Services Marketing Lectures

Date: Week 1
Professor: Dr. Marwa Ibrahim
Topic: Chapter 1: Introduction to Services
 What are services? Services are deeds, processes, and performances provided, coproduced, or cocreated by one
entity or person for and/or with another entity or person.
- Examples of service industries:
 Health care: Hospital – Medical practice – Dentistry – Eye care.
 Professional services: Accounting – Legal – Architectural.
 Financial services: Banking – Investment advising – Insurance.
 Hospitality: Restaurants – Hotels/Motels – Resorts.
 Travel: Airlines – Travel agency – Theme parks.
 Others: Hair styling – Pest control – Plumbing – Lawn maintenance – Counseling services – Interior
design.
- Service industries and companies – Typical service sector.
- Service as a product – Manufacturers and technology companies “IBM”.
- Customer service – Real time chat/Retail employee helps a customer find a desired item.
- Derived service – Pharmaceutical drug provides medical service.

 Contribution of service industries to the United States gross domestic product:

 Why service marketing?

- Service dominate U.S. and worldwide economies.
- Service as a business essential in goods focused businesses.
- Service leads to profit.

 Tangibility spectrum:

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 Service and technology:
- Technology:
 Is the foundation of many service offerings.
 Provides new ways to deliver service.
 Enables both customers and employees.
 Extends the global reach of services.
 The internet is a service.
 Some outcomes may be negative.

 Characteristics of services compared to goods:

Intangibility Heterogeneity

Stimultaneous
production and Perishability
comsumption
- Implications of intangibility:
 Services cannot be inventoried.
 Services cannot be easily patented – As an invention.
 Services cannot be readily displayed or communicated.
 Pricing is difficult.
- Implications of heterogeneity:
 Service delivery and customer satisfaction depend on employee and customer actions.
 Service quality depends on many controllable factors.
 There is no sure knowledge that the service delivered matches what was planned and promoted.
- Implications of simultaneous production and consumption:
 Mass production is difficult.
 Customers participate in and affect the transaction.
 Customers affect each other.
 Employees affect the service outcome.
 Decentralization may be essential.
- Implications of perishability:
 It is difficult to synchronize supply and demand services.
 Services cannot be returned or resold.

 Comparing goods and services:

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 Traditional marketing mix:
- Elements an organization controls that can be used to satisfy or communicate with customers (7P’s):
 Product.
 Price.
 Place.
 Promotion.
 People: All human actors who play a part in service delivery and thus influence the buyer’s perceptions;
namely, the firm’s personnel, the customer, and other customers in the service environment.
 Physical evidence: The environment in which the service is delivered and where the firm and customer
interact, and any tangible components that facilitate performance or communication of the service.
 Process: The actual procedures, mechanisms, and follow of activities by which the service is delivered –
the service delivery and operating systems.
 Expanded marketing mix of services:

 Customer focus – A critical theme:

- All strategies should be developed with an eye on the customer.
- All implementations should be carried out with an understanding of their impact on the customer.
- All decisions regarding new services, communications, operations, and human resources should integrate the
customer.

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Date: Week 2
Professor: Dr. Marwa Ibrahim
Topic: Chapter 2: The gaps model of service quality
 Customer’s gap: Difference customer expectations and perceptions.
- The customer gap is the difference between customer expectations and perceptions.

Expected service

Customer gap

Percived service

- Customer expectations often consist of what a customer believes should or will happen.
- The sources of customer expectations are:
 Marketer controlled factors (Pricing, Ads, etc.…).
 Marketer limited ability to affect (Personal – Needs – WOM – Competitive offerings).
- In perfect world, expectations meet perceptions.
- In practice these concepts are often separated.
- The goal of service marketing is to bridge this distance.

