mock-up. With services, due
to their intangible, process-oriented nature, this is much more difficult.
Because services are typically delivered by employees to customers, they are inherently
heterogeneous—rarely are two services identical nor are they experienced in exactly the same way by
every customer. This characteristic also makes the design of services challenging since there are likely
to be many subtle variations in the service that are difficult to capture in concept development and
testing.
Another challenge relates to the simultaneous production and consumption aspect of services. Because
of this characteristic, quality cannot be controlled at the factory gate. Thus, it is even more critical to
design quality and recovery mechanisms right into the service itself.
2. Why is service innovation so critical for firms and countries?
Service innovation is absolutely critical for firms and countries today. As suggested by the Global
Feature in this chapter, many countries around the globe have put a new emphasis on growth through
service innovation. The sheer magnitude of the service sector in most established economies, and even
in many emerging economies, suggests that most economic growth and activity will occur in this sector.
To remain competitive, countries and leading companies must innovate in this large, dominant, and
high-growth sector of their economies.
To be competitive in service requires both innovation in processes to improve service productivity and
innovation in offerings to increase revenues. Almost every competitive business today is looking for
innovative ways to accomplish both of these innovation objectives. Manufacturing and technology
companies in particular are looking for ways to innovate around both service processes and service
offerings. Partly this is due to the fact that many tangible products and technologies are becoming
commoditized with little room for differentiation, resulting in small margins. Our Strategy Insight in
this chapter provides several examples of service innovation in non-traditional service firms.
3. What are the risks of attempting to describe services in words alone?
The risks of describing services in words alone are: oversimplification, incompleteness, subjectivity
and biased interpretation (discussed in detail in Chapter 8). Despite these risks, most organizations
continue to develop services primarily using words alone to communicate concepts and operational
details. Frequently this results in service designs that are not compatible with the visions of all
concerned (managers, employees, customers) and that lack important operational support. While such
flaws can be corrected in “real time” or after-the-fact, there are ways to make the design and
development of services more precise and successful from the outset. The chapter provides approaches
and tools for dealing with service design.
4. Compare and contrast the blueprints in Figures 8.5 and 8.6.
A comparison of the two blueprints is presented in the text on pp. 241-242. The point of this discussion
question is to focus students on what they can learn from a blueprint. Following a general discussion,
the instructor can turn to the benefits of service blueprinting discussed throughout the chapter and
illustrate how the example blueprints might be used to achieve these benefits.
Discussion of this question can then be followed by a brief lecture on the components of blueprints and
how to build one. The best thing to do next is have students actually draw a blueprint.
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5. How might a service blueprint be used for marketing, human resource, and operations decisions?
Focus on one of the blueprint examples shown in the text as a context for your answer.
The benefits and uses of blueprints are discussed in the text. As pointed out in the text, one of the major
benefits of blueprinting is educational in that it requires everyone involved to agree at some level
regarding the service and its component parts. Blueprints can be used by people in different functional
areas within the organization.
From a marketing perspective, the blueprint can be used for: communicating with customers and getting
their feedback at the concept and service development stages of the process; making the service more
concrete for those who will promote or sell it; analyzing elements of the service for positioning
purposes; seeing clearly all employees who interact with customers and thus serve as “marketers” from
the customer’s perspective; understanding the process the customer must go through (which should
facilitate appropriate customer education); identifying all service encounter points that might
potentially be monitored for customer satisfaction and quality; and analyzing the appropriateness of
physical evidence provided at each point of customer contact.
From a human resources perspective, the blueprint can be used for: understanding roles and
responsibilities in the service delivery process; showing individual employees how they fit in the total
scheme and how their roles are linked into the service delivered to the customer; identifying critical
customer-contact roles by noting all of the points of direct customer-firm interaction; providing a base
for writing job descriptions; and highlighting staffing needs.
From an operations perspective, the blueprint can be used for: identifying potential operational fail
points; noting the effectiveness and efficiency of the process from both the employees’ and customers’
perspectives; understanding the complexities of the process; identifying possible operational changes;
and noting the physical evidence of service provided at each point of contact.
6. Assume that you are a multiproduct service company that wants to grow through adding new services.
Describe a logical process you might use to introduce a new service to the marketplace. What steps in
the process might be most difficult and why? How might you incorporate service blueprinting into the
process?
The logical process referred to here is shown in Figure 8.1, and each step is described in detail in the
text. The steps that are most challenging include: concept, development and evaluation; service
development and testing; and market testing. Blueprinting can be incorporated at any of these points.
In the early stages of developing a new service, a basic concept blueprint can be used to communicate
with both employees and customers. As the new service becomes more concrete, blueprints with
greater complexity and more operational details can be included. Prior to market testing and
commercialization, detailed blueprints are essential.
7. Discuss Figure 8.2 in terms of the four types of opportunities for growth represented there. Choose a
company or service, and explain how it could grow by developing new services in each of the four cells.
Figure 8.2 provides a nice vehicle for discussing generic growth strategies. The examples in the text
provides are useful in helping students identify exactly what the generic strategies might mean in
practice.
Students can then apply the four generic strategies to a company they are familiar with. Or, the
professor could provide background on a company and ask students to discuss specific growth strategies
based on Figure 8.2. A previously discussed case can sometimes be used for this as well. Using a
specific company as an example forces students to be more specific in defining current customers and
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thinking about potential new customers. It also forces them to clearly define existing services and to
think about potential new services. This discussion can lead naturally into a discussion of the challenges
of diversification.
Company Location
ARAMARK www.aramark.com
Bank of America www.bankofamerica.com
eBay www.eBay.com
Expedia www.expedia.com
IDEO www.ideo.com
Netflix www.netflix.com
Tide Dry Cleaners www.tidedrycleaners.com
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Companies]
Companies]
Companies]
From other sources:
• Cleveland Clinic [Harvard Business School Case 9-607-143, 2007]
• Pharmacy Service Improvement at CVS (A) [Harvard Business School Case 9-606-015, 2006]
• Zipcar: Refining the Business Model [Harvard Business School Case 9-803-096, 2005]
• Bank of America (A) [Harvard Business School case, 9-603-022, October 2002, written by Stefan
Thomke]
• Everdream [Harvard Business School case, 5-800-251, 2000]
• Sothebys.com [Harvard Business School case, 9-800-387, 2000]
CHAPTER 9:
CUSTOMER-DEFINED SERVICE STANDARDS
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CHAPTER TOPICS
• Factors Necessary for Appropriate Service Standards

• Types of Customer-Defined Service Standards
• Development of Customer-Defined Service Standards
• Technology Spotlight: The Power of Good Responsiveness Standards
• Global Feature: Adjusting Service Standards around the Globe
• Strategy Insight: Using Big Data to Define Service Standards and Improve Customer Experience
CHAPTER OBJECTIVES
1. Distinguish between company-defined and customer-defined service standards.
2. Differentiate among “hard” and “soft” customer-defined service standards and one-time fixes.
3. Explain the critical role of the service encounter sequence in developing customer-defined standards.
4. Illustrate how to translate customer expectations into behaviors and actions that are definable,
repeatable, and actionable.
5. Explain the process of developing customer-defined service standards.
LECTURE TIPS & AIDS
1. This chapter is about taking customer information and turning it into standards usually handled in other
functional parts of the organization such as operations or human resources. It is not a typical chapter
for a marketing text, yet it is where the rubber hits the road in terms of making good service happen.
2. Following the process for setting customer-defined service designs and standards is a good way to
structure the lecture and discussion. The instructor can often effectively use guest speakers from the
local community to talk about the way the process works in their organizations. Giving the guest
speaker the process figure prior to speaking to the class is an excellent way to reinforce the concepts.
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QUESTIONS FOR USE WITH CHAPTER OPENING VIGNETTE
Chapter 9: FedEx
1. How is the FedEx service quality indicator (SQI) different from service performance indices of other
companies?
2. Why does the management at FedEx believe so strongly in reporting performance measures in the
particular way it does?
3. In addition to the “hard” standards of the FedEx SQI, what “soft” customer-defined service standards
should FedEx use to measure its performance? Consider this question from your perspective as a
customer or potential customer of FedEx’s shipping services.
1. Working in a small group (3-4 people), choose a service company that group members are fairly
familiar with. (Your group won’t know everything it would like to know to do this exercise. When you
do not know the information, make some reasonable assumptions or use your best logic to develop the
answer.) After you have chosen a company, complete the following activities:
• Define the service encounter sequence for a typical customer.

