Services Marketing Christopher Lovelock1

Service as Theater
“ All the world’s a stage and all

the men and women merely
players. They have their exits
and their entrances and each
man in his time plays many
parts”
William Shakespeare
As You Like It
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1- 1
The Dramaturgy of Service Delivery
 Service dramas unfold on a “stage”--settings may change as

performance unfolds
 Many service dramas are tightly scripted, others improvised
 Front-stage personnel are like members of a cast
 Like actors, employees have roles, may wear special
costumes, speak required lines, behave in specific ways
 Support comes from a backstage production team
 Customers are the audience—depending on type of
performance, may be passive or active
Role and Script Theories
 Role: A set of behavior patterns learned through

experience and communication
 Role congruence: In service encounters, employees and
customers must act out defined roles for good outcomes
 Script: A sequence of behavior to be followed by employees
and customers during service delivery
 Some scripts (e.g. teeth cleaning) are routinized, others flexible
 Technology change may require a revised script
 Managers should reexamine existing scripts to find ways to improve
delivery, increase productivity, enhance experiences
The Flower of Service:
Categorizing Supplementary Services (Fig. 4-5)
Information
Payment Consultation
Billing Core Order-Taking
Exceptions Hospitality
KEY:
Facilitating elements Safekeeping
Enhancing elements
Facilitating Services - Information
(Table 4.1)
Customers often require

information about how to
obtain and use a product or
Core service. They may also
need reminders and
documentation
Facilitating Services - Order-Taking
(Table 4.2)
Many goods and services

must be ordered or reserved
in advance. Customers need
Core
to know what is available and
may want to secure
commitment to delivery
Facilitating Services - Billing
(Table 4.3)
“How much do I owe you?”

Customers deserve clear,
Core
accurate and intelligible
bills and statements
Facilitating Services - Payment
(Table 4.4)
Customers may pay faster

and more cheerfully if you
Core
make transactions simple
and convenient for them
Enhancing Services - Consultation
(Table 4.5)
Value can be added to

goods and services by
offering advice and
Core
consultation tailored to
each customer’s
needs and situation
Enhancing Services - Hospitality
(Table 4.6)
Customers who invest time

and effort in visiting a
business and using its
Core services deserve to be
treated as welcome guests
(after all, marketing invited
them there!)
Slide ©2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 10
Enhancing Services - Safekeeping
(Table 4.7)
Customers prefer not to

worry about looking after
the personal possessions
that they bring with them
Core
to a service site.
They may also want delivery
and after-sales services for
goods that they purchase
or rent
Enhancing Services - Exceptions
(Table 4.8)
Customers appreciate some

flexibility in a business
when they make special
Core requests. They expect it
when not everything goes
according to plan
What is Brand Equity and Why Does It Matter?
(From Berry, “Cultivating Brand Equity”)
Definition: A set of assets and liabilities linked to a brand’s

name and symbol that adds to (or subtracts from) the
perceived value of the product
Insights
 Brand equity can be positive or negative
 Positive brand equity creates marketing advantage for
firm plus value for customer
 Perceived value generates preference and loyalty
 Management of brand equity involves investment to
create and enhance assets, remove liabilities
A Service Branding Model:
How Communications + Experience Create Brand Equity
Marketer-controlled communications
Firm’s Presented Brand Awareness of

(Sales, Advertising, PR) Firm’s Brand
Uncontrolled brand communications

Firm’s
What Media, Intermediaries,
Brand Equity
Word-of-Mouth Say re: Firm
Customer’s Experience Meaning Attached

with Firm To Firm’s Brand
Source: Adapted from L. L. Berry ( Fig. 1)
Marketing Communication and the Internet (1)
 International in Scope
 Accessible from almost anywhere in the world
 Simplest form of international market entry
 Internet Applications
 Promote consumer awareness and interest
 Provide information and consultation
 Facilitate 2-way communications through e-mail and chat rooms
 Stimulate product trial
 Enable customers to place orders
 Measure effectiveness of specific advertising/promotional
campaigns
Chapter 6
Pricing and Revenue