 Provider’s gap:
1. Provider gap 1 (Listening gap): Not knowing what customers expect.
 It’s the difference between customer expectations and the company understanding of those expectations.
 When companies focus too much on attracting new customers, they may fail to understand the changing
needs and expectations of their current customers.
- Key factors leading to provider gap 1: Customer expectations
 Inadequate customer research orientation:
 Insufficient customer research.
 Research not focused on service quality.
 Inadequate use of market research.
 Lack of upward communication:
 Lack of interaction between management and customers.
 Insufficient communication between contact employees and managers.
 Too many layers between contact personnel and top management.
 Insufficient relationship focus:
 Lack of market segmentation.
 Focus on transactions rather than relationships.
 Focus on new customers rather than relationship customers.
 Inadequate service recovery:
 Lack of encouragement to listen to customer complaints.
 Failure to make amends when things go wrong.
 No appropriate recovery mechanisms in place for service failures.
Customer perceptions of
customer expectations

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 2. Provider gap 2 (The service design and standards gap): Not having the right service deigns and standards.
 It’s the difference between the company understanding of customer expectations and developing a
customer – driven service designs and standards.
 Management sometimes, believes that customer expectations are unreasonable or unrealistic.
 Also, they believe that the degree of variability in service defies standardization and accordingly they will
not be able to achieve the desired goal.
- Key factors leading provider gap 2:
Customer-driven service
 Poor service design:
designs and standards
 Unsystematic new service development process.
 Vague, underdefined service designs.
 Failure to connect service design to service positioning.
 Absence of customer-driven standards:
 Lack of customer-driven service standards.
 Absence of process management to focus on customer requirements.
 Absence of formal process for setting service quality goals.
 Inappropriate physical evidence and servicescape:
 Failure to develop tangibles in line with customer expectations.
 Servicescape design that does not meet customer and employee needs.
 Inadequate maintenance and updating of the servicescape.
Management
perceptions of customer
expectations

3. Provider gap 3 (The service performance gap): Not delivering to service standards.
 It’s the discrepancy between development of customer – driven service standards and actual service
performance by the company employees.
- Key factors leading provider gap 3: Customer-driven service
 Deficiencies in human resource policies: designs and standards
 Ineffective recruitment.
 Role ambiguity and role conflict.
 Poor employee – technology job fit.
 Inappropriate evaluation and compensation systems.
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  Lack of empowerment, perceived control, and teamwork.
 Failure to match supply and demand:
 Failure to smooth peaks and valleys of demand.
 Inappropriate customer mix.
 Overreliance on price to smooth demand.
 Customers not fulfilling roles:
 Customers lack knowledge of their roles and responsibilities.
 Customers negatively impact each other.
 Problems with service intermediaries:
 Channel conflict over objectives and performance.
 Channel conflict over costs and rewards.
 Difficulty controlling quality and consistency.
 Tension between empowerment and control.
Service delivery

4. Provider gap 4 (The communication gap): Not matching performance to promises.

 It’s the difference between service delivery and the service provider’s external communication.
 Promises made through the media advertising, sales force and other communications tools may raise the
customers’ expectations.
- Key factors leading to provider gap 4: Service delivery
 Lack of integrated services marketing communications:
 Tendency to view each external communication as independent.
 Not including interactive marketing in communication plan.
 Absence of strong internal marketing program.
 Ineffective management of customer expectations:
 Not managing customer expectation through all forms of communication.
 Not adequately educating customers.
 Overpromising:
 Overpromising in advertising.
 Overpromising is personal selling.
 Overpromising through physical evidence cues.
 Inadequate horizontal communications:
 Insufficient communication between sales and operations.
 Insufficient communication between adverting and operations.
 Differences in policies and procedures across branches or units.
 Inappropriate pricing:
 High prices that raise customer expectations.
 Pries that are not lied to customer perceptions of value. External
communications to
customers

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 Gaps model of service quality:

 Ways to use gap analysis:

- Overall strategic assessment:
 How are we doing overall in meeting or exceeding customer expectations?
 How are we doing overall in closing the four company gaps?
 Which gaps represent our strengths and where are our weaknesses?
- Specific service implementation:
 Who is the customer? What is the service?
 Are we consistently meeting/exceeding customer expectations with this service?
 If not, where are the gaps and what changes are need?

