Services Marketing
Objectives for
Chapter 1:
Introduction
to Services
• Explain what services are and
identify service trends
• Explain the need for special
services marketing concepts and
practices
• Outline the basic differences
between goods and services and
the resulting challenges for service
businesses
• Introduce the service marketing
triangle
• Introduce the expanded services
marketing mix
• Introduce the gaps model of
service quality
Introduction
Services are deeds,processes and performance
Intangible, but may have a tangible component
Generally produced and consumed at the same
time
Need to distinguish between SERVICE and
CUSTOMER SERVICE
• Defining and improving quality
• Communicating and testing new services
• Communicating and maintaining a consistent
image
Challenges
for Services
• Motivating and sustaining employee
commitment
• Coordinating marketing, operations and
human resource efforts
• Setting prices
• Standardization versus personalization
Examples of Service Industries
• Health Care
• hospital, medical practice, dentistry, eye
care
• Professional Services
• accounting, legal, architectural
• Financial Services
• banking, investment advising, insurance
• Hospitality
• restaurant, hotel/motel, bed &
breakfast,
• ski resort, rafting
• Travel
• airlines, travel agencies, theme park
• Others:
• hair styling, pest control, plumbing,
lawn maintenance, counseling services,
health club
Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics Fast-food
 Outlets

Tangible
Dominant

Fast-food
Outlets
Intangible
Dominant


Advertising
Agencies
Airlines
Investment
Management
Consulting



Teaching
Differences Between
Goods and Services
Intangibility
Heterogeneity
Simultaneous
Production
and
Consumption
Perishability
Services cannot be
inventoried
Implications
of
Intangibility
Services cannot be
patented
Services cannot be readily
displayed or communicated
Pricing is difficult
Service
delivery
and
customer satisfaction depend
on employee actions.
Implications of
Heterogeneity
Service quality depends on
many uncontrollable factors.
There is no sure knowledge
that the service delivered
matches what was planned
and promoted
Implications of
Simultaneous
Production
and
Consumption
Customers participate in and
affect the transaction
Customers affect each other
Employees affect the service
outcome
Decentralization may be
essential
Mass production is difficult
Implications of
Perishability
 It is difficult to
synchronize supply
and demand with
services
 Services cannot be
returned or resold
Services are Different
Goods
Services
Resulting Implications
Tangible
Intangible
Services cannot be inventoried.
Services cannot be patented.
Services cannot be readily displayed or communicated.
Pricing is difficult.
Standardized
Heterogeneous Service delivery and customer satisfaction depend on
employee actions.
Service quality depends on many uncontrollable factors.
There is no sure knowledge that the service delivered
matches what was planned and promoted.
Production
separate from
consumption
Simultaneous
production and
consumption
Nonperishable Perishable
Customers participate in and affect the transaction.
Customers affect each other.
Employees affect the service outcome.
Decentralization may be essential.
Mass production is difficult.
It is difficult to synchronize supply and demand with
services.
Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,”
Journal of Marketing 49 (Spring 1985): 33-46.
The Services Marketing Triangle
Company
(Management)
Internal
Marketing
External
Marketing
“enabling the
promise”
Employees
“setting the
promise”
Interactive Marketing
Customers
“delivering the promise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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 Services Triangle
and Technology
Company
Technology
Providers
Source: Adapted from A. Parasuraman
Customers
Services Marketing Mix:7 Ps for
Services
• Traditional Marketing Mix
• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through
People, Processes, and Physical Evidence
• Ways to Use the 7 Ps
Expanded Marketing Mix for Services
PRODUCT
PLACE
PROMOTION PRICE
Physical good Channel type
features
Promotion
blend
Flexibility
Quality level
Exposure
Salespeople
Price level
Accessories
Intermediaries
Advertising
Terms
Packaging
Warranties
Outlet location Sales
promotion
Transportation Publicity
Product lines
Storage
Branding
Differentiation
Allowances
Expanded Marketing Mix for Services
PEOPLE
PHYSICAL
EVIDENCE
PROCESS
Employees
Facility design
Flow of activities
Customers
Equipment
Number of steps
Communicating
culture and values
Signage
Level of customer
involvement
Employee research
Employee dress
Other tangibles
Ways to Use the 7 Ps
Overall Strategic Assessment
Specific Service Implementation
• How effective is a firm’s services
marketing mix?
• Who is the customer?
• Is the mix well-aligned with
overall vision and strategy?
• How effectively does the services
marketing mix for a service
communicate its benefits and
quality?
• What are the strengths and
weaknesses in terms of the 7 Ps?
• What is the service?
• What changes/improvements are
needed?
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?
Part 1
Focus on the Customer
Gaps Model of Service Quality
Expected
CUSTOMER
Service
Customer
Gap
Service Delivery
COMPANY
GAP 1
Perceived
Service
GAP 3
Customer-Driven Service
Designs and Standards
GAP 2
Part 1 Opener
Company Perceptions of
Consumer Expectations
GAP 4
External
Communications
to Customers
Gaps Model of Service Quality
• Customer Gap:
• difference between expectations and
perceptions
• Provider Gap 1:
• not knowing what customers expect
• Provider Gap 2:
• not having the right service designs and
standards
• Provider Gap 3:
• not delivering to service standards
• Provider Gap 4:
• not matching performance to promises
Part 1 Opener
Gap between consumer expectation of
service and company understanding of
these expectations.
Inadequate consumer research.
GAP 1: The
Listening Gap
Lack of upward communication.
Lack of relationship marketing.
Lack of service recovery.
Gap 2: The Service Design and Standards Gap
Gap between customer expectation of service designs and
standards and company perceptions of service standards,
Poor service design
Absence of customer-driven standards.
Inappropriate physical evidence and servicescape.
Gap 3: The Service Performance Gap
Discrepancy between development of customer driven service standards
and actual service performance.
Inadequate HR policy.
Failure to match supply and demand.
Customers not fulfilling roles.
Problems with service intermediaries.
Gap 4: The
Communication
Gap
• The difference between
service delivery and service
providers external
communication.
• Lack of integrated service
communication.
• Ineffective management of
customer expectations.
• Overpromising.
• Inadequate horizontal
communication.
• Inappropriate pricing.
The Customer Gap
Expected
Service
GAP
Perceived
Service
Part 1 Opener
Chapter 2
• CONSUMER BEHAVIOR IN SERVICES
Objectives for Chapter 2:
Consumer Behavior in Services
• Overview the generic differences in consumer behavior
between services and goods
• Introduce the aspects of consumer behavior that a
marketer must understand in five categories of consumer
behavior:
•Information search
•Evaluation of service alternatives
•Service purchase and consumption
•Postpurchase evaluation
•Role of culture
Ideal Expectations or Desire
Normative “Should” Expectations
Levels of
Customer
Expectations
Experience Based Norms
Acceptable Expectations
Minimum Tolerable Expectations.
Consumer Evaluation Processes for
Services
• Search Qualities
• attributes a consumer can determine prior to
purchase of a product
• Experience Qualities
• attributes a consumer can determine after
purchase (or during consumption) of a product
• Credence Qualities
• characteristics that may be impossible to evaluate
even after purchase and consumption
Continuum of Evaluation for Different
Types of Products
Most
Goods
Easy to evaluate
Most
Services
Difficult to evaluate
High in search
qualities
High in experience High in credence
qualities
qualities
Categories in Consumer Decision-Making and Evaluation
of Services
Information
Search
Evaluation of
Alternatives
 Evoked set
 Emotion and mood
 Use of personal sources
 Perceived risk
Culture
 Values and attitudes
 Manners and customs
 Material culture
 Aesthetics
 Educational and social
institutions
Purchase and
Consumption
 Service provision as drama
 Service roles and scripts
 Compatibility of customers
Post-Purchase
Evaluation
 Attribution of dissatisfaction
 Innovation diffusion
 Brand loyalty
Information
search
• In buying services consumers rely
more on personal sources.
• Personal
influence
becomes
pivotal as product complexity
increases
• Word of mouth important in
delivery of services
• With service most evaluation
follows purchase
Perceived Risk
• More risk would appear to be involved
with purchase of services (no
guarantees)
• Many services so specialised and
difficult to evaluate (How do you know
whether the plumber has done a good
job?)
• Therefore a firm needs to develop
strategies to reduce this risk, e.g,
training of employees, standardisation
of offerings
Evoked Set
• The evoked set of alternatives
likely to be smaller with services
than goods
• If you would go to a shopping
centre you may only find one dry
cleaner or “single brand”
• It is also difficult to obtain
adequate prepurchase
information about service
• The Internet may widen this
potential
• Consumer may choose to do it
themselves, e.g. garden services
Emotion and Mood
• Emotion and mood are feeling states that
influence people’s perception and evaluation of
their experiences
• Moods are transient
• Emotions more intense, stable and pervasive
• May have a negative or positive influence
Need to maintain a
desirable
impression
Service
Provision as
Drama
Service “actors” need to
perform certain
routines
Physical setting
important, smell, music,
use of space,
temperature,
cleanliness, etc.
Chapter 3
• CUSTOMER EXPECTATIONS OF SERVICES
Objectives for Chapter 3:
Customer Expectations of Service
• Recognize that customers hold different types of
expectations for service performance
• Discuss controllable and uncontrollable sources of customer
expectations
• Distinguish between customers’ global expectations of their
relationships and their expectations of the service encounter
• Acknowledge that expectations are similar for many
different types of customers
• Delineate the most important current issues surrounding
customer expectations
Customer Expectation Levels
Desired Service
Zone of
Tolerance
Adequate Service
Zone of Tolerance
• Zone of Tolerance lies between
desired service and adequate service.
• Zone of tolerance is the range or the
window when customer particularly
notice service performance.
• Zone of tolerance varies with
customers.
• Zone of tolerance vary with service
dimensions.
Zones of Tolerance VARY for
Different Service Dimensions
Desired Service
Level
of
Expectation
Zone of
Tolerance
Desired
Desired Service
Service
Adequate Service
Zone
of
Tolerance
Adequate
Adequate
Service
Service
Most Important Factors
Least Important Factors
Source: Berry, Parasuraman, and Zeithaml (1993)
Zones of Tolerance VARY 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
• Personal needs include physical, social,
psychological categories
• Enduring service intensifiers are individual, stable
factors that lead to heightened sensitivity to service
This can further divided into Derived Service
Expectations and Personal service Philosophies
Figure 3-6
Factors that Influence
Adequate Service
Transitory Service
Intensifiers
Desired
Service
Perceived Service
Alternatives
Zone
of
Tolerance
Adequate
Service
Situational
Factors
• Transitory service intensifiers – temporary – a computer breakdown
will be less tolerated at financial year-ends
• Perceived service alternatives
• Perceived service role of customer
• Situational factors
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 Delight
• Customer delight happens
when expectations are
exceeded by a large
degree.
• It builds competitive
advantage to a firm.
• It is sustainable when it
cannot be easily replicated
by competition.
• It may raise the bar and
increase customer
expectation.
Exceeding Service
Expectations
• Delivering promised services
accurately, reliably and on
time rarely lead to customer
delight.
• Some companies have a
strategy of personalization
within the service ambit to
delight customers.
• Service expectations may rise
with increased service levels.
• Companies should operate
within a close range of
desired service levels to
maintain customer loyalty.
Chapter 4
• CUSTOMER PERCEPTIONS OF SERVICE
Objectives for Chapter 4:
Customer Perceptions of Service
• Provide you with definitions and understanding
of customer satisfaction and service quality
• Show that service encounters or the “moments
of truth” are the building blocks of customer
perceptions
• Highlight strategies for managing customer
perceptions of service
Customer Perceptions of Service Quality and
Customer Satisfaction
Reliability
Responsiveness
Service
Quality
Situational
Factors
Assurance
Empathy
Tangibles
Product
Quality
Price
Customer
Satisfaction
Personal
Factors
Product/service quality
Factors
Influencing
Customer
Satisfaction
Product/service attributes or
features
Consumer Emotions
Attributions for product/service
success or failure
Equity or fairness evaluations
Outcomes of
Customer Satisfaction
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues
Relationship between Customer Satisfaction and
Loyalty in Competitive Industries
Loyalty (retention)
100%
80%
60%
40%
20%
0%
Very
dissatisfied
Dissatisfied
Neither
satisfied nor
dissatisfied
Satisfied
Very
satisfied
Satisfaction measure
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.
Service Quality
The customer’s judgment
of overall excellence of
the service provided in
relation to the quality
that was expected.
Process and outcome
quality are both
important.
The Five Dimensions of
Service Quality
Ability to perform the promised
service dependably and accurately.
Knowledge and courtesy of
Assurance
employees and their ability to convey
trust and confidence.
Physical facilities, equipment, and
Tangibles
appearance of personnel.
Caring, individualized attention the
Empathy
firm provides its customers.
Responsiveness Willingness to help customers and
provide prompt service.
Reliability
SERVQUAL Attributes
RELIABILITY
ASSURANCE