Management
What Makes Service Pricing Strategy Different
(and Difficult)?
 No ownership of services--hard for firms to calculate

financial costs of creating an intangible performance
 Variability of inputs and outputs--how can firms define a
“unit of service” and establish basis for pricing?
 Many services hard for customers to evaluate--what
are they getting in return for their money?
 Importance of time factor--same service may have more
value to customers when delivered faster
 Delivery through physical or electronic channels--may
create differences in perceived value
Objectives of Pricing Strategies
 Revenue and profit objectives

 Seek profit
 Cover costs
 Patronage and user base-related objectives

 Build demand
 Build a user base
The Pricing Tripod (Fig. 6.1)
Pricing Strategy
Competition
Costs Value to customer
Three Main Approaches to Pricing
 Cost-Based Pricing
 Set prices relative to financial costs
(problem: defining costs)
 Competition-Based Pricing
 Monitor competitors’ pricing strategy
(especially if service lacks differentiation)
 Who is the price leader? (one firm sets the pace)
 Value-Based
 Relate price to value perceived by customer
Net Value = (Benefits – Outlays)
(Fig. 6.3)
Effort Time
e
Perceived Perceived
Benefits Outlays
Enhancing Gross Value
 Pricing Strategies to Reduce Uncertainty

 service guarantees
 benefit-driven (pricing that aspect of service that creates value)
 flat rate (quoting a fixed price in advance)
 Relationship Pricing
 non-price incentives
 discounts for volume purchases
 discounts for purchasing multiple services
 Low-cost Leadership
 Convince customers not to equate price with quality
 Must keep economic costs low to ensure profitability at low price
Paying for Service:
The Customer’s Perspective
Customer “expenditures” on service comprise both

financial and non-financial outlays
 Financial costs:
 price of purchasing service
 expenses associated with search, purchase activity, usage
 Time expenditures
 Physical effort (e.g., fatigue, discomfort)
 Psychological burdens (mental effort, negative feelings)
 Negative sensory burdens (unpleasant sensations affecting any
of the five senses)
Determining the Total Costs of a Service
to the Consumer (Fig. 6.4)
Search Costs Price Operating Costs
Related Monetary
Costs Incidental
Expenses
Time Costs
Purchase and
Physical Costs
Use Costs
Psychological
Costs
Sensory Costs
Necessary
After Costs follow-up
Problem
solving
Place vs. Cyberspace
 Place - customers and  Required for people processing

suppliers meet in a physical services
environment  Offers live experiences, social
interaction, e.g., food services
 More emphasis on eye-catching
servicescape, entertainment
 Cyberspace - customers  Ideal for info-based services

and suppliers do business  Saves time
electronically in virtual  Facilitates information gathering
environment created by  May use express logistics service
phone/internet linkages to deliver physical core products
Technology Revolutionizes Service Delivery:
Some Examples
 Smart mobile telephones to link users to Internet

 Voice recognition software
 Automated kiosks for self-service (e.g. bank ATMs)
 Web sites
 provide information
 take orders and accept payment
 deliver information-based services
 Smart cards that can act as “electronic wallets”
The Problem of Customer Misbehavior –
Identifying and Managing “Jaycustomers”
What is a jaycustomer?
A customer who behaves in a thoughtless or abusive
fashion, causing problems for the firm itself, employees,
other customers
Why do jaycustomers matter?

 Can disrupt processes
 Affect service quality
 May spoil experience of other customers
What should a firm do about them?
 Try to avoid attracting potential jaycustomers
 Institute preventive measures
 Control abusive behavior quickly
 Take legal action against abusers
 BUT firm must act in ways that don’t alienate other
customers
Six Types of “Jaycustomer”
 Thief – seeks to avoid paying for service

 Rule breaker – ignores rules of social behavior and/or procedures for
safe, efficient use of service
 Belligerent – angrily abuses service personnel (and sometimes other
customers) physically and/or emotionally
 Family Feuders – fight with other customers in their party
 Vandal – deliberately damages physical facilities, furnishings, and
equipment
 Deadbeat – fails to pay bills on time
Can you think of others?
How should firms deal with each of these problems?
Planning the
Service Environment
The Purpose of Service Environments
The service environment influences buyer behaviour in 3 ways