• Describe expected behaviors/actions for each encounter.
• Choose three particularly important encounters and define hard and soft measures that you
could establish for these encounters.
2. Interview both an employee and a customer of a local service business. Create a service encounter
sequence for each person. How are the two sequences similar? How do they differ? What are the
implications of any differences for the company? Would you recommend any changes based on what
you found out?
1. How does the service measurement that we describe in this chapter differ from the service measurement
in chapter 5? Which of the two types do you think is most important? Why?
The measurement in this chapter is largely operational whereas the measurement in Chapter 5 was
perceptual. Both types of measurement are important and students can argue either way on this question
and can probably support either answer.
2. In what types of service industries are standards most difficult to develop? Why? Recommend three
standards that might be developed in one of the firms from the industries you specify. How would
employees react to these standards? How could you gain buy-in from them?
Standards are most difficult to develop in professional services and expert services. For these services,
specific, concrete and standardized behaviors can rarely be stated as standards because the service is
complex and depends on the expertise of providers. Nevertheless, some standards can be specified.
For example, the Mayo clinic could state as standards that every patient will be weighed and have blood
pressure checked, that each patient must complete a personal history form, and that each patient will
pay for services upon receipt of them. These particular standards would not be hard to obtain
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compliance for because they deal with the staff rather than the experts. However, the professionals and
experts would resist standards for themselves, believing that their work cannot be reduced to repetitive
actions and behaviors and instead stems from their expertise. Any standards developed for experts
must be shown to have value, perhaps in simplifying the work of the experts, in order to obtain buy-in.
3. Given the need for customer-defined service standards, do firms need company-defined standards at
all? Could all standards in a company be customer defined? Why or why not? What functional
departments in a firm would object to having all standards be customer-defined?
Customer-defined service standards are not sufficient to bring effectiveness to an organization. There
is a place in an organization for company-defined standards because these standards promote
productivity and efficiency. The operations function in an organization would object to having only
customer-defined service standards.
4. What is the difference between hard and soft standards? Which do you think would be more readily
accepted by employees? By management? Why?
Hard standards are operational standards whereas soft standards are perceptual standards. Employees
tend to accept operational standards more than perceptual standards because they trust the measurement
of operational standards to a greater degree. Often, perceptual standards are considered to be subjective
and more biased than operational standards.
5. Consider the university or school you currently attend. What are examples of hard standards, soft
standards, and one-time fixes that would address student requirements? Does the school currently use
these standards for delivery of service to students? Why or why not? Do you think your reasons would
apply to private-sector companies as well? To public or nonprofit companies?
A variety of hard and soft standards could be developed for a university or school. Hard measures
could be devised for behaviors such as starting classes on time and the accuracy of information. For
each support service (such as the library, computer support services, or registration), administrators
could determine what core promises are made to customers (which would include students, faculty and
administration). They could develop operational measures for reliability (such as right first time and
right on time) and responsiveness (speed with which important activities are carried out). Next,
perceptual measures could be developed for assurance and empathy and measured on surveys. One-time
fixes would deal with important behaviors that must be executed for the service to be successful. For
example, one-time fixes for instructors in their classes might include such behaviors as having a
syllabus on the first day of class and specifying in the syllabus how grades will be determined. Most
schools and universities will not have such standards in place, partly because they are unaware of how
these standards might help improve service delivery and partly because schools rarely approach
education as a delivered service. Similarly, many other nonprofit and public services that could benefit
from customer-defined service standards will not have them.
6. Think about a service that you currently use, then map out the service encounter sequence for that
service. What is your most important requirement in each interaction? Document these requirements,
and make certain that they are expressed at the concrete level of behaviors and actions.
This question will result in many different sequences for a variety of services. The main purpose of the
question is to assure that students can recognize requirements at the concrete level of behaviors and
actions.
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• “Vegas Vacation” – In this scene the Griswold family is checking into a Las Vegas hotel. The front-
desk employee provides very confusing directions on how to get to their hotel room. This clip could
be used to begin a discussion of what type of standards might be appropriate in this context.
• “Taxi” – In this movie there is a scene where a customer asks a cab driver (Queen Latifah) to get him
to the airport (so he will not miss his plane) in less than 15 minutes. She proceeds to get him there in
less than 10 minutes, speeding and driving recklessly along the way. This clip could be used to illustrate
how hard-standards (getting the customer to the airport in 15 minutes or less) have been accomplished
at the expense of soft-standards (being delivered to the airport in a safe and comfortable manner).
Company Location
Amazon www.amazon.com
Ford Motor Company www.ford.com
Four Seasons Hotel www.fourseasons.com
Granite Rock www.graniterock.com
Hampton Inn www.hamptoninn.com
John Robert’s Spa www.johnrobertsspa.com
Office Depot www.officedepot.com
Puget Sound Energy www.pse.com
The Walt Disney Company www.disney.com
Zappos.com www.zappos.com
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Companies]
Companies]
From other sources:
• Four Seasons Goes to Paris: “53 Properties, 24 Countries, 1 Philosophy” [Harvard Business
School Case 9-803-069, 2002]
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CHAPTER 10:
PHYSICAL EVIDENCE AND THE SERVICESCAPE
CHAPTER TOPICS
• Physical Evidence
• Types of Servicescapes
• Strategic Roles of the Servicescape
• Framework for Understanding Servicescape Effects on Behavior
• Guidelines for Physical Evidence Strategy
• Technology Spotlight: Virtual Servicescapes: Experiencing Services through the Internet
• Global Feature: McDonald’s Adapts Servicescapes to Fit the Culture
• Strategy Insight: Strategic Positioning through Architectural Design
CHAPTER OBJECTIVES
1. Explain the profound impact of physical evidence, particularly the servicescape, on customer
perceptions and experiences.
2. Illustrate the differences in types of servicescapes, the roles played by the servicescape, and the
implications for strategy.
3. Explain why the servicescape affects customer and employee behavior, using a framework based in
marketing, organizational behavior, and environmental psychology.
4. Present elements of an effective physical evidence strategy.
LECTURE TIPS & AIDS
1. To supplement the class lecture on the topic of physical evidence, student teams could be asked to
“produce” a short (4 to 5 minutes) video segment related to a specific servicescape. Although the
assignment could include a local business, it probably could be done on most college campuses by
looking at such servicescapes at a campus dining hall, a student recreational center, the library, the
business building, etc. (Many universities have facilities that will loan out video equipment at minimal
or no charge for such purposes.) Each video segment might address the following questions:
1. What is done well in this servicescape? Use the video to point out specific examples.
2. What are the important issues in designing/maintaining this servicescape so that it will be a
positive influence on customer expectations?
3. What part(s) of the servicescape could be improved or altered to positively influence the service
experience? Use the video to point out specific examples.
4. Do any of the following characteristics (color, lighting, shapes, sound, and smell) influence the
customer’s experience? Explain.
5. Which roles (package, facilitator, socializer, and differentiator) does this servicescape play?
Explain.
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Student groups can be assigned completely different services, or several groups may be assigned
different aspects of one provider’s servicescape. For example, several student teams could be assigned
the university golf course, but each might be responsible for a different aspect of the servicescape (e.g.,
parking lot, club house, driving range, or the course itself). Alternatively, a different approach might
be to make comparisons between providers who essentially provide the same service. In this case,
students could compare and contrast the university golf course’s servicescape with (if available) the
servicescape of a municipal golf course, a resort golf course, and/or a private country club golf course.
Each course is likely to have a very different servicescape which, in turn, is likely to have a different
effect on its customers. Once the video segments have been “produced,” they can be shown to the
entire class. The instructor can stop the videos to elaborate on various points and ask the video’s
producers questions. A major objective of the assignment is to illustrate how the servicescape can
influence the customer’s service experience.
2. An alternative to creating a video segment would be for the entire class to take a “field trip” to compare
and contrast two local service providers. This exercise can be used to demonstrate the differences in
competitive formulas of two service firms who are providing the same core benefit. Students could be
asked to compare a fast food franchise (e.g., McDonald’s, Wendy’s, Hardees, etc.) with a full-service
restaurant (e.g., TGI Fridays, Ruby Tuesdays, etc.). Ideally, two providers located next to each other
should be selected to allow students to go easily from one to the other. As part of the learning
experience students might be asked to answer the following questions:
1. For each provider, what is done well in this servicescape? Elaborate and point out specific
examples.
2. For each provider, what aspects of this servicescape have a positive influence on customer
perceptions of the overall service experience? Similarly, what aspects of this servicescape do
not necessarily have a positive influence on customer perceptions of the overall service
experience? Explain.
3. Which of the following characteristics (color, lighting, shapes, sound, and smell) in each
servicescape influences the customer’s experience? Explain.
4. What other aspects (besides the servicescape) of physical evidence are present?
5. How does each provider (fast food and full-service) use the servicescape as a differentiator?
In their positioning strategy? To appeal to their target segment(s)? To facilitate service
delivery?
6. How does each provider (fast food and full-service) use physical evidence (other than the
servicescape) as a differentiator? To enhance the customer’s experience? To facilitate service
delivery?
7. What suggestions would you make to improve the servicescape and other physical evidence
for each provider (fast food and full-service)?
To conclude the instructor might have all of the students come together at the same time at each
provider’s facility and relate their observations. A discussion about physical evidence is much more
vivid when the students actually can observe it and instructors can elaborate easily on observations
made by the students. If the field trip is carefully scheduled, the service providers’ management may
serve as “guest speakers” on physical evidence issues.
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3. Once again, to illustrate the influence of physical evidence, students could be turned to for their
expertise in the educational service delivery. Once the instructor has covered the major concepts from
the chapter, or even while the concepts are being covered, students might be asked about the
servicescape of where your particular class is being delivered. Questions could focus on the
advantages or the positive aspects of a servicescape, as well as what might be done to improve the
servicescape here in this setting. Additionally, students might also be asked about other aspects of
physical evidence that they use in order to evaluate the service being delivered by the instructor. (Care
should be taken in bringing up the servicescape in the classroom, particularly in older rooms. In
particular, an instructor should try to avoid creating an atmosphere that leads to a gripe session by the
students.)
Chapter 10: Marriott International, Inc.
1. Discuss the importance of the servicescape in positioning each of Marriott’s 18 hotel brands.
2. Why does Marriott go to such great lengths to mesh hotel design with employee selection and training
to match brand strategy, operational brand standards, and specific customer segments?
3. Look online for pictures of the Marriott brands “Moxy Hotels” and “Gaylord Hotels.” Using only
visual information about their physical evidence and servicescapes, describe their respective target
customer segments in terms of demographics, needs, benefits desired, etc. How effective is Marriott
at positioning its brands just on the basis of physical evidence?
1. This exercise requires a field trip by each group to observe a local service business. The instructor
and/or the class will identify a type of service business that has many local competitors so that different
types of service delivery options are available (specialty coffee houses, automobile oil changing
services and hair salons are ideal for this assignment). Small groups of students will then visit a service
business of their choice within the designated industry (e.g., every group must visit a hair salon). The
exercise consists of the following activities:
• With your group, visit the service business you have chosen. Observe the business in enough
detail so that you can describe both the servicescape and the tangible commodities that facilitate
performance or communication of the service.
• Describe your observations in a short paper (3-5 pages), and discuss what (if anything) the
business could do to improve the physical evidence aspects of its service delivery.
• You may want to supplement your text with a photographic and/or traditional blueprint (as
described in Chapter 8).
• This paper will be submitted for a team grade (i.e., one paper per team).
[Note: This exercise may also be combined with Exercise 1 at the end of Chapter 10 for a more
comprehensive team project.]
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2. Select a retail store to visit. You will be observing the store to see if you can identify its “personality.”
(Just as people have personalities, so do stores. And just like your personality probably turns some
people off and others on, a store’s personality attracts some customers and repels others.) Components
of a store’s personality included: atmospherics (the ambiance of the store -- created by what you hear,
see, smell and intuitively sense inside a store); service personnel; and other customers. You will be
gathering the following information to use in a class discussion on this topic:
• Record the name and address of the store.