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Date: Week 3 & 4
Professor: Dr. Marwa Ibrahim
Topic: Chapter 3: Customer expectations of services
 Objectives:
- Recognize that customers hold different types of expectations for service performance.
- Discuss several sources of customer expectations of service.
- Acknowledge that the types and sources of expectation are similar for end consumers and business customers, for
pure service and product-related service, for experienced customers and inexperienced customers.
- Delineate some important issues surrounding customer expectations.

 Customer expectations:
- They are beliefs about service delivery that serve as standards or reference points against which performance is
judged.
- Knowing customer expectations is the most critical step in delivering quality service.
- Being wrong means losing money, time and many other resources.
 Possible levels of customer expectations:

 Types of expectations:
1. Desired service: It is the highest expectations, the level of service that the customer wishes to receive. It is a
blend of what the customer believes “Can be” and “Should be”. It reflects the hopes and wishes of consumers.
Example: Online dating websites.
2. Service adequate: It is the threshold level/the minimum level of service that the customer will accept. It
represents the minimum tolerable expectations.

 Dual customer expectation levels:

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 Zones of tolerance:
- The range of expectations between desired and adequate…
 Can be wide or narrow.
 Can change over time.
 Can vary among individuals.
 May vary with the types of product/service.

 Factors that influence desired service:

 Factors that influence adequate service:

- Perceived service alternatives:

 Are the other providers from whom customers can or perceive they can obtain service?
The customers’ perception that service alternatives exist raises the level of adequate service and narrows
the zone of tolerance.
Example: Airline customers (Big city/Small town).
 It is important that service marketers fully understand the complete set of options that customers view as
perceived alternatives.

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 - Situational factors:
 They are contemporary in nature.
 Uncontrollable situational factors: (Catastrophe’s hat affect a large number of people like earthquakes or
tornados).
 Customers who recognize that situational factors are not the fault of the service company may accept
lower levels of adequate service.
 Personal situational factors: Short-term individual factors that make the customer more aware of the need
of the service.
Example: Personal emergency situations.
- Predicted service:
 Predictions made by customers about what is likely to happen during an impending transaction or
exchange.
Example: Service at restaurants in summer.

 Factors that influence desired and predicted service:

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Date: Week 5
Professor: Dr. Marwa Ibrahim
Topic: Chapter 5: Listening to customers through research
 Service research program: Can be defined as the portfolio of research studies and types needed to address research
objectives and execute and overall measurement strategy.

 Criteria for an effective service research program:

- Includes qualitative and quantitative research.
- Includes both perceptions and expectations of customers.
- Balances the cost of the research and the value of the information.
- Includes statistical validity when necessary.
- Measure’s priorities or importance of attributes.
- Occurs with appropriate frequency.
- Includes measures of loyalty, behavioral intentions, or actual behavior.

 Common means for answering questions:

- Ask customers directly:
 Mail, phone, face-to-face, online.
 One-on-one, in groups, formal/informal.
- Observing customers:
 Qualitative depth.
- Get information from employees and front-line service providers:
 Service providers.
- Database marketing research:
 Use customer information files.
 “Capture” behavior through data analysis.

 Using marketing research information:

- Understanding how to make the best use of research – to apply what has been learned to the business – is a key
way to close the gap between customer expectations and management perceptions of customer expectations.

 Relationship marketing:
- It is a philosophy of doing business, a strategic orientation, that focuses on keeping current customers and
improving relationships with them.
- Does not necessarily emphasize acquiring new customers.
- It is usually cheaper (For the firm):
 Keeping a current customer costs less than attracting a new one.
- Thus, the focus is less on attraction, and more on retention and enhancement of customer relationships.