 Message-creating Medium: symbolic cues to communicate the
distinctive nature and quality of the service experience.
 Attention-creating Medium: to make the servicescape stand out
from other competing establishments, and to attract customers
from target segments.
 Effect-creating Medium: colors, textures, sounds, scents and
spatial design to enhance the desired service experience,
and/or to heighten an appetite for certain goods, services or
experiences
Helps the firm to create a distinctive image & positioning that

is unique.
Comparison of Hotel Lobbies
(Figure 10.1)
The servicescape is part of the value proposition!
Orbit Hotel and Hostel, Los Angeles
Four Seasons Hotel, New York
The Mehrabian-Russell Stimulus-Response
Model (Figure 10.2)
Response
Environmental Dimensions of Behaviors:
Stimuli & Affect:
Approach/
Cognitive Pleasure and Avoidance &
Processes Arousal Cognitive
Processes
The Mehrabian-Russell Stimulus-Response
Model
 Simple and fundamental model of how people respond to

environments
 Peoples’ conscious and unconscious perceptions and

interpretation of the environment influence how they feel in
that environment
 Feelings, rather than perceptions or thoughts drive

behavior
 Typical outcome variable is ‘approach’ or ‘avoidance’ of an

environment, but other possible outcomes can be added to
the model as well
The Russell Model of Affect
Arousing
Distressing
Exciting
Unpleasant Pleasant
Boring Relaxing
Sleepy
The Russell Model of Affect
 Emotional responses to environments can be described

along two main dimensions, pleasure and arousal.
 Pleasure is subjective depending on how much the

individual likes or dislikes the environment
 Arousal quality of an environment is dependent on its

“information load”, i.e., its degree of
 Novelty (unexpected, surprising, new, familiar) and
 Complexity (number of elements, extent of motion or change)
Drivers of Affect
 Affect can be caused by perceptions and cognitive

processes of any degree of complexity.
 Simple Cognitive Processes, Perception of Stimuli

 tangible cues (of service quality)
 consumer satisfaction
 Complex Cognitive Processes

 affective charged schemata processing
 attribution processes
The more complex a cognitive process becomes, the more

powerful its potential impact on affect.However, most service
encounters are routine. Simple processes can determine affect.
Behavioral Consequence of Affect
 Basically, pleasant environments result in approach, and

unpleasant environments result in avoidance
 Arousal acts as an amplifier of the basic effect of pleasure

on behavior
 If the environment is pleasant, increasing arousal can lead

to excitement and stronger positive consumer response. If
the environment is unpleasant, increasing arousal level will
move consumers into the Distressing region
 Feelings during the service encounter is also an important

driver of customer loyalty
An Integrated Framework – Bitner’s
ServiceScape Model (Figure 10.4)
Environmental Moderators Internal Responses Behaviour
Dimensions
Holistic Cognitive
Environ- Emotional
ment Psychological
Ambient Approach
Employee or
Conditions
Response Avoid
Moderator Employee
Responses
Space/ Social Interaction
Perceived Between
Function ServiceScape Customers &
Employees
Customer
Signs, Customer Responses Approach
Symbols & Response or
Artefacts Moderator Cognitive Avoid
Emotional
Psychological
An Integrated Framework – Bitner’s
ServiceScape Model(con’t)
 Identifies the main dimensions in a service environment

and views them holistically
 Customer and employee responses classified under,

cognitive, emotional and psychological which would in turn
lead to overt behavior towards the environment
 Key to effective design is how well each individual

dimension fits together with everything else
Dimensions of the Service Environment
Service environments are complex and have many design

elements. The main dimensions in the servicescape model
includes:
 Ambient Conditions
 Music (e.g, fast tempo and high volume increase arousal
levels)
 Scent (strong impact on mood, affect and evaluative

responses, purchase intention and in-store behavior)
 Color (e.g, warm colors associated with elated mood states

and arousal but also increase anxiety, cool colors reduce
arousal but can elicit peacefulness and calm)
Dimensions of the Service Environment (con’t)
 Spatial Layout and Functionality

 Layout refers to size and shape of furnishings and the ways it
is arranged
 Functionality is the ability of those items to facilitate
performance
 Signs, Symbols and Artifact

