Customer Expectations

of Service
Meaning and Types of Services
Expectations
Factors that Influence Customer
Expectations of Service
A Model of Customer Service
Expectations
Issues Involving Customer Service
Expectations

Possible Levels of Customer

Expectations

Dual Customer Expectation

Levels
Desired Service

Adequate Service

The Zone of Tolerance

Desired Service
Zone of
Tolerance

Adequate Service

Internal Antecedents of Consumer

Expectations
Individual needs
Level of involvement
Past experience
Service philosophy

External Antecedents of Consumer

Expectations

Competitive options
Social context
Word-of-mouth communication

Word-of-Mouth Communications
Strongest source of information
Types of sources

Personal sources
Expert sources
Derived sources

Situational Factors Impacting

Consumer Expectations

Reason for purchase

Consumer mood
Weather
Time constraints
Emergency

Firm-Produced Antecedents of
Consumer Expectations
Promotions
Price
Distribution
Service personnel
Other customers
Firm image
Pre-service waiting
Tangible cues

Tangible Cues
Interior of facility
Exterior of facility
Furniture
Interior dcor
Equipment
Cleanliness
Point-of-purchase displays
Appearance of service personnel

Role of Consumer Expectations

During Pre-Purchase Phase
During Service Encounter
During Post-Purchase Phase

Managing Consumer Expectations

During Pre-Purchase Phase

Learn what customers expect.

Tell customers what to expect.
Consistently provide the service
customers expect.

Managing Consumer Expectations

During Service Encounter

Communicate with customers during

the service.
If possible, modify the service to
meet customer expectations.
Explain why service cannot be
modified.

Managing Consumer Expectations

During Post-Purchase Phase

Communicate to see if
expectations were met.
Develop a follow-up program.
Develop a procedure for dealing
with dissatisfied customers.

Zones of Tolerance for

Different Service Dimensions
Desired Service

Level
of
Expectation

Zone of
Tolerance
Adequate Service

Desired Service
Zone
of
Tolerance
Adequate Service

Most Important Factors

Source: Berry, Parasuraman, and Zeithaml (1993)

Least Important Factors

Zones of Tolerance for

First-Time and Recovery Service
First-Time Service
Outcome
Process

Recovery Service
Outcome
Process
LOW
Source: Parasuraman, Berry and Zeithaml (1991)

Expectations

HIGH

Factors That Influence

Desired Service
Enduring Service
Intensifiers

Desired Service
Personal Needs

Zone
of
Tolerance
Adequate Service

Factors That Influence

Adequate Service
Transitory Service
Intensifiers

Desired Service
Perceived Service
Alternatives

Self-Perceived
Service Role

Situational
Factors

Zone
of
Tolerance
Adequate Service

Factors That Influence

Desired and Predicted Service
Explicit Service
Promises

Implicit Service
Promises

Word-of-Mouth

Desired Service
Zone
of
Tolerance
Adequate Service

Past Experience

Predicted
Service

Customer Perceptions
of Service

Customer Perceptions
Customer Satisfaction
Service Quality
Service Encounters: The Foundations for
Satisfaction and Service Quality
Strategies for Influencing Customer
Perceptions
Dr. Vinita Sahay

Customer Perceptions of Service

Quality and Customer Satisfaction

Dr. Vinita Sahay

Factors Influencing
Customer Satisfaction

Product/service quality
Product/service attributes or features
Consumer Emotions
Attributions for product/service success or
failure
Equity or fairness evaluations

Dr. Vinita Sahay

Outcomes of
Customer Satisfaction

Increased customer retention

Positive word-of-mouth communications
Increased revenues

Dr. Vinita Sahay

ASCI and Annual Percentage Growth

in S&P 500 Earnings

Source: C. Fornell Customer Satisfaction and Corporate Earnings, commentary appearing on ACSI website, May 1, 2001,
http://www.bus.umich.edu/research/nqre/Q1-01c.html.Dr. Vinita Sahay

Relationship between Customer

Satisfaction and Loyalty in Competitive
Industries

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

Dr. Vinita Sahay

Service Quality

The customers judgment of overall excellence

of the service provided in relation to the
quality that was expected.
Service quality assessments are formed on
judgments of:

Outcome quality
Process quality
Physical environment quality
Dr. Vinita Sahay

The Five Dimensions of

Service Quality
Reliability
Assurance
Tangibles
Empathy
Responsiveness

Ability to perform the promised

service dependably and accurately.
Knowledge and courtesy of
employees and their ability to
convey trust and confidence.
Physical facilities, equipment, and
appearance of personnel.
Caring, individualized attention the
firm provides its customers.
Willingness to help customers and
provide prompt service.
Dr. Vinita Sahay

Exercise to
Identify Service Attributes
In groups of five, choose a services industry and spend 10 minutes
brainstorming specific requirements of customers in each of the five
service quality dimensions. Be certain the requirements reflect the
customers point of view.

Reliability:
Assurance:
Tangibles:
Empathy:
Responsiveness
:
Dr. Vinita Sahay

SERVQUAL Attributes
RELIABILITY

Providing service as promised

Dependability in handling customers
service problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records

RESPONSIVENESS

Keeping customers informed as to

when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers
requests

ASSURANCE

EMPATHY

Giving customers individual attention

Employees who deal with customers in a
caring fashion
Having the customers best interest at heart
Employees who understand the needs of
their customers
Convenient business hours

TANGIBLES

Employees who instill confidence in

customers
Making customers feel safe in their
transactions
Employees who are consistently courteous
Employees who have the knowledge
Dr.to
Vinita Sahay
answer customer questions

Modern equipment
Visually appealing facilities
Employees who have a
neat, professional
appearance
Visually appealing materials
associated with the service

Service Quality
Measurement Scales

Ideal service quality scale

Servqual

Servqual

Gap = (P-E)
-ve= dissatisfaction
+ve=consumer delight

Criticizm of servqual
Length of the questionnaire
(P-E) gap of magnitude -1 can be produced in
six ways:
P=1, E=2;
P=2, E=3;
P=3, E=4;
P=4, E=5;
P=5,E=6
P=6, E=7
Not implying equal perceived service quality shortfalls.
E is subject to multiple interpretations

Should offer
Would offer
Excellent service

Servperf

Servqual Vs Servperf

Servqual

Servperf

Diagnostic power

High

low

Convergent

More

less

Data collection

Less

More

Weighted scales

Number of items in each scale

Comparison of all scales

The PZB View...

