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Chapter 15: Special Topic: Strategies for Service Markets
Chapter Objectives
After reading this chapter, students should understand:
·The nature of services and the characteristics that distinguish them from
manufactured goods
·The service quality model
·Measuring the quality of services
·Developing marketing strategies for services
·Marketing-mix decision making for service businesses
·How information technology affects the marketing of services
Chapter Overview
The purpose of this chapter is to introduce concepts underlying the differences in
developing strategies for services versus manufactured products.
Chapter Outline and Key Terms
Key Terms:
·Loss aversion
·SERVQUAL
·Return on quality (ROQ)
A. Definitions
1. Loss aversion: A psychological phenomenon characterized by customers reacting
more strongly to unexpectedly poor service than to unexpectedly good service.
2. SERVQUAL: A popular survey instrument that measures service quality by
grouping questions into five categories of service quality.
3. Return on quality (ROQ): An approach that attempts to quantify financial returns on
investments in improved service quality.
·
B. The Nature of Services
1. Difficult to distinguish between the product and the service because they are
bundled together
2. Classification of goods
·Different type of product attributes that distinguish products from services
·Figure 15.3 Page 439 Continuum of Evaluation for Different Types of
Products
·Classification
·Search attributes: characteristics of which the qualities can be assessed
prior to purchase
·Experience attributes: characteristics of which the qualities can be
assessed only during consumption
·Credence attributes—Characteristics of which the qualities can not be
assessed even after consumption
3. Characteristics of services
·Intangibility: difficulty in assessing service quality and difficulty in
inventorying services
·Non-standardization: service is not the same each time it is given or
received and it is difficult to control quality for services
·Inseparability of production and consumption
C. Service Quality
A. Perceptions pay an important role in the assessment of quality services.
B. Customers needs affect expectations and experience with the company affect
perceptions.
C. Attributes or features of the service and how they are delivered influence
customer perceptions.
·Figure 15.4 Page 440 A Model of Perceived Quality This is an expanded
version of Figure 14.9 from Chapter 14.)
·Figure 15.5 Page 441 The Dimensions of Service Quality. Outlines the
factors that influence service quality. These include:
·Reliability
·Assurance
·Tangibles
·Empathy
·Responsiveness
·Illustration: The Broadmoor Hotel (www.broadmoor.com) Page
441
1. Gaps in perceptions of quality
·When customer’s expectation and the experienced quality do not match.
·A customer who is dissatisfied will talk about negative experiences more
than positive ones (loss aversion)
·Figure 15.6 Page 442 Loss Aversion of Service Quality
·Four types of gaps
·The gap between customer’s expectations and
management’s perceptions
·The gap between management’s perceptions and
service quality specifications
·The gap between service quality specifications and service delivery
·The gap between service delivery and external communications
2. Measuring service quality
·One method to measure service quality is with the SERVQUAL
instrument
·Table 15.1 Page 444 Example of SERVQUAL Survey
·One survey given to customers regarding expectations.
·Another given about a specific company.
·The rating is the difference between the two.
·Not evidence that states that if a company gets good satisfaction
rating they will get repeat customers.
3. Return on quality
· Based on philosophy that quality is an investment, quality improvement
efforts must be financially accountable, it is possible to spend too much
on quality and not all quality expenditures are equally valid.
·Figure 15.7 Page 445 Linking Customer Satisfaction to Retention
·Illustration: Marriott (www.marriott.com) Page 445
D. Strategic Issues
1. The problem of intangibility
·Need to make services appear more tangible by reminding customers the
service that they have gotten.
2. The problem of low barriers to entry
·Companies must differentiate their service from the competition and
communicate this to customers by paying attention to dimensions of
service quality and the value chain
·Communicate differentiation by effectively communicating or
positioning the service:
·Reliability
·Assurance
·Tangibles
·Additional framework for differentiating services is value chain shown
in Chapter 1, Figure 1.2:
·Inbound logistics
·Operations
·Marketing and sales
·Service
3. Professional services
·Dependant on the quality of the employees
·Emphasis on specialized expertise, reputation and integrity will get
customers to consider services with that particular firm
·Making the service tangible and attention to customer relationship
management
4. Service design
·Service blueprinting involves using flow charts to describe the flow of
activity from point of entry through the customer receiving service.
·Figure 15.11 Page 450 Express Mail Delivery Service Blueprint is an
example of a service blueprint
·Figure 15.13 Page 452 Singapore Airlines: Detailed Customer
Service Activities
·Illustration: Singapore Airlines (www.singaporeair.com) Page 451
E. Marketing-Mix Implications of Service Marketing
1. Decisions on pricing, channels of distribution and communication are
similar with some subtle differences
2. Channels of distribution
·Physical distribution does not apply because services are not tangible.
·In order for distribution to occur the service, organization has to be
present or someone designated by the service principal has to present.
·The service principal must design a channel structure to bring the service
and the customer together.
·Three major approaches to service distribution
·Franchising
·Agents and Brokers
·Electronic channels: Internet
1. Advertising
·Role of advertising in service industry is helping to shape service
expectations.
·Important not to promise what cannot be delivered.
·Should contain vivid information that will help customers understand the
service and evaluate the service compared to other services.
·Make the service tangible through use of concrete and specific language
and dramatizations.
·Want the customer to connect brand with a product category through
repetition or interactive imagery.
2. Pricing
·Must be consistent with overall strategy for the product and customer
perception.
F. Customer Relationship Management
1. Remind customers of benefits of service
2. Track the customers’ usage and develop a system to remind customer to use
the service.
G. Global Aspects of Service Marketing
1. Table 15.2 I Page 457 Issues Posed By Internationalization of a
“Strategic Service Vision”
2. Three basic growth strategies
·Multi-site: more locations
·Multii-service: more services
·Multi-segment: targeting different customer segments
3. Illustration: Euro Disney Page 452 (Disneyland Paris
www.disneylandparis.com)
H. Impact of Technology on Service Marketing
1. Created a new channel of distribution in the Internet.
2. Computers provide some standardization that humans cannot provide.
3. The Internet has provided information to customers allowing service
companies a mechanism for differentiating their services and making the
service appear more tangible.
4. Illustration: Page 459 Travel Services
·Expedia www.expedia.com
·Travelocity www.travelocity.com
·Orbitz www.orbitz.com
·Pricline www.priceline.com
·Kayak www.kayak.com
5. Illustration: Car-sharing Services Page 459
·Zipcar www.zipcar.com
·Connect by Hertz www.connectbyhertz.com
·Mint Cars on Demand www.drivemint.com
·I-Go Car Sharing www.igocars.org
Teaching Tips and Strategies from Barbara S. Faries, MBA
The purpose of this chapter is to introduce the concepts involved with services
marketing.
Key Terms and Concepts Introduced Include:
·Loss aversion
·SERVQUAL
·Return on quality (ROQ)
Note: Two recurring themes in this Instructor’s Manual are the first two items:
·Link theory to practice.
·Engage students to link work experience to the concepts demonstrated in
the text.
·Instructors are encouraged to link theory to practice by finding current examples
in the business environment that demonstrate the key concepts above.
·If your class contains those already working in the field, have them describe how
the concepts in theory match those in the actual workplace.
When teaching this type of chapter and topic, I normally emphasize the following
areas:
·Strategic Issues
·Customer Relationship Management
·Global Aspects of Services Marketing
·Impact of Information Technology on Services Marketing
Most of the students who are working in the field will recognize these as important
topics for discussions. Students who have yet to enter the workforce will need to be
familiar with the topics as most will be involved in the strategic issues, customer
relationship management implications, the global aspects and the impact of information
technology. In the “real world,” these are all topics that most will encounter regardless of
the size of corporation they will work.
Depending on the class, I ask for examples from their workplaces or supplement
with case studies that will spark discussion and tie these elements together.
Review Questions
1. Consider the three kinds of attributes described in this chapter: search, experience, and
credence. Which of these are most appropriate for services? What are the implications
for marketing managers?
2. Recall the last time you had an unsatisfactory encounter with a service provider. Given
dimensions of service quality discussed in the chapter, exactly where were the negative
gaps between expectations and the actual service?
3. Pick two services, one consumer and one industrial. What can a company in each
industry do to make its services more tangible to customers?
4. Develop a blueprint for the course registration process at your school or university.
Where are the likely service failure points? Where can the school improve its service
levels?
5. Suppose you have spent the first five years of your career working for Procter &
Gamble as the assistant, associate, or brand manager for Crest toothpaste. You apply
for a job as a senior marketing manager for United Airlines. What have you learned at
P&G that is applicable to airline marketing? What do you need to learn about airline
marketing to be effective beyond the fact that airlines are different from toothpaste?
Key items learned would include super brand management and the power of brand
recognition. Other items might include matching customer expectations with service
6. As the U.S. economy continues to be increasingly dominated by services, is it necessary
to change our thinking about marketing and marketing strategy? Would a marketing
course be different between the U.S. and, say, China, which is a manufacturing-
dominated economy?