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



EMPATHY

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
Employees who instill confidence in
customers
Making customers feel safe in their
transactions
Employees who are consistently courteous
Employees who have the knowledge to
answer customer questions




Giving customers individual attention
Employees who deal with customers in a
caring fashion
Having the customer’s best interest at heart
Employees who understand the needs of
their customers
Convenient business hours
TANGIBLES




Modern equipment
Visually appealing facilities
Employees who have a neat,
professional appearance
Visually appealing materials
associated with the service
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
Moments of Truth
First moment of truth (FMOT): When a customer is first confronted with the
product, taking place either offline or online. It occurs within the first 3-7
seconds of a consumer encountering the product and it is during this time that
marketers have the capability of turning a browser into a buyer. Procter &
Gamble describe the first moment of truth as the "moment a consumer
chooses a product over the other competitors offerings".
Second moment of truth (SMOT): When a customer purchases a product and
experiences its quality as per the promise of the brand. There can be multiple
second moment of truths for every time the product is consumed (used),
providing the consumer with information for future purchases and for sharing
their experience with the product/service.
Third moment of truth (TMOT): Consumers feedback or reaction towards a
brand, product or service i.e. consumer becomes brand advocate and gives
back via word of mouth or social media publishing.
Moments of
Truth
Zero moment of truth (ZMOT) is a term coined by
Google in 2011,it refers to the research which is
conducted online about a product or service before
taking any action i.e. searching for mobile reviews
before making a purchase. The internet has changed
altogether the way consumers are interacting with
brands, products or services this online decisionmaking moment is termed as ZMOT. According to
research conducted by Google, 88% of US customers
are researching online before actually buying the
product.
Actual moment of truth was identified
by Amit Sharma, Founder & CEO of
Narvar, to describe the new postpurchase experience gap created by
the advent of online shopping, after a
consumer has made a purchase but
before they've received the product.
Figure 4-4
A Service Encounter
Cascade for a Hotel Visit
Check-In
Bellboy Takes to Room
Restaurant Meal
Request Wake-Up Call
Checkout
A Service Encounter
Cascade for an Industrial Purchase
Sales Call
Delivery and Installation
Servicing
Ordering Supplies
Billing
GOAL - understanding actual events
and behaviors that cause customer
dis/satisfaction in service
encounters
Critical
Service
Encounters
Research
METHOD - Critical Incident
Technique
DATA - stories from customers
and employees
OUTPUT - identification of themes
underlying satisfaction and
dissatisfaction with service
encounters
Critical Incidents Study
•Customers are asked about
•A particularly satisfying or dissatisfying
experience.
•Happening of the incident
•Specific circumstance leading upto the
incident.
•Reaction of employees.
•Why the incident was particularly satisfying
or dissatisfying.
•What could have been done differently.
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)?
Common Themes in Critical
Service Encounters Research
Recovery:
Adaptability:
Employee Response
to Service Delivery
System Failure
Employee Response
to Customer Needs
and Requests
Coping:
Employee Response
to Problem Customers
Spontaneity:
Unprompted and
Unsolicited Employee
Actions and Attitudes
Recovery
DO
• Acknowledge problem
• Explain causes
• Apologize
• Compensate/upgrade
• Lay out options
• Take responsibility
DON’T
• Ignore customer
• Blame customer
• Leave customer to fend for
him/herself
• Downgrade
• Act as if nothing is wrong
Adaptability
DO
• Recognize the seriousness
of the need
• Acknowledge
• Anticipate
• Attempt to accommodate
• Explain rules/policies
• Take responsibility
• Exert effort to
accommodate
DON’T
• Promise, then fail to
follow through
• Ignore
• Show unwillingness to try
• Embarrass the customer
• Laugh at the customer
• Avoid responsibility
Spontaneity
DO
• Take time
• Be attentive
• Anticipate needs
• Listen
• Provide information (even
if not asked)
• Treat customers fairly
• Show empathy
• Acknowledge by name
DON’T
• Exhibit impatience
• Ignore
• Yell/laugh/swear
• Steal from or cheat a customer
• Discriminate
• Treat impersonally
Coping
DO
• Listen
• Try to accommodate
• Explain
• Let go of the customer
DON’T
• Take customer’s dissatisfaction
personally
• Let customer’s dissatisfaction
affect others
Evidence of Service from the Customer’s Point of
View