• Describe the physical environment, the customers, and the employees.
• How do you feel in the environment?
• What is the target market? How do you think people in this group feel in the store?
• Does the environment consistently convey the image desired by the store? If yes, how? If no,
why not and what should be changed?
3. The instructor will divide the class into pairs and assign each pair a set of service businesses to observe
for this exercise. Student pairs should be assigned two businesses with similar offerings (e.g., Pair 1
would visit two hair salons, Pair 2 would visit two fast food restaurants, Pair 3 would visit two doctor’s
offices, etc.). Spend approximately 30 minutes in each business. Carefully but unobtrusively observe
the business while you are there and make brief written notes outside each business following your
field observation. Answer the following questions for each business separately:
• Describe the “atmosphere” of the establishment (store layout, colors, sounds, smells, etc.).
How crowded was the business? How did the atmosphere make you feel?
• Describe the customers. How were they dressed, and how did they act? Were they shopping
alone or with others? Can you make any inferences regarding customers’ lifestyles or incomes?
Why or why not?
• Describe the customer contact personnel. How were they dressed, and how did they behave?
• Describe the general demographic characteristics of the employees (gender, age range,
ethnicity, etc.). Can you make any inferences about whether the business is a “good” place to
work based on the employees’ behaviors?
• Sum up in a few words your impressions of the store’s “culture.”
4. Have students find a clip from a current film that visually depicts elements of physical evidence in
service businesses. Show the clips to the class and provide a brief analysis of how the physical evidence
is used in the film setting to enhance the scene and its impact on the actors and the audience. (Examples
of this include the scene in Pretty Woman where Julia Roberts tries unsuccessfully to buy clothes in a
very posh establishment and the scene in Father of the Bride where Steve Martin, his wife, and his
bride-to-be daughter are in the caterer’s office ordering a wedding cake. Many of the clips students
bring to class are fun as well as an effective way to demonstrate the importance of physical evidence.)
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1. What is physical evidence, and why have we devoted an entire chapter to it in a marketing text?
Physical evidence is the environment in which the service is delivered and where the firm and the
customer interact and any tangible commodities that facilitate performance or communication of the
service. Physical evidence includes the servicescape, a term used to describe the physical facility where
the service is produced and/or delivered. Examples of physical evidence are shown in Tables 10.1 and
10.2. The definition of physical evidence was first presented in Chapter 1 to introduce the term as one
of the three new P’s in the service marketing mix. Because services are intangible, customers frequently
rely on physical, tangible cues to learn about the service and to form their initial expectations. Later,
during actual consumption of the service, physical evidence can affect customers’ satisfaction as well
as facilitating or hindering their use of the service. Because physical evidence of service can affect any
phase of the service evaluation process from setting of initial expectations to the purchase decision and
satisfaction during consumption, it is of critical importance to services marketers.
2. Describe and give an example of how servicescapes play each of the following roles: package,
facilitator, socializer, and differentiator.
By discussing each of these roles, students will see even more clearly the marketing impact of the
servicescape. This question works well as a lead-in to a more structured lecture/discussion of the
theoretical model shown in Figure 10.1. Descriptions for the roles and examples are as follows:
• Package: As a “package” the servicescape helps to establish the image of the service
organization in ways similar (although more complex) to a package for a tangible product.
Students can be asked to provide examples of local service establishments where the
servicescape provides effective/ineffective packaging for the service.
• Facilitator. The servicescape also serves as a facilitator for those who must perform actions in
the servicescape. How the setting is designed can enhance or inhibit the efficient flow of
activities, making it easier or harder for customers and employees to accomplish their goals.
Again, students can provide their own examples (from their perspectives as customers or
employees) of ways the servicescape acts as a facilitator or inhibitor for their actions.
• Socializer. The way the servicescape is designed can help both customers and employees to
understand their roles, where they can/cannot be, and how they should act in the environment.
• Differentiator. Elements of physical evidence can serve to distinguish the service organization
from its competitors.
3. Imagine that you own an independent copying and printing shop (similar to FedEx Kinko’s). In which
cell would you locate your business in the typology of servicescapes shown in Table 10.3? What are
the implications for designing your physical facility?
This question allows students to apply their knowledge of the typology of service organizations to a
specific context. Most students will be familiar with Kinko’s or similar copying and printing services.
A typical Kinko’s service would lie in the interpersonal services row of the typology, toward the lean
column. By placing the service in this area of the typology, students should note that decisions
regarding the design and layout of the facility will affect both customers and employees. Thus, the
servicescape should be designed to facilitate employee productivity, comfort and other organizational
goals. At the same time, the servicescape should communicate the image of the organization effectively
to customers and facilitate their usage of the place as well (through signage, information, layout, access
to self-service equipment, etc.). The Kinko’s servicescape should thus be designed for both
organizational/employee goals as well as marketing/customer goals. Because a typical Kinko’s is
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located under one roof to accomplish a limited set of purposes (unlike a hospital, hotel, etc.), the
servicescape is relatively lean and decisions for its design are relatively simple. A useful extension of
this question can be incorporated if students are working on projects for specific companies. They can
then locate their project companies in the Typology (Table 10.3) and discuss the implications for that
particular context.
4. How can an effective physical evidence strategy help to close provider gap 2? Explain.
Because physical evidence is a form of communication that serves to tangibilize the service in the
customers’ eyes, it is one of the strategies the organization can use to match service design to customer
expectations (Gap 2). The appearance of the service facility and related tangibles will communicate
things about the nature of the service and the level of quality customers might expect. By planning the
physical evidence to match customer expectation, gap 2 will be diminished.
The servicescape in particular has a large role to play in closing gap 2. As a “facilitator, the servicescape
can aid or inhibit service production and delivery. Effective design and specification of the
servicescape to match customer and employee needs/expectations is critical for quality service. For
example, if customers expect to wait no longer than 5-7 minutes in a grocery store checkout line, then
the number of check-out counters and line configurations need to be designed to facilitate this process.
5. Why are both customers and employees included in the framework for understanding servicescape
effects on behavior (Figure 10.1)? What types of behaviors are influenced by the servicescape
according to the framework? Think of examples.
This question is intended to help students work further with Figure 10.1 and to see its implications for
marketing. Both customers and employees are included in the framework since in many service
contexts both groups are physically present in the service facility and thus will be affected by its design,
layout, décor, and ambient conditions. It is important to note in this context that customer and employee
needs for servicescape design are not necessarily compatible, presenting challenges for service
organizations. The general types of behaviors influenced by the servicescape are illustrated in the far
right column of Figure 10.1. These include individual behaviors (approach/avoidance) of customers
and employees as well as social interactions between and among customers and employees. Many
examples of these types of behaviors are included in the text.
6. Using your own experiences, give examples of times when you have been affected cognitively,
emotionally, and physiologically by elements of the servicescape (in any service context).
By providing their own examples, students are encouraged to understand and apply the model shown
in Figure 10.1 and the three types of responses as discussed in the text on pp. 298-299. Through the
discussion of their own examples, students will see how their experiences differ or are similar to their
classmates. Throughout the discussion, the instructor can clarify any misunderstandings of the three
types of internal responses.
7. Why is everyone not affected in exactly the same way by the servicescape?
The text discussion indicates that not all individuals respond the same way to the perceived
servicescape. Personality differences as well as temporary conditions like moods or the purpose for
being there can cause variations in how people respond to the servicescape (see pp. 299-300 of the
text).
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8. Describe the physical environment of your favorite restaurant in terms of the three categories of
servicescape dimensions: ambient conditions; spatial layout and functionality; and signs, symbols, and
artifacts.
This question makes the abstract servicescape dimensions more concrete through application to a
personal example. By interpreting the dimensions in the context of their favorite restaurant, students
will better understand the model and the instructor can clarify any obvious misunderstandings. The
question can be followed by a general discussion of the entire model and its implications for marketing
strategy.
9. Imagine that you are serving as a consultant to a local health club. How would you advise the health
club to begin the process of developing an effective physical evidence strategy?
This question provides an opportunity for students to apply almost everything they have learned in this
chapter. It can be given as a homework assignment, where students are asked to write a memo to a
health club manager explaining the marketing impact of the physical environment on both employees
and customers (using the roles of the servicescape and the theoretical model of servicescape effects as
guides). The letter can also include recommendations for developing an effective physical evidence
strategy (using the guidelines for physical evidence strategy on pp. 304-307 as a guide). Adaptations
of this question have been used very effectively in exams.
• “Wild Things” – Fairly early in this movie, one of the main characters is speaking with another man
who indicates that the first one needs a lawyer. This man then drives up to a lawyer’s office (next to a
pawn shop in a rundown outdoor strip center) and goes inside...the atmosphere does not suggest a high-
class law firm. Before the clip is shown, students could be asked to describe the servicescape in a
typical law office; this clip can be used to illustrate what would probably NOT be expected in the
servicescape of a reputable law firm.
• “Father of the Bride” – After agreeing to hire a wedding coordinator, George Banks (Steve Martin), his
wife, and his bride-to-be daughter are in the coordinator’s office discussing potential wedding plans
and the ordering of a wedding cake. The clip can be used to illustrate how the servicescape and other
types of physical evidence (specifically, a book with pictures of wedding cakes) can influence the
customer’s experience.
• “Daddy Day Care” – In one scene, Charlie (Eddie Murphy) and his wife Kim visit a very impressive
preschool in a very nice, elegant building—a service provider with an impeccable servicescape.
Although the cost of the preschool is very high, they decide to send their five-year-old son there. A
few minutes later in the movie they realize they cannot afford this preschool any longer, so they look
at three other (less elegant) preschools. The servicescape in two of these other preschools is enough to
turn them off before finding out anything about the actual quality of the service being provided, and
therefore they immediately decide not to use these service providers.
• “Ghostbusters” – for a different, fun activity, a clip from this movie could be used to have students
identify aspects of the servicescape and other physical evidence. In particular, a new business opens
called Ghostbusters. Starting with the scene where a sign is being put up on the outside of a building,
this five-minute clip (where a customer comes in and looks around) includes lots of elements that could
be identified. Students might even be asked to suggest which elements of physical evidence might be
changed or altered to improve a first-time customer’s impressions.
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• “National Lampoon's European Vacation” (1985). Clip 1-start 17:47, stop 19:42, clip 2-start 19:43,
stop 20:35. (clip 1 length 1:55, clip 2 length 52 seconds). The Griswold family, who won a
European vacation from a game show, is in London, England. They are staying at the Royal Imperial
Windsor Arms Hotel. The family arrives at the hotel and the wife, Ellen, is quick to judge the hotel
because of what she sees. Then the couple walks into their assigned room where they find that the room
does not match what the brochure showed. Illustrates physical evidence (The 3 P's) and provider gap
2.
• “Caddyshack” (1980); First Scene (7:52-8:56); Second Scene (9:14-9:58). The first scene starts
with the owner of the golf course pulling into the country club enraged due to the fact that his greens
keeper was not preventing gophers from coming into the country club from a nearby construction site.
The gophers were acting as a nuisance while destroying the putting greens and fairways. The owner of
the golf course threatened to "get a new greens keeper" if the problem was not fixed immediately! As
a result the greens keeper said he would get his best man to fix the problem, right away. The second
scene begins with the greens keeper telling his "best man," Carl, to kill all gophers on the course.
However, initially there was a miscommunication between them until Carl finally understood why a
gopher problem is so significant and agreed to take care of the issue. Illustrates the service-scape and
tangible cues.
Company Location
Apple Retail Stores www.apple.com/retail/
Build-A-Bear Workshop www.buildabear.com
British Airways www.britishairways.com
NASCAR www.nascar.com
Recreational Equipment Inc. (REI) www.rei.com
Starbucks www.starbucks.com
Washington Mutual Bank www.wamu.com
Yellowstone National Parks (virtual servicescape) www.yellowstone.net/onlinetours
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• Giordano: Positioning For International Expansion [included in the fifth edition of this text: Zeithaml,
Bitner, and Gremler (2009) Services Marketing: Integrating Customer Focus Across the Firm, New York,
• Hong Kong Disneyland [included in the fifth edition of this text: Zeithaml, Bitner, and Gremler
Companies]
Companies]
From other sources:
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CHAPTER 11:
EMPLOYEES’ ROLES IN SERVICE DELIVERY
CHAPTER TOPICS
• Service Culture
• The Critical Importance of Service Employees
• Boundary-Spanning Roles
• Strategies for Delivering Service Quality Through People
• Customer-Oriented Service Delivery
• Technology Spotlight: How Technology Is Helping Employees Serve Customers More Effectively and
Efficiently
• Global Feature: How Well Does a Company’s Service Culture Travel?
• Strategy Insight: Strategies for Managing Emotional Labor
CHAPTER OBJECTIVES
1. Demonstrate the importance of creating a service culture in which providing excellent service to both
internal and external customers is a way of life.
2. Illustrate the pivotal role of service employees in creating customer satisfaction and service quality.
3. Identify the challenges inherent in boundary-spanning roles.
4. Provide examples of strategies for creating customer-oriented service delivery through hiring the right
people, developing employees to deliver service quality, providing needed support systems, and
retaining the best employees.
LECTURE TIPS & AIDS
1. An alternative to presenting this material in straight lecture format would be to have students help in
the delivery of the service. Figure 11.4 provides an excellent framework for such an activity. In
particular, the class could be divided up into 12 approximately equal size groups (2-4 students,
depending on class size). Each group might be then assigned one of the human resource strategies
depicted in Figure 11.4. For example, one group might be assigned the “empower employees” strategy.
As part of their assignment, then, the students in that team would be asked to describe what we mean
by empowering employees, to discuss how this fits into one of the strategies (in this case “develop
people to deliver service quality”), and to provide examples from industry that they are aware of where
these strategies have been employed. This will help to break up the routine of regular lectures, and
allow students to become more involved in the classroom discussion.
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2. Guest speakers can often make a valuable contribution to what is being said in class. Figure 11.4 can
also be used to structure a lecture around the topics in this chapter for a guest speaker. In particular, an
instructor might approach a guest speaker in advance. For example a vice president of marketing or
possibly human resource management in an organization, and ask him or her to come in during the
discussion of the material in this chapter. Without a lot of preparation, many guest speakers can talk
intelligently from this figure. In particular, many knowledgeable managers will know what their
company is planning and doing for many of the human resource strategies depicted in Figure 11.4. So
for example, a guest speaker can easily talk about what’s being done to empower employees, to train
for interactive skills, or things they may be doing to become a preferred employer.
Providing this figure as a framework provides benefits for both an instructor and the guest speaker. For
the instructor, it helps to keep the conversation and the discussion on topics related to class material.
For the guest speaker, it gives him/her an organized framework from which to talk. Most of the topics
are areas that he/she is probably very knowledgeable, and the figure provides an easy method to present
ideas and strategies used in their particular organization (without having to spend a lot of time in
developing a specific framework for that particular class lecture).
QUESTIONS FOR USE WITH CHAPTER OPENING VIGNETTE
Chapter 11: Employees are the Service and the Brand
1. Discuss how the actions of the employees in each of the three stories reflect on their respective
company brands?
2. What key concepts from Chapter 11 are exemplified in each of the three stories in the opening
vignette? Be as specific as possible.
3. Choose one of the three stories and write up two tweets – one from the perspective of the customer
and one from the perspective of a fellow customer – to convey your perceptions of the service
provided.
1. In groups of 5 or 6, develop “role plays” of some of the human resource strategies for closing gap 3
(see Figure 11.4). Each group should create two scenarios: one where these strategies are not used and
one where they are used effectively. Each group then presents its scenarios in class. Groups should
start with the “ineffective” scenario and then ask the class to critique what went wrong before presenting
their “effective” version.
2. Have students find clips from popular movies that demonstrate either very effective or very ineffective
internal service relationships. Show the clips to the class and provide a brief analysis of the film
material as it relates to Chapter 11.
Students often come up with amazing ideas for this assignment. One example of this is a student who
showed a clip from a James Bond movie where “Q” and the R & D personnel for Her Majesty’s Secret
Service were showing Bond all the gadgets they had developed to support his hazardous occupational
activities. The student then showed a scene from one of the Star Wars films that demonstrated the poor
internal service Darth Vader received from his organization. The final part of this presentation was a
mini-analysis of the qualitative and quantitative impact of the internal service on the front-line
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employees and their organizations (all very negative for Darth Vader and the Evil Empire and very
positive for James Bond and Her Majesty’s Secret Service!).
3. A good question for stimulating lively discussion is “Is empowering employees always a good thing?”
To address this question, an instructor might consider passing out a copy of the article “Employees
Putting on the Ritz at KMC” included on the next page. This article discusses an employee
empowerment program at Kootenai Medical Center in Coeur d’Alene, Idaho.
Students could be asked to discuss potential benefits of the program of empowerment at KMC, and/or
discuss potential drawbacks. Perhaps the class might even be divided and forced to argue for the
benefits of such a program, or argue regarding the drawbacks of such empowerment. Students might
also, at the end of the discussion, think from a “service marketing” perspective whether or not KMC’s
program is a good idea, and asked to defend their opinion. Adaptations of this question have been used
very effectively in exams.
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Employees Putting on the Ritz at KMC:
Hospital workers allowed to spend $1,000 a year to improve patient stays
By Craig Welch
COEUR d’ALENE—Kootenai Medical Center plans to give all 1,000 of its employees the
spending power of a hotel housekeeper. But not just any housekeeper—a Ritz-Carlton Hotel
housekeeper. Starting Nov. 1, KMC’s top brass will let every hospital worker spend up to $1,000
a year to improve patients’ or family members’ stays or to help resolve customer complaints. The
million-dollar move mirrors a program at the luxury hotel, which empowers all its employees to
spend money without a manager’s approval. The idea: Keep customers happy.
“We do everything we can to try to never lose a customer,” said Amber Vierra, a spokeswoman for
the Ritz in San Francisco. Joe Morris, the hospital’s chief executive officer, thinks that is a worthy
goal for a hospital as well. Morris stole the idea from author and business guru Tom Peters, who
lectured last month at Eastern Washington University.
“He told us about a housekeeper named Rosa in charge of the second floor at the Ritz-Carlton who
had the authority to spend a couple of thousand dollars to please a guest,” Morris said. Morris ran
with the brainstorm. Under his new program, radiologists could knock down a customer’s bill
when it’s clear the patient had been overcharged. A janitor could buy pizza for family members
waiting for grandma to come out of surgery. A dietician could pay for a cab ride for an elderly
woman who can’t find a ride home.
“People want to have as much control of their work as possible,” Morris said. “Giving them
authority to spend money is a symbolic one, and it takes care of needs of patients and family. That
sends a good message to folks.”
Currently, he said, patients with billing complaints go through a billing department. It may be
months before the complaint is resolved. Other examples abound. “Sometimes a person flies in to
visit a relative and the admitting desk clerk says they’re not in here and we later discover they are
in the hospital,” Morris said. Under the program, Morris said, a receptionist could apologize to
Uncle Joe and perhaps pay for his hotel room.
At the Ritz-Carlton in San Francisco, receptionists frequently eliminate phone charges if customers
can’t remember placing the call, said Vierra. “If another guest is making noise next door, we would
relocate the guest,” she said. “If we didn’t have a room, we’d offer them another night’s stay free.”
The hotel program aptly is named “instant guest pacification,” Vierra said. Morris is still working
out some of the finer points of the hospital’s program. He wants employees to fill out reports
explaining the expenses so the hospital can better track—and rectify—complaints.
And while 1,000 employees spending $1,000 each could cost $1 million a year, Morris says he isn’t
concerned. “Everyone is not going to spend all the money,” he said. Besides, “if they’re correcting
a mistake or problem, it’s something we should do anyway.” His biggest concern: Employees
might be reluctant to spend the money. “I might have to do it myself just to show them it’s OK,”
he said, laughing.
[Note: This article originally appeared in The Idaho Spokesman-Review, October 9, 1997, pp. A1 and A15.]
Copyright 1997. Reprinted with permission of The Spokesman-Review.
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1. Define service culture. Why is service culture so important? Can a manufacturing firm have a service
culture? Why or why not?
As defined by Christian Grönroos and cited in the text, a service culture is “a culture where an
appreciation for good service 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.” The richness of this definition and the difficulty in achieving it are discussed on pp. 316-
319. Organizations that have very strong service cultures (e.g., FedEx, Nordstrom, Disney, Ritz-
Carlton) usually have had this type of culture for a long time, perhaps even from the time the
organization was first established. Changing from a non service culture to a service culture, while it
can be done is a long and challenging process. Given the definition of a service culture, a manufacturing
company can certainly have a service culture. In fact, many are recognizing that to be competitive,
they must work toward achieving a service culture.
2. Why are service employees critical to the success of any service organization? Why do we include an
entire chapter on service employees in a marketing course?
Because services are typically delivered by people to people, the employees who communicate about
and actually deliver the service are critical to the organization’s success. As stated near the beginning
of the chapter:
• They are the service.