Pararaman, Zeithaml, and Berry (1994)

SERVPERF-M

A shortened 15-item version of the

SERVPERF scale to be called SERVPERF-M.

Example (Health): Set of 22

Questions!!!

Q.1

Prompt service to customers

Q.2

Employees who are consistently courteous

Q.3

Employees who deal with customers in a caring fashion

Q.4

Providing service at the promised time

Q.5

Employees who understand the needs of their customers

Q.6

Visually appealing materials associated with the service (e.g., clear and concise forms)

Q.7

Having the customers best interest at heart

Q.8

Willingness to help customers

Q.9

Maintaining error-free customer and catalog records

Q.10

Keeping customers informed about when services will be performed

Q.11

Providing services as promised

Q.12

Employees who instill confidence in customers

Q.13

Knowledge who have the knowledge to answer customers questions

Q.14

Readiness to respond to customers questions

Q.15

Dependability in handling customers service problems

Q.16

Performing services right the first time

Q.17

Visually appealing facilities

Q.18

Giving customers individual attention

Q.19

Employees who have a neat, professional appearance

Q.20

Convenient business hours

Q.21

Modern equipment

Q.22

Assure customers of the accuracy and confidentiality of their transactions

The Service Encounter

is the moment of truth

occurs any time the customer interacts with the firm
can potentially be critical in determining customer
satisfaction and loyalty
types of encounters:

remote encounters, phone encounters, face-to-face encounters

is an opportunity to:

build trust
reinforce quality
build brand identity
increase loyalty
Dr. Vinita Sahay

Critical Service Encounters

Research

GOAL - understanding actual events and

behaviors that cause customer dis/satisfaction
in service encounters
METHOD - Critical Incident Technique
DATA - stories from customers and employees
OUTPUT - identification of themes underlying
satisfaction and dissatisfaction with service
encounters
Dr. Vinita Sahay

Sample Questions for Critical

Incidents Technique Study

Think of a time when, as a customer, you had a

particularly satisfying (dissatisfying) interaction
with an employee of
.
When did the incident happen?
What specific circumstances led up to this
situation?
Exactly what was said and done?
What resulted that made you feel the interaction
was satisfying (dissatisfying)?
Dr. Vinita Sahay

Common Themes in Critical

Service Encounters Research
Recovery:

Adaptability:

Employee Response
to Service Delivery
System Failure

Employee Response
to Customer Needs
and Requests

Coping:

Spontaneity:

Employee Response
to Problem Customers

Unprompted and
Unsolicited Employee
Actions and Attitudes

Dr. Vinita Sahay

Recovery

DO
Acknowledge
problem
Explain causes
Apologize
Compensate/upgrade
Lay out options
Take responsibility

Dr. Vinita Sahay

DONT
Ignore customer
Blame customer
Leave customer to
fend for him/herself
Downgrade
Act as if nothing is
wrong

Adaptability
DO

DONT

Recognize the

seriousness of the need

Acknowledge
Anticipate
Attempt to
accommodate
Explain rules/policies
Take responsibility
Exert effort to
accommodate

Promise, then fail to

Dr. Vinita Sahay

follow through
Ignore
Show unwillingness to
try
Embarrass the customer
Laugh at the customer
Avoid responsibility

Spontaneity
DO

DONT

Take time
Be attentive
Anticipate needs
Listen
Provide information
(even if not asked)
Treat customers fairly
Show empathy
Acknowledge by name

Exhibit impatience
Ignore
Yell/laugh/swear
Steal from or cheat a
customer
Discriminate
Treat impersonally

Dr. Vinita Sahay

Coping
DO

DONT

Take customers

Listen
Try to accommodate
Explain
Let go of the customer

dissatisfaction
personally
Let customers
dissatisfaction affect
others
Dr. Vinita Sahay

Evidence of Service from the

Customers Point of View

Operational flow of
activities

People

Steps in process

Contact employees
Customer
him/herself
Other customers

Flexibility vs.
standard
Technology vs.
human

Process

Physical
Evidence

Tangible
communication
Servicescape
Guarantees
Technology

Dr. Vinita Sahay

Website

LISTENING TO CUSTOMER
REQUIREMENTS

Dr. Vinita Sahay

Provider GAP 1
CUSTOMER

Expected
Service

GAP 1
COMPANY

Company
Perceptions of
Consumer
Expectations

Part 2 Opener

Dr. Vinita Sahay

Common Research Objectives

for Services

To identify dissatisfied customers

To discover customer requirements or expectations
To monitor and track service performance
To assess overall company performance compared to competition
To assess gaps between customer expectations and perceptions
To gauge effectiveness of changes in service
To appraise service performance of individuals and teams for
rewards
To determine expectations for a new service
To monitor changing expectations in an industry
To forecast future expectations
Dr. Vinita Sahay

Portfolio of Services Research

Type of Research

Research Objective
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure
for remedial action

Customer Complaint
Solicitation

Assess companys service performance compared to

competitors; identify service-improvement priorities; track
service improvement over time

Relationship Surveys

Obtain customer feedback while service experience is still

fresh; act on feedback quickly if negative patterns develop

Post-Transaction Surveys

Use as input for quantitative surveys; provide a

forum for customers to suggest service-improvement
ideas
Measure individual employee service behaviors for use in
coaching, training, performance evaluation, recognition and
rewards; identify systemic strengths and weaknesses in
service
Measure internal service quality; identify employeeperceived obstacles to improve service; track
employee morale and attitudes

Customer Focus Groups

Mystery Shopping of
Service Providers
Employee Surveys

Determine the reasons why customers defect

To forecast future expectations of customers
To develop and test new service ideas

Dr. Vinita Sahay

Lost Customer Research

Future Expectations Research

Stages in the Research Process

Stage 1 :
Stage 2 :
Stage 3 :
Stage 4 :
Stage 5 :
Stage 6 :