 Operational flow of
activities
Contact employees
Customer him/herself
Other customers
People
 Steps in process
 Flexibility vs.
standard
 Technology vs.
human
Process
Physical
Evidence
 Tangible
communication
 Servicescape
 Guarantees
 Technology
Part 2
• LISTENING TO CUSTOMER
REQUIREMENTS
Provider GAP 1
CUSTOMER
Expected
Service
GAP 1
COMPANY
Part 2 Opener
Company
Perceptions of
Consumer
Expectations
Chapter 5
• UNDERSTANDING CUSTOMER
EXPECTATIONS AND PERCEPTIONS
THROUGH MARKETING RESEARCH
Objectives for Chapter 5:
Understanding Customer Expectations and Perceptions through
Marketing Research
• Present the types of and guidelines for marketing
research in services
• Show the ways that marketing research information can
and should be used for services
• Describe the strategies by which companies can
facilitate interaction and communication between
management and customers
• Present ways that companies can and do facilitate
interaction between contact people and management
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
Figure 5-1
Criteria for An Effective Services Research
Program
Occurs
with
Appropriate
Frequency
Includes
Perceptions
and
Expectations
of
Customers
Research
Objectives
Measures
Priorities
or
Importance
Includes
Statistical
Validity
When Necessary
Includes
Measures
of
Loyalty or
Behavioral
Intentions
Portfolio of Services Research
Research Objective
Identify dissatisfied customers to attempt
recovery; identify most common categories of
service failure for remedial action
Type of Research
Customer Complaint
Solicitation
Assess company’s 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
Determine the reasons why customers defect
To forecast future expectations of customers
To develop and test new service ideas
Customer Focus Groups
“Mystery Shopping” of
Service Providers
Employee Surveys
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
Service Quality Perceptions
Relative to Zones of Tolerance by Dimensions
9
8
7
6
O
O
O
O
O
5
4
3
2
1
0
Reliability
Retail Chain
Responsiveness
Assurance
Empathy
Tangibles
Zone of Tolerance O S.Q. Perception
Service Quality Perceptions
Relative to Zones of Tolerance by
Dimensions
10
8
O
O
O
O
O
6
4
2
0
Reliability
Responsiveness
Computer
Manufacturer
Assurance
Zone of Tolerance
Empathy
O
Tangibles
S.Q. Perception
Figure 5-6
Importance/Performance Matrix
HIGH
High
Leverage

