Services Marketing

CRKC 5004

Unit 1: Lecture 2 Basic Principles of Service Marketing

Dr Patrick Reid
 Agenda

• Objectives
• Services Marketing Challenges
• Review the Three Stage Model of Service Consumption
• Review the Service Profit Chain
• Summary
• References
 Objectives
• To understand service specific marketing challenges

• To understand the Three Stage Model of Service Consumption

• To understand the Service Profit Chain

Characteristics of Services and Marketing Challenges
Marketing management tasks in the service sector differ from the
manufacturing sector:

• Most service products cannot be inventoried

• Intangible elements usually dominate value creation
• Services are often difficult to visualize and understand
• Customers may be involved in co-production
• People may be part of the service experience
• Operational inputs and outputs tend to vary more widely
• The time factor often assumes great importance
• Distribution may take place through nonphysical channels
Characteristics of Services and Marketing
Challenges
Differences, Implications, and Marketing-Related Tasks (1)

Marketing-related
Difference Implications
Topics
Most service products cannot Customers may be turned Use pricing, promotion,
be inventoried away reservations to smooth
demand; work with ops to
Intangible elements usually manage capacity
dominate value creation Harder to evaluate service &
distinguish from competitors Emphasize physical clues,
Services are often difficult to employ metaphors and vivid
visualize & understand Greater risk & uncertainty images in advertising
perceived
Customers may be involved Educate customers on
in co-production Interaction between making good choices; offer
customer & provider; but guarantees
poor task execution
could affect satisfaction Develop user-friendly
equipment, facilities &
systems; train customers,
provide good support
Characteristics of Services and Marketing
Challenges
Differences, Implications, and Marketing-Related Tasks (2)

Marketing-related
Difference Implications
Topics
People may be part of Behavior of service Recruit, train employees to
service experience personnel & customers can reinforce service concept
affect satisfaction
Operational inputs and Shape customer behaviour
outputs tend to vary Hard to maintain quality,
more widely consistency, reliability Redesign for simplicity and
failure proofing
Time factor often Difficult to shield customers
assumes great from failures Institute good service
importance recovery procedures
Time is money; customers
Distribution may take want service at convenient Find ways to compete on
place through times speed of delivery; offer
nonphysical channels extended hours
Electronic channels or voice
telecommunications Create user-friendly, secure
websites and free access by
telephone
The Three Stage Model of Service Consumption
The Three Stage Model of Service Consumption
The Three Stage Model of Service Consumption
• Need awareness
• Information search
• Evaluation of alternatives
• Multi-attribute model
• Service attributes
• Perceived risk
• Service expectations
• Purchase decision
 The Three Stage Model of Service Consumption
Need Awareness
• A service purchase is triggered by an underlying need (need
arousal)
• Needs may be due to:
•People’s unconscious minds (e.g., aspirations)
• Physical conditions (e.g., chronic back pain)
• External sources (e.g., marketing activities)
• When a need is recognized, people are likely take action to resolve it
The Three Stage Model of Service Consumption

Information Search
• When a need is recognized, people will search for solutions.
• Several alternatives may come to mind, and these form the
evoked set
• Evoked set: set of possible services or brands that a customer may
consider in the decision process
• When there is an evoked set, the different alternatives need to
be evaluated before a final choice is made
 Service Expectations
• Customers evaluate service quality by comparing what they
expect against what they perceive
• Situational and personal factors also considered
• Expectations of good service vary from one business to
another, and differently positioned service providers in same
industry
• Expectations change over time
Service Expectations

Ref: Parasuraman, A Parsu & Berry, Leonard & Zeithaml, Valarie. (1991). Understanding Customer
Expectations of Service. Sloan Management Review. 32. 39–48.
 Service Expectations
Components of Customer Expectations
• Desired Service Level:
• Wished-for level of service quality that customer believes can and
should be delivered

• Adequate Service Level:

• Minimum acceptable level of service
 Service Expectations
Components of Customer Expectations
• Predicted Service Level:
• Service level that customer believes firm will actually deliver

• Zone of Tolerance:
• Range within which customers are willing to accept variations
in service delivery
 Service Expectations
Purchase Decision
• When possible alternatives have been compared and
evaluated, the best option is selected
• Can be quite simple if perceived risks are low and alternatives
are clear
• Very often, trade-offs are involved. The more complex the
decision, the more trade-offs need to be made
• Price is often a key factor in the purchase decision
 Service Encounter - Moments of Truth
• The “moment of truth” is when the customer directly interacts
with the service firm.

• It involves the skills, motivation and tools employed by the firm

to prove to the customer that they are the best alternative for
them.
The Servuction System
 The Servuction System
Visible front stage and invisible backstage

• Service Operations system

• Technical core where inputs are processed and service elements created, usually
backstage
• Includes facilities, equipment, and personnel

• Service Delivery System (front stage)

• Where “final assembly” of service elements takes place and service is delivered to
customers
• Includes customer interactions with operations and other customers
 The Service Profit Chain
Heskett and colleagues proposed the Service Profit Chain which
establishes the relationship between profitability, customer
loyalty, and employee satisfaction, loyalty an productivity.

The basic principle is based on the fact that customer satisfaction

starts with good staffing and treatment of ones own employees.

Ref: Heskett, James & Jones, Thomas & Loveman, Gary & Sasser, W. & Schlesinger, Leonard. (1994). Putting the
Service - Profit Chain to Work. Harv Bus Rev. 72.
The Service Profit Chain
 Links in the Service Profit Chain
• Customer loyalty drives profitability and growth.
• Customer satisfaction drives customer loyalty.
• Value drives customer satisfaction.
• Quality and productivity drive value.
• Employee loyalty drives service quality and productivity.
• Employee satisfaction drives employee loyalty.
• Internal quality as delivered by operations and IT drives employee
satisfaction.
• Top management leadership underlies the chain’s success.
 Theatrical Metaphor
• Good metaphor as service delivery is a series of events that
customers experience as a performance
• Service facilities
• Stage on which drama unfolds
• This may change from one act to another
• Personnel
• Front stage personnel are like members of a cast
• Backstage personnel are support production team
 Summary
• Reviewed the link with Marketing

• Considered the three stage model of Service Consumption

• Reviewed the service expectations and the Servuction model

• Reviewed the Service Profit Chain and the Theatrical Metaphor

Thanks for your attention…
 References
Ennew, Christine. (2015). The Service‐Profit Chain. 10.1002/9781118785317.weom090241

Heskett, James & Jones, Thomas & Loveman, Gary & Sasser, W. & Schlesinger, Leonard. (1994). Putting the Service - Profit Chain to Work. Harv Bus
Rev. 72.

Lovelock, Christopher & Wirtz, Jochen. (2011). Services Marketing: People, Technology, Strategy, 7th edition Prentice Hall
https://www.researchgate.net/publication/263523474_Services_Marketing_People_Technology_Strategy_7th_edition Accessed Date: 24th April
2022

Parasuraman, A Parsu & Berry, Leonard & Zeithaml, Valarie. (1991). Understanding Customer Expectations of Service. Sloan Management Review. 32.
39–48.