Service Marketing
Part One
PART ONE UNDERSTANDING SERVICES
Module 1 Distinctive Aspects of Service Management 1/1
1.1 Services in the Modern Economy 1/3
1.2 The Evolving Environment of Services 1/8
Forces for change: govt reg, professional ads, privatisation, technology, franchises, globalisation, productivity
pressures, service quality, leasing, manufacturers as services, new income for non profit, innovative managers
1.3 Marketing Services versus Physical Goods 1/14
Intangibility, heterogeneity, perishability, simultaneity production/consumption, customers involved in production,
people part of product, difficult to evaluate, no inventories, electronic delivery
1.4 An Integrated Approach to Service Management 1/18
Product (elements), price, place and time, promotion, productivity, people, physical evidence, process
HR+ Operations+Marketing
Companies values
Module 2 Customer Involvement in Service Processes 2/1
2.1 How Do Services Differ From One Another? 2/3
Classifying services: degree tangibility, who or what is the direct recipient, delivery place and time, degree of
customisation, relationship with customers, demand & supply in balance?, facilties part of service experience?
2.2 Service as a Process 2/7
People, possession, mental stimulus, information
2.3 Different Processes Pose Distinctive Management Challenges 2/12
Identify service benefits & work with operations to balance efficiency with benefits
Satisfaction influenced by service personnel, appearance of facilities, interactions with self service eqp., other
customers
Module 3 Managing Service Encounters 3/1
3.1 Customers and the Service Operation 3/3
Service encounters – high/medium/low
Moments of truth = encounters which define perceived service quality
3.2 Service as a System
Total service system = operations (back stage) + delivery (front stage) + marketing (all contact points)
3.3 Managing Service Encounters 3/11
Personnel = sales people, junior hence training, empowerment &incentives
CIT = critical incident technique = collecting, characterising & analysing incidents = areas to improve service
Bad customer experience = high staff turnover
3.4 The Customer as Co-Producer
Customer education => increased customer involvement : how they currently act, how do you want them to act,
motivate them, measure them
PART TWO UNDERSTANDING CUSTOMERS AND MANAGING RELATIONSHIPS
Module 4 Customer Behaviour in Service Settings 4/1
4.1 Understanding Customer Needs and Expectations
Maslows hierarchy of needs; increased affluence => more focused on higher needs
Perceived quality = expected (experience, marcomms) vs. received
Zone of tolerance changed by price, competition, importance of specific service attributes
Norms based on industry, demographics, public/private company, country
Total service = basic + expected + augmented + potential
Different level of desires according to sub categories of service – e.g. McDs vs. Shanahans
4.2 How Customers Evaluate Service Performances
Intangible => difficult to evaluate;
high search qualities = easier, high in experience = more difficult, high in credence = v. difficult
Reduce risk – free trial, link to tangible benefits, maintain facilities, advertising professional services, strong brand,
mavens, tangible clues
Quality for credence and experience services = > difficult to control, customer is part of service production
Quality linked to physical settings, personnel & other customers
4.3 The Purchase Process for Services 4/12
Pre Purchase stage – information search, evaluation of alternatives, weight benefits, decision
Purchase – reservations & Post Purchase – evaluate service quality and satisfaction=> influence future decisions
Satisfaction = key: repeat purchases, word of mouth, lowers acquisition cost, reduces failure cost, sustainable
advantage, protect from competition
Keeping customer is hard => detailed research into what they want, creative thinking to identify key things to
delight them, long term customer satisfying strategies
4.4 The Service Offering
Core (do or die) vs. supplementary service elements (=ways to differentiate, do or decline)
Can supp service be copied easily? Does it enhance?