Importance
Attributes to Improve

Attributes to Maintain




Low
Leverage




Attributes to Maintain
LOW
Performance
Attributes to De-emphasize
HIGH
Chapter 6
• BUILDING CUSTOMER
RELATIONSHIPS
Objectives for Chapter 6:
Building Customer Relationships
• Explain relationship marketing, its goals, and the benefits of
long-term relationships for firms and customers
• Explain why and how to estimate customer lifetime value
• Specify the foundations for successful relationship
marketing--quality core services and careful market
segmentation
• Provide you with examples of successful customer retention
strategies
• Introduce the idea that “the customer isn’t always right”
is a philosophy of doing business that
focuses on keeping and improving
current customers
does not necessarily emphasize
acquiring new customers
Relationship
Marketing
is usually cheaper (for the firm)--to
keep a current customer costs less
than to attract a new one
goal = to build and maintain a base of
committed customers who are
profitable for the organization
thus, the focus is on the attraction,
retention, and enhancement of
customer relationships
Customers as
strangers.
Evolution of
Customer
Relationships
Customers as
acquaintances.
Customers as friends.
Customers as
partners.
Benefits for Customers
CONFIDENCE
BENEFITS.
SOCIAL BENEFITS.
SPECIAL TREATMENT
BENEFITS.
Economic Benefits
Benefits for
Firms
Customer Behaviour
Benefits.
Human Resource
Management Benefits.
Relationship
Value of
Customers
Relationship value of a
customer is a concept or
calculation that looks at
customers from the point of
view of their lifetime revenue
and/or profitability
contributions to a company.
Factors Influencing Relationship Value
Estimating customer lifetime
value.
Linking customer relationship
value to firm value.
Assumptions
Income
Lifetime Value
of a Customer
• Expected Customer Lifetime
• Average Revenue (month/year)
• Other Customers convinced via
WOM
• Employee Loyalty??
Expenses
• Costs of Serving Customer
Increase??
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
• wouldn’t consider terminating the relationship-psychological commitment
• has a positive attitude about the supplier
• says good things about the supplier
Figure 6-1
Customer Goals of
Relationship Marketing
Enhancing
Retaining
Satisfying
Getting
Figure 6-3
Underlying Logic of Customer Retention
Benefits to the Organization
Customer Satisfaction
Customer Retention &
Increased Profits
Employee Loyalty
Quality
Service
The 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?
Platinum Tier – Heavy users, not
overtly price sensitive, willing to
try new products, committed.
Profitability
Tiers –
Customer
Pyramid
Gold Tier – Less profitability
than platinum since prone to
price discounts and switching.
Iron Tier – Essential customers
who provide volume. But
profitability not substantial.
Lead Tier – Customers who are
costing money. Spend less and
want more.
• Core Service Provision
Relationship
Development
Strategies
• Switching Barriers
• Customer Inertia
• Switching Costs
• Relationship Bonds
• Level 1 – Financial Bonds
• Level 2 – Social Bonds
• Level 3 – Customisation
Bonds
• Level 4 – Structural Bonds
Levels of Retention Strategies
Volume and
Frequency
Rewards
Bundling and
Cross Selling
Continuous
Relationships
I. Financial
Bonds
Integrated
Information
Systems
Joint
Investments
Stable
Pricing
IV.
Structural
Bonds
Shared
Processes
and
Equipment
Excellent
Quality
and
Value
II.
Social
Bonds
III. Customization
Bonds
Anticipation
/ Innovation
Personal
Relationships
Social Bonds
Among
Customers
Customer
Intimacy
Mass
Customization
The Customer is not
always right
Relationship
Challenges
• The wrong segment
• Not profitable in the long
term
• Difficult customers
Ending Business
Relationships
• Relationship endings
• Should firms fire their
customers
Chapter 7
• SERVICE RECOVERY
Objectives for Chapter 7:
Service Recovery
• Illustrate the importance of recovery from service
failures in building loyalty
• Discuss the nature of consumer complaints and
why people do and do not complain
• Provide evidence of what customers expect and
the kind of responses they want when they
complain
• Provide strategies for effective service recovery
• Discuss service guarantees
Service Failure & Recovery
• A Service Failure is generally
described as service performance
that falls below a customer’s
expectations in such a way that leads
to customer dissatisfaction.
• Service Recovery refers to the actions
taken by an organization in response
to a service failure.
Service
Recovery
Paradox
In some businesses
customers who were
highly dissatisfied with
service experience and
then experience a high
level of excellent service
recovery, seemingly
become highly satisfied
and more likely to
repurchase than if no
problem had occurred.
Passives
Types of
Complainers
Voicers
Irate
Activists
Understanding
and Accountability
Customer’s
Recovery
Expectations
Fair Treatment
• Outcome Fairness
• Procedural Fairness
• Interactional Fairness
Figure 7-1
Unhappy Customers’
Repurchase Intentions
Unhappy Customers Who Don’t Complain
9%
37%
Unhappy Customers Who Do Complain
Complaints Not Resolved
19%
46%
54%
Complaints Resolved
70%
82%
Complaints Resolved Quickly
95%
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.
Figure 7-3
Customer Response Following Service
Failure
Service Failure
Take Action
Do Nothing
Switch Providers
Complain to
Provider
Complain to
Family & Friends
Switch Providers
Complain to
Third Party
Stay with Provider
Stay with Provider
Figure 7-5
Service Recovery Strategies
Service
Recovery
Strategies
Pricing
•
•
•
•
High Price
Price Increases
Unfair Pricing
Deceptive Pricing
Inconvenience
• Location/Hours
• Wait for Appointment
• Wait for Service
Causes Behind Service
Switching
Core Service Failure
• Service Mistakes
• Billing Errors
• Service Catastrophe
Service Encounter Failures
•
•
•
•
Uncaring
Impolite
Unresponsive
Unknowledgeable
Response to Service Failure
• Negative Response
• No Response
• Reluctant Response
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
Service
Guarantees
guarantee = an
assurance of the
fulfillment of a
condition (Webster’s
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
 The guarantee should make its promise unconditionally - no
strings attached.
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
 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.
forces company to focus on
customers
sets clear standards
Why a Good
Guarantee
Works
generates feedback
forces company to understand
why it failed
builds “marketing muscle”
• Does everyone need a
guarantee?
Service
Guarantees
• Reasons companies do NOT offer
guarantees:
• guarantee would be at odds
with company’s 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
• “it’s the icing on the cake, not
the cake”
Part 3
• ALIGNING STRATEGY, SERVICE DESIGN
AND STANDARDS
Provider GAP 2
CUSTOMER
Customer-Driven
Service Designs and
Standards
COMPANY
GAP 2
Company
Perceptions of
Consumer
Expectations
Part 3 Opener
Chapter 8
• SERVICE DEVELOPMENT AND DESIGN
Objectives for Chapter 8:
Service Development and Design
• Describe the challenges inherent in service design
• Present steps in the new service development
process
• Show the value of service blueprinting and quality
function deployment (QFD) in new service design
and service improvement
• Present lessons learned in choosing and
implementing high-performance service
innovations
Risks of Relying on Words Alone to
Describe Services
 Oversimplification
 Incompleteness
 Subjectivity
 Biased Interpretation
User Centered
Co-Creative
Service
Design
Thinking
Sequencing
Evidencing
Holistic
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
Existing
Services
New
Services
Current Customers
New Customers
SHARE BUILDING
MARKET
DEVELOPMENT
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 customer’s point of
view.
Process
Service
Mapping
Points of Contact
Evidence
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
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
Destinatio
n
Unload
&
Sort
Load
On
Truck
CONTACT PERSON
SUPPORT PROCESS (Back Stage) (On Stage)
CUSTOMER PHYSICAL
EVIDENCE
Overnight Hotel Stay
Hotel
Exterior
Parking
Arrive
at
Hotel
Cart for
Bags
Desk
Elevators Cart for
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
Figure 8-8
Building a Service Blueprint
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Identify the
process to
be blueprinted.
Identify the
customer
or
customer
segment.
Map the
process
from the
customer’s
point of
view.
Map
contact
employee
actions,
onstage
and backstage.
Link
customer
and contact
person
activities to
needed
support
functions.
Add
evidence
of service
at each
customer
action
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
• service system
design
• promotion
• Operations Management
• rendering the
service as
promised
• managing fail
points
• training systems
• quality control
• Human Resources
•
empowering the
human element
• job descriptions
• selection criteria
• appraisal systems
• System Technology
•
providing
necessary tools:
• system
specifications
• personal
preference
databases
Chapter 9
• CUSTOMER-DEFINED SERVICE
STANDARDS
Objectives for Chapter 9:
Customer-Defined Service Standards
• Distinguish between company-defined and customerdefined service standards.
• Differentiate among “hard” and “soft” customer-defined
standards and one-time fixes.
• Explain the critical role of the service encounter sequence in
developing customer-defined standards.
• Illustrate how to translate customer expectations into
behaviors and actions that are definable, repeatable, and
actionable.
• Explain the process of developing customer-defined service
standards.
9-135
FedEx Service Quality Indicator (SQI)
9-136
Factors Necessary for Appropriate Service
Standards
• Standardization of service behaviors and actions
• Standardization usually implies a nonvarying sequential
process similar to the production of goods
• Customization usually refers to some level of adaptation
or tailoring of the process to the individual customer
• Formal service targets and goals
• Setting specific targets for individual behaviors and
actions; for example, the customer service standards set
by Puget Sound Energy and shown in Figure 9.1.
9-137
Customer Service Report Card for
Puget Sound Energy
9-138
Service Standards
Standards are based on the most important customer
expectations and reflect the customer’s view of these expectations.
CustomerDefined
Standards
SOURCES
Customer Expectations
Customer Process Blueprint
Customer Experience
Observations
CompanyDefined
Standards
SOURCES
Productivity Implications
Cost Implications
Company Process Blueprint
Company View of Quality
9-139
Standards…
HARD STANDARDS AND MEASURES
Things that can be counted, timed,
or observed through audits (time,
numbers of events)
SOFT STANDARDS AND MEASURES
Opinion-based measures that cannot
be observed and must be collected by
talking to customers (perceptions, beliefs)
9-140
Exhibit 9.1: Examples of Hard Customer-Defined Standards
9-141
Exhibit 9.2: Examples of Soft Customer-Defined Standards
9-142
Process for Setting Customer-Defined Standards
9-143
Step 2: What Customers Expect: Getting to
Actionable Steps
9-144
Step 3:
Determine
Appropriate
Standards
• Standards are based on behavior and
actions that are important to customers.
• The standards cover performance that
need to be improved or maintained.
• The standards cover behaviours and
actions employees have control over
and can improve.
• The standards are understood and
accepted by employees.
• The standards are predictive rather than
reactive – based on current and future
customer requirements rather than past
complaints.
• The standards are challenging but
realistic.
Step 4: Linkage between Soft Measures and Hard
Measures for Speed of Complaint Handling
9-146
Responsiveness Standards at Zappos.com
• Respond to 80 percent of all incoming calls within 20 seconds
• Respond to all e-mail messages in less than four hours
• Respond to live (online) chats in less than 10 seconds.
9-147
Soft Standards at Toyota in Japan
• Standards for salespeople patterned
after samurai behaviors:
• Assume the samurai warrior’s “waiting
position” by leaning five to ten degrees
forward when a customer is looking at a car
• Stand with left hand over right, fingers
together and thumbs interlocked, as the
samurais did to show they were not about to
draw their swords
• Display the “Lexus Face,” a closed-mouth
smile intended to put customers at ease
9-148
More Soft Standards at Toyota in Japan
• Standards for salespeople patterned after
samurai behaviors:
• When serving coffee or tea, kneel on the floor
with both feet together and both knees on the
ground
• Bow more deeply to a customer who has
purchased a car than a casual window shopper
• Stand about two arms’ lengths from customers
when they are looking at a car and come in closer
when closing a deal
• Point with all five fingers to a car door’s handle,
right hand followed by left, then gracefully open
the door with both hands
9-149
Hard and Soft Service Standards at Ford
• Appointment available within one day of customer’s
requested service day
• Write-up begins within four minutes
• Service needs are courteously identified, accurately
recorded on repair order and verified with customer
• Service status provided within one minute of
inquiry
• Vehicle serviced right on first visit
• Vehicle ready at agreed-upon time
• Thorough explanation given of work done, coverage
and charges
9-150
Standards at Four Seasons
• Seven Service Culture Standards
1.
2.
3.
4.
5.
6.
7.
Smile
Eye
Recognition
Voice
Informed
Clean
Everyone
• Core Worldwide Service Operating
Standards
•
•
•
•
•
•
Reservations
Hotel Arrival
Messages and Paging
Guest Room Evening Service
Breakfast
Room
Exceptions are permitted if
they make local sense
9-151
Importance/Performance Matrix
HIGH
10.0
Improve
Maintain
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)