• They are the organization in the customer’s eyes.
• They are the brand.
• They are marketers.
Each of the above ideas is developed on p. 320 of the text. Further, there is considerable research that
suggests that employee satisfaction and customer satisfaction are correlated. Organizations that ignore
or treat their employees badly will likely have customers who are less satisfied than will organizations
where employees are treated well. Exhibit 11.1 illustrates that Google believes in the underlying
linkages between employee satisfaction and customer satisfaction. Finally, the dimensions of service
quality are frequently driven by employee behaviors. Quality service is therefore highly dependent on
recruiting, training, and retaining employees who can and will deliver excellent service.
3. What is emotional labor? How is it different from physical or mental labor?
Emotional labor is a term coined by Arlie Hochschild in her book The Managed Heart (note 26 in the
chapter). It is the type of labor that goes beyond physical or mental skills, drawing on employees’
feelings and inner emotions. It means delivering smiles, making eye contact, showing sincere interest,
and engaging in friendly conversation with people who are essentially strangers. Emotional labor often
requires employees to suppress their true feelings at the moment. A good follow-up to this question is
to ask students to think about jobs they have had and whether emotional labor was a major part of the
job. The students’ own examples help to make the concept even more concrete.
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4. Reflect on your own role as a frontline service provider, whether in a current job or in any full- or
part-time service job you have had in the past. Did you experience the kinds of conflicts described in
the boundary-spanning roles section of the chapter? Be prepared with some concrete examples for
class discussion.
This question allows students to make more concrete, through application, the types of conflicts
discussed in the text on pp. 325-328. Students will generally provide excellent and clear examples. The
four major sources of conflict are:
• person/role conflicts: employees feel that they must suppress their own personalities,
orientations, or values to effectively perform their jobs.
• organization/client conflicts: employees are faced with conflicting needs of the organization
versus the customer; this conflict is especially intense when the employee believes the
organization’s policies/rules are wrong and the customer is right, but yet he/she can’t do what
the customer is asking for.
• interclient conflicts: these conflicts occur when the employee is serving multiple customers
with conflicting needs—to satisfy one customer may mean causing another customer to be
disappointed.
• quality/productivity trade-offs: in many instances, employees are asked to provide both high
quality/customer satisfaction and to be efficient and productive; these goals are not always
compatible, particularly at the level of individual employee/customer interactions.
5. Select a service provider (your dentist, doctor, lawyer, hair stylist) with whom you are familiar, and
discuss ways this person could positively influence the five dimensions of service quality in the context
of delivering his or her services. Do the same for yourself (if you are currently a service provider).
This question allows students to see how the dimensions of service quality (reliability, assurance,
tangibles, empathy, and responsiveness) are reinforced by individual employees at the service
encounter level. Many times discussions of the dimensions tend to stay at the abstract or organizational
level. By focusing in on a specific person (or even themselves), students can start to see how the
behaviors of individual employees are what actually determine perceptions of quality in many
instances.
6. Describe the four basic human resource strategy themes and why each plays an important role in
building a customer-oriented organization.
The four basic themes are shown in Figure 11.4, and each is discussed in some detail on pp. 328-340.
It is important to point out that at the center of Figure 11.4 is the purpose for developing the four
strategic themes: customer-oriented service delivery. The four strategy themes are: hire the right
people; develop people to deliver service quality; provide needed support systems; and retain the best
people. The first paragraph at the beginning of each of the four strategy theme sections provides the
rationale for the strategy and how it is linked into the overall goal of delivering customer-oriented
service. This question can lead into a more detailed discussion of any/all of the specific strategies listed
within the four basic themes.
7. What is the difference between service competencies and service inclination? Provide examples
(preferably from your own work context or from another context with which you are familiar). Why do
service employees need training in both?
Service competencies are those basic skills, knowledge, and capabilities needed to perform a particular
job. For example (other examples are provided in the text):
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• a bank teller must be able to operate the bank’s computer information system in dealing with
customers, and have basic math skills and knowledge of the bank’s policies and procedures.
• a medical doctor must have a degree from a certified medical school, have passed certain
exams, and have knowledge of policies and procedures related to hospitals, insurance
companies, etc.
• a sanitation engineer (garbage collector) must be able to drive a particular type of large
collection vehicle and operate the equipment, have the physical strength required to do the job,
and have knowledge of the company’s policies and procedures.
In addition to the service competencies required to do the job, service employees also need service
inclination, an interest in providing courteous, caring, responsive and empathetic service. They need
training in listening, problem-solving, communication and interpersonal skills. Many times, it is the
employee’s service inclination that can provide a competitive advantage for an individual provider or
a company. Customers often assume that the service competencies are there and do not give a firm
“extra credit” for being good at these. However, skill in providing caring, responsive, and empathetic
service frequently surprises customers and may even result in “exceeding their expectations.”
Following a discussion of these two skills sets, using students’ own examples, it is useful to ask how
many of them received training on their jobs in one or both types of skills. In most cases, students will
have had technical skills training, but interactive skills training is far less common.
8. Is empowerment always the best approach for effective service delivery? Why is employee
empowerment so controversial?
This question can provide quite a long and meaningful discussion since empowerment is a well-used
and often poorly understood concept. If the instructor plans to use this question for a lengthy discussion,
the source article for Exhibit 11.2 provides excellent back-up and additional material to add to the
discussion. In a 1992 Sloan Management Review article, Bowen and Lawler presented a contingency
framework for when empowerment is most effective vs. a production line approach to service. They
suggest that an empowerment approach is best when:
• the business strategy is one of differentiation and customization

• customers are long-term relationship customers
• technology is nonroutine or complex
• the business environment is unpredictable
• managers and employees have high growth and social needs and strong interpersonal skills.
A production line approach is most appropriate when the opposite conditions hold.
Employee empowerment is controversial for a variety of reasons:
• it is often poorly understood

• poorly designed empowerment strategies are tried and fail to produce results
• it is threatening particularly to middle managers who may see their authority and scope of
control diminishing
• there are real benefits, costs, and tradeoffs (see Exhibit 11.2)
• it is not always the most appropriate strategy (as discussed above).
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• “Castaway” – The movie begins with a package being delivered in Russia (Tom Hanks sent it to himself
before he left from Memphis). Tom Hanks, a FedEx employee, explains the FedEx philosophy and the
focus on being a speedy and reliable service provider (“we never lose sight of the time”). The clip can
be used to discuss service culture, as well as the difficulty of transferring a service culture across
cultures.
• “Saturday Night Live Goes Commercial” (“MetroCard” clip) – In a spoof of a credit card commercial
that appeared in the 1980s, Rosann Barr plays a credit card customer service representative and Phil
Hartman a customer who loses his credit card. In this clip, she is clearly NOT an empathetic (one of
the five dimensions of service quality) employee.
• “Fawlty Towers” (“Communication Problems” episode) – In this scene, a female hotel customer
complains about the size of the bath tub and the view from the room...the employee (Basil) is quite rude
in interacting with the customer.
• “Road Trip” – In this clip, three college-age customers order breakfast, including one customer who
asked for no powdered sugar on his waffle. The employee “fixes” the problem in a very gross,
unethical, and rude manner. (Note: the manner in which the problem is resolved could be perceived as
highly offensive…and, for that reason, might actually appeal to some college students!)
• “Ghost World” – A new movie theater employee is being trained how to interact with customers, and
does not do all that well. The clip could be used to illustrate human resource strategies for closing the
Service Performance gap (gap 3).
• “Maid in Manhattan” – A maid (Jennifer Lopez) attempts to make a purchase at the hotel where she
works. The employee is very rude to her and basically ignores her at the counter (and even talks about
her on the phone). The clip illustrates common complaints about service workers—that they are
apathetic and unconcerned about the satisfaction of their customers.
• “Legally Blond” – Reese Witherspoon, playing the part of a legal intern, interviews a client in order to
determine if the client has an alibi for the crime for which she is accused. The client shares an alibi,
but then asks that the intern NOT share it with anyone else. When the intern returns to the law firm, a
senior partner asks her to reveal the alibi, but she indicates that she promised not to do so. This clip
could be used to demonstrate the sources of conflict for boundary-spanning employees, particularly
person/role conflict and organization/client conflict.
• “Waiting” (2005). Three scenes: Chapter 4 / 18:49 – 19:51 (length 1:02); Chapter 12 / 47:55 – 48:10
(length 0:15); Chapter 12 / 48:11 – 49:19 (length 1:08). Each clip shows how a restaurant manager sets
expectations and rules of behavior for his employees and explains the impact of their actions on other
employees.
• “Forgetting Sarah Marshall” (2008). Chapter 4 / 15:10 - 19:42 (length 04:32). Peter decides to
take his chances and visits Hawaii without making any reservations. He arrives at his desired resort
only to find out it is completely booked. The hotel employee knows that no one ever books the hotel's
most expensive suite and makes the decision to allow him to stay there instead of turning him away.
Illustrates employee empowerment.
• “Dude, Where’s My Car?” (2000). (2:07 in length). Customers pull up to a drive-through
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speaker and place a food order. After every item, the employee on the speaker asks, “and
then?” This continues even when the customers are done ordering, to the point that the
customers become enraged and attack the speaker box. Illustrates the service performance gap,
the critical importance of service employees, the (im)proper training of employees.
Company Location
Blackboard www.blackboard.com
Chick-Fil-A www.Chick-fil-A.com
Disneyland Paris www.disneylandparis.com
Four Seasons Hotel www.fourseasons.com
Imperial Hotel (Tokyo) www.imperialhotel.co.jp
Google www.google.com
Merrill Lynch www.ml.com
Nordstrom www.nordstrom.com
SAS Institute www.sas.com
United Parcel Service www.ups.com
Yellow Transportation www.yrcw.com
Companies]
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Companies]
• AT&T (A): Focusing the Services Salesforce on Customers; AT&T (C): Employees as Customers
[included in the second edition of this text: Zeithaml and Bitner (2000) Services Marketing:
Integrating Customer Focus Across the Firm, New York, NY: McGraw-Hill Companies]
From other sources:
• Four Seasons Goes to Paris: “53 Properties, 24 Countries, 1 Philosophy” [Harvard Business
School Case 9-803-069, 2002]
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CHAPTER 12:
CUSTOMERS’ ROLES IN SERVICE DELIVERY
CHAPTER TOPICS
• The Importance of Customers in Service Cocreation

• Customers’ Roles
• Self-Service Technologies—The Ultimate in Customer Participation
• Strategies for Enhancing Customer Participation
• Technology Spotlight: Technology Facilitates Customer Participation in Health Care
• Global Feature: At Sweden’s IKEA, Customers Around the World Cocreate Customized Value
• Strategy Insight: Customer Cocreation of Value: An Important Strategy Frontier
CHAPTER OBJECTIVES
1. Illustrate the importance of customers in successful service delivery and cocreation of service
experiences.
2. Discuss the variety of roles that service customers play: productive resources for the organization,
contributors to quality and satisfaction, and competitors.
3. Explain strategies for involving service customers effectively to increase satisfaction, quality, and
productivity.
LECTURE TIPS & AIDS
1. The topic of customers’ roles in service delivery is a very interesting one to discuss in a classroom
setting. To prepare students to take an active role in the lecture, students might be asked during the
meeting prior to the discussion of this chapter to do the following:
Your assignment is to choose a service that requires a moderate or high level of your participation as a
customer. Table 12.1 provides examples of such services. You should pick a unique service, one that
few people in the class are likely to select. The following questions pertain to the service you have
selected. In addition to answering the questions on this sheet, you should be prepared to discuss any
(or all) of these questions in class. Students will be randomly selected to discuss their responses to
these questions to illustrate various concepts included in the chapter.
1. What service have you selected?