 Explicit or implicit signals to communicate the firm’s image,
help consumers find their way and to convey the rules of
behavior
Selection of Environmental Design Elements
 There is a multitude of research on the perception and

impact of environmental stimuli on behaviour, including:
 People density, crowding
 Lighting
 Sound/noise
 Scents and odours
 Queues
 No standard formula to designing the perfect combination of

these elements.
 Design from the customer’s perspective
 Design with a holistic view!
Tools to Guide in Servicescape Design
 Keen Observation of Customers’ Behavior and Responses

to the service environment by management, supervisors,
branch managers, and frontline staff
 Feedback and Ideas from Frontline Staff and Customers

using a broad array of research tools ranging from
suggestion boxes to focus groups and surveys.
 Field Experiments can be used to manipulate specific

dimensions in an environment and the effects observed.
 Blueprinting or Service Mapping - extended to include the

physical evidence in the environment.
Managing People
for Service Advantage
Frontline Service Personnel: Source of
Customer Loyalty and Competitive Advantage
 Frontline is an important source of differentiation and

competitive advantage. It is:
 a core part of the product
 the service firm
 the brand
 Frontline also drives customer loyalty, with employees

playing key role in anticipating customer needs,
customizing service delivery and building personalized
relationships
Boundary Spanning Roles
 Boundary spanners link the inside of the organization to the

outside world
 Multiplicity of roles often results in service staff having to

pursue both operational and marketing goals
 Consider management expectations of restaurant servers:

 deliver a highly satisfying dining experience to their customers
 be fast and efficient at executing operational task of serving
customers
 do selling and cross selling, e.g. “We have some nice desserts to
follow your main course”
Role Stress in the Frontline
3 main causes of role stress:

 Person vs. Role: Conflicts between what jobs require and
employee’s own personality and beliefs
 Organization vs. Customer: Dilemma whether to follow

company rules or to satisfy customer demands
 Customer vs. Customer: Conflicts between customers that

demand service staff intervention
Emotional Labor
 “The act of expressing socially desired emotions during

service transactions” (Hochschild, The Managed Heart)
 Three approaches used by employees

 surface acting
 deep acting
 spontaneous response
 Performing emotional labor in response to society’s or

management’s display rules can be stressful
 Good HR practice emphasizes selective recruitment,

training, counseling, strategies to alleviate stress
How to Manage People for Service Advantage?
Staff performance is a function of both ability and motivation.

How can we get able service employees who are motivated to
productively deliver service excellence?
1. Hire the right people
2. Enable your people
3. Motivate and energize your people
Hire the Right People
“The old saying ‘People are your most

important asset’ is wrong.
The RIGHT people are your most

most important asset.”
Jim Collins
Recruitment
 The right people are a firm’s most important asset: take a

focused, marketing-like approach to recruitment
 Clarify what must be hired versus what can be taught

 Clarify nature of the working environment, corporate values
and style, in addition to job specs
 Ensure candidates have/can obtain needed qualifications

 Evaluate candidate’s fit with firm’s culture and values
 Fit personalities, styles, energies to the appropriate jobs
Select And Hire the Right People:
(1) Be the Preferred Employer
Create a large pool: “Compete for Talent Market Share”
 What determines a firm’s applicant pool?

 Positive image in the community as place to work
 Quality of its services
 The firm’s perceived status
 There is no perfect employee

 Different jobs are best filled by people with different skills, styles or
personalities
 Hire candidates that fit firm’s core values and culture
 Focus on recruiting naturally warm personalities
Select and Hire the Right People:
(2) How to Identify the Best Candidates
 Observe Behavior
 Hire based on observed behavior, not words you hear
 Best predictor of future behavior is past behavior
 Consider group hiring sessions where candidates given group tasks
 Personality Testing
 Willingness to treat co-workers and customers with courtesy,
consideration and tact
 Perceptiveness regarding customer needs
 Ability to communicate accurately and pleasantly
Select and Hire the Right People:
(3) How to Identify the Best Candidates
 Employ Multiple, Structured Interviews

 Use structured interviews built around job requirements
 Use more than one interviewer to reduce similar to me effects
 Give Applicants a Realistic Preview of the Job

 Chance to have “hands-on” with the job
 Assess how the candidates respond to job realities
 Allow candidates to self select themselves out of the job
Train Service Employees
 The Organizational Culture, Purpose and Strategy