Gets price we originally agreed upon (9.21, 8.64)
 

Tells me cost ahead of time (9.06, 8.46)
 

Provides equipment that operates as vendor said it would (9.24, 8.14)
Completes projects
correctly, on time (9.29, 7.68)
9.0
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
Figure 9-6
Aligning Company Processes with
Customer Expectations
Customer Expectations
Customer
Process
Blueprint
Company
Process
Blueprint
A
B
Lost Card
Reported
48 Hours
Report Lost
Card
Receive New
Card
Company Sequential Processes
C
D
E
40 Days
F
G
H
New Card
Mailed
• https://www.youtube.com/watch?v=XeVkV4_YnMA
• https://www.youtube.com/watch?v=lSZdKK14zgg
Chapter 10
• PHYSICAL EVIDENCE AND THE
SERVICESCAPE
Objectives for Chapter 10:
Physical Evidence and the Servicescape
• Explain the impact on customer perceptions of physical
evidence, particularly the servicescape
• Illustrate differences in types and roles of servicescapes
and their implications for strategy
• Explain why the servicescape affects employee and
customer behavior
• Analyze four different approaches for understanding the
effects of physical environment
• Present elements of an effective physical evidence
strategy
Table 10-1
Elements of Physical Evidence
Servicescape
Other tangibles
Facility exterior
Business cards
Stationery
Billing statements
Reports
Employee dress
Uniforms
Brochures
Internet/Web pages
Exterior design
Signage
Parking
Landscape
Surrounding environment
Facility interior
Interior design
Equipment
Signage
Layout
Air quality/temperature
Table 10-2
Examples of Physical Evidence from the Customer’s Point of
View
Service
Physical evidence
Servicescape
Other tangibles
Insurance
Not applicable
Hospital
Building exterior
Parking
Signs
Waiting areas
Admissions office
Patient care room
Medical equipment
Recovery room
Airline gate area
Airplane exterior
Airplane interior (décor, seats, air
quality)
Not applicable
Airline
Express mail
Sporting
event
Parking, Seating, Restrooms
Stadium exterior
Ticketing area, Concession Areas
Entrance, Playiing Field
Policy itself
Billing statements
Periodic updates
Company brochure
Letters/cards
Uniforms
Reports/stationery
Billing statements
Tickets
Food
Uniforms
Packaging
Trucks
Uniforms
Computers
Signs
Tickets
Program
Uniforms
Table 10-3
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
Ritz Carlton Bangalore
JW Marriott Hyderabad
Courtyard by Marriott, Hyderabad
Fairfield
Inn,
Hyderabad
Singapore
Airlines
First Class
Suite
Singapore
Airlines A 380
Business Class
Singapore Airlines, Economy Class
Strategic
Roles of
Servicescape
PACKAGE
FACILITATOR
SOCIALIZER
DIFFERENTIATOR
Servicescape as Facilitator
Servicescape as Socialiser
Servicescape as Differentiator – Jyske Bank
Servicescape as Differentiator – Pets Hotel
Figure 10-3
A Framework for Understanding
Environment-user Relationships
in Service Organizations
PHYSICAL
ENVIRONMENTAL
DIMENSIONS
HOLISTIC
ENVIRONMENT
INTERNAL
RESPONSES
BEHAVIOR
Cognitive
Emotional
Physiological
Employee
Responses
Ambient
Conditions
Space/Function
Individual
Behaviors
Social
Interactions
between and
among
customer and
employees
Perceived
Servicescape
Signs, Symbols,
and Artifacts
Customer
Responses
Individual
Behaviors
Cognitive
Emotional
Source: Adapted from Mary Jo Bitner, “Servicescapes.”
Physiological
Framework for understanding Servicescape
effects on Behaviour
Individual Behaviour – Approach or Avoidance Behaviour
Social Interactions
Environment and Cognition
Environment and Emotion – Pleasure/Displeasure and Degree of Arousal
Environment and Physiology – Human Factor Design or Ergonomics
Variations in Individual Responses
Ambient Conditions
Spatial Layouts and Functionality
Signs, Symbols and Artifacts
REI Store
Seattle –
Rock
Climbing
Wall
Target Store vs Pantaloons
Recognise the Strategic Impact.
Blueprint Physical Evidence
Guidelines for
Physical
Evidence
Strategy
Clarify Strategic Role of
Servicescape
Assess and Identify Physical
Evidence Opportunities
Update and Modernize
Work Cross Functionally
Part 4
• DELIVERING AND PERFORMING SERVICE
Provider GAP 3
CUSTOMER
Service Delivery
COMPANY
GAP 3
Customer-Driven
Service Designs and
Standards
Part 4 Opener
Chapter 11
• EMPLOYEES’ ROLES IN SERVICE DELIVERY
Objectives for Chapter 11:
Employees’ Roles in Service Delivery
• Illustrate the critical importance of service
employees in creating customer satisfaction and
service quality
• Demonstrate the challenges inherent in boundaryspanning roles
• Provide examples of strategies for creating
customer-oriented service delivery
• Show how the strategies can support a service
culture where providing excellent service is a way
of life
Service Employees
• They are the service
• They are the firm in the customer’s eyes
• They are marketers
• Importance is evident in
• The Services Marketing Mix (People)
• The Service-Profit Chain
• The Services Triangle
Who are they?
• “boundary spanners”
What are these jobs like?
Service
Employees
• emotional labor
• many sources of potential
conflict
• person/role
• organization/client
• interclient
• quality/productivity
Figure 11-3
Boundary Spanners Interact
with Both Internal
and External Constituents
External Environment
Internal Environment
Figure 11-4
Sources of Conflict for
Boundary-Spanning Workers
• Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity
Figure 11-5
Human Resource Strategies for Closing GAP 3
Hire for
Service
Competencies
and Service
Inclination
Hire the
Right People
Retain the
Best
People
Include
Employees in
the
Company’s
Vision
Customeroriented
Service
Delivery
Provide
Needed Support
Systems
Provide
Supportive
Technology
and
Equipment
Develop
People to
Deliver
Service
Quality
Empower
Employees
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.”
Service Culture at Corporations
• https://www.youtube.com/watch?v=P8U7MQXjztQ - Training
• https://www.youtube.com/watch?v=9ANgEo40VSE - Google
• https://www.youtube.com/watch?v=ZFb01yTR9bA
• https://www.youtube.com/watch?v=n2BCamn1V_I
• https://www.youtube.com/watch?v=tgzGJE-xEoY
Chapter 12
• CUSTOMERS’ ROLES IN SERVICE
DELIVERY
Objectives for Chapter 12:
Customers’ Roles in Service Delivery
• Illustrate the importance of customers in successful
service delivery
• Enumerate the variety of roles that service
customers play
• Productive resources
• Contributors to quality and satisfaction
• Competitors
• Explain strategies for involving service customers
effectively to increase both quality and
productivity
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
Low viz. Cinema, Play,
Music Soirees, Sports
Events
Customer
Level of
Participation
Moderate viz. Medical,
Tax, Lawyer
High viz. Education,
Weight Loss
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
Figure 12-2
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
organization’s productivity
• key issue:
• should customers’ roles be
expanded? reduced?
Client Co-Production in KIBS
(Knowledge Edge Business Service)
• Communications Openess
• Shared Problem Solving
• Tolerance
• Accommodation
• Advocacy
• Involvement in project
governance
• Personal dedication
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 may “compete” with the
service provider
• “internal exchange” vs. “external
exchange”
• internal/external decision often
based on:
Customers
as
Competitors
• expertise
• resources
• time
• economic rewards
• psychic rewards
• trust
• control
Technology Spotlight:
Services Production Continuum
Customer Production
1
2
Joint Production
3
4
Firm Production
5
6
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
Success with Self Service
Technologies
• What is our strategy?
• What are the benefits to customers? Do
they know and understand them?
• How can the customers be motivated to
try? Do they understand their role? Do
they have capacity to perform the role?
• How technology ready are our
customers? Are some segments more
ready?
• How can the customers be involved in
the design so that they are more likely to
adopt?
• What forms of customer education is
needed? Will other incentives be
needed?
• How will inevitable SST failures be
handled to regain customer confidence?
Figure 12-3
Strategies for Enhancing Customer
Participation
Define Customer
Roles
Effective
Customer
Participation
Manage the
Customer
Mix
Recruit, Educate,
and Reward
Customers
Strategies for Enhancing
Customer Participation
1. Define customers’ roles
- helping oneself
- helping others
- promoting the company
2. 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
Manage the Customer Mix
Chapter 13
• MANAGING DEMAND AND CAPACITY
Chapter’s Objectives……………
Explain the underlying issue for capacity-constrained services: lackof
inventory capability.