2. Describe your role, as a customer, in the service delivery.
3. How did you learn your “role”?
4. How important is the customer to the service delivery process?
5. How would you describe your level of participation (low/medium/high)? Explain.
6. What influence do other customers have on your service experience?
7. When might other customers enhance your experience?
8. When might other customers diminish your experience?
9. Could you be considered a “partial employee” of this organization? Explain.
10. When might you, as the customer, be able to enhance your experience?
11. When might you, as the customer, be able to do something that diminishes your experience?
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12. Is this a service that you might, at some point, be able to provide yourself (without the service
provider’s assistance)? Why or why not?
The combination of providing the actual discussion questions in advance, allowing students to select a
service they are familiar with, and providing the opportunity for students to think through questions
prior to class can significantly help in increasing class participation. This activity is particularly good
in encouraging (or even “forcing”) participation from students who are normally very quiet in class. If
students are expected to turn in written answers to these questions, most of them will be fairly prepared
to contribute to class discussion. In a class of 20 or more, the instructor can easily move from one
question to another and from one student to another so that many students are involved in co-creating
the classroom experience.
2. The following suggestion is for those instructors that want to try something very different in their class.
This activity will, in effect, “turn the tables” in the classroom by having the students take on the role of
instructor and having the instructor become a student. In particular, the last part of the chapter (on
strategies for enhancing customer participation) will be “taught” by teams of students. The class is
divided into teams in the meeting prior to this one. (The example below is for seven teams, but the
outline could easily be altered for a different number of teams.) Team 1 is instructed (privately) that
the instructor will be a couple of minutes late and that they should begin the discussion at the normal
starting time for the class. Each team will be expected to cover their assigned material in 3-5 minutes.
In our next class, we will begin class by having each team “produce” a brief (3-5 minute)
presentation related to a specific issue for enhancing customer participation. Your task is to
address the major elements of the section of textbook that you have been assigned. Each segment
should highlight the major points of the section and provide an example of each relevant issue
(other than what is in the textbook). (Although you will not have to discuss it, be sure to observe
your own roles in the service delivery of this class session, as you will be “co-creating” the
service.)
Team 1 Overview/Introduction/Goals of a Customer Participation Strategy (p. 365)
Team 2 (1) Define Customers’ Roles (pp.365-367)

Customer’s Job:
Helping Oneself
Helping Others
Team 3 Customer’s Job: (pp. 367-369)

Promoting the Company
Individual Differences: Not Everyone Wants to Participate
Team 4 (2) Recruit, Educate, and Reward Customers (pp. 370-373)

Recruit the Right Customers
Educate and Train Customers to Perform Effectively
Team 5 Reward Customers for Their Contributions (pp. 373)
Team 6 (3) Manage the Customer Mix (pp. 373-374)
Team 7 Summary of Customer Participation Strategies (pp. 365-375)
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The instructor’s role is to play a disruptive student. The following is a list of some “disruptive
behaviors” that students exhibit from time to time:
• Come to class late (and take a seat not so quietly)

• Dress in sweats, shorts, baseball cap (backwards, of course)
• Bring in backpack with noisy food (e.g., chips, apple, can of pop) and a newspaper
• Forget to bring notebook paper, a pencil, or the textbook
• Ask fellow students about what the topic is (and why the instructor is not up front)
• Pass notes, food, pencils, or whatever to students on the other side of the classroom
• Take a little nap (with head down on the desk)
• Read a newspaper, send text messages, have your cellphone ring
• Work on an assignment for another class
• Continually talk and make negative comments about wanting to be somewhere else
• (you probably have your own observations to add to the list…)
As the student teams attempt to deliver their 3-5 minutes worth of material they were assigned, others
in the class will most likely be distracted by the “new student” (the instructor) in the class. It is unlikely
that much of the material that is covered will be remembered by anyone other than the team that
prepared it. However, this exercise can be an extremely insightful lesson about the role the service
employee, customers themselves, and other customers can play in the delivery of the service.
Once the student teams are finished (you may want to stop them early) and you as the instructor are
now “back in charge,” the class can discuss what just occurred. Students can reflect on (1) the difficulty
(as the service provider) in delivering the service—even without the “disruptive student” (instructor),
(2) the difficulty of delivering the service when there is an uncooperative customer, and (3) the
difficulty of learning/paying attention when a fellow customer (“student”) is not doing his/her part. The
following questions can help to stimulate some interesting discussion:
• What problems can occur when the customer is a “co-producer” or “co-creator” of the
service?
• In what ways can a student take an “active” role in the delivery of a university class?
• Why is it important for the student to take an “active” role in the delivery of a university
class?
• How can other students’ participation in the service delivery process enhance your experience
with and satisfaction in a class such as this?
• What did you learn from the “customer participation” experience?
Chapter 12: Customers as Creators and Co-creators of Service Value
1. Discuss what is meant by customer creation and customer co-creation and highlight their similarities
and differences. Provide examples from your own experiences of creating and co-creating service
value for yourself. What did you do? What companies or organizations were involved? How were
they involved?
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2. What is meant by a service ecosystem?
3. For the examples you described in #1, consider and describe the broader ecosystems of services,
products, and people that were involved. What are some potential opportunities within each
ecosystem for companies to innovate and expand the ways in which they serve customers?
ACTIVE LEARNING ACTIVITY
This activity requires the instructor to break the class into groups of 3-4 people. Each group is then assigned
a category of “levels of customer participation” from Table 12.1. Ideally, one third of the groups will be
assigned to each of the three categories. Groups complete the following activities:
• Decide on a service in your category that your group would like to discuss.
• Attempt to describe the “typical” customer behavior for your service.
• Develop a plan for enhancing customer participation.
1. Using your own personal examples, discuss the general importance of customers in the successful
creation and delivery of service experiences.
This question focuses on understanding the importance of both the customer him/herself as well as
other customers in the successful delivery of service. This topic is novel and can result in a lively and
interesting discussion. The discussion can focus first on the role and importance of the customer
him/herself as presented in the text. In almost all types of services, the customer has a role to play. But
the role is increasingly more important and critical as one proceeds from services where a low level of
participation is required (e.g., concert, motel, fast-food) to a high level of participation (e.g., personal
training, weight-reduction, counseling). See Table 12.1 for additional examples and more detail.
The discussion can then turn to the role of other customers in the successful delivery of service.
Classroom settings offer an obvious and relevant example here, and it should be apparent to students
and the instructor how significant the influence of other individuals can be in altering the service
delivery process. All students and instructors can recall specific classes and their “personalities” that
come about as the result of the particular combination of students in the class. Other settings (e.g.,
hotels, restaurants, health clubs and airlines) also share this characteristic.
2. Why might customer actions and attitudes cause the service performance gap to occur? Use your own
examples to illustrate your understanding.
This question allows students to see the relevance of customer actions and attitudes within the context
of the Service Quality Gaps model. Even when the service is designed to meet customer needs and
expectations, there may be a failure to deliver service quality when customers do not perform their roles
effectively or when other customers interfere with the process. This can occur when: customers lack
understanding of their roles; customers are unwilling or unable to perform their roles; customers are
not rewarded for good performance; other customers interfere; or market segments are incompatible.
Each of these themes is further developed in the chapter.
3. Using Table 12.1, think of specific services you have experienced that fall within each of the three levels
of customer participation: low, moderate, high. Describe specifically what you did as a customer in
each case. How did your involvement vary across the three types of service situations?
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This question focuses students on understanding the variety of levels of involvement of customers in
the service delivery process. By using their own examples, the levels of participation become more
concrete. A useful extension of the discussion is to ask what strategies the organization used in each
type of situation to prepare them for their participation role. What could the organization have done
differently or better? This can then lead into a more structured lecture/discussion on “strategies for
enhancing customer participation.”
4. Describe a time when your satisfaction in a particular situation was increased because of something
another customer did. Could (or does) the organization do anything to ensure that this experience
happens routinely? What does it do? Should it try to make this a routine occurrence?
Examples of types of situations where customers are most likely to influence each other positively are
discussed in the chapter. Students will provide their own examples, and this discussion can lead
logically into a discussion of strategies for educating and using customers effectively to enhance the
satisfaction of others. While not appropriate in all cases, such strategies can be quite effective in the
right setting (e.g., schools and universities, health clubs, certain types of recreation and resort settings,
nursing homes, and other residential settings).
5. Describe a time when your satisfaction in a particular situation was decreased because of something
another customer did. Could the organization have done anything to manage this situation more
effectively? What?
The discussion of this question can be combined with Question 4. Strategies for effectively handling
“problem customers” and managing the customer mix so segments are compatible can be discussed in
this context.
[Note: Questions 6, 7, and 8 focus students on the three primary roles of customers in service delivery.
By using their own concrete examples in each case, the abstract ideas take on more meaning. The
global feature in this chapter, describing IKEA of Sweden, can serve as an excellent focal point for
discussing these questions. Any or all of the questions can lead effectively into a lecture/discussion on
strategies for enhancing customer participation.]
6. Discuss the customer’s role as a productive resource for the firm. Describe a time when you played
this role. What did you do and how did you feel? Did the firm help you to perform your role effectively?
How?
In serving as productive resources, customers can be viewed as “partial employees” of the organization
(as discussed in the text). They contribute time, effort, information, and other resources to facilitate
delivery of the service. When customers perform effectively as productive resources, their labors can
cut costs for the organization which may be passed on in the form of lower prices for customers. Total
self-service is the extreme case of using customers as productive resources.
7. Discuss the customer’s role as a contributor to service quality and satisfaction. Describe a time when
you played this role. What did you do and how did you feel? Did the firm help you to perform your
role effectively? How?
Through their effective participation, customers can contribute to service quality and to their own
satisfaction. In many services, such participation is essential (e.g., education, health care, weight loss
and counseling). Unless the customers perform their roles in these settings, they cannot receive quality
service. In other less extreme cases, customers can still enhance service value and their own satisfaction
by asking questions, preparing for the service in advance, and complaining when there is a service
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failure. Exhibit 12.2, as well as the global feature on IKEA of Sweden, can provide nice focal points
for this discussion along with the students’ own examples.
8. Discuss the customer’s role as a potential competitor. Describe a time when you chose to provide a
service for yourself rather than pay someone to provide the service for you. Why did you decide to
perform the service yourself? What could have changed your mind, causing you to contract with
someone else to provide the service?
The role of customers as potential competitors is discussed in the chapter. For many services customers
can actually choose to provide the service themselves, thus essentially competing with the service
provider who must convince them it can provide the service better, more conveniently, or at lower total
cost to the customer. The contingency framework included in the “customers as competitors” section
for when a customer—whether an organizational customer or an individual—will decide to produce a
service for him/herself provides a nice focal point for this discussion. For more detail on this
framework, see Lusch, Brown, and Brunswick (note 29).
• “Planes, Trains, and Automobiles” – In one scene from this movie, John Candy and Steve Martin are
traveling on a bus with several other customers. Their experience is clearly affected by the other
(fellow) customers traveling on the bus with them, including two customers are making out across aisle
from them. The clip can be used to demonstrate the influence of other (fellow) customers in service
delivery.
• “As Good As It Gets” – In one scene an obnoxious customer (Jack Nicholson) chases off customers
from his favorite table by making derogatory remarks about them while standing over the table. Then,
he makes a mean comment about a waitress’ sick child. Later he barges into his psychologist’s office
and demands to be seen immediately. Finally he returns to the restaurant, only to be kicked out. This
clip demonstrates how a fellow customer can diminish the service experience. It could also be used
with Chapter 12 to provide examples where employees must exert emotional labor in dealing with a
customer.
• “Ellen Degeneres: Here and Now” – In this HBO special from 2003, Ellen does a stand-up comic
routine where she discusses annoying behaviors of others while you are watching a movie in a theater.
The behaviors include describing when you are at the movies and the person behind you distracts you
by kicking and tapping your seat. This is a good illustration of how other (fellow) customers can affect
a customer’s experience (in this case, at the movies).
• “The Blues Brothers” (Theatrical Version) (1980). Chapter 7 / 41:50 - 47:20 (length 6:30) . The
scene shows customers interrupting and disrupting a service atmosphere at a restaurant where they
obviously do not fit in to. Illustrates customer roles in service delivery, including: the customer may
not always be right, how other customers can detract from customer satisfaction.
• “It's Always Sunny in Philadelphia,” Episode: "Dennis Reynolds: An Erotic Life" (2008) FX Network.
2 scenes: 10:45 - 12:31 (length 01:46); 17:19 - 18:08 (length 00:49); Dennis, the main character, has
to make things he describes in one of his books in order to make the stories behind to be really true.
The scenes show him in two of those situations. In the first one he is harassed by two men in a hospital.
In the second one his book is stolen. Illustrates how other customers detract from satisfaction in service
delivery.
• “Kicking and Screaming” (2005). 59:53 mark (1:30 in length). In this video clip, Will Ferrell's character
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is a loyal customer to a local coffee store, "Bean Town." During this visit, he is upset about having to
wait in a long line due to the fact that he is a "regular" at this service provider. He begins to grow
impatient and starts making loud verbal attacks towards the women who is deciding on what to order
and consequently, the cause of the long line. His actions cause the employees at Bean Town to grown
upset and they warn him to calm down or else they will be forced to remove him from their store.
However, Will Ferrell's character believes that he is not allowed to be kicked out due to the fact that he
is a "regular" there and deserves special treatment. Illustrates that the customer is not always right and
sometimes a firm has to fire a customer.
Company Location
Charles Schwab & Company www.schwab.com
Christie’s International www.christies.com
eBay www.ebay.com
IKEA www.ikea.com
iPrint.com www.iPrint.com
John Deere www.deere.com
Weight Watchers International www.weightwatchers.com
• Zappos.com 2009: Clothing, Customer Service, and company Culture [included in the sixth
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Companies]
Companies]
From other sources:
800-004, 2000]
• Building Brand Community on the Harley-Davidson Posse Ride [Harvard Business School Case
9-501-015, 2000; Teaching Note 5-501-052; Video 9-501-801]
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CHAPTER 13:
MANAGING DEMAND AND CAPACITY
CHAPTER TOPICS
• The Underlying Issue: Lack of Inventory Capability

