Services Marketing:

People, Technology, Strategy

CHAPTER 1
Creating Value In The Service
Economy

1
 Assessment – 14 days

1. Participants (30%):
1.1 Attendance (10%) following the school’s system
1.2 Mini Test (30 mins) (20%) - Week 9

2. Mid-term group presentation (20%):

2.1 Khảo sát chất lượng dịch vụ của đối thủ / Survey the
service quality of competitors.

3. Final Service MKT Service Project Report &

Presentation (50%):
- Group Report Assignment – (80%)
- Group presentation – (by individual) (20%)
 Class rules:

- 20 mins late: (-0.1)

- Using phone for private issues during lecturing (-0.1)
- Talking to each other during lecturing (-0.1)
- Express own ideas by raising hands: 4 times =
(+0,1) in
- 1 day attending the workshop from MKT Faculty.
- Self-learning – Chap 12, 14, 15 and others in slides
Day 1 Chap 1 Day 8 Chap 13
(Handling complaint)

Day 2 Chap 2,3

Day 9 Mini Test
Day 3 Chap 4 Service survey
Day 10
report
Day 4 Chap 5,6 Service survey
Day 11
report
Day 5 Chap 7,8
Day 12 Chap 13 & Review

Day 6 Chap 9, 10 Final report &

Day 13
presentation
Day 7 Chap 11,14 Final report &
Day 14
presentation
 What is
your
business?
 Learning Objectives (1 of 2)
By the end of this chapter, the reader should be able to:
• Understand how services contribute to a country’s economy.
• Know the principal industries of the service sector.
• Identify the powerful forces that are transforming service
markets.
• Understand how B2B services improve the productivity of
individual firms and drive economic development.
• Be familiar with the difference between outsourcing and
offshoring of services.
• Define services using the non-ownership service framework.
• Identify the four broad “processing” categories of services.
7
 Learning Objectives (2 of 2)
• Be familiar with the characteristics of services and the distinctive
marketing challenges they pose.
• Understand the components of the traditional marketing mix applied
to services.
• Describe the components of the extended marketing mix for
managing the customer interface.
• Appreciate that the marketing, operations, and human resource
management functions need to be closely integrated in service
businesses.
• Understand the implications of the Service-Profit Chain for service
management.
• Know the framework for developing effective service marketing
strategies.

8
Chapter Overview (1 of 2)

9
 Chapter Overview (2 of 2)
• Why Study Services?

• What are Services?

• Marketing Challenges Posed by Services

• Extended Marketing Mix Required for Services

• Integration of Marketing with Other Management Functions

• Developing Effective Service Marketing Strategies

10
11
May cái Bán cái
quần quần
Selling Sewing
13
Customer Service
ThS. Nguyen Thi Trung Trinh
Phone: 090.88.736.88
 “Customer service is not a
department,… it’s everyone’s job”
18
 Why Study Services (1 of 6)
• Services Dominate the Global Economy
– Increasing size of the service sector across the
globe
– The relative share of employment between
agriculture, industry and services is changing
dramatically
– Service output is growing rapidly and represents
more than 50% of Gross Domestic Product
(GDP).

19
 Why Study Services (2 of 6)

Evolution of
Service Dominated
Economy

Figure 1.4 Changing structure of employment as

an economy develops

20
 Why Study Services (3 of 6)

Contribution Of
Services Industries
To GDP Globally

Figure 1.5 Contribution of services industries to GDP globally

21
 Why Study Services (4 of 6)

Size Of Service
Sector In Various
Economies

Figure 1.6 Estimated size of service sector in selected countries as a

percentage of GDP

22
 Why Study Services (5 of 6)
• Most new jobs are generated by
services
– In most countries around the world, new
job creation comes mainly from services.
– Knowledge-based industries — such as
professional and business services,
education, and health care generate high
paid jobs.

23
 Why Study Services (6 of 6)
• Understanding Services Offers Personal
Competitive Advantage
– The distinctive characteristics of services
and how they affect both customer
behavior and marketing strategy will give
important insights and perhaps create a
competitive advantage

24
The Principal Industries of the Service
Sector

Figure 1.8 Value added by service industry categories to US GDP.

25
 Powerful Forces are Transforming Service
Markets
• Government policies, social changes, business
trends, globalization, and advances in information
technology and communications are among the
powerful forces transforming today’s service
markets
• Development of IT and communications
• Innovations in big data, cloud computing, user-
generated content, mobile communications,
networking technologies, artificial intelligence, and
app-based self-service technologies bring service
revolution

26
Factors stimulating transformation of service economy
Government Social Changes Business Trends Advances in Globalization
Policies Information
Technology
• Changes in • Rising consumer • Push to increase • Growth of the Internet • More companies
regulations expectations shareholder value • Wireless networking operating on a
• Privatization • Ubiquitous social • Emphasis on productivity and technology transnational basis
• New rules to networks and cost savings • Digitization of text, • Increased international
• More affluence • Manufacturers add value
protect consumers, graphics, audio, and travel
• More people short of time through service and sell
employees and the • Increased desire for services
video • International mergers
environment buying experiences vs. • More strategic alliances and • Cloud technology and alliances
• New agreement on things outsourcing • Location-based • “Offshoring” of
trade in services • Rising consumer • Focus on quality and services customer service
ownership of computers, customer satisfaction • Big data • Foreign competitors
cell phones, and high-tech • Growth of franchising • Artificial intelligence invade domestic
equipment • Marketing emphasis by non- • Improved predictive markets
• Easier access to more profits analysis
information
• Immigration
• Growing but aging
population

New markets and product categories create increased demand for

services in many existing markets, making it more competition
intensive.

