Chapter 1:
Foundations for
Service Marketing
1.
Introduction to
Services
“ Services are all economic activities whose output is not a physical
product or construction, is generally consumed at the time it is
produced, and provides added value in forms (such as convenience,
amusement, timeliness, comfort, or health) that are essentially
intangible concerns of its first purchaser. (Source: J. B. Quinn, J. J.
Baruch, and P. C. Paquette, “Technology in Services,” Scientific
American 257, 1987, p. 50–58.)
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“ Services are economic activities offered by one party to another,
most commonly employing time-based performances to bring about
desired results in recipients themselves or in objects or other assets
for which purchasers have responsibility. In exchange for their
money, time, and effort, service customers expect to obtain value
from access to goods, labor, professional skills, facilities, networks,
and systems; but they do not normally take ownership of any of the
physical elements involved. (Source: Christopher Lovelock and
Lauren Wright, Services Marketing: People, Technology, Strategy, 6th
ed., Upper Saddle River, NJ: Prentice-Hall, 2007, p. 6.)
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“ Services are deeds, processes, and performances. (Source: Valarie
A. Zeithaml, Mary Jo Bitner, and Dwayne D. Gremler, Services
Marketing, 4th ed., New York: McGraw-Hill, 2006, p. 4.)
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Service industries and
companies
▰ Service industries and companies include those
industries and companies typically classified within the
service sector where the core product is a service.
▰ Service as a product represents a wide range of
intangible product offerings that customers value and
pay for in the marketplace. Service products are sold by
service companies and by nonservice companies such as
manufacturers and technology companies.
▰ Customer service is the service provided in support of a
company’s core products.
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Tangibility Spectrum
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WHY
STUDY
SERVICES?
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Why Study Services?
▰ Services dominate the global economy
▰ Most new jobs are generated by services
▰ Understanding services offers personal
competitive advantage
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Service and Technology
▰ Technology-based service offerings
▰ New ways to deliver service
▰ Enabling both customers and employees
▰ Extending the global reach of services
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CHARACTERISTICS
OF SERVICES
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Characteristics of Services
▰ Intangibility
▰ Heterogeneity
▰ Simultaneous production and consumption
▰ Perishability
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Search, Experience, and
Credence Qualities
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Challenges and Questions
for Service Marketers
▰ How can service quality be defined and improved when the product is
intangible and nonstandardized?
▰ How can new services be designed and tested effectively when the
service is essentially an intangible process and one that is frequently
cocreated with customers and networks of providers?
▰ How can the firm be certain it is communicating a consistent and
relevant image when so many elements of the marketing mix
communicate to customers and some of these elements are the service
providers themselves?
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Challenges and Questions
for Service Marketers
(cont.)
▰ How does the firm accommodate fluctuating demand when capacity is
fixed and the service itself is perishable?
▰ How can the firm best motivate and select service employees who,
because the service is delivered in real time, become a critical part of
the product itself?
▰ How should prices be set when it is difficult to determine actual costs
of production and price may be inextricably intertwined with
perceptions of quality?
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Challenges and Questions
for Service Marketers
(cont.)
▰ How should the firm be organized so that good strategic and tactical
decisions are made when a decision in any of the functional areas of
marketing, operations, and human resources may have significant
impact on the other two areas?
▰ How can the balance between standardization and personalization be
determined to maximize both the efficiency of the organization and the
satisfaction of its customers?
▰ How can the organization protect new service concepts from
competitors when service processes cannot be readily patented?
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Challenges and Questions
for Service Marketers
(cont.)
▰ How does the firm communicate quality and value to customers when
the offering is intangible and cannot be readily tried or displayed prior
to the purchase decision?
▰ How can the organization ensure the delivery and cocreation of
consistent quality service when both the organization’s employees and
the customers themselves can affect the service outcome?
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SERVICE
MARKETING
MIX
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Expanded Mix for Services
▰ People: All human actors who play a part in
service delivery and thus influence the buyer’s
perceptions: namely, the firm’s personnel, the
customer, and other customers in the service
environment.
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Expanded Mix for Services
(cont.)
▰ Physical evidence: The environment in which the service is
delivered and where the firm and customer interact, as
well as any tangible components that facilitate
performance or communication of the service.
▰ Process: The procedures, mechanisms, and flow of
activities by which the service is delivered, consumed, and
cocreated—the service delivery and operating systems.
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The Customer Gap
▰ The customer gap is the difference between customer expectations
and perceptions.
▰ Customer expectations are standards or reference points that
customers bring into the service experience, whereas customer
perceptions are subjective assessments of actual service
experiences.
▰ Closing the gap between what customers expect and what they
perceive is critical to delivering quality service.
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Customer expectations
▰ Customer expectations often consist of what a customer believes
should or will happen.
▰ The sources of customer expectations are marketer-controlled
factors (such as pricing, advertising, and sales promises) as well
as factors that the marketer has limited ability to affect (innate
personal needs, word-of-mouth communications, and competitive
offerings).
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The Provider Gaps
▰ Gap 1: The listening gap
▰ Gap 2: The service design and standards gap
▰ Gap 3: The service performance gap
▰ Gap 4: The communication gap
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Provider Gap 1: the
Listening Gap
▰ Provider gap 1, the listening gap, is the difference between customer
expectations of service and company understanding of those
expectations.
▰ The primary reason that many firms do not meet customers’
expectations is that the firms lack an accurate understanding of
exactly what those expectations are.
▰ Many reasons exist for managers not being aware of what customers
expect: they may not interact directly with customers, they may be
unwilling to ask about expectations, or they may be unprepared to
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Provider Gap 2: the Service
Design and Standards Gap
▰ Provider gap 2, the service design and standards gap is
the difference between company understanding of
customer expectations and the development of customer-
driven service designs and standards.
▰ They are operations standards set to correspond to
customer expectations and priorities rather than to
company concerns such as productivity or efficiency.
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Provider Gap 3: the Service
Performance Gap
▰ Provider gap 3, the service performance gap, is the
discrepancy between the development of customer-driven
service standards and actual service performance by
company employees.
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Provider Gap 4: the
Communication Gap
▰ Provider gap 4, the communication gap, illustrates the
difference between service delivery and the service provider’s
external communications.
▰ Promises made by a service company through its media
advertising, sales force, and other communications may raise
customer expectations, the standards against which
customers assess service quality.
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PUTTING IT ALL
TOGETHER:
CLOSING THE
GAPS
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