• Capacity Constraints
• Demand Patterns
• Strategies for Matching Capacity and Demand
• Yield Management: Balancing Capacity Utilization, Pricing, Market Segmentation, and Financial
Return
• Waiting Line Strategies: When Demand and Capacity Cannot Be Matched
• Technology Spotlight: Information and Technology Drive Yield Management Systems
• Global Feature: Cemex Creatively Manages Chaotic Demand for Its Services
• Strategy Insight: Combining Demand (Marketing) and Capacity (Operations) Strategies to Increase
Profits
CHAPTER OBJECTIVES
1. Explain the underlying issue for capacity-constrained services: lack of inventory capability.
2. Present the implications of time, labor, equipment, and facilities constraints combined with variations
in demand patterns.
3. Lay out strategies for matching supply and demand through (a) shifting demand to match capacity or
(b) adjusting capacity to meet demand.
4. Demonstrate the benefits and risks of yield management strategies in forging a balance among capacity
utilization, pricing, market segmentation, and financial return.
5. Provide strategies for managing waiting lines for times when capacity and demand cannot be aligned.
LECTURE TIPS & AIDS
1. This chapter is very amenable to a discussion based around an in class exercise that asks students to
chart the demand patterns and develop strategies for a local business. This exercise is described in the
active learning activities that follow (activity number 4). A short lecture can introduce or wrap up this
activity.
A guest speaker from a capacity-constrained industry can also be an excellent way to explore this topic.
Airline, hotel or resort managers are good choices. They can discuss the challenges they face as well
as strategies they have used to overcome capacity issues.
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Chapter 13: How to Fill Over 600 Rooms 365 Days of the Year
1. What key concepts from Chapter 13 are exemplified by the actions of the Phoenician Hotel and the
Lotte New York Palace Hotel in the opening vignette? Be as specific as possible.
2. Discuss the pros and cons of the strategies employed by the Phoenician Hotel and the Lotte New
York Palace Hotel. Make sure to consider the service marketing concepts you’ve learned as well as
branding implications for these luxury properties.
1. In a small group, discuss examples of times you have had to wait during a service experience. Answer
the following questions for the services you discuss, using the material on pp. 404-410 as a reference:
• Did the wait seem long or short to you? Why?
• Did the service business do anything to make your wait more tolerable? If so, what? If not,
what might the company have done?
• Did other customers have to wait? How did they impact your experience in any way?
2. This assignment requires an on-site evaluation of “queuing behaviors.” In an unobtrusive way, observe
a queue for 20 minutes (this can also include waiting room situations). Spend some time observing the
queue and different customers in line. Then take notes describing where you are in relationship to the
queue, the service for which people are waiting, and the general mood of the queue. What are people
in line doing, and how are others reacting? Do you think customers expected the line? Did it enhance
or detract from their service experience? Write a paper summarizing your observations, thoughts, and
reactions.
3. Identify several services that can be inventoried for use at a later date than they are actually produced.
Has technology played a role in the ability to inventory the service? If so, how?
4. To further explore issues in managing supply and demand, ask students to select a service (or,
alternatively, the instructor may provide a list of services). Then, have the students work through the
following questions:
• Chart the demand pattern for this service. Is it predictable?
• What is the constraint(s) on capacity?
• What strategies could be used to match demand and capacity by:

(a) shifting demand to meet capacity?
(b) adjusting capacity to meet demand?
• Is a waiting line strategy needed? If yes, what type of approach would you use? If no, why
not?
• Is yield management relevant in this context? If yes, how would you use it? If no, why not?
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5. The topic of waiting for service delivery is a very interesting one to discuss in a classroom setting. To
prepare students to take an active role in the lecture, students might be asked during the meeting prior
to the discussion of this chapter to do the following:
Your assignment is to choose a service, either one you have been involved in (as a customer) or
one you are very familiar with, that can (and, perhaps, often does) require a moderate or high level
of waiting by the customer for the service to be delivered. You should attempt to pick a unique
service (that is, one that few people in the class are likely to select).
The following questions pertain to the service you have selected. In addition to answering the
questions on this sheet, you should be prepared to answer any (or all) of these questions in class.
Students may be randomly selected to illustrate various waiting concepts by discussing their
responses to these questions.
1. Describe the service you have selected.

2. Describe the conditions where you, as a customer, may have to wait for delivery of this service.
3. What impact can waiting (or, alternatively, not having to wait) have on the customer's overall
evaluation of the service delivery process? Explain.
4. What do customers typically do while they are waiting for service?
5. How does a typical firm in this industry handle situations where customers have to wait to
receive this service?
6. In what ways could a firm in this industry change the service delivery process so that customers
do not have to wait? Explain.
7. In what ways could a firm in this industry change the servicescape so that customers do not
have such a poor experience when they have to wait? Explain.
8. When might other customers enhance (or diminish) your waiting experience?
9. When might you, as the customer, be able to enhance your waiting experience in receiving this
service?
1. Why do service organizations lack the capability to inventory their services? Compare a car repair
and maintenance service with an automobile manufacturer/dealer in terms of inventory capability.
In general, service organizations lack the capability to inventory their services because of two basic
characteristics: simultaneous production and consumption; and perishability. Because services are
produced and consumed simultaneously, they generally cannot be produced prior to the customer
demanding the service. While elements of the service may be prepared in advance (e.g., a hotel room
can be readied in advance to receive a guest), the actual service cannot be provided until the customer
arrives ready to consume it. And, in the hotel room example, unless a guest arrives, uses, and pays for
the room, the revenue-producing capacity of that service perishes for that particular night. This
combination of simultaneous production and consumption and perishability results in a general lack of
inventory capability for most service organizations.
In comparing car repair and maintenance services with an automobile manufacturer/dealer, it is obvious
how inventory plays an entirely different role in two types of firms in the same industry:
• On the one hand, the car repair service has no real inventory capability. The shop can be
open, staffed, and ready to provide service. But unless a customer and his/her car show up,
no actual service can be provided. And, if the resources (time, labor, equipment) of the
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shop are not used on a particular day, the revenue-producing potential of those resources
for that day is lost forever.
• On the other hand, an automobile manufacturer or dealer can hold cars in inventory if a
sale is not made on a particular day. While a loss is incurred for every day an automobile
is not sold, the full revenue-producing potential of the vehicle is not lost. Further, swings
in demand cycles for cars can be planned for in the production cycle of the automobile
manufacturer. Cars can be produced and held in inventory in anticipation of a high demand
period; similarly, production can be slowed following unexpected periods of slow demand.
(It should be pointed out that most manufacturers try to avoid building up inventories, and
strategies such as “just in time” inventory management are fully focused on avoiding large
inventories and the costs associated with them.)
2. Discuss the four scenarios presented in Figure 13.1 and presented in the text (excess demand, demand
exceeds optimum capacity, demand and supply are balanced, excess capacity) in the context of a
professional basketball team selling seats for its games. What are the challenges for management
under each scenario?
This discussion should be preceded with a short lecture/discussion about the differences in maximum
capacity utilization and optimum capacity utilization. In an excess demand situation, some people who
want tickets to the game will be turned away. All seats will be filled, and capacity will be stretched to
its maximum. Service quality may suffer unless additional staff is hired to help with food lines, parking,
seating, etc. Ticket scalping may become an issue for management, especially if it is illegal in the
particular state or location.
When demand exceeds optimum capacity, everyone who wants a ticket will get one. Capacity will be
stretched beyond what is ideal and there could be a problem with maintaining optimal levels of service
quality. Management may decide to hire additional staff to help with food lines, parking, seating, etc.
to avoid service quality problems.
[Note: If either of these first two scenarios occurs continually, excess wear and tear on the facilities and
other resources could result. Renewal, repair, and maintenance of the facilities would need to be
planned in to the schedule.]
If demand and supply are balanced, everyone who wants a ticket will get one. Seats will be filled at an
optimal level. (In the case of entertainment and sports, optimal seating capacity is frequently very close
to the maximum number of seats available.) Resources (labor, facilities, parking, etc.) will be used at
their optimal level so service quality should be consistent.
During situations of excess capacity everyone who wants a ticket will get one, but there will be excess
seats. While service quality may be high as a result, attendees at the game may question the value of
coming since there is obviously not a high demand for seats. Morale among employees may suffer, and
the organization will lose potential revenues from unoccupied seats forever.
3. Discuss the four common types of constraints (time, labor, equipment, and facilities) facing service
businesses and give an example of each (real or hypothetical).
This question allows students to explore the various types of constraints facing service organizations in
planning for optimal capacity utilization. It also highlights the revenue-producing potential of various
types of service resources. It should be pointed out in the discussion that most organizations operate
under multiple constraints.
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• Time is the primary constraint for organizations that essentially sell time, advice, counsel, personal
services, etc. Examples include lawyers, consultants, doctors, accountants, and others. Unless these
professionals can sell their time on a given day, the revenue-producing capability of that time is
lost forever. If there is excess demand for their time, more time cannot be produced nor can time
be saved in inventory from one day to the next.
• Labor is the primary constraint in labor-intensive services where individual workers can produce
service up to some (often difficult to determine) maximum capacity. Examples of such
organizations are law firms, consulting firms, and health clinics. These organizations are
constrained by the number of people available to serve customers at a given point in time.
• Equipment is a third common constraint for service businesses. Some services depend heavily on
certain types of equipment to deliver the service, and the constraint they face is the capacity of the
equipment. Examples include delivery services dependent on trucks and aircraft,
telecommunications, and/or utilities. Sometimes, as in the case of an airplane, the capital
investment in the equipment is tremendous. Unless that equipment is used to capacity, revenue is
severely affected. On the other hand, service cannot be provided above the maximum capacity of
the equipment.
• Facilities are a very common constraint in services like hotels, restaurants, hospitals, airlines,
schools, theaters, and churches. In all of these cases, the facility itself has a certain maximum
capacity, beyond which service cannot be provided. However, if the facility is not fully used on a
particular day, its revenue-producing capability is lost forever.
4. How does optimal capacity utilization differ from maximal capacity utilization? Give an example of a
situation in which the two might be the same and one in which they are different.
Optimal capacity utilization occurs when the organization’s resources are being employed at some ideal
level (sometimes difficult to determine) where service quality can be consistently delivered and
resources are not taxed to the point where they wear out or burn out. Customers are happy, employees
are happy, demand and supply are balanced, and revenues are being produced at an ideal level.
Maximum capacity utilization occurs when the organization’s resources are being used to their absolute
maximum, i.e., every seat is full, every minute and every hour are being used, and/or equipment is
operating at maximum levels continuously. In most cases, organizations cannot support maximum
capacity utilization over long periods of time (without adding capacity) since equipment, people, and
facilities will wear out and burn out at some point.
Examples where optimal and maximum use of capacity might be the same include entertainment, sports
events, and package delivery services. Examples where optimal and maximum use of capacity are
probably not the same include university classrooms, most restaurants, and sports activities (like
swimming pools and golf courses).
5. Choose a local restaurant or some other type of service with fluctuating demand. What is the likely
underlying pattern of demand? What causes the pattern? Is it predictable or random?
This question allows students to apply the concepts of understanding demand patterns to a situation
they are familiar with. This question works very well as an in-class exercise. Students can be divided
into groups and the instructor can give them a choice of several local establishments to chart demand
patterns. For example, the instructor might choose a local theater, a restaurant near campus, an
accounting firm or a “ski resort in Utah.” In groups, students then chart the likely demand patterns (by
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season, week, day, or whatever they believe is relevant). The exercise can also be combined with
Question 6 to add more strategic insight.
6. Describe the two basic strategies for matching supply and demand and give at least two specific
examples of each.
This question works very well as an in-class exercise when combined with the exercise described in
Question 5. The two basic strategies are: shifting demand to match capacity (pp. 390-394) and adjusting
capacity to meet demand (pp. 394-397). After students have charted the demand patterns in Question
5, they can then develop strategies for addressing the patterns and their underlying causes.
7. What is yield management? Discuss the risks in adopting a yield management strategy.
Yield management is a very useful concept for students to begin to grasp. The discussion and examples
provided in the book are intentionally kept simple. The important point for students is to see the
underlying logic of the concept. It can be pointed out that organizations (particularly transportation
industries) use extremely sophisticated models to manage their yield. The risks and challenges of yield
management are great, particularly from a marketing, positioning, and image perspective. Dealing with
unrealistic price expectations (when customers get a low price one time and must pay more at a later
date) is also a challenge. These risks and challenges are enumerated in the text.
8. How might yield management apply in the management of the following: a Broadway theater? a
consulting firm? a commuter train?
In each of these cases, the students should first identify the constraint on capacity (e.g., seats,
time/hours, or cars/seats, respectively) and the underlying demand patterns. Then they can begin to
explore how pricing might be used to offer the service at different price levels to different market
segments at various times. They should keep in mind the goal of yield management to maximize
revenue producing potential at any given time and to make optimal use of capacity. This discussion
can be followed up with a more structured discussion/lecture on the risks and challenges of yield
management.
9. Describe the four basic waiting line strategies, and give an example of each one, preferably based on
your own experiences as a consumer.
The four basic strategies are:
• Employ operational logic - This strategy can involve a “one time fix” (see Chapter 10), where
the organization observes that it has a waiting problem and focuses in on designing processes
and systems to reduce waiting as much as possible. If waiting is inevitable, then the queuing
system should be designed in an optimal way from an operational perspective. See Figure 13.4
for some common options.
• Establish a reservation process - This strategy involves essentially “inventorying demand” by

asking customers to reserve a place or time for service. The idea here is to avoid waiting lines
by having customers arrive at predictable times geared to some optimal use of capacity.
• Differentiate waiting customers - This strategy differentiates customers on various criteria to