Define Problem
Develop Measurement Strategy
Implement Research Program
Collect and Tabulate Data
Interpret and Analyze Findings
Report Findings

Dr. Vinita Sahay

Tracking of Customer Expectations and

Perceptions of Service Reliability

Dr. Vinita Sahay

Service Quality Perceptions

Relative to Zones of Tolerance
(by Dimensions)
9
8
7
6

O
O

5
4
3
2
1
0

Reliability

Retail Chain

Responsiveness

Assurance

Empathy

Tangibles

= Zone of Tolerance O = S.Q. Perception

Dr. Vinita Sahay

10
8

Service Quality Perceptions

Relative to Zones of Tolerance
(by Dimensions)
O

6
4
2
0
Reliability

Responsiveness

Computer
Manufacturer

Assurance

Empathy

= Zone of Tolerance

Dr. Vinita Sahay

Tangibles

O = S.Q. Perception

Importance/Performance Matrix
HIGH

Importance

High
Leverage

Attributes to Improve

Attributes to Maintain

Low
Leverage

Attributes to Maintain

LOW

Performance
Dr. Vinita Sahay

Attributes to De-emphasize

HIGH

Building Customer
Relationships

Relationship Marketing
Relationship Value of Customers
Foundations for Relationship Strategies
The Customer Isnt Always Right
Customer Profitability Segments
Levels of Relationship Strategies

Relationship Marketing

is a philosophy of doing business that focuses on

keeping current customers and improving relationships
with them
does not necessarily emphasize acquiring new
customers
is usually cheaper (for the firm)

keeping a current customer costs less than attracting a new

one

thus, the focus is less on attraction, and more on

retention and enhancement of customer relationships

TRADITIONAL vs
RELATIONSHIP MARKETING
Transaction marketing

Focus on making sale

Product features are focused
Short-term focus
Little emphasis on customer
service
Customer commitment low
Moderate customer contact
Quality is primary concern of
production
Customer satisfaction

Relationship marketing

Focus on making a customer loyal

Product benefits are focused
Long-term focus
High customer service emphasis
Customer commitment is high
High customer contact
Quality is concern of all
Customer retention

Customer Goals of Relationship

Marketing

Six Marketing Domains of RM

Recruitment Market
Influence Market

Referral Market
SERVICE
ORGANISATION

Internal Market

Channel Market
Customer Market

Profit Impact of 5 Percent Increase

in Retention Rate

Lifetime Value of an Average Business

Customer at Telecheck International, Inc.

A Loyal Customer is One Who...

Shows Behavioral Commitment

buys from only one supplier, even though other options

exist
increasingly buys more and more from a particular supplier
provides constructive feedback/suggestions

Exhibits Psychological Commitment

wouldnt consider terminating the relationship-psychological commitment

has a positive attitude about the provider
says good things about the provider

Customer Loyalty Exercise

Think of a service provider you are loyal to.

What do you do (your behaviors, actions,
feelings) that indicates you are loyal?
Why are you loyal to this provider?

Underlying Logic of Customer

Retention Benefits to the
Organization
Customer Satisfaction

Customer Retention &

Increased Profits

Employee Loyalty

Quality
Service

Benefits to the Organization

of Customer Loyalty

loyal customers tend to spend more with the

organization over time
on average costs of relationship maintenance
are lower than new customer costs
employee retention is more likely with a stable
customer base
lifetime value of a customer can be very high

Benefits to the Customer

inherent benefits in getting good value

economic, social, and continuity benefits

contribution to sense of well-being and quality of

life and other psychological benefits
avoidance of change
simplified decision making
social support and friendships
special deals

The Customer Isnt Always

Right

Not all customers are good relationship

customers:

wrong segment

not profitable in the long term

difficult customers

Steps in Market Segmentation and

Targeting for Services

STEP 1:

STEP 2:

Develop
Identify
Profiles of
Bases for
Segmenting Resulting
the Market Segments

STEP
3:
Develop

Measures
of Segment
Attractiveness

STEP4:
Select the
Target
Segments

STEP
5:
Ensure that
Segments
Are
Compatible

Strategies for Building

Relationships

Foundations:

Bonding Strategies:

Excellent Quality/Value
Careful Segmentation
Financial Bonds
Social & Psychological Bonds
Structural Bonds
Customization Bonds

Relationship Strategies Wheel

The 80/20 Customer Pyramid

Most Profitable
Customers
Best
Customers

What segment spends more with

us over time, costs less to maintain,
spreads positive word of mouth?

Other
Customers

Least Profitable
Customers

What segment costs us in

time, effort and money yet
does not provide the return
we want? What segment is
difficult to do business with?

The Expanded Customer

Pyramid
Most Profitable
Customers

Platinum

What segment spends more with

us over time, costs less to maintain,
spreads positive word of mouth?

Gold

Iron

Lead

Least Profitable
Customers

What segment costs us in

time, effort and money yet
does not provide the return
we want? What segment is
difficult to do business with?

Levels of Retention Strategies

Volume and
Frequency
Rewards

Stable
Pricing

Bundling and
Cross Selling
Continuous
Relationships

I. Financial
Bonds

Integrated
Information
Systems

IV.
Joint
Structural
Investments
Bonds
Shared
Processes
and
Equipment

Excellent
Quality
and
Value

II.
Social
Bonds

III. Customization
Bonds

Anticipation/
Innovation

Mass
Customization

Personal
Relationships

Social Bonds
Among
Customers

Customer
Intimacy

Service Recovery

The Impact of Service Failure and Recovery

How Customers Respond to Service Failures
Why Do (and Dont) People Complain?
When They Complain, What Do Customers
Expect?
Switching vs. Staying Following Service
Recovery
Service Recovery Strategies
Service Guarantees

Unhappy Customers
Repurchase Intentions
Unhappy Customers Who Dont Complain

9%

37%

Unhappy Customers Who Do Complain

Complaints Not Resolved

19%

46%
54%

Complaints Resolved

70%
82%

Complaints Resolved Quickly

Percent of Customers Who Will Buy Again

Minor complaints ($1-$5 losses)

Major complaints (over $100 losses)

Source: Adapted from data reported by the Technical Assistance Research Program.

