AMB340 Services Marketing

Lecture 5: Distributing Services and

the Service Environment
Big ideas from last lecture
• Creating services involve designing (a) core product, (b) supplementary services and (c)
a delivery process
• Flower of Service includes core product and two types of supplementary services:
– Facilitating services include information, order taking, billing, and payment
– Enhancing services include consultation, hospitality, safekeeping, and exceptions

 To develop a customer-driven services marketing strategy, we need to conduct

customer, company and competitor analyses

 The key elements of a customer-driven services marketing strategy are segmentation,

targeting and positioning

 Targeting ensures that the firm focuses its efforts on those customers it can serve best
 Service focused
 Fully focused
 Market focused
 Unfocused
Course Overview
PART 1: Lecture 1, 2 & 3
Customer Focus
• Introduction to Services Marketing
•Consumer Behaviour in a Services Context
•Evaluation of Services

PART 2:
Lectures 4, 5, 6, 8, 9 & 10
Creating value using the 7 Ps
•Positioning Services and Developing Service Products
•Distributing Services and Service Environment
•Managing People
•Setting Prices
•Promoting Services and Educating Customers
•Managing the Service Process; Balancing Demand and Capacity

PART 3: Lectures 11 & 12

Managerial Focus
• Complaint Handling and Service recovery
•Managing Relationships and Building Loyalty
Agenda

Distribution in a Services Context

• Flows of distribution
• Determining type of contact: Options for service delivery
• Place decisions
• Time decisions
• Delivering services in cyberspace
Crafting the service environment
• What is physical evidence?
• What is the purpose of service environments?
• The theory behind consumer responses to service environments
• Dimensions of the service environment
Distribution in a Services Context:
What?

In a services context, we often move nothing. Experiences,

performances and solutions are not physically stored and
shipped.

So WHAT is distributed?
• Information and Promotion flow
• Negotiation flow
• Product flow
Distribution in a Services Context:
How?

The nature of service both influences, and is shaped by, the

distribution or delivery strategy
Distribution in a Services Context:
Usage Channels
1. Self-Service (customer only)

Few, if any employees involved; customer performs most of the activities

2. Interpersonal Service (customer AND employee)

Both customers and employees are present and active in the servicescape

3. Remote Service (employee only)

https://vimeo.com/14939329
Little or no customer involvement
Distribution in a Services Context:
Channel Preferences Vary
For complex and high-perceived-risk services, people tend to
rely on personal channels

Individuals with higher confidence and knowledge about a

service and/or the channel are more likely to use impersonal
and self-service channels

Customers with social motives tend to use personal channels

Convenience is a key driver of channel choice for the majority of

consumers
Distribution in a Services Context:
When?
Traditionally, schedules were restricted
Today
 For flexible, responsive service operations: 24/7 service – 24 hours a
day, 7 days a week, around the world

Factors that encourage extended operating hours:

 Economic pressure from consumers
 Changes in legislation
 Availability of employees to work ‘unsocial’ hours
 Automated self-service facilities
 Economic incentives to improve use of assets
 Technology
Delivering Services in Cyberspace:
Core Service
Amazon.com pioneered the concept of the virtual store, but
now thousands exist all over the world.
Among the factors luring customers to virtual stores are:
 Convenience
 Ease of search
 Broader selection
 Potential for better prices
 24-hour service with prompt delivery
Delivering Services in Cyberspace:
Supplementary Services
•Five of the supplementary
services are information-based
and can be distributed
electronically

•Distribution of information,
consultation and order-taking
has reached very sophisticated
levels in global service industries
(e.g., hotels, airlines, car rental
companies)

•Some services are entirely

information based and can be
delivered electronically
What is Physical Evidence?

The environment in which the service is delivered and in which

the firm and the customer interact, and any tangible
commodities that facilitate performance or communication of
the service (Zeithaml et al., 2006).
Purpose of Physical Evidence
Physical surroundings help shape appropriate feelings and
reactions in customers and employees

For image, positioning and differentiation

Part of the value proposition

Sets customer expectations

Communicates service quality

For employees, it facilitates service encounter and enhance

productivity
How Does Environment Affect Behaviour?
Mehrabian-Russell Stimulus-Response Model
How Does Environment Affect Behaviour?
The Russell Model of Affect

Emotional responses to environments can

be described along two main
dimensions:
• Pleasure: direct, subjective, depending on
how much individual likes or dislikes
environment
• Arousal: how stimulated individual feels,
depends largely on information rate or load
of an environment

VS
Purpose of Physical Evidence
Physical evidence and atmosphere affect buyer
behaviour in the following ways:

Attention-Creating Medium uses colour, noise, smell

(sensory)

Message-Creating Medium uses symbolic cues to

communicate with the intended audience, and to
demonstrate organisation’s regard for customers

Effect-Creating Medium uses colours, sounds, and

spatial design to create or heighten appetite for
certain goods, services and experiences

Source: Kotler, P. (1973). “Atmospherics as a marketing tool”. Journal

of Retailing 49 (4), pp. 48-64
Theories behind Customers Responses:
Bitner’s Servicescape Model
 Dimensions of the Service Environment:
Ambient Conditions
Ambient environment is composed of hundreds of design elements and
details that must work together to create desired service
environment

 Ambient conditions are perceived

both separately and holistically,
and include:
 Sounds such as noise and music
 Scents
 Lighting and color schemes
 Size and shapes
 Air quality and temperature
Dimensions of the Service Environment:
(1) Music
 In service settings, music can have powerful effect on
perceptions and behaviors, even if played at barely audible
levels

 Structural characteristics of music ― such as tempo, volume,

and harmony ― are perceived holistically
 Fast tempo music and high volume music increase arousal levels
 People tend to adjust their pace, either voluntarily or involuntarily, to match
tempo of music

 Careful selection of music can deter wrong type of customers

Dimensions of the Service Environment:
(1) Music
Music in McDonalds: Mini Case
Study

Quarter Pounder with Keys

The New York Times – SAM SCHECHNER

Andrew Shapiro plays classical and ambient music on a grand piano in
McDonalds on Sundays.
"Pure Andrew: The sublime in collision with the mundane" --Peter
Jensen
When Mr. Shapiro began his set, countering the noon rush with a
world-weary piece that filled the cavernous space, many diners
looked up at him, slack-jawed, before returning to their burgers
and fries. "Look, there's a guy actually playing that piano," a
woman told her young daughter.
George Toledo, a silver-haired tour guide, was reading a
newspaper in a corner while members of his group of German
tourists grabbed lunch. Although Mr. Toledo often comes to the
restaurant on Sundays when his charges are visiting ground zero,
he was not a big fan of Mr. Shapiro's music. "He's not exactly my
idea of fun," Mr. Toledo said, making a wrist-slitting gesture. "It's
all minor keys."
Others were more impressed. "It's good," said Dexter Russell, a
23-year-old security guard whose music tastes run more to the
work of the hip-hop artist Beanie Sigel. "If you want to mellow
out, you listen to stuff like that."
 Dimensions of the Service Environment:
(2) Scent
 An ambient smell is one that pervades an environment
 May or may not be consciously perceived by customers
 Not related to any particular product
 Scents have distinct characteristics and can be used to obtain
emotional, physiological, and behavioral responses
 In service settings, research has shown
that scents can have significant effect
on customer perceptions, attitudes,
and behaviors
Dimensions of the Service Environment:
(2) Scent

NYC Grocery Store Pipes in

Artificial Food Smells
By Josh Sanburn | @joshsanburn | July 20, 2011 | 7
TIME MAGAZINE
                                                                                      
Steve Lewis / Getty Images
When you walk into one of the Net Cost supermarkets in Brooklyn,
N.Y., you’ll be greeted by hints of chocolate and grapefruit and
rosemary focaccia. And while the store actually sells those products,
the smells you’ll smell are fake.
Fake in the sense that
the artificial aromas are being piped in by five scent machines that are
strategically located around the store. Chocolate scents near the
candy. Fruit smells in the produce aisle. Wet cat food along the pet
supply section. (Ok, I made that last one up.)
The scents are designed to make customers hungrier and thereby
get them to buy more. Back in the old days, stores gave out free
samples, which of course allows you to actually taste the product you
might buy.
But the scents appear to be working. Sales in the produce section
of the Brooklyn grocery are up 7 percent, according to CBS News.
Each machine costs $99 a month, but that’s far less than what it costs
ScentAir, the company behind the scents, to manufacture a smell.
(That would be about $5,000.)