 Promote core values, get emotional commitment to strategy
 Get managers to teach “why”, “what” and “how” of job.
 Interpersonal and Technical Skills

 Both are necessary but neither is sufficient for optimal job
performance
 Product/Service Knowledge
 Staff’s product knowledge is a key aspect of service quality
 Staff need to be able to explain product features and to position
products correctly
Factors Favoring Employee Empowerment
 Firm’s strategy is based on competitive differentiation and on

personalized, customized service
 Emphasis on long-term relationships vs. one-time transactions

 Use of complex and non-routine technologies
 Environment is unpredictable, contains surprises
 Managers are comfortable letting employees work independently
for benefit of firm and customers
 Employees seek to deepen skills, like working with others, and

are good at group processes
Levels of Employee Involvement
 Suggestion involvement
 Employee recommendation
 Job involvement
 Jobs redesigned
 Employees retrained
 Supervisors facilitate
 High involvement
 Information is shared
 Employees skilled in teamwork,
problem solving etc.
 Participate in decisions
 Profit sharing and stock ownership
Motivate and Energize the Frontline
Use the full range of available rewards effectively,

including:
 Job content
 Feedback and recognition
 Goal accomplishment
The Inverted Organizational Pyramid (Fig. 11.5)
Customer Base
Top
Mgmt Frontline Staff
Middle
Mgmt
Middle Mgmt
Frontline & Top Mgmt
Staff Support Frontline
Traditional Inverted Pyramid with a

Organizational Pyramid Customer & Frontline Focus
Legend: = Service encounters, or ‘Moments of Truth.’
The Wheel of Successful HR in Service Firms
(Fig. 11.6)
Leadership that:
Focuses the entire organization 1. Hire the
on supporting the frontline Right People
Fosters a strong 3. Motivate & Be the preferred
service culture with
Energize Your People employer & compete
passion for service
and productivity for talent market share
Drives values that Service Excellence Intensify the

Utilize the full selection
inspire, energize range of rewards
& Productivity
and guide service process
providers
2. Enable Your People
Empower Frontline
Build high performance service
delivery teams
Extensive Training
Managing Relationships
and Building Loyalty
Four Stages of Brand Loyalty in a Consumer
 Cognitive loyalty – perception from brand attribute

information that one brand is preferable to its alternatives
 Affective loyalty – developing a liking for the brand based

on cumulatively satisfying usage occasions
 Conative loyalty – commitment to rebuying the same brand

 Action loyalty – exhibiting consistent repurchase behavior
What Makes Loyal Customers More Profitable?
 Tend to spend more as relationship develops

 customer’s balances may grow
 may consolidate purchases to one supplier
 Cost less to serve

 less need for information and assistance
 make fewer mistakes
 Recommend new customers to firm (act as unpaid sales

people)
 Trust leads to willingness to pay regular prices vs. shopping

for discounts
Customer-Firm Relationship
Today’s marketers seek to develop long-term relationships

with customers. Relationship marketing includes:
 Database Marketing: Involves the use of technology by

delivering differentiated service levels to consumers and
subsequently tracking the relationship.
 Interaction Marketing: Usually in B2B context where people and

the social process also add mutually beneficial value.
 Network Marketing: Common in B2B context where companies

commit resources to develop positions in a network of
relationships with the stakeholders and relevant agencies.
Basic Segmentation Issues:
Building an Appropriate Customer Portfolio
 Target customers whose needs match firm’s capabilities

 Focus on value of prospective customers within each
segment, not just numbers
 Avoid targeting customers who might abuse:
 our employees, facilities
 other customers
 Create a mix of segments to reduce risks of volatility during
swings of economic cycles
Service-Relevant Segmentation Variables
 Timing of service use (e.g., by hour, day, season)

 Level of skill and experience as co-producer/self-
server
 Preferred language in face-to-face contact

 Access to electronic delivery systems (e.g., Internet)
 Attitudes toward use of new service technologies
Identifying and Selecting Target Segments
(Mgt Memo 12.2)
User characteristics
 demographics
 psychographics
 geographic location
 benefits sought
User behavior
 when, where, how services used
 quantity/value of purchases
 frequency of use
 profitability of relationship
 sensitivity to marketing variables
The Customer Pyramid (Fig. 12.5)
Good Relationship
Customers
Which segment sees high value in
our offer, spends more with us over
Platinum time, costs less to maintain, and
spreads positive word-of-mouth?
Gold
Which segment costs us in time,