95%

Customer Complaint Actions

Following Service Failure

Service recovery refers to the actions taken by the organization

in response to a service failure for reasons like:
Non-availability when promised
Delivered late or too slowly
The outcome may be incorrect or poorly executed
Employees may be rude or uncaring
It has a strong impact on Customer satisfaction ,loyalty, WOM
& bottom-line performance.
RECOVERY PARADOX: 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 those who were satisfied in the first place.

Fairness and Satisfaction

Source: Reproduced from S.S. Tax and S. W. Brown, Recovering and Learning from Service Failure,
Sloan Management Review, Fall 1998, p. 80.

Service Recovery Strategies

il
Fa

fe
Sa

e
th

c
vi
r
Se

We
En lcom
co
ura e an
ge d
Co
m

pla
i

n ts

Act Quickly

Learn from
ers
Lost Custom

Service
Recovery
Strategies

Le
Re arn f
co rom
ve
ry
Ex
pe
ri

en
ce
s

ea
Tr

om
t
s
Cu

er

i
Fa

rl y

Causes Behind Service Switching

Pricing

High Price
Price Increases
Unfair Pricing
Deceptive Pricing

Response to Service Failure

Negative Response
No Response
Reluctant Response

Inconvenience
Location/Hours
Wait for Appointment
Wait for Service

Core Service Failure

Service Mistakes
Billing Errors
Service Catastrophe

Service Encounter Failures

Uncaring
Impolite
Unresponsive
Unknowledgeable

Service
Switching
Behavior

Competition
Found Better Service

Ethical Problems

Cheat
Hard Sell
Unsafe
Conflict of Interest

Involuntary Switching
Customer Moved
Provider Closed

Source: Sue Keaveney, Customer Switching Behavior in Service Industries: An Exploratory Study, Journal of Marketing, April, 1995, pp. 71-82.

Service Guarantees

guarantee = an assurance of the fulfillment of a

condition (Websters Dictionary)

for products, guarantee often done in the form of a

warranty

services are often not guaranteed

cannot return the service

service experience is intangible
(so what do you guarantee?)

Characteristics of an Effective
Service Guarantee

Unconditional

Meaningful

It should guarantee elements of the service that are important to the

customer.
The payout should cover fully the customer's dissatisfaction.

Easy to Understand and Communicate

The guarantee should make its promise unconditionally - no strings

attached.

For customers - they need to understand what to expect.

For employees - they need to understand what to do.

Easy to Invoke and Collect

There should not be a lot of hoops or red tape in the way of accessing or
collecting on the guarantee.

Source: Christopher W.L. Hart, The Power of Unconditional Guarantees, Harvard Business Review, July-August, 1988, pp. 54-62.

The Hampton Inn 100 Percent

Satisfaction Guarantee

Why a Good Guarantee Works

forces company to focus on customers

sets clear standards

generates feedback

forces company to understand why it failed

builds marketing muscle

Service Guarantees

Does everyone need a guarantee?

Reasons companies do NOT offer guarantees:

guarantee would be at odds with companys image

too many uncontrollable external variables
fears of cheating by customers
costs of the guarantee are too high

Service Guarantees

service guarantees work for companies who are

already customer-focused
effective guarantees can be BIG deals - they put the
company at risk in the eyes of the customer
customers should be involved in the design of
service guarantees
the guarantee should be so stunning that it comes as
a surprise -- a WOW!! factor
its the icing on the cake, not the cake

ALIGNING STRATEGY,
SERVICE DESIGN, AND
STANDARDS

Provider GAP 2
CUSTOMER

Customer-Driven
Service Designs and
Standards

COMPANY

GAP 2

Company
Perceptions of
Consumer
Expectations

Service Development
and Design

Challenges of Service Design

New Service Development
Types of New Services
Service Redesign
Stages in New Service Development
Service Blueprinting
Quality Function Deployment
High-Performance Service

Risks of Relying on Words Alone to

Describe Services

New Service Development Process

Business Strategy Development or Review
New Service Strategy Development

Front End
Planning

Idea Generation
Screen ideas against new service strategy
Concept Development and Evaluation
Test concept with customers and employees
Business Analysis
Test for profitability and feasibility
Service Development and Testing
Conduct service prototype test

Implementation

Market Testing
Test service and other marketing-mix elements
Commercialization
Postintroduction Evaluation

Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

New Service Strategy Matrix for

Identifying Growth Opportunities
Markets
Offerings

Current Customers

New Customers

Existing
Services

SHARE
BUILDING

MARKET
DEVELOPMENT

New
Services

SERVICE
DEVELOPMENT

DIVERSIFICATION

Service Mapping/Blueprinting

A tool for simultaneously depicting the service

process, the points of customer contact, and
the evidence of service from the customers
point of view.
Service
Mappin
g

Proces
s
Points of
Contact
Evidenc
e

Service Blueprint Components

CUSTOMER ACTIONS
line of interaction
ONSTAGE CONTACT EMPLOYEE ACTIONS
line of visibility
BACKSTAGE CONTACT EMPLOYEE ACTIONS
line of internal interaction
SUPPORT PROCESSES

Service Blueprint Components

CONTACT PERSON CUSTOME PHYSICAL

EVIDENCE
(Back Stage) (On Stage)R

Express Mail Delivery Service

Customer
Calls

Customer
Gives
Package

Receive
Package

Driver
Picks
Up Pkg.