Present the implications of time, labor, equipment, andfacilities
constraints combined with variations in demandpatterns.
Lay out strategies for matching supply and demand through (a)shifting
demand to match capacity or (b) adjusting capacity to meet demand.
Demonstrate the benefits and risks of yield management strategiesin
forging a balance among capacity utilization, pricing, market
segmentation, and financial return.
Provide strategies for managing waiting lines for times whencapacity
and demand cannot be aligned.
Lack of inventoryCapability
Variations in Demand Relative to Capacity
 Excess demand: the level of demand exceeds maxcapacity.
◦ Some customers will be turned away.
◦ For customers who do receive service, quality may be lacking becauseof
crowding or overtaxing of staffand facilities
 Demand exceeds optimum capacity.
◦ No one is turned away, but quality may stillsuffer.
 Demand and supply are balanced at optimumcapacity.
◦ Staff and facilities are occupied at ideal level.
◦ No one is overworked, facilities can be maintained, customers are receiving
quality.
 Excess capacity: demand is belowoptimum.
◦ Resources are underutilized resulting in lower profits.
◦ Some customers may receive high quality service, but if quality dependson
the presence of other customers, customers may bedisappointed.
Demand and Capacityfor Service Providers
Constraints on Capacity
Capacity…………………
Examples-:
Place
Capacity
Stadium
• 35000 Seats
Film Theater
• 513 seats
Hotel
•
450 Rooms
Air Lines
Business class seats 28
A330-3000
• Economic class seats
269
Optimal Vs.Maximum
Optimal
Maximum
• Resources are fully employed
but capacity not overused.
• Resources are fully
employed
• Customers are received quality
service in a timely manner.
• Limited service available
capacity
• Best Quality
• Highest possible
DemandPatterns
1. The charting of demand patterns
2. Predictable cycles
3. Random demand fluctuations
4. Demand pattern by market segment
Strategies for Matching Demand and
Capacity
Strategies for Shifting Demand to Match Capacity
Strategies for Adjusting Capacity to Match Demand
Strategies for Matching Demand and
Capacity
Strategies for Shifting Demand to Match Capacity
Strategies for Matching Demand and
Capacity
Strategies for Adjusting Capacity to Match
Demand
Strategies for Matching Demand and
Capacity
Definition
“The process of allocating the right type of capacity to the rightkind
of customer at the right price so as to maximize revenue oryield.”
Actual revenue
Potential revenue
Yield =
Actual revenue
price
=
Potential revenue =
actual capacity x average actual
total capacity x maximum price
Yield Management Example
200 room Hotel
Max room rate =$100/night
◦ Potential Revenue = 200 x $100 = $20,000
All rooms sold at discounted rate ($50/night)
◦ Yield = (200 x $50) /$20,000 = $10,000/20000 x 100= 50%
Full rate charged, but only 80 rooms sold
◦ Yield = (80 x $100)/$20,000 = $8,000/20000 x100 = 40%
Full rate charged for 80 rooms, discount for
remaining 120 rooms
◦ Yield = [(80 x $100) + (120 x $50)]/$20,000 = $14,000/20000 x100
= 70%
Challenges and Risks in Using
Yield Management
Loss of competitive focus
Customer alienation
 Overbooking
Incompatible incentive and reward systems
Inappropriate organization of the yield
management function
Waiting Line Configurations
Employ operational logic to reducewait
◦How to configure the queue?
◦Multiple Queue
◦Single Queue
◦Take aNumber
Waiting Line Configurations
2
1
3
8
Waiting Line Strategies
Establish a reservation process
Differentiate waiting customers
◦ Importance of the customer
◦ Urgency of the job
◦ Duration of the servicetransaction
◦ Payment of a premiumprice
Make waiting more pleasurable
Issues to Consider in Making Waiting
More Pleasurable
Unoccupied time feels longer than occupied time.
Preprocess waits feel longer than in-processwaits.
Anxiety makes waits seem longer.
Uncertain waits seem longer than known, finite waits.
Unexplained waits seem longer than explained waits.
Unfair waits feel longer than equitablewaits.
The more valuable the service, the longer the customer
will wait.
Solo waits feel longer than group waits.
Part 5
• MANAGING SERVICE PROMISES
Provider GAP 4
CUSTOMER
COMPANY
Service Delivery
GAP 4
Part 5 Opener
External
Communications
to Customers
KeyFactorsLeadingtoProviderGap4
Chapter 14
• INTEGRATED MARKETING
COMMUNICATION
Objectives for Chapter 14:
Integrated Services
Marketing Communications
• Introduce the concept of Integrated Services Marketing
Communication
• Discuss the key reasons for service communication
problems
• Present four key ways to integrate marketing
communication in service organizations
• Present specific strategies for managing promises,
managing customer expectations, educating customers, and
managing internal communications
• Provide perspective on the popular service objective of
exceeding customer expectations
Role of Marketingcommunications
•
•
•
•
•
•
Position and differentiate the service
Helps Customers to evaluate Service Offerings
Promote the Contribution of the ServicePersonnel
Add Value through Communication Content
Facilitate Customer Involvement in Production
Stimulate or Dampen Demand to matchCapacity
Howisthisdoneinservices?
• Create memorable images of
specific companies and their
brands
Common
Promotional
Objectives in
ServiceSettings
• Build awareness/interest for
unfamiliarservice/brand
• Compare service favorably with
competitors’offerings
• Build preference by
communicating brand strengths
andbenefits
• Reposition service relative to
competition
• Reduce uncertainty/perceived risk
by providing useful info andadvice
Common Promotional Objectives in
ServiceSettings
• Provide reassurance (e.g., promote service guarantees)
• Encourage trial by offering promotional incentives
• Familiarize customers with service processes before use
• Teach customers how to use a service to best advantage
• Stimulate demand in off-peak, discourage during peak
• Recognize and reward valued customers and employees
Messages through Marketing
Channels: Advertising
• Build awareness, inform, persuade, and remind
• Challenge: How stand out from the crowd?
• Effectiveness remains controversial
• Research suggests that less than half of all ads generate apositive
return on their investment
Messagesthrough Marketing
Channels: Public Relations
 PR/Publicity involves efforts to stimulate positive interest inan organization and its
products through third parties
 e.g., press conferences, news releases, sponsorships
 Corporate PRspecialists teach senior managers how to present themselves well at public
events, especially when faced with hostilequestioning
 Unusual activities can present an opportunity to promotecompany’s expertise
Messagesthrough Marketing
Channels: Direct Marketing
• Mailings, recorded telephone messages, faxes, email
• Potential to send personalized messages to highly targeted
micro segments
• Need detailed database of information aboutcustomers and
prospects
Messagesthrough Marketing
Channels: Direct Marketing
• Advance in on-demand technologies empower consumers to decide how
and when they prefer to be reached, and by whom
• e.g. email spam filters, pop-up blockers, podcasting
• Permission Marketing goal is to persuade customers to volunteer their
attention
• Enables firms to build strong relationships withcustomers
• e.g., People invited toregister at a firm’s website and specify what type of
information they like to receive viaemail
Messages throughMarketing
Channels:Sales Promotion
 Defined as “Communication that comes with anincentive”
 Should be specific to a time period, price, or customer group
 Motivates customers to use a specific service sooner, in greater volumewith
each purchase, or more frequently
Messages through Marketing
Channels: PersonalSelling
• Interpersonal encounters educate customers and promote preferences
for particular brand
or product
• Common in B2B and infrequently purchased services
• Many B2B firms have dedicated sales force to do personal selling
• Customer assigned to a designated account manager
• For services that are bought less often, firm’s representative acts
as consultant to help buyers make selection
• Face-to-face selling of new products is expensive—
telemarketing is lower cost alternative
Messages throughInternet:
Company’sWebsite
• The web is used for a variety of communication tasks
• Creating consumer awareness and interest
• Providing information and consultation
• Allowing two-way communication with customers through email
and chatrooms
• Encouraging product trial
• Allowing customers to place orders
• Measuring effectiveness of advertising or promotional campaigns