Iron
effort and money, yet does not
provide the return we want?
Which segment is difficult to do
Lead business with?
Poor Relationship
Customers
How Customers See Relational Benefits in
Service Industries (Research Insights 12.1)
 Confidence benefits
 less risk of something going wrong, less anxiety
 ability to trust provider
 know what to expect
 get firm’s best service level
 Social benefits
 mutual recognition, known by name
 friendship, enjoyment of social aspects
 Special treatment benefits

 better prices, discounts, special deals unavailable to others
 extra services
 higher priority with waits, faster service
The Customer Satisfaction-Loyalty Relationship
(Fig. 12.6)
Apostle
100
Zone of Affection
Loyalty (Retention)
80
Near Apostle
60 Zone of Indifference
40 Zone of Defection
20
Terrorist 0
1 2 3 4 5
Very Neither Very
dissatisfied Dissatisfied satisfied Satisfied Satisfied
nor dissatisfied
Satisfaction
The Wheel of Loyalty (Fig. 12.7)
3. Reduce 1. Build a
Churn Drivers Foundation
for Loyalty
Conduct churn diagnostic
Segment the market
Address key churn drivers
Be selective in acquisition
Enabled through: Implement complaint
handling & service Use effective tiering
 Frontline staff of service.
 Account
recovery Customer
managers Increase switching Deliver quality
 Membership costs
Loyalty service.
programs
 CRM
Systems 2. Create Loyalty
Bonds
Build higher Deepen the
level bonds relationship
Give loyalty
rewards
Drivers of Service Switching (Fig. 12.9)
Service Failure / Recovery Value Proposition
Core Service Failure

• Service Mistakes
Pricing
• Billing Errors • High Price
• Service Catastrophe • Price Increases
• Unfair Pricing
Service Encounter Failures • Deceptive Pricing
• Uncaring Service Inconvenience
• Impolite
• Unresponsive Switching • Location/Hours
• Unknowledgeable • Wait for Appointment
• Wait for Service
Response to Service Failure
• Negative Response Competition
• No Response • Found Better Service
• Reluctant Response
Others
Involuntary Switching Ethical Problems
• Customer Moved • Cheat • Unsafe
• Provider Closed • Hard Sell • Conflict of Interest
Improving Service Quality
and Productivity
Importance of Productivity and Quality for
Service Marketers
Productivity
 Helps to keep costs down
 lower prices to develop market, compete better
 increase margins to permit larger marketing budgets
 raise profits to invest in service innovation
 May impact service experience (must avoid negatives)
 May require customer involvement, cooperation
Quality
 Gain competitive advantage, maintain loyalty
 Increase value (may permit higher margins)
 Improve profits
Perspectives on Service Quality
Transcendental: Quality = excellence. Recognized only through

experience
Product-Based: Quality is precise and measurable
User-Based: Quality lies in the eyes of the beholder
Manufacturing- Quality is conformance to the firm’s developed

Based: specifications
Value-Based: Quality is a trade-off between price and value
Dimensions of Service Quality
 Tangibles
 Reliability
 Responsiveness
 Assurance
 competence,
 courtesy
 credibility
 security
 Empathy
 access
 communication
 understanding of customer
Seven Service Quality Gaps (Fig. 14.1)
Customer needs CUSTOMER

and expectations
1. Knowledge Gap
Management definition
of these needs
MANAGEMENT
2. Standards Gap
Translation into
design/delivery specs
3. Delivery Gap
Execution of 4. I.C.Gap Advertising and
design/delivery specs sales promises
5. Perceptions Gap 6. Interpretation Gap

Customer perceptions Customer interpretation
of product execution of communications
7. Service Gap
Customer experience
relative to expectations
Prescriptions for Closing Service Quality Gaps
(Table 14.3)
 Knowledge: Learn what customers expect--conduct

research, dialogue, feedback
 Standards: Specify SQ standards that reflect expectations
 Delivery: Ensure service performance matches specs--
consider roles of employees, equipment, customers
 Internal communications: Ensure performance levels match
marketing promises
 Perceptions: Educate customers to see reality of service
delivery
 Interpretation: Pretest communications to make sure
message is clear and unambiguous.
Tools to Address Service Quality Problems
 Fishbone diagrams: A cause-and-effect diagram to identify

potential causes of problems.
 Pareto charts: Separating the trivial from the important.