Deliver
Package

Customer
Service
Order

Dispatch
Driver

SUPPORT
PROCESS

Truck
Packaging
Forms
Hand-held
Computer
Uniform

Truck
Packaging
Forms
Hand-held
Computer
Uniform

Airport
Receives
& Loads

Fly to
Sort
Center
Load on
Airplane
Sort
Packages

Fly to
Destinati
on

Unload
&
Sort

Load
On
Truck

CONTACT PERSON
PHYSICAL
SUPPORT PROCESS
(Back Stage)(On Stage)CUSTOMER EVIDENCE

Overnight Hotel Stay

Hotel
Exterior
Parking

Arrive
at
Hotel

Cart for Desk

Elevators Cart for
Bags Registration
Hallways Bags
Papers
Room
Lobby
Key
Give Bags
Check in
to
Bellperson

Go to
Room

Greet and
Process
Take
Registration
Bags

Receive
Bags

Room
Menu
Amenities
Bath

Sleep
Shower

Call
Room
Service

Deliver
Bags

Take Bags
to Room

Registration
System

Delivery
Food
Tray
Food
Appearance
Receive
Food

Deliver
Food

Eat

Bill
Desk
Lobby
Hotel
Exterior
Parking
Check out
and
Leave

Process
Check Out

Take
Food
Order

Prepare
Food

Registration
System

Building a Service Blueprint

Step
Step11

Step
Step22

Step
Step33

Step
Step44

Step
Step55

Step
Step66

Identify
Identifythe
the
process
to
process to
be
beblueblueprinted.
printed.

Identify
Identifythe
the
customer
customeror
or
customer
customer
segment.
segment.

Map
Mapthe
the
process
process
from
fromthe
the
customers
customers
point
pointof
of
view.
view.

Map
Mapcontact
contact
employee
employee
actions,
actions,
onstage
onstage
and
andbackbackstage.
stage.

Link
Link
customer
customer
and
andcontact
contact
person
person
activities
activitiesto
to
needed
needed
support
support
functions.
functions.

Add
Add
evidence
evidenceof
of
service
at
service at
each
each
customer
customer
action
actionstep.
step.

Application of Service Blueprints

New Service Development

concept development
market testing

Supporting a Zero Defects Culture

managing reliability
identifying empowerment issues

Service Recovery Strategies

identifying service problems
conducting root cause analysis
modifying processes

Blueprints Can Be Used By:

Service Marketers

creating realistic customer

expectations

Human Resources

service system design

promotion

empowering the human

element

Operations Management

rendering the service as

promised

managing fail points

training systems
quality control

job descriptions
selection criteria
appraisal systems

System Technology

providing necessary tools:

system specifications
personal preference
databases

House of Quality for Village

Volvo

Customer-Defined
Service Standards
Factors Necessary For Appropriate Service
Standards
Customer-Defined Service Standards
Process for Developing Customer-defined
Standards
Service Performance Indexes

Examples of Hard
Customer-Defined Standards

Examples of Soft
Customer-Defined Standards

AT&Ts Process Map for

Measurements
Business Process
30% Product

30% Sales
Total
Quality 10% Installation

15% Repair

15% Billing
Source: AT&T General Business Systems

Internal Metric

Customer Need
Reliability

(40%)

% Repair Call

Easy To Use

(20%)

% Calls for Help

Features / Functions

(40%)

Functional Performance Test

Knowledge

(30%)

Supervisor Observations

Responsive

(25%)

% Proposal Made on Time

Follow-Up

(10%)

% Follow Up Made

Delivery Interval Meets Needs (30%)

Average Order Interval

Does Not Break

(25%)

% Repair Reports

Installed When Promised

(10%)

% Installed On Due Date

No Repeat Trouble

(30%)

% Repeat Reports

Fixed Fast

(25%)

Average Speed Of Repair

Kept Informed

(10%)

% Customers Informed

Accuracy, No Surprise

(45%)

% Billing Inquiries

Resolve On First Call

(35%)

% Resolved First Call

Easy To Understand

(10%)

% Billing Inquiries

Exercise for Creating CustomerDefined Service Standards

Form a group of four people

Use your schools undergraduate or graduate
program, or an approved alternative
Complete the customer-driven service standards
importance chart
Establish standards for the most important and
lowest-performed behaviors and actions
Be prepared to present your findings to the class

Customer-Driven Standards
and Measurements Exercise
Service Encounter

Service
Quality

Customer Requirements

Measurements

Getting to Actionable Steps

Requirements: Diagnosticity:
Abstract
Low
General
Concepts

Satisfaction Value
Relationship
Solution Provider
Dig
Deeper

Reliability
Empathy
Assurance
Tangibles
Responsiveness Price

Dig
Deeper

Dig
Deeper

Delivers on Time
Returns Calls Quickly
Knows My Industry
Delivers by Weds 11/4
Returns Calls in 2 Hrs
Knows Strengths of
My Competitors

Dimensions

Attributes

Behaviors
and Actions
Concrete

High

Process for Setting

Customer-Defined Standards
1. Identify Existing or Desired Service Encounter Sequence
2.2.Translate
TranslateCustomer
CustomerExpectations
ExpectationsInto
IntoBehaviors/Actions
Behaviors/Actions
3.3.Select
SelectBehaviors/Actions
Behaviors/Actionsfor
forStandards
Standards
4. Set Hard or Soft Standards
Measure by
Audits or
Operating Data

Hard

5.5.Develop
DevelopFeedback
Feedback
Mechanisms
Mechanisms

Soft

6.6.Establish
EstablishMeasures
Measuresand
andTarget
TargetLevels
Levels
7. Track Measures Against Standards
8.8. Update
UpdateTarget
TargetLevels
Levelsand
andMeasures
Measures

Measure by
TransactionBased Surveys

Importance/Performance Matrix
HIGH

10.0

Maintain

Improve
Does whatever it takes to
correct problems (9.26, 7.96)

Delivers on promises specified in proposal/contract (9.49, 8.51)

Gets project within budget, on time (9.31, 7.84)

Completes projects
Gets price we originally agreed upon (9.21, 8.64)

correctly, on time (9.29, 7.68)

Tells
9.0

me cost ahead of time (9.06, 8.46)
Provides equipment that operates as vendor said it would (9.24, 8.14)
Gets back to me when
promised (9.04, 7.63)

Importance

Takes responsibility for their mistakes (9.18, 8.01)

Delivers or installs on
promised date (9.02, 7.84)

8.0

LOW

7.0
8.0

Performance

9.0

10.0

HIGH

Linkage between Soft Measures

and Hard Measures for Speed of
Complaint Handling
10
SATISFACTION

9
8

Large Customers

7
6

Small Customers

5
4
3
2
1
0

WORKING

12

16

HOURS

20

24

Physical Evidence
and the Servicescape

Physical EvidenceWhat is it?