 Customer goals of relationship marketing:

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 Relationship value of customers:
- The relationship value of a customer considers customers from the point of view of their lifetime revenue and/or
profitability contributes to a company.
- It is influenced by:
 Length of average customer “Lifetime”.
 Additional sales overtime.
 Referrals by the customer over time.
 Costs associated with serving the customer.
- Relationship development model:

- Levels of relationship strategies:

1.
Financial
bonds

4.
2. Social
Structural
bonds
bonds

3.
Customization
bonds

 The customer is NOT always right:

- Not all customers are goof relationship customers:
 The wrong segment.
 Not profitable in the long term.
 Difficult customers.

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Date: Week 6
Professor: Dr. Marwa Ibrahim
Topic: Chapter 8: Service innovation and design
 Risk of relying on words alone to describe services:
- Oversimplification.
- Incompleteness.
- Subjectivity.
- Biased interpretation.

 Important considerations for service innovation:

- Involve customers and employees.
- Employ service design thinking and techniques (5 Principles of service design thinking):
1. User-centered: Services should be experienced and designed through the customers eyes.
2. Co-creative: All stakeholders should be included in the service design process.
3. Sequencing: A service should be visualized as a sequence of interrelated actions.
4. Evidencing: Intangible services should be visualized in terms of physical artifacts.
5. Holistic: The entre environment of a service should be considered.

 Service blueprinting: A technique for service innovation and design.

- What is a blue print? It’s a picture or a map that portrays the customer experience and the service system so that
different people involved in providing the service can understand it objectively regardless of their role or their
individual points of view.
- Service 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.

- Service blueprint components: - Blue print for overnight hotel stay service:

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 - Benefits of service blueprinting:
 Provides a platform for innovation.
 Recognizes roles and interdependence among functions, people, and organizations.
 Facilitates both strategic and tactical innovations.
 Transfers and stores innovation and service knowledge.
 Design’s moments of truth from the customer’s point of view.
 Suggests critical points for measurement and feedback in the service process.
 Clarifies competitive positioning.
 Provides understanding of the ideal customer experience.
- Building a service blueprint:

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Date: Week 7
Professor: Dr. Marwa Ibrahim
Topic: Chapter 11: Employees’ roles in service delivery
 Service culture: “A culture where an appreciation for good service exists, and were 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”.

 The critical importance of service employees:

- They are the service.
- They are the organization in the customer’s eyes.
- They are the brand.
- They are the marketers.
- Their importance is evident in:
 The service marketing mix (People).
 The services triangle.
 The service-profit chain.

 The service marketing triangle:

 Making promises:
- Understanding customer needs.
- Managing expectations.
- Traditional marketing communications.
- Sales and promotion.
- Advertising.
- Internet and website communication.

 Enabling promises:
- Hiring the right people.
- Training and developing people to deliver service.
- Employee empowerment.
- Support systems.
- Appropriate technology and equipment.
- Rewards and incentives.

 The effect of employee behaviors on service quality dimensions:

- Reliability: Delivering the service as promised is often totally within the control of front-line employees.
- Responsiveness: Front line employees may exhibit a range of responses in terms of promptness and willingness
to help.
- Assurance: Highly dependent on employees’ ability to communicate their credibility and inspire trust.
- Empathy: Implies that employees will pay attention, listen, and adapt to customers’ needs.
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 Strategies for delivering service quality through people:

- Hire the right people:

 Compete for the best people.
 Hire for service competencies and service inclination.
 Be the preferred employer.
- Develop people to deliver service quality:
 Train for technical and interactive skills.
 Empower employees.
 Promote teamwork.

 Benefits and costs of empowerment:

Benefits Costs
 Quicker responses to customer needs during service  Potentially greater dollar investment in selection and
delivery. training.
 Quicker responses to dissatisfied customers during  Higher labor costs.
service recovery.  Potentially slower or inconsistent service delivery.
 Employees feel better about their jobs and themselves.  May violate customers’ perceptions of fair play.
 Employees tend to interact with warmth/enthusiasm.  Employees may “Give away the store” or make bad
 Empowered employees are a great source of ideas. decisions.
 Great word-of-mouth advertising customers.