• Innovative companies look for ways to improve the appeal
and usefulness of their sites
Messages throughInternet:
OnlineAdvertising
• Banner advertising
• Placing advertising banners and buttons on portals such as Yahoo,Netscape
and other firms’ websites
• Draw online traffic to the advertiser’s own site
• Web sites often include advertisements of other related, but non competing
services
Messages throughInternet:
OnlineAdvertising
• Search engine advertising
• Reverse broadcast network: search engines let advertisers know exactly what consumer
wants through their keywordsearch
• Can target relevant messages directly to desired consumers
• Several advertising options:
• Pay for targeted placement of ads torelevant keyword searches
• Sponsor a short text message with a click-throughlink
• Buy top rankings in the display of search results
Moving fromImpersonaltoPersonal
Communications
• There used to be a difference between
personal and impersonal communication
• Technology has created a gray area between
the two
• Direct mail and email can be personalized
• With advances of on-demand technologies,
consumer are increasingly empowered to
decide how and when they like to be reached
Messages through Service Delivery Channels
• Frontline employees
• Communication from frontline staff can be for the core service or
supplementary elements
• New customers in particular need help fromservice personnel
• Service outlets
• Can be through banners, posters, signage, brochures, video
screens, audio
etc.
• Self-service delivery points
• ATMs, vending machines and websites are examples
• Customer Training
MessagesOriginating from Outside the
Organization
• Word of Mouth (WOM)
• Recommendations from other customers viewed as more credible
• Strategies to stimulate positive WOM:
• Having satisfied customers providingcomments
• Using other purchasers and knowledgeable individuals asreference
• Creating exciting promotions that get people talking
• Offering promotions that encourage customers to persuade their friend to purchase
• Developing referral incentive schemes
Messages Originating from Outside
the Organization
• Blogs – A new type of online WOM
• Becoming increasingly popular
• Communications about customer experiences influence
opinions of brands andproducts
• Some firm have started to monitor blogs as form of market
research and feedback
• Media Coverage
• Compares, contrasts service offerings from competing
organizations
• Advice on “best buys”
Ethical Issues inCommunication
• Advertising, selling, and sales promotion all lend themselves easily to
misuse
• Communication messages often include promises aboutbenefits and
quality of service delivery. Customers are sometimes disappointed
• Why were their expectations not met?
• Poor internal communications between operations and marketing personnel
concerning level of service performance
• Over promise to get sales
• Deceptive promotions
• Unwanted intrusion by aggressive marketers into people’s personal
lives
Marketing Communications
Planning
The ‘5 Ws’Model
•
•
•
•
•
Who is our target audience?
What do we need to communicate andachieve?
How should we communicate this?
Where should we communicate this?
When do communications need to takeplace?
Target Audience: 3 BroadCategories
• Prospects
• Employ traditional communication mix because prospects are not knownin
advance
• Users
• More cost effective channels
• Employees
• Secondary audience for communication campaigns through publicmedia
• Shape employee behavior
• Part of internal marketingcampaign using company-specific channels
Five Major Approaches to Overcome
Service Communication Channels
(1) Approaches for Addressing
Service Intangibility
• Use narrative to demonstrate
the service experience
• Present vivid information
• Use interactive imagery
• Focus on the tangibles
• Use brand icons to makethe
service tangible
• Use association, physical
representation,
documentation, and
visualization
• Feature service employees in
communication
•
•
•
•
Use buzz or viral marketing
Leverage social media
Aim messages to influencers
Create advertising that
generates talk because it is
humorous, compelling, or
unique
• Feature satisfied customersin
the communication
• Generate word-of-mouth
through employee
relationships
Services Advertising Strategies Matchedwith
Properties of Intangibility
(2) Approaches for Managing ServicePromises
• Create a strong service brand
• Coordinate external communication
MANAGING SERVICE PROMISES
Create
Effective
Services
Communications
Coordinate
External
Communicatio
n
Make
Realistic
Promises
Offer
Service
Guarantees
Goal:
Delivery
greater than
or equal to
promises
Service BrandingModel
(3) Approaches for Managing Customer
Expectations
• Make realistic promises
• Offer service guarantees
• Offer choices
• Create tiered-value service offerings
• Communicate the criteria and levels of serviceeffectiveness
(4) Approaches for Managing
CustomerEducation
• Prepare customers for the serviceprocess
• Confirm performance to standards and expectations
• Clarify expectations after the sale
• Teach customers to avoid peak demand periods and to seek slow
demand periods
(5) Approaches for Managing Internal
Marketing Communication
• Create effective vertical communications
• Sell the brand inside the company
• Create effective upward communication
• Create effective horizontal communications
• Align back-office and support personnel with external customers
through interaction or measurement
• Create cross-functional teams of sales, service, and operations people
when developing new services or engaging in serviceimprovements
• Maintain a customer focus throughout all functions
Interactive Imagery:Travelers
Service Brand Icon: The
GEICOLizard
Focusing onTangibles Associated with
the Service: The Sierra Club
THE MOST TOP RATED BOUTIQUE HOTEL IN AMERICA
Taglines
“Little Island, BigEscape”
“Where Modern Comfort Meets HistoricalCharm”
INTERNAL COMMUNICATION
• MARISOL Management Training Program (MMTP)
• Hotel Operations Management Trainee Program (HOMT)
• Service employees must be well versed in what ads are promising
• Knowledge of services offered across the organization
• call centers
• web design
• e-mail response mechanisms
• InSight (new service offered)
• Cross-functional communication
• operations
• public relations/marketing
INTERACTIVE COMMUNICATION
• Digital Marketing
• Trip Advisor
• Website
• Facebook
MediaTools
●
●
●
●
●
●
●
●
●
Website
Cross-marketing
Public Relations
Direct Marketing
Internet Marketing
Social Media
Event Marketing
Print Media
Soft Opening
Timeline of MediaTools
Website
•
Launch new site - May
•
Streamline the UserExperience
•
•
Tobe maintained all year long
•
Easy and accessible reservationsystem
•
Updated photos and content
•
Link the website to social mediaplatforms
Optimize the Website’s Content (SEO-also to be
maintained allyear)
•
Keywords, descriptions, site map
Cross-marketing
● Ongoing initiative
● Helps to attract more customers withlocal businesses while satisfying
services and amenities Hotel Marisol cannot directly deliver
● Ability to successfully expand using otherbusiness’ customer base
● Chance to introduce and market itself inan inexpensive way,
● Ideal local businesses to cross-market withwould include gyms,
restaurants, and spas.
Cross-marketing:Gyms
Cross-Marketing:Restaurants
Cross-Marketing:Spas
PublicRelations
●
Press Releases:
o
o
o
o
o
●
UT San Diego
WHEREMagazine
Coast Magazine
San Diego Magazine
CoastalLiving.com
PRNewsWire - iReach
o
Per release/bundle
DirectMarketing
● Direct mailers to be sent out bi-annually
July ‘14 & January‘15
● Utilize email opt-ins onwebsite
● Create an inquiry-based direct marketing plan
● Creates the ability to send personalizedmailers
● Easy to track as far as ROI and effectiveness
InternetMarketing
● SEO(search engine optimization)
o
o
Keywords: Hotels in Coronado, Hotels in San Diego, Romantic Hotels in Coronado,
Boutique Hotels in Coronado
Optional: SEM if organic leads need to besupplemented
o
o
Yelp, TripAdvisor, Hotels.com, Travelocity,
SanDiego.Org, GreatSmallHotels.com, i-escape.com
o
Targeted on TripAdvisor, Expedia
o
DiscoverSD, SanDiegoReader, UT San Diego
● Hotel Review Sites/Business Listings
● Banner Ads
● Online Event Calendars
● E-Newsletters
Keywords: “Hotels inCoronado”
SocialMedia
EventMarketing
SalesPromotion
• Seasonal Packages
• “Summer Fun in the Sun”
• “Valentine’s Romantic Getaway”
• Spring Special Wedding Group Rates”
PrintMedia
Magazines aimed at target market
Soft Opening
●
May 2014
●
Extend invitations to influentials
o
Coronado Chamber of CommerceMembers
o
Local Business Owners and Managers