4.5 Understanding Customer Behaviour at Different Points in the Service Experience
Flowchart of customer experience – step through delivery process => highlights problems & opportunities, defines
core vs. supp
Define purpose of flowchart, compile activities list, chart each step, link front office to back office, validate
(customers, employees), create narrative & roles/responsibilities
Module 5 Positioning A Service in the Marketplace 5/1
5.1 The Search for Competitive Advantage 5/3
Firms can be market focused and/or service focused
Research into : purpose for service, who makes decision, timing of use, individual or group, composition of group
Determinant attributes that buyers make decisions on
5.2 Creating a Competitive Position 5/9
Copy positioning (through marcomms) vs. product positioning => positioning statement
5.3 Steps in Developing a Positioning Strategy 5/13
Market, competitive & internal corporate analysis => target segment
Select determinant attributes => benefits to emphasise to customer through marcomms
Positioning in marketplace=> marketing action plan
5.4 Developing Positioning Maps 5/16
Two access: e..g Price vs. service quality
Module 6 Targeting Customers, Managing Relationships and Building Loyalty 6/1
6.1 Targeting the Right Customers 6/3
Search for value, not just numbers
Transactional marketing (one off) vs. Relationship marketing: treat customers fairly, service augmentations and
market of one
6.2 Selecting the Appropriate Customer Portfolio 6/7
Lifetime value of a category
Several categories of customer to keep capacity full – don’t mix segments of people at the same time
6.3 Abusive Customers and How to Deal with Them 6/9
Thief, rulebreaker, belligerent, vandal, deadbeat
Educate customers about nature of service
6.4 Creating and Maintaining Valued Relationships 6/15
no formal relationship vs. Membership (info for segmentation, special deals build loyalty)
Zero defections; link between customer and employee satisfaction
Customer relationship => repeat purchases, reduced operating costs, word of mouth, price premium
Reward value of repeat customers, not just frequency
Module 7 Complaint Handling and Service Recovery
7.1 Consumer Complaining Behaviour 7/3
Do nothing, complain, take action through 3rd party, abandon supplier and discourage use
TARP study – majority don’t complain, those that do are younger and wealthier, complaints resolved=> loyal
customer
Factors in complaining: whats at stake, recover economic loss or loss of self esteem
Complaints as source of market research – indicator of drop in service quality; have central database & ensure all
are responded to
7.2 Impact of Service Recovery Efforts on Customer Loyalty 7/9
Service recovery difficult after the fact => real time systems
Act fast, don’t argue, admit mistakes (not defensive), empathise, give them benefit of doubt, claify resolving steps,
keep them informed, consider compensation, preserve to regain goodwill
7.3 Service Guarantees 7/12
Forces focus on customer wants and expects, sets clear standard, need system to capture feedback, forces firms
understand why they fail, reduces risk of purchase
Steps: ask customer what they want in guarantee; train and empower employees, pilot it, measure abuses and
successes
PART THREE STRATEGIC ISSUES IN SERVICES MARKETING
Module 8 Creating Services and Adding Value 8/1
8.1 Service Products as Experiences 8/3
Design Services: #1 corporate level objectives, #2 market and competitive analysis, #3 positioning strategy, #4
establish service marketing concept (benefits & costs) #5 establish service operations (scope, scheduling)
#configure service delivery
8.2 Core Products and Supplementary Services 8/7
The more intangibles there are, the more the need for tangible clues about feature and quality of service
Are intangible services needed to facilitate use of core service or add appeal, are customers willing to pay for
them?
8.3 Classifying Supplementary Services 8/8
Two types of supp service: facilitating (ordering, billing, reserving) & enhancing (consultation, hospitality,
safekeeping, exceptions)
8.4 Managerial Implications 8/21
People processing => more supp services, esp. hospitality
Possession services => safekeeping
Information services => financial service require safekeeping
Supp services should be in line with positioning (e.g. no frills) & reviewed against competition constantly
8.5 Planning and Branding Service Products
Brand is useful in clarifying and making tangible service offerings
Success factors in designing new service elements: market synergy (good fit for firm, customers & vs.
competition); organisational features (good co-ordination); market research
Module 9 Designing Service Delivery Systems 9/1
9.1 Alternative Scenarios for Service Delivery 9/3
Need to select service channel best suited to your target segment – do they expect you to visit them?
9.2 The Physical Evidence of the Servicescape 9/6
Servicescape = style and appearance of physical environment where customers interact with service provider
(uniforms, music, design)
Must grab attention, send a message, create an effect (slow music to allow lingering and purchasing)
9.3 Place and Time Decisions 9/9
Should be based on customers needs and expectations, competitors, nature of service operation
Supp services may have different distribution strategies
Location limited by environmental factors, economies of scale, transportation route.
9.4 The Process of Service Delivery 9/16
#1 what should be steps in service delivery – where and when
#2 bundle or unbundle service elements for delivery (e.g. UPC uses third pary installers)
#3 define nature of contact with customer (home delivery?)
#4 define nature of service process (self service?)
#5 Serving protocol - prioritise to some customers?
#6 Imagery and atmosphere
9.5 The Role of Intermediaries 9/21
Sky using third party installers – problem with keeping service quality consistent -> need same priorities &
procedures
Module 10 Pricing Services 10/1
10.1 Paying for Service 10/3
Intangibles & variability of inputs/outputs -> harder to price
Allocate by % floor space, customers served etc.
Break even sales volume must be related to price sensitivity, market size & max. capacity
Services have higher ratio of fixed to variable costs -> temptation to price low and ignore required contribution
Time factor = large bearing on cost (and price)
Costs of customer: travel to service site, babysitting (financial) - time, discomfort, stress (credence), sensory (non
financial)
value = what I get for what I give; net value = all perceived benefits minus all perceived costs
Increase value by: adding benefits to core or supp, reduce financial costs, minimise non financial costs
10.2 Foundations of Pricing Strategy 10/11
Pricing based on costs (min price), competition & value to customer (max price – can communicate tangible
quality)
Pricing objectives: revenue, operational (capacity constrained industries), patronage (maximise appeal amongst
particular segment – OAP discount)
10.3 Value Strategies for Service Pricing
Need to relate price to value
To remove uncertainity: service guarantee, benefit driven pricing (NGB usage pricing), flat rate pricing
Relationship pricing: avoids discounts and concentrates on repeat selling (bulk discounts)
Low cost leadership – shouldn’t equate quality with price, most be able to generate profit
10.4 Putting Service Pricing Strategy into Practice 10/19
Develop a price strategy: #1 just cover variable, or fixed & variable? What are costs? #2 assess price elasticity #3
analyse competition prices #4 develop a price based on a unit – unit of consumption, flat rate or bundled?
Module 11 Communicating to Customers: Education and Promotion 11/1
11.1 The Role of Marketing Communication 11/3
Inform/educate, remind, persuade, maintain contact
Internal comms important: ensure efficient and quality service delivery, achieve productive and harmonious
working relationship, build employee trust and morale
Comms create powerful images, sense of credibility, confidence, reassurance
11.2 Services vs. Goods: Implications for Communication Strategy 11/5
Intangible->use cues (symbols) and metaphors
Customer involvement -> inform, educate and change behaviour (self service discounts)
Supply vs. demand -> shape usage at offpeak hours (esp. when variable costs are low)
Intermedaries -> internal comms, incentives
11.3 Setting Communication Objectives 11/8
Create tangible images, differentiate vs. competitors, reposition a service, educate customers, create awareness
amongst existing customers, attract new customers, drive repeat sales
Must take into account: nature of service, is it credence/experience/search, target audience, style of message,
presentation manner, medium, budget
Five W’s: Who, what, how, where, when
11.4 The Marketing Communications Mix 11/9
Personal (including customer service), advertising, sales promo’s, PR, instructional materials, corporate design
(servicescape: facility, location, ambient, interpersonal)
All should reinforce each other
11.5 Impact of New Technologies on Marketing Communication 11/20
Web site advertising: promote awareness, information, stimulate sales, facilitate personal communication
Five W’s apply
PART FOUR INTEGRATING MARKETING WITH OTHER MANAGEMENT FUNCTIONS
Module 12 Enhancing Value by Improving Quality and Productivity 12/1
12.1 Integrating Productivity and Quality Strategies 12/3
Quality and productivity were seen as realm of operations, now marketing gets involved
12.2 A Role for Marketing 12/4
Quality improvement must be continuously deliver enhanced benefits to customer
Productivity improvement must drive costs down
12.3 Definition and Measurement 12/5
Five quality perspectives: transcendent view (know quality when see it), product based (based on attributes,
ignores customer tastes), user based (subjective), manufacturing based (conform to internal standards), value
based (in terms of value vs. price – affordable excellence) --- must not rely on single one
Manufacfturing quality components: performance, features, reliability, conformance, durability, serviceability,
aesthetics, perceived quality)
Service based quality: Process of service delivery (functional quality) vs. actual output (technical quality) – five
components : tangibles, reliability, responsiveness, assurance, empathy
SERVQUAL = measuring of expectations vs. perceived quality ; limitations: may have low expectations, assumes
lots of search & experience attributes , high credence may require peer review – other option: walk customer
through service encounter
Improve productivity by cutting resources or increasing output – easier in possession services; may focus on
efficiency vs. effectiveness.
Measure should have customer as denominator e.g. profitability/customer
12.4 Identifying and Correcting Service Quality Shortfalls 12/12
Must balance expectations vs. perceptions and close any gaps
Reasons for gap: not knowing what customer expects, specifying service quality standards that don’t reflect what
management believe customer expectations to be, service performance doesn’t match specs, marcomms sets
bar to high
To correct: use flowcharts to identify failure points, build quality information system (listen to customers using
multiple methods – customer complaints, surveys, employees, mystery shopping, operating data
Must be a return on quality programs – financially accountable
12.5 Problem-Solving and Service Recovery 12/16
Problem must not re-occur
Use flowcharting, control charts (publish on time departure info), Fishbone charts (brainstorm all reasons:
equipment, people, material information, procedures), Pareto (80:20 rule)
12.6 How Productivity Improvement Impacts Quality and Value 12/21
Zero defections: quality problems weaken loyalty->decreased usage-> defection
Are backstage changes noticed by customer? If yes then involve marketing
Frontstage changes effect high contact services big time – must research customers response and use
marcomms to prepare them
12.7 Customer-Driven Approaches to Improving Productivity 12/24
Change timing of demand – attract new segements through promotions/marcomms
Involve customers more – self service (non self service pay premium), internet
Use third parties for supp services
Six stages to manage customers reluctance to change: develop trust, understand habits (flowchart), pre test,
publicise benefits, educate how to use, monitor performance
Module 13 Balancing Demand and Capacity 13/1
13.1 The Ups and Downs of Demand 13/3
Require close co-operation between marketing, HR and operations
Fixed capacity service may face: excess demand (queueing), demand exceeds optimum service capacity (poor
quality service), demand & supply well balanced, excess capacity (low productivity & sends bad signals)
Two solutions: adjust capacity to meet demand, manage demand to smooth out peaks and troughs (marketing
strategies)
13.2 Measuring and Managing Capacity 13/6
Capacity can be # of customers (queue), # of goods (retailer), equipment to process
people/possessions/information (bandwidth), labour, infrastructure (electricity supply)
May be able to stretch capacity at peak times – extra floor opened in restaurant
May be able tailor capacity by scheduled downtime, part time employees, rent/share facilities, cross train
employees
13.3 Understanding the Patterns and Determinants of Demand 13/9
Does demand follow predictable cycle? If randon, why? Can you split up demand between market segments?
Multiple Cycles can usually be collapsed to one or two & dealt with – must keep good demand records
13.4 Strategies for Managing Demand 13/12
Processing times for people more variable than objects
Disaggregating by market segment
Approaches: do nothing (let demand find its own level), reduce demand in peak hours, increase demand where
excess capacity, storing demand through reservation system, create formal queue system
Shape demand by: price (elasticity by segment must be know), changing product elements (ski resorts become
mountain bike in summer), modifying place and time of delivery (free offpeak delivery, weekend matinees),
promotion/education, queue/reserve
13.5 Managing Customer Behaviour through Queuing Systems 13/18
Queues are never good
Reduce them by: more service personnel, rethinking queue system design, redesign process to shorten
transaction time, managing customers behaviour and perceptions, install reservation system
Six elements of queuing system: customer population (expectations), arrival process (peak times), baulking (don’t
join), queue configuration(single step (ss), ss/sequential stages, parallel queues, express line, take a number),
reneging, customer selection process (priority line)
Match queue to market segement: different queues based on urgency, duration, premium payment, VIPs
13.6 Minimising the Perceived Length of the Wait 13/23
Often people feel they are waiting longer than they are
Factors: unoccupied (tv?), pre/port (wait for ticket vs. for rollercoaster), anxiety, unexplained, unfair, value of
service, solo vs. group, comfort, familiarity
13.7 Reservations 13/26
Reservation systems: control demand (deflect times, locations), capture financial projections, pre
sell/inform/educate,
Avoid overbooking problems – deposit, automated cancelling of unpaid orders, provide compensation
Link to yield management systems (% capacity sold) -> operational efficiency
Need good info: segment profitability, relationship manamgenet, future projections
% yield not necessarily indication of profit, could be dependant on promotions
Constrain yield & price gouging to ensure good customer relations
Module 14 Managing Customer-Contact Personnel 14/1
14.1 Human Resources: An Asset Worth Investing in 14/3
Service personnel characteristics: inter personal skills, personal appearance, grooming, product/operational
knowledge, selling, co-production skills, monitor non verbal cues
Emotional labour = empathic ability – in some cases they need to act
14.2 Job Design and Recruitment 14/6
Goal of job design = study: requirements of operations, nature of customer desires, needs/capabilities of
employees, characteristics of operational equipment
Empowerment (involvement) must be coupled with: invest in training/selection, higher labour costs, slower
service, less consistency in service delivery
In control (hierarchal) org, the following are at the top, with empowerment, they are at bottom: information about
org performance, rewards based on org performance, knowledge that enables employees to
understand/contribute to org performance, power to make decisions
Types of empowerment involvement: suggestions, job (wider scope), high (profit sharing)
Factors favouring empowerment: business strategy =personalised service, extending relationships, non complex
technologies, unpredictable business environment, existing managers ok with it, employees have need to grow
14.3 Service Jobs as Relationships 14/12
Net costs to employee (commuting, wage etc.)< net benefits
Cycle of failure=productivity pursued to nth degree: narrow job design->emphasis on rules not service->use of
technology to control quality->low service quality/high staff turnover-> low profit margins->more productivity
Cusgtomer cycle: attract new customers that become dissatisfied->churn->attract new customers
Cost of these cycles: recruitment costs, lower worker productivity, acquisition costs, service levels drop while
awaiting new employee, loss of knowledge from organisation, future revenue streams lost with defections, bad
word of mouth->loss of potential revenue
Cycle of mediocrity (semi state): good pay but: service standards rigid, standardised service, operatonal
efficiencies, prevention of employee fraud, favouritism to certain customers
14.4 Human Resource Management in a Multicultural Context
Need to serve more diverse range of customers and recruit more diverse workforce
Module 15 Organising for Service Leadership 15/1
15.1 Service Leadership 15/3
Service leaders visualise quality service as a foundation for competing
Themes to success in service business: service=time bound performance with core+supp services, understand
and manger operational processes, roles customers play, superior service=competitive advantage , managing
contact between employees & customers, role of technology, challenge in international markets
Links between management functions: loyalty->profitability, satisfaction->loyalty, value->satisfaction, employee
productivity ->value, employee loyalty->productivity, employee satisfaction-> employee loyalty, internal quality>satisfaction, top management is the chain that holds it all together
Marketing has a role to play in Operations (understand customer motivation/habits, opportunities for new product,
comms with customer, loyalty) & HR (recruitment, training, work systems, reward and empowerment)
15.2 Interfunctional Conflict 15/11
Revenue vs. cost orientation – marketers must understand: limits of existing operations, different time horizons
(HR needs time to recruit, Ops to develop), fit of new products to existing ops
Three imperatives: Marketing (target segment, create relationship), Operations (meet cost, delivery, quality goals)
& HR (train, recruit and build customer loyalty)
Reduce friction through cross functional teams and transfer/cross training, redirecting or replacing people
15.3 Ensuring that Service Encounters are Customer-Oriented 15/16
Concentrate on supp service and create formal standards on all predicted service encounters by: research needs,
identifying satisfaction/dissatisfaction points, setting sevice levels for different tasks, design jobs and technology
for those tasks, revise continuously, HR training for personnel
15.4 How Technology Changes Organisations and Control Systems 15/18
Technology allows flattening of org structure e.g. first direct
Tech in customer service - NPS
Module 16 Developing Strategies for Transnational Operations 16/1
16.1 Moving from Domestic to Transnational Marketing 16/4
Transnational marketing = one strategy formulation and implementation across all countries
Globalisation depends on: market forces, cost factors, technology, govt policies, competitive factors
Forces for Internationalisation of Service Businesses
Use America as an example – geographic and lifestyle segementation. Europeans following suit
Forces for internationalisation of service businesses
Market drivers: common customer needs, consistency, global channels, transferable marketing, lead countries
Competition drivers: high imports/exports in a particular industry, transnational competitors, inter dependence
Technology drivers: internet access, digitising of information, offshoring
Cost drivers: economies of scale, steep experience curves, sourcing efficiencies, favourable logisitics, difference
in country costs, recouping development costs (Merck), decline in comms and transport costs
Govt: favourable trade policies, common tech standards, common marketing regs, govt owned competitors, host
govt policies
Three modes of internationalisation: capturing service performance in a storage medium (CDs), reliance on third
parties (agents for supp services), full control via direct investment
16.3 Transnational Strategy for Supplementary Services 16/15
Need to decide which supp services should be localised
Types: information (localised), consultation (customers needs vary widely), order taking (global ordering),
hospitality (may vary internationally), safekeeping (may vary internationally), exceptions & billing (may vary
internationally), payment (global)
Low customer contact-> suitable for internationalisation
16.4 Elements of Global Transnational Strategy 16/18
Five elements: global market participation (local market contribute to wider globalisation benefits), delivering
global products (no customisation), global location of supp services, consistent marketing approach worldwide,
global competition and what their strategy is
Simple service concepts-> internationalise (banks), those based on trust/reputation=more difficult, strategic
importance (manufacturing in Japan)
International Brands provide reassurance and recognition
16.5 Pan-European Strategies in Business Logistics
Four big trends: European integration, privitisation, more international competition, more demanding customers
Logisitics is a way of differentiating – search for edge using IT and business process outsourcing
Module 1 – Distinctive aspects of Service Marketing
1.1 Services in the modern economy
1.1. 1 What is a service
 Act or performance by one party to another. May be tied to physical, but performance is
essentially intangible and does not normally result in ownership of any of the factors of
production
1.1.2 Understanding the service sector
 Services make up the bulk of developed economy
 Internal service are things like a HR dept within a production company
1.2 Evolving nature of Services
1.3 Marketing Services vs. physical goods
1.3.1 Basic differences between goods and services
 Differences:
o Intangibility
o Heterogeneity (Variability)
o Perishability of output
o Simultaneity of production and consumption
o Time factor more important
o Customers more involved in production process
o People (service personnel) are part of the product
o Difficult for customer to evaluate
o Absence of inventories
o Delivery systems may involve electronic as well as physical channels
1.4 An integrated approach to service management
 Service operations and HR are important as well as services marketing
1.4.1 Eight components of integrated services


1.4.2


Physical evidence = buildings, appearance etc.
Service firms must understand the implication of the above 8 P’s to develop integrated
strategies that span marketing, operations and HR
Creating Value in context of values
Value is defined as worth of a specific action or object relative to a person (or a firms) needs
at a particular time
Companies need a set of values to guide their actions and shape dealings with employees
and customers given the amount of customer contact and the difficulty in maintaining
consistency
Module 2 - Customer involvement in service process
2.1 How do services differ from each other?
2.1.2 How might services be classified?

Benefit of classification: helps manager better understanding of customer expectations and
behaviour
 Durable benefit linked to frequency of use of service
2.2 Service as a process
2.2.1 Categorising service processes
 Taking an input and transforming it into an output
 People and objects get transformed in services
 Four categories
o People processing involves tangible actions to peoples bodies
 What benefits are being created? What non financial costs are incurred?
 Travel, Transport etc.
o Possession processing - tangible action to goods and objects belonging to customers
 Satisfactory solution to customers problem and intangible enhancement
 Cleaning, delivery
o Mental stimulus processing - intangible actions directed at people’s minds e.g.
entertainment, media, papers
 Lend themselves to digital storage and later consumption
o Information processing – actions directed at a customer’s assets
 Customer involvement defined by tradition and personal desire to meet
supplier face to face
 Banking, Consulting
2.3 Different Processes pose distinctive management challenges
2.3.1 Identifying Service Benefits
 Key is to understand specific benefits that a service provides to the customer
 Innovation in service delivery requires that a constant focus is placed on the processes
underlying delivery of core product
 Operations need to work with marketing how to balance efficiency with delivery of benefits
2.3.2 Design of the Service Factory
 Satisfaction is influenced by such factors as
o Encounters with service personnel (work with HR on this)
o Appearance and features of service facilities
o Interactions with self service equipment
o Characteristics and behaviour of other customers
2.3.3 Alternative Channels for Service Delivery
 Non people processing services can offer other delivery channels for a service
o Customers come to user friendly factory
o
o
o
Limiting contact to a small retail office that is separate from back office
Come to customers home/office
Conducting business at arms length (low contact)
2.3.4 Balancing Supply and demand
 Service ‘stock’ is highly perishable – airplane seat is wasted if empty at takeoff
 If demand > supply, excess business may be lost
 Services that process people and possessions more likely to face capacity restrictions
2.3.5 People as part of the product
 Customers may meet employees and other customers
2.3.6 Making the most of Information Technology
 Especially important for information services
Module 3 – Managing Service encounters
3.1 Customers and the Service Operation
 Where does the customer fit within a service operation
3.1.1 Service encounters: three levels of customer contact
 Service encounter = period of time during which customers interact directly with a service
o May be single encounter
o May be several over a period of time – eg. Flying
 Three levels of contact – many high contact are being transformed into low
o High contact - visits service facility in person e.g. banking (but now less so)
o Medium contact – visits but do not remain long
 Establishing a service need - meeting an accountant
 Dropping off and picking up physical possession
 Resolving a problem
o Low contact – e.g. info services
3.2 Service as a System
 Level of contact that a service has is a major factor in defining total service system
 Total service system includes:
o Service operations – inputs processed
o Service delivery – final assembly
o Service marketing – all points of contact with customers, billing, advertising
3.2.1 Service Operations System
 Actors (service personnel), stage set (facilities, equipment...) & backstage
 How much of the service operation that is visible depends on level of customer contact –
very visible in high contact services
3.2.2 Service Delivery System
 Service delivery = where, when and how service is delivered
 Self service requires education and information
 Traditional managed by Operations, marketing needs to be involved too though
3.2.3 Service Marketing System
 Other elements may contribute to customers overall view of a service business
o Marcomms
o Billings
o PR
o Word of mouth
3.2.4 Physical Evidence
 Many service performance are intangible & hard to evaluate
 Customers look for clues eg. Well groomed sales staff
3.3 Managing Service Encounters
 Service encounter = period of time during which customers interact directly with a service
 A moment of truth is a point in service delivery when customers interact with service
employees or self-service equipment and the nature of that outcome may affect perceptions
of quality
 Moments of truth need to be managed carefully – they define relationship with customer
3.3.1 Managing people in service encounters
 Often service people are becoming sales people as well
 Personnel can be very junior
 Personnel need training, control, empowerment and mentoring
3.3.2 Critical incidents in service encounters
 These are specific encounters between customers and service employees that are especially
satisfying or dissatisfying
 Critical Incident technique (CIT) is a methodology for collecting, categorising & analysing such
incidents
3.3.2.1 The customer’s perspective
 CIT pinpoints opportunities in improvement to service delivery processes – failure points,
areas that make customers happy etc.
3.3.2.1 The employees perspective
 Bad customer experiences can drive staff turnover
3.4 Customer as co producer
3.4.1 Service firms as teachers
 The more customers are expected to do, they more they need information and
education
 Brochures or a service preview (video)
3.4.2. Increasing productivity and quality when customers are co-producers
 Customers can be partial employees
 Customers who are offered opportunity to become involved can be more satisfied
o Look at current customer role and how you want that to change
o Do customers possess an awareness of how they are expected to behave?
o Motivate them by ensuring that they are rewarded for performing well
o Regularly appraise their performance