Types of Servicescapes
Roles of the Servicescape
Framework for Understanding Servicescape
Effects on Behavior
Approaches for Understanding Servicescape
Effects
Guidelines for Physical Evidence Strategy

Elements of Physical Evidence

Servicescape

Other tangibles

Facility exterior

Business cards
Stationery
Billing statements
Reports
Employee dress
Uniforms
Brochures
Web pages
Virtual servicescape

Exterior design
Signage
Parking
Landscape
Surrounding environment
Facility interior
Interior design
Equipment
Signage
Layout
Air quality/temperature

Examples of Physical Evidence from

the Customers Point of View

Typology of Service Organizations

Based on Variations in Form and Use
of the Servicescape
Complexity of the servicescape evidence
Servicescape
usage

Elaborate

Lean

Self-service
(customer only)

Golf Land
Surf 'n' Splash

ATM
Ticketron
Post office kiosk
Internet services
Express mail drop-off

Interpersonal
services
(both customer and
employeee)

Hotel
Restaurants
Health clinic
Hospital
Bank
Airline
School

Dry cleaner
Hot dog stand
Hair salon

Remote service
(employee only)

Telephone company
Insurance company
Utility
Many professional services

Telephone mail-order desk

Automated voice-messagingbased services

Strategic Roles Of the

Servicescape
Package
Facilitator
Socializer
Differentiator

A Framework for Understanding EnvironmentUser Relationships in Service Organizations

DELIVERING AND
PERFORMING
SERVICE

Provider GAP 3
CUSTOMER

Service Delivery

COMPANY

GAP 3
Customer-Driven
Service Designs and
Standards

Employees Roles
in Service Delivery
The Critical Importance of Service
Employees
Boundary Spanning Roles
Strategies for Closing Gap 3
Service Culture

The Services Marketing Triangle

Company
(Management)
Internal
Marketing

External
Marketing

enabling
promises

Employees

setting
promises

Interactive Marketing

Customers

keeping promises
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Services Marketing Triangle

Applications Exercise

Focus on a service organization. In the context

you are focusing on, who occupies each of the
three points of the triangle?
How is each type of marketing being carried out
currently?
Are the three sides of the triangle well aligned?
Are there specific challenges or barriers in any
of the three areas?

Ways to Use the

Services Marketing Triangle

Overall Strategic
Assessment

How is the service

organization doing on all
three sides of the
triangle?
Where are the
weaknesses?
What are the strengths?

Specific Service
Implementation

What is being promoted

and by whom?
How will it be delivered
and by whom?
Are the supporting
systems in place to
deliver the promised
service?

The Service Profit Chain

Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting
the Service-Profit Chain to Work, Harvard Business Review, March-April 1994, p. 166.

Service Employees

They are the service.

They are the organization in the customers eyes.
They are the brand.
They are marketers.
Their importance is evident in:

The Services Marketing Mix (People)

The Service-Profit Chain
The Services Triangle

Service Employees

Who are they?

boundary spanners

What are these jobs like?

emotional labor
many sources of potential conflict
person/role
organization/client
interclient
quality/productivity

Boundary Spanners Interact with Both

Internal and External Constituents
External Environment

Internal Environment

Sources of Conflict for

Boundary-Spanning Workers
Person vs. Role
Organization vs. Client
Client vs. Client
Quality vs. Productivity

Human Resource Strategies for Closing

GAP 3

Me
as
Re ure a
w
Str ard nd
o
S
n
Pe ervi g
rfo ce
rm
ers

CustomerOriented
Service
Delivery

Retain the
Best
People

Develop
People to
Deliver
Service
Quality

e
lud s in
Inc ee
y
plo e
s
Em th any
mp n
Co Visio

Provide
Needed Support
Systems

De
Se v e l o
or rvic p
i
e
Int ente Pr ern d
oc
es al
se
s

Provide
Supportive
Technology
and
Equipment

Empower
Employees

Treat
Employees
as
Customers

Hire the
Right People

B
Pr e t
E m e f e he
pl rred
oy
er

r
fo and
ain l
Tr nica tive
ch rac
Te nte kills
I S

r
fo
e
t t
pe es
m B le
Co the op
Pe

P
Te rom
am ot
wo e
rk

Hire for
Service
Competencies
and Service
Inclination

re
su al
a
Me tern e
In rvic y
Se alit
Qu

Empowerment

Benefits:

quicker responses
employees feel more
responsible
employees tend to interact
with warmth/enthusiasm
empowered employees are
a great source of ideas
positive word-of-mouth
from customers

Drawbacks:

greater investments in
selection and training
higher labor costs
slower and/or
inconsistent delivery
may violate customer
perceptions of fair play
giving away the store
(making bad decisions)

Service Culture
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 in the organization.

Customers Roles
in Service Delivery
The Importance of Customers in Service
Delivery
Customers Roles
Self-Service TechnologiesThe Ultimate in
Customer Participation
Strategies for Enhancing Customer
Participation

Levels of Customer Participation

across Different Services

Importance of Other Customers

in Service Delivery

Other customers can detract from satisfaction:

disruptive behaviors
excessive crowding
incompatible needs

Other customers can enhance satisfaction:

mere presence
socialization/friendships
roles: assistants, teachers, supporters

How Customers Widen Gap 3

Lack of understanding of their roles

Not being willing or able to perform their roles
No rewards for good performance
Interfering with other customers
Incompatible market segments

Customer Roles in Service

Delivery
Productive Resources

Contributors to
Quality and
Satisfaction

Competitors

Customers as Productive
Resources

partial employees

contributing effort, time, or other resources to the

production process

customer inputs can affect organizations

productivity
key issue:

should customers roles be expanded? reduced?