Innovation in service products and delivery systems is stimulated by

application of new and improved technologies.

Success hinges on (1) understanding customers and competitors, (2) viable

business models, and (3) creation of value for both customers and the firm, (4)
increased focus on services marketing and management. 27
B2B Services as Core Engine of
Economic Development

Source: Jochen Wirtz and Michael Ehret, "Service-Based Business Models: Transforming Businesses, Industries and Economies," in
Raymond P. Fisk, Rebekah Russell-Bennett, and Lloyd C. Harris, eds. Serving Customers: Global Services Marketing Perspectives (Tilde 28
University Press, Melbourne, Australia), 28–46.
 Outsourcing and Offshoring (1 of 2)
• Offshoring refers to services that are
conducted in one country and consumed in
another
• 11% of service jobs around the world could
be carried out remotely

29
Outsourcing and Offshoring (1 of 2)
Video Clip

VTV Cap
Outsourcing and Offshoring (2 of 2)

Figure 1.12 Outsourcing and offshoring are independent, but often work in tandem.

Source: Jochen Wirtz, Sven Tuzovic, and Michael Ehret (2015), “Global Business Services: Increasing
Specialization and Integration of the World Economy as Drivers of Economic Growth,” Journal of Service 32
Management, Vol. 26, No.4, pp. 565--587.
33
 What Are Services?
• Production and consumption inseparable in services
• Benefits without Ownership
• Labor, skills and expertise rentals
• Rented goods services
• Defined space and facility rentals
• Access to shared facilities
• Access and use of networks and systems

34
 Definition Of Services
Services are economic activities performed by one party
to another. Often time-based, these performances bring
about desired results to recipients, objects, or other
assets.
In exchange for money, time, and effort, service
customers expect value from access to labor, skills,
expertise, goods, facilities, networks, and systems.
However, they do not normally take ownership of the
physical elements involved.

35
36
 Four Categories of Services –
A Process Perspective (1 of 2)

• People processing
• Possession processing
• Mental stimulus processing
• Information processing

37
Four Categories of Services –
A Process Perspective (2 of 2)

38
 People Processing
• Implications of people processing
services:
– Service production and consumption are
simultaneous
– Active cooperation of the customer is needed in
the service delivery process
– Careful consideration of location of the service
operation, the design of service processes and the
service environment, demand and capacity
management, and output from the customer’s
point of view
39
People Processing
41
 Possession Processing
• Production and consumption are not
necessarily simultaneous
• Customers tend to be less involved in
these services, compared to people-
processing services

42
Possession Processing
Possession Processing
45
 Mental Stimulus Processing
• Customers do not have to be physically
present in the service factory
• Services can be “inventoried” for
consumption at a later date, or
consumed repeatedly.

46
Mental Stimulus Processing
Mental Stimulus Processing
Mental Stimulus Processing
49
 Information Processing
• Can be transformed into more
permanent and tangible forms
like letters, reports, books, or files in any
type of format
• Not very different from mental stimulus
processing services

50
Information Processing
52
 Marketing Challenges Posed By
Services
• Four characteristics of Services
– intangibility

– heterogeneity (variability of quality)

– inseparability of production and

consumption and
– perishability

… IHIP
53
Eight Features of Services

54
 Difference Implications Marketing-related
Topics

1. Most service Customers may be Smooth demand through

products cannot turned away or have promotions, dynamic
be inventoried to wait pricing, and reservations
(i.e., output is Work with operations to
perishable) adjust capacity

2. Intangible Customers cannot Make services tangible

elements usually taste, smell, or touch through emphasis on
dominate value these elements and physical clues
creation may not be able to see Employ concrete
(i.e., service is or hear them metaphors and vivid
physically Harder to evaluate images in advertising
intangible) service and distinguish and branding
from competitors
 Difference Implications Marketing-related Topics

3. Services are Customers perceive Educate customers to

often difficult to greater risk and make good choices, explain
visualize and uncertainty what to look for, document
understand performance, offer
(i.e., service is guarantees
mentally intangible)

4. Customers may Customers interact Educate customers to

be involved in co- with providers’ make good choices, explain
production equipment, facilities, what to look for, document
(i.e., if people and systems performance, offer
processing is Poor task execution guarantees
involved, the service by customers may
is inseparable) hurt productivity, spoil
the service
experience, and
curtail benefits
 Difference Implications Marketing-related Topics