determine who should be served first. Common criteria are: first-come, first served;
segmentation by importance of the customer; urgency of the need for service; length of the
service transaction; and payment of a premium price.
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• Make waiting more pleasurable - This strategy offers a variety of possibilities based on
“psychology of waiting lines” theories discussed in the text.
• “Spanglish” – Jack Clasky (Adam Sandler) is a chef at a restaurant that reviews a great review from a
food critic. As a result of the review, however, a four-month wait for reservations becomes the norm.
Jack is concerned about losing the causal, neighborhood feel of the restaurant, as most of the customers
will be coming from outside of the neighborhood. In this clip, Jack has an interaction with the restaurant
manager and voices these concerns, illustrating the difficulty service firms can have in managing
demand and capacity.
• “Honeymoon in Vegas” - Jack Singer (Nicholas Cage) is at the end of a long line of customers waiting
to buy a plane ticket. The man at the front of the line (not flying that day) is taking a very long time
and asking many questions. Jack yells at the other customer to buy his ticket and get out of line so that
customers flying that day can purchase their tickets. This clip can be used to illustrate the frustration
customers face when waiting in line.
• Seinfeld episode “The Chinese Restaurant” – In this episode Jerry, George, and Elaine go to dinner at
a Chinese restaurant and spend the entire episode waiting for a table. A very humorous depiction of
what customers think about when they have to wait for service.
• “Miss Congeniality” – Early in this movie, an FBI agent (Sandra Bullock) gets an early-morning call
at home. As a result, she leaves her house quickly in her car with her siren blaring on the hood. She
screeches to a stop with her car and runs into a Starbucks store, using her authority to skip to the
beginning of a long line of customers waiting to buy coffee. This clip could be used to show how, at
least in the U.S., customers want their waits to be “fair.” The fact that a customer, even if a police
officer, got to go to the front of the line without having to wait would NOT be perceived as a fair wait
by those who were in line long before she arrived.
3-117
Company Location
Air Berlin www.airberlin.com
American Airlines www.AA.com
California Department of Motor Vehicles (DMV)
Cemex www.cemex.com
Ritz-Carlton Phoenix www.ritzcarlton.com/hotels/phoenix/
Whistler Mountain www.whistlerblackcomb.com
Yellow Transportation www.yrcw.com
Companies]
Companies]
From other sources:
3-118
CHAPTER 14:
INTEGRATED SERVICE MARKETING COMMUNICATIONS
CHAPTER TOPICS
• The Need for Coordination in Marketing Communication

• Key Service Communication Challenges
• Five Categories of Strategies to Match Service Promises with Delivery
• Technology Spotlight: Internet Expert Mary Meeker Predicts What Companies Most Need to Know
• Global Feature: Virgin Atlantic Airways
• Strategy Insight: Mobile Advertising—The Key to the Future of Digital
CHAPTER OBJECTIVES
1. Discuss the key service communication challenges.
2. Introduce the concept of integrated service marketing communications.
3. Discuss ways to integrate marketing communications in service organizations.
4. Present specific strategies for addressing service intangibility, managing promises, managing customer
expectations, educating customers, and managing internal communications.
LECTURE TIPS & AIDS
1. To assist in the discussion of integrated service marketing communications, the instructor might bring
in to class 4-6 print advertisements for services and have students critique them using the criteria
suggested in the chapter. The advertisements could be (1) all from one company, (2) all for one type
of service provider, or (3) a group of very good (or very poor) ads. A discussion of the positioning
strategy in each ad could serve as a review for various service marketing concepts discussed during the
course. If the Internet is accessible in the classroom, the instructor could also “bring in” to class various
Internet ads for similar discussion. Alternatively, this activity could be combined with Active Learning
Activity 2 (see below) and the students could be responsible for leading the discussion.
2. If the classroom has access to the Internet, visit the following Web sites to evaluate whether the
company is using integrated service marketing communications:
• www.kraftfoodscompany.com
• www.fedex.com
• www.ups.com
• www.intuit.com
What are the strengths of each in terms of integrated external marketing communications? Is there
evidence of integrated interactive marketing communications?
3-119
Chapter 14: Three Successful Cross-Channel Integrated Service Marketing Campaigns
1. What is meant by integrated service marketing communications? How is this different from integrated
marketing communications?
2. Choose one of the three examples presented in the opening vignette. Using the service marketing
triangle as a framework, identify and describe the external marketing, interactive marketing, and
internal marketing tactics used by the company during the campaign. Further research into these
campaigns for more detail is encouraged. Discuss the ways in which the messaging was coordinated
across all of the media/channels involved to create a cohesive message.
1. Go to the DHL Website at www.dhl-usa.com. Explore each area of the site and make a list of the types
of information you can find based on the three categories of marketing communication (external,
interactive, internal) discussed in this chapter. What additional information would you find useful on
the site?
2. Find five effective service advertisements in newspapers and magazines. According to the criteria
given in this chapter, identify why they are effective. Critique them using the list of criteria and discuss
ways they could be improved.
3. Debate the issue of exceeding customer expectations with another person or group in the class. One
of the groups or individuals should be for establishing a company goal of exceeding customer
expectations and one should be against establishing such a goal. What company evidence can you
provide for your side of the argument?
1. Think of a service company that provides integrated service marketing communications. Go to the
services company’s website and find the section where it posts its advertising and communication. Is
the Company’s campaign as comprehensive and as integrated as those described in the opening
vignette? Why or why not? What should be added, changed, or deleted to improve the campaign?
Students will often think about the services they know well, such as McDonald’s, IBM, Verizon, or
Burger King. The selections will vary. In any case, unless they choose companies such as Federal
Express, Hewlett Packard, or Mail Boxes, Etc., it is likely the integrated service marketing
communications will not be as good as those of Southwest Airlines or Domino’s. Looking at the Web
sites of their selections will demonstrate this but, for the most part, the question is an opinion question
and the discussion (not the exact answer) is where the value is.
2. Which of the key reasons for the communication gap (provider gap 4) discussed in the beginning of this
chapter is the easiest to address in a company? Which is the hardest to address? Why?
The easiest of the four reasons for gap 4 to address is probably insufficient customer education. The
reason this is the easiest strategy is that it can be prepared and executed by the marketing department;
armed with tangible information to give the customer, contact personnel can, at a minimum, distribute
this information. The more involved contract personnel are in education, of course, the more effective
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the strategy. Probably the most difficult gap 4 reason to address is inadequate management of customer
promises. This reason requires coordination and cooperation across all parts of the organization that
are involved with making and delivering on customer promises, including advertising, sales, operations
and human resources.
3. Review the five general strategies for achieving integrated service marketing communications. Would
all of these be relevant in goods firms? Which would be most critical in goods firms? Which would be
most critical in services firms? Are there any differences between those most critical in goods firms
and those most critical in services firms?
The five strategies would be relevant in goods firms but to a lesser degree. In pure goods firms, internal
communication would not be as important as in services firms. Having internal functions communicate
in the design or redesign of a good is, of course, critical but once the good is created a continual dialogue
is not essential as it is in services firms. Probably the most critical strategies in goods firms are
managing customer expectation and providing sufficient customer education if the good is complex.
4. What are the most effective Internet advertisements you have seen? Why are they effective?
This question is completely open-ended and will be very time-sensitive. Services advertising changes
quickly and, for that reason, there is no single right answer to this question. Among the categories
where good advertising occurs are films (go to any site advertised on television for a particular movie),
music, and television shows.
5. Using the section on managing customer expectations, put yourself in the position of your professor,
who must reduce the amount of “service” provided to the students in your class. Give an example of
each strategy in this context. Which of the strategies would work best with you (the student) in
managing your expectations? Why?
While students will have a variety of their own ideas on this question, here are some examples:
• Make realistic promises. The instructor should not promise to have exams and assignments graded
for the next class or have materials posted on a Blackboard or eLearning website on a certain date
and then not follow through. If the instructor takes a week to grade exams, then he/she should not
promise to have them finished earlier. Knowing your limitations and capabilities and then making
promises with these in mind will set a good example for students.
• Offer choices. If students believe that the instructor has assigned too much work, one strategy
might be to tell the students that they have a choice of completing all the work assigned and earning
the highest possible grade in the course (assuming that the quality is present) or completing one
less assignment for a drop in letter grade. Many instructors make this offer to executive MBA
students who are very busy. They feel that the tradeoff between grade and work is very fair.
• Create tiered-value offering. In this option, the instructor could lay out different levels of
requirements (in terms of rigor) for students. The lowest tier, for those students who simply want
to pass the course, would have shorter papers, lower hurdles for test marks, etc. In the upper tiers,
students would be required to achieve higher levels on tests and complete longer papers.
• Communicate criteria for service effectiveness. One of the best ways the instructor executes this
strategy is through the class syllabus. Clearly explaining the criteria for grades and requirements
tells students in advance what will be expected of them.
6. Why are social marketing media like Facebook, LinkedIn and YouTube so important in service firms?
Are they important in product firms?
3-121
These social marketing media are critical because they simulate word-of-mouth communication among
peers. If a company has an advertisement or product that is worthy of peer conversation, it serves a
company the same unbiased way that word of mouth serves. The message is perceived to come from
friends, family, colleagues, or others that users want to be like, rather than from a firm itself. Many of
these social media (e.g., Facebook) have specific places on the web site where users can recommend
local firms for haircuts, dentists, doctors, and other service providers. While social media are important
for product firms as well, they are particularly critical for services because there is greater uncertainty
and perceived risk associated with services. In these situations, friends’ and colleagues’ opinions help
to relieve the uncertainty and risk.
7. What other strategies can you suggest for leveraging consumer-generated media?
Anything a firm can do to stimulate discussion on a social marketing site will help. Strategies can
involve contests, intriguing tests, interactive questions, and puzzles. During the NCAA basketball
tournament, one company sponsored a hoops bracket contest where users could fill in the brackets
predicting the game winners. Other companies have compelling tests like, “Who is your ideal mate?”
or “What kind of animal would you be?” Fashion firms show two stars with the same outfit on and
query, “Who wore it best?”—after which their answer is immediately merged with everyone else’s
answers and shown to the user. The strategies must be fun, involving, and not obviously sales-oriented.
The least likely strategies are direct ads and “planted” material where it is obvious that someone from
the company initiated a positive discussion of the firm.
8. What other strategies can you add to the four offered in the section on customer education? What types
of education do you expect from service firms? Give an example of a firm from which you have received
the adequate education. What firm has not provided you with adequate education?
Other strategies include: (1) educating customers throughout the service process, perhaps after each
major step; (2) developing an ongoing customer education program through direct mail or the Internet;
(3) provide customers incentives for being knowledgeable about the company; and (4) encourage a
dialogue between customers and the company so that the company understands what customers need
to know.
• “FedEx” Commercials – FedEx generally has creative commercials that can be used to illustrate
concepts from Chapter 16.
• “DHL” Commercials – Recent DHL commercials might be used to illustrate the integrated service
marketing communications the company has developed (and that is discussed in the chapter) in its
attempt to become a major player in the U.S. marketplace.
• “Dodgeball” – The opening scene of this movie includes a humorous promotion (i.e.,
advertisement/infomercial) of a service business: a gymnasium. This clip could be used to depict use
(or, misuse) of several of the services advertising strategies mentioned in Chapter 16.
3-122
Company Location
DHL www.dhl-usa.com
Domino’s Pizza www.dominos.com
GEICO Insurance www.geico.com
Google www.google.com
hotels.com www.hotels.com
Nike www.nike.com
The Travelers Company Inc. www.travelers.com
YouTube www.youtube.com
Web sites for fan clubs of students’ favorite musical groups
Current movie web sites
Companies]
• ong Kong Disneyland [included in the fifth edition of this text: Zeithaml, Bitner, and Gremler
3-123
Companies]
From other sources:
• Bronner Slosberg Humphrey [Harvard Business School Case 9-598-136, 1998; Teaching Note
5-598-141, 1998]
• The Museum of Fine Arts, Boston/Fleet Financial Group Sponsorship of Monet in the 20th
Century [Harvard Business School Case 9-502-059, 2002]
3-124
CHAPTER 15:
PRICING OF SERVICES
CHAPTER TOPICS
• Three Key Ways that Service Prices Are Different for Consumers
• Approaches to Pricing Services
• Pricing Strategies that Link to the Four Value Definitions
• Technology Spotlight: Dynamic Pricing on the Internet Allows Price Adjustments Based on Supply
and Demand
• Global Feature: Unique Tipping and Pricing Practices Around the World
• Strategy Insight: Pricing Variation in Airlines Offers Strategic Opportunities
CHAPTER OBJECTIVES
1. Discuss three major ways that service prices are perceived differently from goods prices by customers.
2. Articulate the key ways that pricing of services differs from pricing of goods from a company’s
perspective
3. Demonstrate what value means to customers and the role that price plays in value.
4. Describe strategies that companies use to price services.
5. Give examples of pricing strategy in action.
LECTURE TIPS & AIDS
1. To illustrate the difficulty in pricing services, an example many students may have fun discussing is
creative dating services. In particular, a company could (theoretically) help someone plan and execute
a creative date. A creative date might include a date based upon a particular theme (e.g., a red date
where the participants dress in red, drive a red car, go to “Red Robin” restaurant, eat red meat, drink
red wine, and watch the movie “Reds”), a catered wine and cheese picnic in the park, or an ABC date
(e.g., doing something for each letter of the alphabet, such as Acting out your favorite movie scenes,
Bragging about a childhood accomplishment, Chugging a Coke, Driving downtown, etc.). The major
discussion could center on what a provider should charge for assisting a client in creating a creative
date. Many of the pricing issues identified in the chapter could be discussed. For example:
• What value would you (as a customer) put on such a service?