Customers as Contributors to
Service Quality and Satisfaction

Customers can contribute to

their own satisfaction with the service

by performing their role effectively
by working with the service provider

the quality of the service they receive

by asking questions
by taking responsibility for their own satisfaction
by complaining when there is a service failure

Customers as Competitors

customers may compete with the service provider

internal exchange vs. external exchange
internal/external decision often based on:

expertise
resources
time
economic rewards
psychic rewards
trust
control

Services Production Continuum

Customer Production

Joint Production

Firm Production

Gas Station Illustration

1. Customer pumps gas and pays at the pump with automation
2. Customer pumps gas and goes inside to pay attendant
3. Customer pumps gas and attendant takes payment at the pump
4. Attendant pumps gas and customer pays at the pump with automation
5. Attendant pumps gas and customer goes inside to pay attendant
6. Attendant pumps gas and attendant takes payment at the pump

Strategies for Enhancing Customer

Participation

Define Customer
Jobs

Effective
Customer
Participation

Manage the
Customer
Mix

Recruit, Educate,
and Reward
Customers

Strategies for Enhancing

Customer Participation

Define customers jobs

helping himself
helping others
promoting the company

Individual differences:

not everyone wants to participate

Strategies for Recruiting,

Educating, and Rewarding
Customers
1. Recruit the right customers
2. Educate and train customers to perform
effectively
3. Reward customers for their contribution
4. Avoid negative outcomes of inappropriate
customer participation

Characteristics of Service that Increase

the Importance of Compatible Segments

Delivering Service Through

Intermediaries and Electronic
Channels

Service Intermediaries
Direct or Company-owned Channels
Common Issues Involving Intermediaries
Key Intermediaries for Service Delivery
Strategies for Effective Service Delivery
Through Intermediaries

Service Provider Participants

service principal (originator)

creates the service concept

(like a manufacturer)

service deliverer (intermediary)

entity that interacts with the customer in the

execution of the service

(like a distributor/wholesaler)

Key Issues
Involving Intermediaries

conflict over objectives and performance

conflict over costs and rewards

control of service quality

empowerment versus control

channel ambiguity

Services Intermediaries

franchisees

agents and brokers

e.g., Jiffy Lube, H&R Block, McDonalds

e.g., travel agents, independent insurance agents

electronic channels

e.g., ATMs, university video courses, TaxCut software

Benefits and Challenges for

Franchisers of Service
Benefits

Leveraged business
format for greater
expansion and revenues
Consistency in outlets
Knowledge of local
markets
Shared financial risk
and more working
capital

Challenges

Difficulty in maintaining and

motivating franchisees
Highly publicized disputes
and conflict
Inconsistent quality
Control of customer
relationship by intermediary

Benefits and Challenges for

Franchisees of Service (contd..)
Benefits

An established business
format
National or regional
brand marketing
Minimized risk of
starting a business

Challenges

Encroachment
Disappointing profits and
revenues
Lack of perceived control
over operations
High fees

Benefits and Challenges in Distributing

Services through Agents and Brokers
Benefits

Reduced selling and

distribution costs
Intermediarys
possession of special
skills and knowledge
Wide representation
Knowledge of local
markets
Customer choice

Challenges

Loss of control over

pricing and other aspects
of marketing
Representation of
multiple service
principals

Benefits and Challenges in

Electronic Distribution of Services
Challenges

Benefits

Consistent delivery for

standardized services
Low cost
Customer convenience
Wide distribution
Customer choice and ability
to customize
Quick customer feedback

Customers are active, not passive

Lack of control of electronic environment
Price competition
Inability to customize with highly standardized
services
Lack of consistency with customer involvement
Requires changes in consumer behavior
Security concerns
Competition from widening geographies

Strategies for Effective Service

Delivery through Intermediaries
Control Strategies

Measurement
Review

Partnering Strategies
Alignment of goals
Consultation and
cooperation

Empowerment Strategies
Help the intermediary
develop customeroriented service
processes
Provide needed support
systems
Develop intermediaries
to deliver service quality
Change to a cooperative
management structure

Managing Demand
and Capacity
The Underlying Issue: Lack of Inventory
Capability
Understanding Capacity Constraints
Understanding Demand Patterns
Strategies for Matching Capacity and
Demand
Yield Management
Waiting Line Strategies

Variations in Demand
Relative to Capacity

Understanding Capacity
Constraints and Demand Patterns
Capacity Constraints

Time, labor, equipment,

and facilities
Optimal versus maximal
use of capacity

Demand Patterns

Charting demand
patterns
Predictable cycles
Random demand
fluctuations
Demand patterns by
market segment

Demand vs. Supply

Constraints on Capacity
Nature of the constraint

Type of service

Time

Legal
Consulting
Accounting
Medical

Labor

Law firm
Accounting firm
Consulting firm
Health clinic

Equipment

Delivery services
Telecommunication
Utilities
Health club

Facilities

Hotels
Restaurants
Hospitals
Airlines
Schools
Theaters
Churches

Strategies for Shifting Demand

to Match Capacity
Demand Too High

Shift Demand

Use signage to communicate busy days and

times.
Offer incentives to customers for usage during
non-peak times.
Take care of loyal or regular customers first.
Advertise peak usage times and benefits of
non-peak use.
Charge full price for the service--no discounts.

Demand Too Low

Use sales and advertising to increase
business from current market
segments.
Modify the service offering to
appeal to new market segments.
Offer discounts or price reductions.
Modify hours of operation.
Bring the service to the customer.

Strategies for Flexing Capacity

to Match Demand
Demand Too High

Demand Too Low

Flex Capacity

Stretch time, labor, facilities and equipment.

Cross-train employees.
Hire part-time employees.
Request overtime work from employees.
Rent or share facilities.
Rent or share equipment.
Subcontract or outsource activities.
Outsource.

Perform maintenance,
renovations.
Schedule vacations.
Schedule employee training.
Lay off employees.

