Chapter

2. Chapter 1 Introduction to Services • What are services? • Why services marketing? • Service and Technology • Differences in Goods vs. Services Marketing • Services Marketing Mix • Staying Focused on the Customer • The Gaps Model of Service Quality

3. A note on the PowerPoint Slides... • These PowerPoint slides contain selected exhibits, figures and tables from the chapters as well as objectives for the chapters. For many chapters, we include extra lecture slides and in-class exercises that we have compiled and used in our classes. The lecture slides are not intended to provide full outlines or complete lectures for the chapters, but rather may be used selectively to enhance class sessions.

4. 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.

5. Challenges for Services • Defining and improving quality • Communicating and testing new services • Communicating and maintaining a consistent image • Motivating and sustaining employee commitment • Coordinating marketing, operations and human resource efforts • Setting prices • Standardization versus personalization

6. 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

7. Figure 1.1Tangibility Spectrum Salt  Soft Drinks  Detergents  Automobiles  Cosmetics  Fast-food Outlets Intangible Dominant  Tangible Dominant   Fast-food Outlets  Advertising Agencies  Airlines  Investment Management  Consulting Teaching

8. Figure 1.2 Percent of U.S. Labor Force by Industry 80 70 60 50 Percent of U.S. Labor Force 40 30 20 10 0 • Services • Manufacturing • Mining & Agriculture 1929 1948 1969 1977 1984 1999 Year Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.

9. Figure 1.3Percent of U.S. Gross Domestic Product by Industry 80 70 60 Percent of GDP 50 40 30 20 10 • Services • Manufacturing • Mining & Agriculture 0 1948 1959 1967 1977 1987 1999 Year Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.

10. Table 1.1Industries Classified within the Service Sector

11. Differences Between Goods and Services Intangibility Heterogeneity Simultaneous Production and Consumption Perishability

12. Implications of Intangibility • Services cannot be inventoried • Services cannot be patented • Services cannot be readily displayed or communicated • Pricing is difficult

13. Implications of Heterogeneity • 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

14. 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

15. Implications of Perishability • It is difficult to synchronize supply and demand with services • Services cannot be returned or resold

16. Table 1.3 Services are Different 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.

17. 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

18. Traditional Marketing Mix • All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: • Product • Price • Place • Promotion

19. Expanded Mix for Services --The 7 Ps • Product • Price • Place • Promotion • People • Process • Physical Evidence

20. Table 1.4Expanded Marketing Mix for Services

21. Table 1.4 (Continued)Expanded Marketing Mix for Services

22. Overall Strategic Assessment How effective is a firm’s services marketing mix? Is the mix well-aligned with overall vision and strategy? What are the strengths and weaknesses in terms of the 7 Ps? Specific Service Implementation Who is the customer? What is the service? How effectively does the services marketing mix for a service communicate its benefits and quality? What changes/ improvements are needed? Ways to Use the 7 Ps

23. Part 1 FOCUS ON THE CUSTOMER

24. Gaps Model of Service Quality Expected Service CUSTOMER Customer Gap Perceived Service External Communications to Customers Service Delivery COMPANY GAP 4 GAP 1 GAP 3 Customer-Driven Service Designs and Standards GAP 2 Part 1 Opener Company Perceptions of Consumer Expectations

25. 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

26. The Customer Gap Expected Service GAP Perceived Service Part 1 Opener

27. Chapter Consumer Behavior in Services 2 • Services: Search versus Experience versus Credence Properties? • Services: Categories in the Decision-making Process and Framework of the Chapter • The Role of Culture in Services

28. 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: • Need recognition. • Information search. • Evaluation of service alternatives. • Service purchase and consumption. • Postpurchase evaluation. • Understand the roles of culture and group consumer behavior in services

29. 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

30. Figure 2.2Continuum of Evaluation for Different Types of Products Clothing Jewelry Furniture Houses Automobiles Restaurant meals Vacations Haircuts Child care Television repair Legal services Root canals Auto repair Medical diagnosis Most Services Most Goods Easy to evaluate Difficult to evaluate { { { High in experience qualities High in credence qualities High in search qualities

31. Figure 2.3Stages in Consumer Decision Making and Evaluation of Services

32. 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 Purchase and Consumption Post-Purchase Evaluation  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty

33. Culture • Values and attitudes • Manners and customs • Material culture • Aesthetics • Educational and social institutions 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 Purchase and Consumption Post-Purchase Evaluation  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty

34. Global Feature: Differences in the Service Experience in the U.S. and Japan • Authenticity • Caring • Control Courtesy • Formality • Friendliness • Personalization • Promptness

35. Chapter Customer Expectations of Service 3 • Meaning and Types of Services Expectations • Factors that Influence Customer Expectations of Service • A Model of Customer Service Expectations • Issues Involving Customer Service Expectations

36. 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.

37. Figure 3.2Possible Levels of Customer Expectations

38. Figure 3.3Dual Customer Expectation Levels Desired Service Adequate Service

39. Figure 3.4 The Zone of Tolerance Desired Service Zone of Tolerance Adequate Service

40. Figure 3.5 Zones of Tolerance forDifferent Service Dimensions Desired Service Zone of Tolerance Level of Expectation Desired Service Zone of Tolerance Adequate Service Adequate Service Most Important Factors Least Important Factors Source: Berry, Parasuraman, and Zeithaml (1993)

41. Zones of Tolerance forFirst-Time and Recovery Service First-Time Service Outcome Process Recovery Service Outcome Process LOW HIGH Expectations Source: Parasuraman, Berry and Zeithaml (1991)

42. Figure 3.6 Factors That InfluenceDesired Service Enduring Service Intensifiers Desired Service Personal Needs Zone of Tolerance Adequate Service

43. Figure 3.7 Factors That InfluenceAdequate Service Transitory Service Intensifiers Desired Service Perceived Service Alternatives Zone of Tolerance Self-Perceived Service Role Adequate Service Situational Factors

44. Figure 3.8 Factors That InfluenceDesired and Predicted Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Desired Service Zone of Tolerance Past Experience Predicted Service Adequate Service

45. Chapter Customer Perceptions of Service 4 • Customer Perceptions • Customer Satisfaction • Service Quality • Service Encounters: The Foundations for Satisfaction and Service Quality • Strategies for Influencing Customer Perceptions

46. 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.

47. Figure 4.1Customer Perceptions of Service Quality and Customer Satisfaction

48. Factors Influencing Customer Satisfaction • Product/service quality • Product/service attributes or features • Consumer Emotions • Attributions for product/service success or failure • Equity or fairness evaluations

49. Outcomes of Customer Satisfaction • Increased customer retention • Positive word-of-mouth communications • Increased revenues

50. Figure 4.3ASCI and Annual Percentage Growthin S&P 500 Earnings Source: C. Fornell “Customer Satisfaction and Corporate Earnings,“ commentary appearing on ACSI website, May 1, 2001, http://www.bus.umich.edu/research/nqre/Q1-01c.html.