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Date: Week 8
Professor: Dr. Marwa Ibrahim
Topic: Chapter 12: Customers’ roles in service delivery
 How customers widen the service performance gap:
- Lack of understanding of their roles.
- Not being willing or able to perform their roles.
- No rewards for “Good performance”.
- Interference with or from other customers.
- Incompatible market segments.

 Customer participation across different services:

 Customer roles in service delivery:

- Productive resources.
- Contributors to quality, satisfaction, and value.
- Competitors.

 Customers as productive resources:

- Customers can be thought of as “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?

 Customers as contributes 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.

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  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 as competitors:
- Customers may “Compete” with the service provider.
- Internal exchange vs. external exchange.
- Internal/external decision often based on:
 Expertise capacity.
 Resource capacity.
 Time capacity.
 Economic rewards.
 Psychic rewards.
 Trust.
 Control.

 Strategies for enhancing customer participation:

- Define customers’ roles:
 Helping oneself.
 Helping others.
 Promoting the company.
- Recruit, educate, and reward customers:
 Recruit the right customers.
 Educate and train customers to
perform effectively.
 Reward customers for their
contributions.
 Avoid negative outcomes of
inappropriate customer participation.
- Manage the customer mix.

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Date: Week 9
Professor: Dr. Sameh Tawfik
Topic: Chapter 14: Integrated service marketing communications
 Communications and the service marketing triangle:

 Integrated service marketing communications:

- Integrated service communications:
 A strategy that carefully integrates all external and internal communication channels to present a
consistent message to customers.
- This means coordination across:
 Sales and service people.
 Print.
 Internet.
 Other forms of tangible communication including the servicescape.
- How is this done in services?
 Advertising.
 Sales presentations.
 Service encounters with employees.
 Servicescape and other tangibles.
 Internet and social media.
 Public relations.
 Pricing.
 Service guarantees.
 Customer education.

 Key communication challenges: Discrepancies between what is communicated about a service and what a customer
receives – or perceives that she/he receives – can powerfully affect consumer evaluations of service quality.

 Service intangibility: Services are performances rather than objects, so their essence and benefits are difficult to
communicate to customers and to make them difficult to visualize and understand.
- The intangible nature of services creates problems for consumers both before and after purchase.
Example: Health care services.

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 Management of service promises: Failures to manage service marketing communications – the vows (Or
overpromising) made by advertising, sales people, etc.
- Sometimes occurs because the part of the company making the promise lacks the information necessary.
Example: Life insurance salespeople often sell services before their actual availability and without having an
exact date of delivery.

 Management of customer expectations: Appropriate and accurate communication about services is the
responsibility of marketing and operations.
- Marketing must accurately reflect what happens in actual service encounters; operations must deliver what is
promised in communications.
Example: Airlines cancel flights that are not full and charge for food.

 Customer education: If customers are unclear about how service will be provided, what their role in delivery
involves, and how to evaluate services they have never used before, they will be disappointed.
- For high-involvement services, such as long-term medical treatment, customers are also unlikely to comprehend
and anticipate the service process.

 Major approaches to overcome the communication challenges:

- Strategies to match service promises with delivery:

Adress
service
intangibility

Manage Manage
internal Goal = Service
marketing service
communication delivery greater promises
than or equal to
promises

Manage Manage
customer customer
education expectations

 Approaches for addressing service intangibility:

 Use narrative to demonstrate the service experience.  Use buzz or viral marketing.
 Present vivid information.  Leverage social media.
 Use interactive imagery.  Aim messages to influencers.
 Focus on the tangibles.  Create advertising that generates talk because it is
 Use brand icons to make the service tangible. humorous, compelling, or unique.
 Use association, physical representation,  Feature satisfied customers in the communication.
documentation, and visualization.  Generate word-of-mouth trough employee
 Feature service employees in communication. relationships.

- Create a strong service brand: The focus of brand creation is on awareness, meaning, and equity of the company

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 For example: Companies like FedEx, HSBC, Facebook, and Uber all focus communication and information on
their companies rather than individual services that the company offers.
 Approaches for managing service promises:
- Coordinate external communication: Managing brand image involves coordinating all the external
communications.
- A brand name that is known internationally for innovation, quality and a sense of fun – this is what we have
always aspired to with virgin.

 Approaches for managing customer expectations:

- Make realistic promises.
- Offer service guarantees.
- Offer choices.
- Create tiered-value service offerings.
- Communicate the criteria and levels of service effectiveness.

 Approaches for managing customer education:

- Prepare customers for the service process.
- Confirm performance to standards and expectations.
- Clarify expectations after the sale.

 Approaches for managing internal marketing communication:

- Create effective vertical communications.
- Create effective horizontal communications.
- Sell the brand inside the company.
- Create effective upward communication.
- Align back-office and support personnel with external customers through interaction or measurement.
- Create cross-functional teams.
 Summary:
- Think about the need for coordination in marketing communication.
- Identify the service communication challenges (e.g., managing promises, expectations).
- Plan for specific strategies (Or strategic business approaches) to address service communication challenges.

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Date: Week 10
Professor: Dr. Sameh Tawfik
Topic: Chapter 7: Service recovery
 Reliability in critical in service but….
- In all service contexts, service failure is inevitable.
- Service failure: Occurs when service performance falls below a customer’s expectations in such a way that leads
to customer dissatisfaction.
- Service recovery: Refers to the actions taken by a firm in response to service failure to improve the situation for
the customer.

 Complaining customers: The tip of the iceberg

 The internet spreads the story of poor service recovery:

- Think about the last time you experienced a less-than-satisfactory service experience.
- Did you complain on Facebook? Why? If you did not complain, explain why not.

 The service recovery paradox: It is a situation in which a customer thinks more highly of a company and be more
loyal after the company has corrected a problem with their service failure.
- Is a customer who has experienced a service failure and exemplary service recovery more likely to be more
satisfied – impressed even – with the service provider?
- Should a firm “Screw up” just a little so that it can “Fix the problem” superbly?
- What are the problems with such an approach?

 Customer complaint actions following service failure:

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 Types of complainers:
- Passives: Least likely to take any action, say anything to the provider, spread negative WOM, or complain to a
third party; doubtful of the effectiveness of complaining.
- Voicers: Actively complain to the provider, but not likely to spread negative WOM; believe in the positive
consequences of complaining – the service provider’s best friends!
- Irates: More likely to engage in negative WOM to friends and relatives and to switch providers; average in
complaints to provider; unlikely to complain to third parties; more angry, less likely to give provider a second
chance.
- Activists: Above average propensity to complain on all levels; more likely to complain to a third part; feel most
alienated from the marketplace compared to other groups; in extreme cases can become “Terrorists”.

 Service recovery strategies:

-Respond quickly:

 Fixing the customer:

- When customers take the time to complain, they generally have high expectations.
 They expect the company to respond quickly and to be accountable.
 They expect to be compensated for their grief and for the hassle of being inconvenienced.
 They expect to be treated nicely in the process!

 Remedies customers seek:

 Treat customers fairly:

- Outcome fairness: Outcome (Compensation) should match the customer’s level of dissatisfaction; equality with
what other customers receive; choices.
- Procedural fairness: Fairness in terms of policies, rules, timeless of the complaint process; clarity, speed, no
hassles; also, choices: “What can we do to compensate you...?”.
- Interactional fairness: Politeness, care, and honesty on the part of the company and its employees; rude behavior
on the part of employees may be due to lack or training and empowerment.
 Fixing the problem:

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 - After “Fixing the customer” the company should address the actual problem that created the poor service delivery
in the first place.
- If the problem is likely to recur for other customers, then the service delivery process may need to be fixed, too.
- Strategies for fixing the problem include:
 Encouraging and tracking complaints.
 Learning from recovery experiences and from lost customers.
 Making the service fail-safe.

 Service guarantees:
- In a business context, a guarantee is a pledge or assurance that a product offered by a firm will perform as
promised and, if not, then some form of reparation will be undertaken by the firm.
- For tangible products, a guarantee is 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:

- Limited restrictions and exclusions:
 The guarantee should make its promise free of “if, and, or but” conditions or exclusions associated with
many legal documents.
- Meaningful:
 The firm should guarantee elements of the service that are important to the customer.
 The payout should cover fully the customer’s dissatisfaction.
- Easy to understand:
 Customers need to understand what to expect.
 Employees need to understand what to do.
- Easy to invoke:
 The firm should eliminate hoops or red tape (e.g., switching costs) in the way accessing or collecting on
the guarantee.

 Benefits of service guarantees:

- A good guarantee forces the company to focus on its customers.
- An effective guarantee sets clear standards for the organization.
- A good guarantee generates immediate and relevant feedback from customers.
- Information generated through the guarantee can be tracked and integrated into continuous improvement efforts.
- A service guarantee reduces customers’ sense of risk and builds confidence in the organization.

 When to use (Or not use) a guarantee:

- Reasons companies might not want to offer a service guarantee:
 Existing service quality is poor.
 A guarantee does not fir the company’s image.
 Service quality is truly uncontrollable.
 Potential exists for customer abuse of the guarantee.
 Costs of the guarantee outweigh the benefits.
 Customers perceive little risk in the service.

 Summary:
- Think the importance of recovery from service failures.
- Identify the nature of customer complaints and why people do and do not complain.
- Present strategies for effective service recovery.
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 - Discuss service guarantees.
Date: Week 11
Professor: Dr. Sameh Tawfik
Topic: Chapter 16: The Financial and Economic Impact of Service
 The direct relationship between service and profits:

The figure shows the underlying question at the heart of this chapter: How does service affect profits?

- Service companies such as FedEx and Disney were willing to trust their intuition that better service would lead to
improved financial success.
- More than two decades of research have demonstrated that customer satisfaction drives corporate earnings, stock
prices, shareholder value, and market value added.

 Offensive marketing effects of service:

- Service quality can help companies attract more and better customers to the business through offensive
marketing.
- Offensive effects (In the figure above) involve market share, reputation, and price premiums.
Example: Netflix VOD service.

 Defensive marketing effects of service:

- When it comes to keeping the customers, a firm already has – an approach called defensive marketing –
researchers and consulting firms have in the past 20 years documented and quantified the financial impact of
existing customers.
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 Example: Jumia Egypt brand extension (Jumia pay).

 Word-of-mouth and customer measurement: The NPS

- The popular “Net promoter score (NPS)” is based on the idea that word-of-mouth communication, rather than
any other customer metric, is the best predictor of growth and therefore financial performance.
- The score itself is based on just one survey question: Would you recommend us to a friend or colleague?
Example: Vodafone Egypt, WE, AAIB.
- To get the NPS, customers rate the like hood (Out of 10) that they would recommend the company.
- Then, the proportion of “Detractors” (Like hood less than 6) is subtracted from the proportion of “Promoters”
(Like hood = 9 or 10).
- Is this a “Magic number” for companies?
- Is NPS superior, appropriate, or complete?
- NPS scores by industry:

 The effects of service on behavioral intentions and behavior:

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 The key drivers of service quality, customer retention, and profits:

- Most evidence for this issue has come from examining the effects of specific aspects of service (e.g.,
responsiveness, reliability, assurance, and tangibles) on overall service quality, customer satisfaction, and
purchase intentions rather than on financial outcomes such as retention or profitability.
Example: Mobile banking services.

 Effective nonfinancial performance measures:

- The balanced performance scorecard is an approach that includes multiple company factors, including financial,
customer, operational, and innovative measures.
- Some mistakes that companies make:
 Not linking measures to strategy.
 Not validating the links between nonfinancial measures and strategy.
 Not setting the right performance targets.
- Fast food example:

 Summary:
- Think about the direct effects of service in profits.
- Consider the effect of service in getting new customers and keeping customers.
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 - Discuss what is known about the key service drivers of overall service quality.
- Discuss the balanced performance scorecard.

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