Read more:
http://moneyland.time.com/2011/07/20/nyc-grocery-store-pipes-in-artifici
al-food-smells/#ixzz26QIbZE8x
Dimensions of the Service Environment:
(3) Colour
 Colours have a strong impact on people’s feelings

 Research has shown that in service environments,

despite differing colour preferences, people are generally
drawn to warm colour environments (with faster tempo
music)

 Warm colours encourage fast decision making and are

good for low-involvement decisions or impulse buys

 Cool colours are preferred for high-involvement decisions

Dimensions of the Service Environment:
(3) Colour

Interior Design (warm colors)

Red love, romance, sex, courage, danger, fire, sinful, warmth,

excitement, vigor, cheerfulness, enthusiasm, and stop
Yellow sunlight, warmth, cowardice, openness, friendliness,
gaiety, glory, brightness, caution
Orange sunlight, warmth, openness, friendliness, gaiety, glory

Interior Design (cool colors)

Blue coolness, aloofness, fidelity, calmness, piety, masculine,

assurance, sadness
Green coolness, restful, peace, freshness, growth, softness,
richness, go
Violet coolness, retiring, dignity, rich
Dimensions of the Service Environment:
Spatial Layout and Functionality
Space/Layout:
 Floorplan
 Size and shape of
furnishings, counters,
machinery, equipment, Floor plan for GE Money Bank in Eastern
and how they are Europe
arranged

Functionality: ability of
those items to make the
performance of the
service easier

http://www.ideo.com/work/branch-experience-for-ge-money-bank
Dimensions of the Service Environment:
Signs, Symbols and Artefacts
 Communicates the firm’s image
o First time customers will
automatically try to draw meaning
from the signs, symbols and
artifacts

 Help customers find their way

 Let customers know the service

script

 Challenge is to design such that

these guide customer through
the service delivery process
Dimensions of the Service Environment:
People
 Appearance and behavior of both
service personnel and customers can
strengthen impression created by
service environment or weaken it

 For employees, once they are dressed

up, they must perform their parts

 For customers, marketing

communication may seek to attract
those who appreciate the service
environment and are also able to
enhance it by their appearance and
behavior

 In hospitality and retail settings,

newcomers often look at existing
customers before deciding whether to
patronise the service firm
Designing the Service Environment

 Design with a holistic view

 Servicescapes have to be seen holistically: No dimension of design can
be optimized in isolation, because everything depends on everything
else
 Holistic characteristic of environments makes designing service
environment an art

 Must design from

a customer’s perspective
Where is the line of visibility?
Key Considerations in Designing the Service
Setting (Frontstage vs Backstage)
Special emphasis should be placed on
selecting and controlling the frontstage
elements

If the ability to maintain consistency

with a frontstage feature is in doubt, it
should be moved to backstage

The outward appearance of backstage

is not as important

Sometimes it pays to move a

backstage feature to frontstage
Key Considerations in Designing the Service
Setting (Customer Factors)
1. Duration of the service setting (i.e.
how long does the customer spend in
the service environment?)
2. Service setting as an operational tool
(efficiency of service delivery)
3. Service setting as a service identifier
(differentiation)
4. Service setting as an orientation tool
5. The appeal of the service setting
(developing an approach environment
in which the customer feels
comfortable and willing to spend time)
Key Considerations in Designing the Service
Setting (Customer Factors)

Tools to Guide Servicescape Design

• Keen observation of customers’ behavior and responses

• Feedback and ideas from frontline staff and customers,
using a broad array of research tools from suggestion
boxes to focus groups and surveys.
• Photo audit: ask customers to take photographs of their
experience and these are used as basis for further
interviews
• Field experiments can be used to manipulate specific
dimensions in an environment and the effects observed
• Blueprinting
Key Considerations in Designing the Service
Setting (Employee Factors)

 Service setting as the

workers’ home away from
home
 Workers usually spend more
time in the service
environment that the
customers – therefore their
needs must also be taken
into account in designing the
service setting
Big Ideas
 Distribution in services involves flow:
 Information and promotion flow
 Negotiation flow
 Product flow
 Options for service delivery include:
 Customers visit the service site
 Service providers go to their customers
 Service transaction is conducted remotely
 Channel preferences vary among customers
 Place and time decisions include where and when services should be
delivered
 Delivery in cyberspace is facilitated by technology and e-commerce
allows 24-hour delivery, saving time and effort
Big Ideas
 Service environments:
 Shapes customers’ experiences and behavior
 Support image, positioning and differentiation
 Part of the value proposition
 Facilitate service encounter and enhance productivity

 Mehrabian-Russell stimulus-response model and Russell’s model of affect help us

understand customer responses to service environments
 Pleasure and arousal
 Approach/avoidance

 Servicescape model is integrative framework of consumer responses to service

environments. Main dimensions:
 Ambient conditions (e.g., music, scent, colour, etc.)
 Spatial layout and functionality
 Signs, symbols and artifacts
 People are also part of service environment

 Guidelines for designing service settings

Next Week

• Keep up to date with your textbook readings!

You should read Chapters 5 & 10 this week.