• Should a provider of creative dates set the price based upon costs, competition, or demand?
• If pricing is based on costs, should it be for the provider’s time in dreaming up (i.e., creating
the date), the time it takes to execute the date, and/or the amount of involvement of the client
in the process?
• Should the service fee be based on the satisfaction of the couple experiencing the date?
• Should the fee be based on the client’s ability to pay? That is, should students pay less for this
service than professionals?
3-125
• If you were the customer, what references might you use in determining whether the price being
charged was appropriate? (reference pricing)
Chapter 15: Airlines Make Huge Profits but Baffle Customers with Fees
1. Discuss the pros and cons of airlines charging for individual services from the customer’s and the
company’s perspectives.
2. Resources such as “The Ultimate Guide to Airline Fees” chart compiled by Smarter Travel and
mentioned in the opening vignette can help customers compare fees for service across airlines.
Consider a trip you might make via airline. Go to the website
(https://www.smartertravel.com/2015/03/17/airline-fees-the-ultimate-guide/) and take a look at the
chart. Would you find this information helpful in planning your next airline trip? Why or why not?
Describe the customer segment(s) that you think would benefit most from this information.
1. Consumer frustration with the price haggling and high pressure tactics associated with car sales has led
to several new types of competitors in the industry. Identify these new competitors and discuss how
technology and changing consumer demands have affected the channels of distribution for automobiles.
(You may want to use the Internet to do some information-gathering for this exercise.)
2. Working with a small group, decide on a specific service offering (like a haircut, automobile insurance,
or listing a home through a realtor) and complete the following steps:
• Discuss how consumers compare the different providers for the service you chose. Is price an
important factor? If so, do customers know the prices of different competitors’ offerings? How
do they compare them?
• Collect pricing information for your service by assuming the role of a potential customer. How
did you find out the information? Was it easy to compare the prices of competitors’ services?
What other cues did you use to make inferences about the desirability of the different offerings?
• Be prepared to analyze your service in class and to compare it to other groups’ services with
regards to pricing issues.
1. Which approach to pricing (cost-based, competition-based, or demand-based) is the most fair to

customers? Why?
Cost-based pricing is likely to be the fairest approach to customers. Costs are based on the direct and
labor costs to provide the service, which should be fairly similar across providers. If all service
suppliers in an industry use cost-based pricing, their prices will be similar to each other. Demand-based
and competition-based pricing tend to result in greater price differentials and can be unrelated to the
costs of providing the services, both of which may be less fair to customers.
3-126
2. Is it possible to use all three approaches simultaneously when pricing services? If you answer yes,
describe a service that is priced this way.
Yes, it is possible to use all three pricing approaches simultaneously. In fact, most pricing decisions
do involve more than one approach either in the price strategy itself or in the tactics taken to create the
final price. Pricing of a hotel room is one example where a combination of methods is used. First, the
hotel room is priced according to the costs spent to create it using a formula that is fairly widespread
throughout the industry. Next, competition with other hotels in the area is factored in, typically by
pricing the hotel rooms either at the same rates or slightly lower. Finally, rates vary based on time of
year, season, and location of the room within the hotel, all demand-based factors.
3. For what consumer services do you have reference prices? What makes these services different from
others for which you lack reference prices?
Among the services that students may have reference prices for are dry cleaning, fast food, and
parking—services which are fairly standardized and are consumed frequently enough that students are
familiar with the costs. The standardized and familiar aspects of these prices make them different from
others for which students lack reference prices. Examples of services where most people lack reference
prices are particular types of automobile repair, unusual vacations, or braces for a child’s teeth. In a
general sense, however, any customer who purchases the services frequently will come to have a
reference price for them.
4. Name three services you purchase in which price is a signal to quality. Do you believe that there are
true differences across services that are priced high and those that are priced low? Why or why not?
Among the services for which price is a signal to quality are spa fitness vacations, some medical
services, and legal services. In some cases, there are true differences between services priced high and
those priced low; sometimes the prices are established based on demand for the services and better
services are in higher demand. In other cases, however, the pricing is a strategic decision that does not
really represent innate differences in the services but instead is done in an attempt to position the service
in the minds of customers. A study was conducted by researchers to examine whether there was a
significant relationship between the actual value of products and services and the prices set for them,
and no relationship was found.
5. Describe the nonmonetary costs involved in the following services: getting an automobile loan,
belonging to a health club, having allergies diagnosed and treated, attending an executive education
class, and getting braces.
Getting an automobile loan involves the psychic cost of getting a credit check, something that can be
painful to many customers. Belonging to a health club has the highest costs associated with the time it
takes to work out. Having allergies diagnosed and treated involves actual pain (from the needles!) and
psychic costs associated with getting the treatment. Attending an executive education class involves
time and energy costs. Getting braces is a complicated, drawn-out process that involves time costs
(going to the dentist many times), psychic costs (again, no one likes visiting the dentist!), opportunity
costs (how many dates am I missing because of these braces?), and physical costs (the pain, the pain!).
6. Consider the specific pricing strategies for each of the four customer value definitions. Which of these
strategies could be adapted and used with another value definition?
Most of the strategies could be (and frequently are) coupled with the low price strategies for
introductory offers when services are first introduced. However, the low price strategies do not fit well
with prestige pricing or skimming pricing—service marketers would be needlessly reducing their profit
3-127
margins in these cases. One example of successful coupling of the strategies is market segmentation
pricing and synchro-pricing, where the synchro-pricing is based on an underlying price-sensitive
market segmentation framework.
Company Location
American Airlines www.aa.com
eBay www.eBay.com
Hotwire.com www.hotwire.com
JetBlue Airlines www.jetblue.com
Orbitz www.orbitz.com
Priceline.com www.priceline.com
Ryanair www.ryanair.com
Travelocity www.travelocity.com
Companies]
3-128
Companies]
Companies]
• North Pittsburgh Telephone Company [included in the third edition of this text: Zeithaml and
Bitner (2003) Services Marketing: Integrating Customer Focus Across the Firm, New York, NY:
From other sources:
• La Grand Alliance [Harvard Business School Case 9-175-266, 1998]
3-129
CHAPTER 16:
THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE
CHAPTER TOPICS
• Service and Profitability: The Direct Relationship

• Offensive Marketing Effects of Service: Attracting More and Better Customers
• Defensive Marketing Effects of Service: Customer Retention
• Customer Perceptions of Service Quality and Purchase Intentions
• The Key Drivers of Service Quality, Customer Retention, and Profits
• Technology Spotlight: Cost Effective Service Excellence through Technology
• Global Feature: Measurement of Customer Satisfaction Worldwide
• Strategy Insight: Customer Equity and Return on Marketing: Metrics to Match a Strategic Customer-
Centered View of the Firm
CHAPTER OBJECTIVES
1. Examine the direct effects of service on profits.
2. Consider the impact of service on getting new customers.
3. Evaluate the role of service in keeping customers.
4. Discuss what is known about the key service drivers of overall service quality, customer retention, and
profitability.
5. Discuss the balanced performance scorecard that allows for strategic focus on measurements other than
financials.
Chapter 16: Share of Wallet
1. What is meant by “share of wallet?”
2. What is the “wallet allocation rule?”
3. What makes this metric so different and more helpful to companies as compared to more traditional
metrics such as customer satisfaction, customer loyalty, and the NPS?
1. On the Internet, use a search engine to locate three companies that make enterprise software. Include
SAP, the industry leader, as one of the companies. What are the software companies’ current offerings?
How can the software firms help individual companies understand the concepts and relationships
3-130
discussed in this chapter? Which of the three companies would you select based on the information
you locate?
2. Interview a local firm and see what they know about the key drivers of financial performance for their
firm. What are the key service drivers of the firm? Does the company know whether these relate to
profit?
1. Why has it been difficult for executives to understand the relationship between service improvements
and profitability in their companies?
One of the main reason it has been difficult for executives to understand the relationship between
service improvements and profitability is that expenditures on service do not have an immediate,
evident impact. Service improvements are cumulative, like advertising, and take several years to be
demonstrated. Furthermore, service is but one of many variables that is changing in an organization at
any given time: pricing, advertising, product, distribution, and many other factors are not constant but
are also in flux. Therefore, without a rigorous method to trace the effects of any or all of these variables,
executives could not tell what was working and what was not. Finally, proper execution of service (an
execution on the right service factors) is what matters rather than spending on service. Executives who
are held accountable for their expenditures are often looking for payback in hard financial terms and
have not been able to factor in the qualitative aspects of service such as quality of execution.
2. To this day, many companies believe that service is a cost rather than a revenue producer. Why might
they hold this view? How would you argue the opposite view?
Companies believe that service is a cost because they have not traditionally had ways to track the return
or payback on the strategy. The way to argue the opposite view is to discuss all the recent evidence
presented in this chapter that service quality is related to profits or to variables that lead to profits (word
of mouth, market share, customer retention, etc.).
3. What is the difference between offensive and defensive marketing? How does service affect each of
these?
Offensive marketing means getting new customers while defensive marketing involves retaining the
ones a company already has. The main figure in the chapter shows how service quality affects each of
the two types of marketing. Service quality affects offensive marketing by increasing marketing share,
allowing a company to command a higher price, and improving the firm’s reputation, all of which lead
to higher sales. Service quality affects defensive marketing by leading to customer retention, which in
turn leads to lower costs, higher purchases, price tolerance and positive word of mouth. These lead to
higher margins and then to higher profits.
4. What are the main sources of profit in defensive marketing?
The main sources of profit in defensive marketing are reduced costs (marketing, administrative and
sales costs, for example, that do not have to be expended with existing customers), higher purchase
volumes, higher price tolerance and positive word of mouth.
3-131
5. What are the main sources of profit in offensive marketing?
The main sources of profit in offensive marketing are a positive reputation and higher price tolerance—
both of which lead to higher market share and more sales.
Company Location
Granite Rock www.graniterock.com
Redbox www.redbox.com
Companies]
Companies]
From other sources:
• Chemical Bank: Implementing the Balanced Scorecard [Harvard Business School Case
9-195-210, 1999; Teaching Note 5-198-090, 1998]
• Wells Fargo Online Financial Services (A) [Harvard Business School Case 9-198-146, 1999]
3-132

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Zeithaml Solutions Manual

Solution Manual: https://testbankpack.com/p/solution-

Test bank: https://testbankpack.com/p/test-bank-for-

Learning is the best of all wealth;

DEVELOPING A LEARNER-CENTERED COURSE

1. Encourage student-faculty contact.

Using Active Learning in Your Class

Basic Active Learning Structures

Suggestions for Getting Started

Teaching and Learning

Shulman, Lee S. (1993). “Teaching as Community Property.” Change. November-December: 6-7.

General Books on Services and Related Topics

Pine, G. Joseph II and James H. Gilmore (1999), The Experience Economy.

Books about Great Service Companies

FOCUS ON THE CUSTOMER

PROFITABILITY SEGMENTATION AND LIFETIME VALUE OF CUSTOMERS

ALIGNING STRATEGY AND SERVICE DESIGN

Stickdorn, M. and J. Schneider (2010), This is Service Design Thinking, Amsterdam.

DELIVERING AND PERFORMING SERVICE

“The 100 Best Companies to Work For,” Fortune Magazine.

SERVICE AND TECHNOLOGY (ASU Research Only)

MANAGING SERVICE PROMISES

• What are Services?

1. Explain what services are and identify important trends in services.

3. Explore the profound impact of technology on service.

LECTURE TIPS & AIDS

List 1 List 2 List 3

Chapter 1: All Businesses are Service Businesses

ACTIVE LEARNING ACTIVITIES

• What things did you notice about the syllabus?

• Please treat others like you would like to be treated!

POTENTIAL VIDEO CLIPS TO USE IN ILLUSTRATING CHAPTER 1 CONCEPTS

From previous Zeithaml, Bitner, and Gremler Services Marketing texts:

From other sources:

• The Customer Gap

LECTURE TIPS & AIDS

• The Customer Gap

• Provide a review/summary of the topic assigned.

QUESTIONS TO USE WITH CHAPTER OPENING VIGNETTE

ACTIVE LEARNING ACTIVITIES

POTENTIAL VIDEO CLIPS TO USE IN ILLUSTRATING CHAPTER 2 CONCEPTS

POSSIBLE WEB SITES FOR CHAPTER 2

APPROPRIATE CASES FOR CHAPTER 2

4. Delineate the most important current issues surrounding customer expectations.

LECTURE TIPS & AIDS

QUESTIONS TO USE WITH CHAPTER OPENING VIGNETTE

Think of a service encounter that you have had recently.

• What were your expectations going into the encounter?

11. Should service marketers delight their customers?

POTENTIAL VIDEO CLIPS TO USE IN ILLUSTRATING CHAPTER 3 CONCEPTS

APPROPRIATE CASES FOR CHAPTER 3

From previous Zeithaml, Bitner, and Gremler Services Marketing texts:

From other sources:

LECTURE TIPS & AIDS

Chapter 4: Zane’s Cycles

ACTIVE LEARNING ACTIVITIES

• What was the source of satisfaction?

3. Choose a local company to visit with the following questions in mind:

• order tickets via phone

This can be followed with a more positive approach to the question:

POTENTIAL VIDEO CLIPS TO USE IN ILLUSTRATING CHAPTER 4 CONCEPTS

APPROPRIATE CASES FOR CHAPTER 4

From previous Zeithaml, Bitner, and Gremler Services Marketing texts: