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LEARNING OBJECTIVES
LO 10-2 Explain the characteristics that set services apart from physical goods.
LO 10-4 Describe the continuum from pure goods to pure services.
LO 10-6 Measure service quality through use of SERVQUAL.
LO 10-7 Understand service blueprinting and how it aids marketing
CHAPTER OUTLINE
I. WHY SERVICE IS IMPORTANT
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II. SERVICE IS THE DOMINANT LOGIC OF
MARKETING
III. CHARACTERISTICS OF SERVICES
A. Intangibility
B. Inseparability
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C. Variability
D. Perishability
IV. THE SERVICE-PROFIT CHAIN
A. Internal Service Quality
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B. Satisfied, Productive, and Loyal Employees
C. Greater Service Value for External Customers
D. Customer Satisfaction and Loyalty
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A. Gap Analysis
i. Gap 1: Management’s Perceptions of
Customer Service Expectations versus Actual
Customer Expectations of Service
iii. Gap 3: Actual Service Quality Specifications
versus Actual Service Delivery
iv. Gap 4: Actual Service Delivery versus What
the Firm Communicates it Delivers
v. Gap 5: Perceived Service by Customers versus
Actual Customer Expectations of Service
B. SERVQUAL: A Multiple Item Scale to Measure
Service Quality
i. Tangibles
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v. Empathy
C. The SERVQUAL Instrument
VIII. SUMMARY
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KEY TERMS
service A product that represents a bundle of benefits that can satisfy customer wants and needs
without having physical form.
service economy An economy that is predominantly comprised of service-related jobs.
variability The characteristic of a service in which the service cannot be separated from its
provider and therefore its service quality can only be as good as that of its provider.
perishability The characteristic of a service in which it cannot be stored or saved for future use.
fluctuating demand When the level of consumer demand is not constant, having serious
implications related to the perishability of services.
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experience attributes Aspects of an offering that can be evaluated only during or after
consumption.
moment of truth The face-to-face time between customer and service provider.
gap model A visual tool used in the measurement of service quality that identifies and measures
the differences between consumer and marketer perceptions of a provided service.
service recovery The restoring of service quality to a level at or above customer’s expectations
following a service failure.
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service blueprints Complete pictorial designs and flow charts of all of a service provider’s
activities from the first customer contact to the actual delivery of the service.
APPLICATION QUESTIONS
1. Marketing managers must be cognizant of the unique characteristics of services: intangibility,
inseparability, variability, and perishability.
a. How does each of these characteristics potentially impact the development and execution
of marketing plans?
b. What might a manager do to mitigate any negative consequences of each characteristic
on the delivery of his or her firm’s service?
c. Come up with an example of a service encounter you have had as a customer (either in
the B2C or B2B market) in which each of these characteristics came into play in how the
service was delivered.
The challenge of intangibility is that a customer cannot easily experience the service
through the senses. Therefore, the marketer should develop a strong brand to make a
service seem more tangible. In addition, customers draw conclusions from what
tangibles they can experience – things like the company’s people, Web site, marketing
communication, office ambience, and pricing are important.
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2. The service-profit chain guides managers toward understanding and facilitating successful
linkages in the service delivery system to drive loyalty, revenue growth, and higher profits.
a. What functional areas of a firm must a marketing manager effectively interface with to
implement a service-profit chain approach?
Initially, the marketing manager would need to interface with those areas that are
b. What potential impediments do you foresee in implementing the service-profit chain in
an organization? How might these impediments best be overcome?
The greatest threat to an effective service-profit chain would be no “buy–in” by the
employees involved in serving customers. Without this acceptance of the service-profit
c. What do you believe are the key advantages in implementing a service-profit chain
approach?
The key advantage in implementing the approach would be that meeting or exceeding
customer expectations would lead to customer satisfaction, since the service was
designed and delivered in a manner that added value. The service-profit chain approach
3. Review Exhibit 10.5 and the accompanying discussion on search, experience, and credence
attributes of offerings.
a. Why are the types of offerings on the far right side of the continuum – professional
services – difficult for customers to evaluate?
In many cases, a customer cannot make a reasonable evaluation of the quality of a
service even after use. The customer may only know the desired end state – a car that
b. What challenges does this difficulty create for marketing managers in professional
services firms? Why?
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The challenge for the marketing manager is how to reassure customers that the level of
service quality is high. Many providers of services in this category rely on professional
4. Review the Gap Model of Service Quality (Exhibit 10.6). Consider each of the five gaps
where customer expectations might not be met. Select a firm of your choice and for each
potential gap list specific actions that the firm could take to improve the likelihood that
customer expectations will be met on a regular basis.
Students will provide various answers. The following is used to guide their responses:
Gap 1: Management’s Perceptions of Customer Service Expectations versus Actual
Customer Expectations of Service
5. Consider the five dimensions of service quality: tangibles, reliability, responsiveness,
assurance, and empathy.
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a. Identify a recent service encounter you have experienced as a customer (either B2C or
B2B) that you would classify as a generally bad experience. In what ways specifically
did each of the five service quality dimensions contribute to your perceptions of poor
service? Be as specific with your examples as you can. What could the service provider
have done to improve each of the relevant dimensions and thus improve your experience?
b. Repeat the above process but instead of a bad service experience this time identify a
generally good service experience. For each relevant dimension, specifically what did
the service provider do really well? Did you experience any delightful surprise? If so,
what?
Tangibles are the physical evidence of a service or the observable aspects that help
customers form advance opinions about the service despite its general intangibility.
MANAGEMENT DECISION CASE
Amazon Dash: More than Just a Dash of Service
Amazon has proved to be a company that has mastered the service environment. And, they have
no intention of stopping. From continued online experiments (with features being added to Prime
Questions for Consideration
1. Leonard Berry suggests that companies delivering great service as a differentiator may create
a sustainable competitive advantage. Using Amazon as an example, what problems might
some companies face in trying to create that advantage?
One of the most pressing issues companies face when trying to build a high-service offering
is the cost. As noted in the case, it took Amazon seven years to reach a profitable state, and
many investors weren’t happy about that. Without Bezos’ vision and continued reselling his
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idea to investors, Amazon would have failed long before the seven years. Not many
2. Amazon invests in predictive algorithms to assist its customers in finding products they may
be interested in. What are some concerns Amazon should look out for as it improves its
search and recommendation tools?
Recommendation engines are quite important to Amazon and other companies. It’s estimated
that up to one-third of Amazon’s sales result in items presented by its recommendation
engines.
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And Netflix, another company mastering predictive recommendations, credits their
engine with $1 billion in savings a year.
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But, there are downsides to the use of predictive
3. Amazon Prime, briefly mentioned in the case, is a subscription service that gives members
free two-day shipping on hundreds of thousands of products, plus provides many other
features such as access to music, movies, TV shows, book sharing, and more. In the United
States, Prime membership is $100 per year. What affect do you think Prime membership has
on customer loyalty and switching costs?
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As noted in the case, about half of Amazon’s 125 million customers pay $100 each to
subscribe to Amazon Prime, giving Amazon $6.25 billion (!) annual income as working
Switching costs for a consumer includes loss of services and costs to find and learn a new,
replacement service. For years, cellular phone companies would lock customers in with two-
year contracts to make it difficult and costly to switch. Now, federal law requires these
contracts to be pro-rated and customers can switch without losing the entire cost of their
contract. Amazon will also refund the unused portion of a customer’s Prime subscription but
they rarely seem to face this problem (as Prime memberships have grown steadily).
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Amazon