Co-marketing partners
o
Travel Bloggers and Travel vloggers
o
Budget: $10,000
Measuring Effectiveness
● Drop-down menu of referrals upon bookingonline
o “How did you hear aboutus?”
●

Cross-Marketing

Event Marketing
Clipping Service
○ Third Party
Measuring Effectiveness
●
Promotional code redemption upon booking online
o
●
from direct mailers and variousads
Click-through metric platforms from onlineefforts
o
Google Analytics
Challenges ofService
Communications
Problems ofIntangibility
• Intangibility creates 4 problems:
• Generality
• Items that comprise a class of objects, persons, or events
• Non-searchability
• Cannot be searched or inspected before purchase
• Abstractness
• No one-to-one correspondence with physical objects
• Mental impalpability
• Customers find it hard to grasp benefits of complex,
multidimensional new offerings
Overcoming Intangibility
• To overcomeintangibility
• Use tangible cues in advertising (showing physical
evidence)
• Use metaphors to communicate benefits of service
offerings
Key Characteristics of Service Pricing
• Customer Knowledge of Service Prices.
• Service Variability Limits Knowledge.
• Providers are unwilling to estimate prices.
• Individual customer needs vary.
• Lack of reference point and price visibility.
Chapter 15
• Pricing of Services
Key
Characteristics
of Service
Pricing
• Customer Knowledge of
Service Prices.
• Service Variability Limits
Knowledge.
• Providers are unwilling
to estimate prices.
• Individual customer
needs vary.
• Lack of reference point
and price visibility.
Time Costs
Search Costs
Nonmonetary
Costs
Convenience Costs
Psychological Costs
• Cost Based Pricing –
lawyer, labour based
services etc.
Approaches to
Pricing
• Competition Based
Pricing – airlines, car
rentals.
• Demand Based Pricing
• Value is low price.
Demand
Based Pricing
- Value
• Value is whatever I want in a
Product or Service.
• Value is the quality I get for the
price I pay.
• Value is what I get for what I give.
Value Is Low Price
DISCOUNTING
ODD PRICING
SYNCHRO
PRICING
PENETRATION
PRICING
Value is Everything I Want in a Service
PRESTIGE PRICING
SKIMMING PRICING
Value is the Quality I get for the Price I pay
VALUE PRICING
MARKET SEGMENTATION
PRICING
Value is the all That I get for all that I give
PRICE FRAMING
PRICE BUNDLING
COMPLEMENTARY
PRICING – CAPTIVE, TWO
PART, LOSS LEADERSHIP
RESULTS BASED PRICING
Chapter 16
• THE FINANCIAL AND ECONOMIC IMPACT
OF SERVICE QUALITY
Objectives for Chapter 16
The Financial and Economic Impact of
Service
• Examine the direct effects of service on profits
• Consider the impact of service on getting new customers
• Evaluate the role of service in keeping customers
• Examine the link between perceptions of service and
purchase intentions
• Emphasize the importance of selecting profitable customers
• Discuss what is know about the key service drivers of
overall service quality, customer retention and profitability
• Discuss the balanced performance scorecard to focus on
strategic measurement other than financials
Figure 16-1
The Direct Relationship between
Service and Profits
Service
Quality
?
Profits
Relationship Between Service and
Profits
Best strategy for improving profitability:
1.Reduce costs: focus on cost cutting and
efficiencies.
2.Build revenues through improvements
to customer service, customer
satisfaction, and customer retention.
3.Combine (1) and (2).
Return on Service Quality (ROSQ)
Return on Service Quality (ROSQ): best
known and widely respected
approach for making decisions about
service quality investments
Replaces intuition as a guide for
service quality investments
Assumptions:
Quality is an investment
(cost)
ROSQ
Quality efforts are financially
accountable
It is possible to spend too
much on quality
Not all quality expenditures
are equally valid
Use of service quality to attract better
and more customers to the business
Effects: market share, reputation,
price premium
Offensive
Marketing
Example:
There are several auto repair shops in
a three block area. One of the shop
owners decides to extend his
operating hours until 10:00pm
Monday-Thursday and provide a
pick-up and delivery service, and
guarantee all repairs for six months.
Figure 16-2
Offensive Marketing Effects of
Service on Profits
Service
Quality
Profits
Market
Share
Reputation
Price
Premium
Sales
Used by companies to prevent customer
defection (“churn”)
Defensive
Marketing
Effects of Defensive Marketing: Customer
retention that leads to:
• lower costs
• volume of purchases
• increased price premium
• increased word of mouth
communication
Customer Retention:
Defensive
Marketing
In general, the longer a customer remains
with the company, the more profitable
the relationship is for the organization
Cost of finding new customers:
Provide consistently good service
Figure 17-3
Defensive Marketing Effects of
Service on Profit
Costs
Service
Quality
Customer
Retention
Volume of
Purchases
Margins
Price
Premium
Word of
Mouth
Profits
Figure 16-5
Perceptions of Service, Behavioral
Intentions and Profits
Costs
Customer
Retention
Service
Behavioral
Intentions
Volume of
Purchases
Margins
Price
Premium
Word of
Mouth
Profits
Sales
Figure 17-6
The “80/20” Customer Pyramid
Most Profitable
Customers
Best
Customers
Other
Customers
Least Profitable
Customers
What segment spends more with
us over time, costs less to maintain,
spreads positive word of mouth?
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?
Figure 16-7
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?
Figure 16-8
The Key Drivers of Service Quality, Customer
Retention, and Profits
Key Drivers
Service Encounters
Service
Encounter
Service
Encounter
Service
Quality
Service
Encounter
Service
Encounter
Behavioral
Intentions
Customer
Retention
Profits
Balanced
Performance
Scorecard
Changes to Financial Measurement
• What is the financial impact of
increase or decrease in customer
retention?
Customer Perceptual Measures
• Behavioral intentions: percentage
of intent to switch, number of
defections;
Balanced
Performance
Scorecard
Operational Measures
• Customer defined standards
• Missed pickups?
Innovation and Learning
Perspective
• Return on innovation;
employee skills
Figure 16-9
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
Adapted from Kaplan and Norton
Operational
Perspective:
Right first time (% hits)
Right on time (% hits)
Responsiveness (% on
time)
Transaction time (hours,
days)
Throughput time
Reduction in waste
Process quality
Figure 16-10
Service Quality Spells Profits
Costs
Defensive
Marketing
Volume of
Purchases
Margins
Price
Premium
Service
Quality
Customer
Retention
Word of
Mouth
Profits
Market
Share
Offensive
Marketing
Sales
Reputation
Price
Premium