Often, a majority of problems is caused by a minority of
causes i.e. the 80/20 rule.
 Blueprinting: A visualization of service delivery. It allows

one to identify fail points in both the frontstage and
backstage.
Efficiency, Effectiveness, and Productivity
 Efficiency: comparison to a standard--usually time-based

(e.g., how long employee takes to perform specific task)
 Problem: focus on inputs rather than outcomes
 May ignore variations in quality or value of service
 Effectiveness: degree to which firm is meeting its goals

 Cannot divorce productivity from quality/customer satisfaction
 Productivity: financial valuation of outputs to inputs

 Consistent delivery of outcomes desired by customers should
command higher prices
Measuring Service Productivity
 Traditional measures of service output tend to ignore

variations in quality or value of service
 That is, they focus on outputs rather than outcomes, and stress
efficiency but not effectiveness.
 Firms that are more effective in consistently delivering

outcomes desired by customers can command higher
prices. Furthermore, loyal customers are more profitable.
 Measures with customers as denominator include:

 profitability by customer
 capital employed per customer
 shareholder equity per customer

Services Marketing Christopher Lovelock1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Services Marketing Christopher Lovelock1

Uploaded by

Copyright:

Available Formats

Service as Theater

“ All the world’s a stage and all

 Service dramas unfold on a “stage”--settings may change as

 Role: A set of behavior patterns learned through

Billing Core Order-Taking

Customers often require

Many goods and services

“How much do I owe you?”

Customers may pay faster

Value can be added to

Customers who invest time

Customers prefer not to

Customers appreciate some

Definition: A set of assets and liabilities linked to a brand’s

Firm’s Presented Brand Awareness of

Uncontrolled brand communications

Customer’s Experience Meaning Attached

Source: Adapted from L. L. Berry ( Fig. 1)

Pricing and Revenue

 No ownership of services--hard for firms to calculate

 Revenue and profit objectives

 Patronage and user base-related objectives

 Pricing Strategies to Reduce Uncertainty

Customer “expenditures” on service comprise both

Search Costs Price Operating Costs

 Place - customers and  Required for people processing

 Cyberspace - customers  Ideal for info-based services

 Smart mobile telephones to link users to Internet

 Smart cards that can act as “electronic wallets”

Why do jaycustomers matter?

 Thief – seeks to avoid paying for service

The service environment influences buyer behaviour in 3 ways

Helps the firm to create a distinctive image & positioning that

The servicescape is part of the value proposition!

Orbit Hotel and Hostel, Los Angeles

Four Seasons Hotel, New York

 Simple and fundamental model of how people respond to

 Peoples’ conscious and unconscious perceptions and

 Feelings, rather than perceptions or thoughts drive

 Typical outcome variable is ‘approach’ or ‘avoidance’ of an

 Emotional responses to environments can be described

 Pleasure is subjective depending on how much the

 Arousal quality of an environment is dependent on its

 Affect can be caused by perceptions and cognitive

 Simple Cognitive Processes, Perception of Stimuli

 Complex Cognitive Processes

The more complex a cognitive process becomes, the more

 Basically, pleasant environments result in approach, and

 Arousal acts as an amplifier of the basic effect of pleasure

 If the environment is pleasant, increasing arousal can lead

 Feelings during the service encounter is also an important

 Identifies the main dimensions in a service environment

 Customer and employee responses classified under,

 Key to effective design is how well each individual

Service environments are complex and have many design

 Scent (strong impact on mood, affect and evaluative

 Color (e.g, warm colors associated with elated mood states

 Spatial Layout and Functionality

 Signs, Symbols and Artifact

 There is a multitude of research on the perception and

 No standard formula to designing the perfect combination of

 Keen Observation of Customers’ Behavior and Responses

 Feedback and Ideas from Frontline Staff and Customers