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The Nature of Services

regardless of the product, there is a services component

to the offerings of all firms in some cases, a service is the principal purpose of the transaction, as in the rental of a car, a haircut, or legal services -- we refer to this as the core service in others, service is performed in support of the sale of a tangible product -- these are referred to as supplementary services

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Managing Services Requires Collaboration between Marketing, Operations, and HR Functions

Operations Management

Marketing Management


Human Resource Management

Four Categories Of Services

Who or What Is the Direct Recipient of the Service?

Nature of the Service Act

Tangible Actions

People processing (services directed at peoples bodies):

Possession processing (services directed at physical possessions):

Intangible Actions

Health care


Mental stimulus processing (services directed at peoples minds):

Information processing (services directed at intangible assets):

Education Advertising/PR


Four Categories Of Services

People Processing Customers must:

Physically enter the service factory Co-operate actively with the service operation

Managers should think about process and output from customers perspective

To identify benefits created and non-financial costs:

Time, mental, physical effort

Possession Processing
Possession Processing Customers are less physically involved compared to people processing services Involvement is limited Production and consumption are separable

Mental Stimulus Processing

Mental Stimulus Processing Ethical standards required when customers who depend on such services can potentially be manipulated by suppliers Physical presence of recipients not required Core content of services is informationbased

Can be inventoried

Information Processing
Information Processing Information is the most intangible form of service output But may be transformed into enduring forms of service output Advance in IT is blurring the boundaries of these categories. Is thus every business an information business?

Implications of service categories:

- No generalization - Different among services

affect customer behaviour

Major Trends in Service Sector

(Fig. 1.3)
Government Policies (e.g., regulations, trade agreements)

Social Changes (e.g., affluence, lack of time, desire for

experiences) Business Trends

Manufacturers offer service Growth of chains and franchising Pressures to improve productivity and quality More strategic alliances Marketing emphasis by nonprofits Innovative hiring practices

Advances in IT (e.g., speed, digitization,

wireless, Internet) Internationalization (travel, transnational companies)

Some Impacts of Technological Change

Radically alter ways in which service firms do


with customers (new services, more convenience)

behind the scenes (reengineering, new value chains)

Creation of an information assembly line

Information today can be standardized, built to order, assembled from components, picked, packed, stored, and shipped, all using processes resembling manufacturings

Strategic Product Implications

service organizations have to plan the introduction of new

services and the management of the life cycle the core service can be enhanced through the addition of supplementary services, thereby creating added value the life cycle of services has to be managed the branding of a service can be difficult as the customer often has nothing tangible to show

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Three-Stage Model of Service Consumption

The three state mode

Prepurchase Stage: Search, evaluation of alternatives, decision

Service Encounter Stage: Role in high-contact vs. low-contact delivery

Post-Encounter Stage: Evaluation against expectations, future intentions

Prepurchase Stage: Overview

Customers seek solutions to aroused needs

Evoked set Search attributes Experience attributes Credence attributes

Prepurchase Stage

Evaluating a service may be difficult

Uncertainty about outcomes increases perceived risk What risk reduction strategies can service suppliers develop?

Service Encounter Stage

Strong brand, warranties, free-trial, money back Expectation vs. perception of real value

Understanding customers service expectations

Components of customer expectations

Making a service purchase decision

Post-Encounter Stage

How Product Attributes Affect Ease of Evaluation

Most Goods Most Services

Easy to evaluate
Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Education Legal services

Difficult to evaluate*
Computer repair

Complex surgery

High in search attributes

High in experience High in credence attributes attributes

Source: Adapted from Zeithaml

*NOTE: Difficulty of evaluation tends to decrease with broad exposure

to a service category and frequency of use of a specific supplier

Factors Influencing Customer Expectations of Service

Personal Needs Desired Service Beliefs about What Is Possible Explicit & Implicit Service Promises Word-of-Mouth Past Experience


Perceived Service Alterations Adequate Service Situational Factors Predicted Service

Source: Adapted from Valarie A. Zeithaml, Leonard A. Berry, and A. Parasuraman, The Nature and Determinants of Customer Expectations of Service, Journal of the Academy of Marketing Science 21, no. 1 (1993): pp 112.

Service Encounter Stage: Overview

Service encounters range from high- to low-contact

Moment of truth

Understanding the servuction system

Prepurchase Stage

Service operations (front and back stage) Service delivery (front stage) Service marketing (front stage)
People processing Information based service processing

Service marketing systems: high-contact and low-contact

Service Encounter Stage

Theater as a metaphor for service delivery: An integrative perspective

Role and script theories

Implications for customer participation in service creation and delivery

Greater need for information/training/preview to customers in advance.

Post-Encounter Stage

Service Encounters Range from High-Contact to Low-Contact

Figure 2.9 Levels of Customer Contact with Service Organizations

Service Marketing System for a High-Contact Service

Service Delivery System Service Operations System
Interior & Exterior Facilities Other Customers

Other Contact Points

Sales Calls Market Research Surveys Billing/Statements

Technical Core


The Customer

Misc. Mail, Phone Calls, E-mails, Faxes, etc. Website

Service People

Random Exposure to Facilities/Vehicles Other Customers Chance Encounters with Service Personnel Word of Mouth

Backstage (invisible)

Front Stage (visible)

Service Marketing System for a Low-Contact Service (

Service Operations System SERVICE MARKETING SYSTEM Service Delivery System Mail Other Contact Points Advertising Market Research Surveys Billing/Statements Random Exposure to Facilities/Vehicles Word of Mouth

Technical Core

Self Service Equipment Phone, Fax, Website, etc.

The Customer

Backstage (invisible)

Front Stage (visible)

Theater as a Metaphor for Service Delivery

All the worlds 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

Theatrical Metaphor: An Integrative Perspective

Service dramas unfold on a stagesettings 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 audiencedepending on type of performance, may

be passive or active participants

Post-Encounter Stage: Overview

Prepurchase Stage
Evaluation of service performance/quality

Satisfaction: attitude like judgment following a service purchase.

Service Encounter Stage

Measured against customer expectations: Positive disconfirmation Confirmation as expected Negative disconfirmation Delight Unexpectedly high levels of

Arousal Positive affect

Post-Encounter Stage
Future intentions

Strategic relationships between customer

satisfaction and corporate performance

Feedback during service delivery

Summary: Customer Behavior in Service Encounters

Four broad categories of services

People processing, possession processing, mental stimulus processing, information processing Based on differences in nature of service act (tangible or intangible), and who or what is direct recipient of service (people or possessions) Each poses distinctive service management challenges

Three-Stage Model of service consumption helps us to understand and better manage customer behavior