Waiting Issues

unoccupied time feels longer

preprocess waits feel longer
anxiety makes waits seem longer
uncertain waits seem longer than finite waits
unexplained waits seem longer
unfair waits feel longer
longer waits are more acceptable for valuable
services
solo waits feel longer

Waiting Strategies

Employ operational logic to reduce wait

Establish a reservation process
Differentiate waiting customers
Make waiting fun, or at least tolerable

Waiting Line Strategies

Waiting Line Configurations

MANAGING SERVICE
PROMISES

Provider GAP 4
CUSTOMER

COMPANY

Part 5 Opener

Service
Delivery

GAP 4

External
Communications
to Customers

Communications and the

Services Marketing Triangle
Company
Internal Marketing

Vertical Communications
Horizontal Communications

Employees

External Marketing
Communication
Advertising
Sales Promotion
Public Relations
Direct Marketing

Interactive Marketing

Personal Selling
Customer Service Center
Service Encounters
Servicescapes

Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

Customers

Approaches for Integrating Services

Marketing Communication
Manage
Customer
Expectations

Manage
Service
Promises

Goal:
Delivery
greater than
or equal to
promises

Manage
Internal
Marketing
Communication

Improve
Customer
Education

Approaches for
Managing Service Promises
MANAGING SERVICE PROMISES
Create
Effective
Services
Communications

Coordinate
External
Communication

Make
Realistic
Promises

Offer
Service
Guarantees

Goal:
Delivery
greater than
or equal to
promises

Services Advertising Strategies Matched

with Properties of Intangibility

For Increasing Advertising

effectiveness

Use narratives to demonstrate the service experience

Present vivid information
Use interactive imagery
Focus on tangibles(Association,Physical
representation,Documentation,Visualization)
Feature service employees in communication
Promise what is possible
Encourage word of mouth communication
Feature service customers
Use transformational advertising

Approaches for
Managing Customer Expectations
Offer Choices

Create Tiered-Value
Offerings
Communicate Criteria for
Service Effectiveness
Negotiate
Unrealistic
Expectations
Goal:
Delivery
greater than
or equal to
promises

Approaches for
Improving Customer Education

Goal:
Delivery
greater than
or equal to
promises

Prepare
Customers
for the
Service
Process

Confirm
Performance
to Standards

Clarify
Expectations
after the Sale

Teach
Customers
to Avoid
Peak
Demand
Periods
and
Seek Slow
Periods

Approaches for Managing

Internal Marketing Communications
Goal:
Delivery
greater than
or equal to
promises
Create Effective
Vertical
Communications

Create Effective
Horizontal
Communications
Align Back
Office Personnel
w/ External Customers
Create
Cross-Functional
Teams

Pricing of Services
Three Key Ways Service Prices are Different
for Consumers
Approaches to Pricing Services
Pricing Strategies That Link to the Four
Value Definitions

Customers Will Trade Money for

Other Service Costs

or
Time

or
Effort

Psychic Costs

Three Basic Price Structures and

Difficulties Associated with Usage for
Services
PROBLEMS:

Co

Co
m
Ba peti
se tio
d n-

1. Small firms may charge too

little to be viable
2. Heterogeneity of services
limits comparability
3. Prices may not
reflect customer
value

PROBLEMS:
st
-B

as
e

se
a
B
d
n
Dema

1. Costs difficult to trace

2. Labor more difficult to
price than materials
3. Costs may not equal value

PROBLEMS:
1. Monetary price must be adjusted to reflect
the value of non-monetary costs
2. Information on service costs less available to
customers, hence price may not be a central factor

Four Customer Definitions of Value

Value is low price.

Value is everything
I want in a service.

Value is the
quality I get for
the price I pay.

Value is all that

I get for all
that I give.

Pricing Strategies When the

Customer Defines Value as Low
Price
Value is low price.
Discounting

Odd pricing
Synchro-pricing
Penetration Pricing

Pricing Strategies When the Customer

Defines Value as Everything Wanted in
a Service
Value is everything
I want in a service.
Prestige pricing

Skimming pricing

Pricing Strategies When the Customer

Defines Value as Quality for the Price
Paid

Value is the quality I

get for the price I pay.
Value pricing
Market segmentation
pricing

Pricing Strategies When the Customer

Defines Value as All That Is Received for
All That Is Given

Value is all that I get

for all that I give.

Price framing
Price bundling
Complementary pricing
Results-based pricing

Summary of Service Pricing Strategies

for Four Customer Definitions of Value
Value is everything
I want in a service.

Value is low price.

Discounting
Odd pricing
Synchro-pricing
Penetration Pricing

Prestige pricing
Skimming pricing

Value is the quality

I get for the price I pay.
Value pricing
Market segmentation
pricing

Value is all that I get

for all that I give.

Price framing
Price bundling
Complementary pricing
Results-based pricing

THE BIG PICTURE:

CLOSING ALL THE
GAPS

The Direct Relationship between

Service and Profits

Service

Profits

Offensive Marketing Effects of

Service on Profits

Profits
Service

Market
Share
Reputation
Price
Premium

Sales

Defensive Marketing Effects of

Service on Profit
Costs

Service

Customer
Retention

Volume of
Purchases

Margins

Price
Premium
Word of
Mouth

Profits

Perceptions of Service,
Behavioral Intentions, and Profits
Costs

Customer
Retention

Service

Behavioral
Intentions

Volume of
Purchases

Margins

Price
Premium
Word of
Mouth

Profits

Sales

The Key Drivers of Service Quality,

Customer Retention, and Profits
Key Drivers

Service Encounters
Service
Encounter

Service
Encounter

Service
Encounter

Service
Encounter

Service
Quality

Behavioral
Intentions

Customer
Retention

Profits

Sample Measurements for the

Balanced Scorecard
Financial Measures

Customer
Perspective
Service Perceptions
Service Expectations
Perceived Value
Behavioral Intentions:
% Loyalty
% Intent to Switch
# Customer Referrals
# Cross Sales
# of Defections

Price Premium
Volume Increases
Value of Customer
Referrals
Value of Cross Sales
Long-term Value of
Customer

Innovation and
Learning Perspective
Number of new products
Return on innovation
Employee skills
Time to market
Time spent talking to
customers

Operational
Perspective
Right first time (% hits)
Right on time (% hits)
Responsiveness (% on time)
Transaction time (hours, days)
Throughput time
Reduction in waste
Process quality

Adapted from: R.S. Kaplan and D.P. Norton, The Balanced ScorecardMeasures That Drive Performance, Harvard Business Review, January-February 1992.

Service Quality Spells Profits

Costs

Defensive
Marketing

Volume of
Purchases

Margins

Price
Premium

Service

Customer
Retention

Word of
Mouth

Profits

Market
Share

Offensiv
e
Marketin
g

Sales
Reputation
Price
Premium