5. People may Appearance, attitude and Recruit, train, and reward

be part of the behavior of service personnel employees to reinforce the
service and other customers can shape planned service concept
experience the experience and affect Target the right customers at
satisfaction the right times; shape their
behavior

6. Operational Harder to maintain consistency, Set quality standards based

inputs and reliability, and service quality or on customer expectations;
outputs tend to lower costs through higher redesign product elements
to vary more productivity for simplicity and failure-
widely Difficult to shield customers from proofing
(i.e., services results of service failures Institute good service
are recovery procedures
heterogeneou Automate customer-provider
s) interactions; perform work
while customers are absent
 Difference Implications Marketing-related Topics

7. The time Customers see time as a scarce Find ways to compete on

factor often resource to be spent wisely, dislike speed of delivery, minimize
assumes wasting time waiting, want service at burden of waiting, offer
great times that are convenient extended service hours
importance

8. Information-based services can be Seek to create user-

Distribution delivered through electronic friendly, secure websites
may take channels such as the Internet or and free access by
place through voice telecommunications, but core telephone
nonphysical products involving physical activities Ensure that all information-
channels or products cannot based service elements are
Channel integration is a challenge; delivered effectively and
that is to ensure consistent delivery reliably through all key
of service through diverse channels, channels
including branches, call centres and
websites.
59
Tangible-dominant to
Intangible-dominant

Relative value added by physical versus intangible elements in goods

and services
60
Value through the marketing mix
 The 7 ‘P’s Of Services Marketing
Price
Service
Process
Product

People
Promotion
Place
Physical environment
 The 7 ‘P’s Of Services Marketing

The 4 ‘P’s
product, price, place (or distribution), and
promotion (or communication)

Extended Marketing Mix for Services – The 3

‘P’s
process, physical environment, and people

63
 The Traditional Marketing Mix
Applied To Services (1 of 2)
• Product Elements
– Service products consist of a core product that
meets the customers’ primary need and a variety
of supplementary service elements
• Place and Time
– Distribution of core versus supplementary
Services
– Importance of the time factor

64
 The Traditional Marketing Mix
Applied To Services (2 of 2)
• Price and Other User Outlays
– Pricing strategy is highly dynamic, with price levels
adjusted over time according to factors like customer
segment, time and place of delivery, level of demand,
and available capacity.
– The outlays include additional monetary costs, time
spent, unwanted mental and physical effort, and
exposure to negative sensory experiences.
• Promotion and Education
– Services are often difficult to visualize and understand as
intangible elements tend to dominate value creation
– Customer-customer interactions affect the service
experience

65
 Extended Marketing Mix Required
For Services
• Process
– Operational Inputs and Outputs Can Vary Widely
– Customers Are Often Involved in Co-production
– Demand and Capacity Need to be Balanced
• Physical Environment
– The appearance of buildings, landscaping, vehicles, interior
furnishings, equipment, staff members’ uniforms, signs,
printed materials, and other visible cues provide tangible
evidence of a firm’s service quality
• People
– Service firms need to work closely with their human
resources (HR) departments and devote special care in
selecting, training, and motivating their service employees
66
67
Integration Of Marketing With Other
Management Functions

68
The Service-Profit Chain

Reprinted by permission of Harvard Business Review: Heskett, JL., Jones, T.O., Loveman, G.W., Sasser Jr., W.E., and Schlesinger, L.A. (March–
April 1994), “Putting the Service–Profit Chain to Work,” Harvard Business Review, p.166. Copyright © 1994 by the Harvard Business School
Publishing Corporation; all rights reserved.
69
Developing Effective Service Marketing
Strategies

70
71
72
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 2
Understanding Service Consumers

1
 Learning Objectives (1 of 2)
By the end of this chapter, the reader should be able to:
• Understand the three-stage model of service consumption.
• Use the multi-attribute model to understand how consumers
evaluate and choose between alternative service offerings.
• Learn why consumers often have difficulties evaluating
services, especially those with many experience and credence
attributes.
• Know the perceived risks customers face in purchasing
services and the strategies firms can use to reduce consumer
risk perceptions.
• Understand how customers form service expectations and
the components of these expectations.
• Know the moment-of-truth metaphor.
2
 Learning Objectives (2 of 2)
• Contrast how customers experience and evaluate high- versus
low-contact services.
• Be familiar with the servuction model and understand the
interactions that together create the service experience.
• Obtain insights from viewing the service encounter as a form
of theater.
• Know how role, script and perceived control theories
contribute to a better understanding of service encounters.
• Describe how customers evaluate services and what
determines their satisfaction.
• Understand service quality, its dimensions and measurement,
and how quality relates to customer loyalty.

3
Three Stage Model

4
 Trước khi đi giải phẫu
thẩm mỹ, bạn sẽ làm gì?
What do you want before you
decide to do cosmetic surgery?
 Stages of Service Consumption Key Concepts

Awareness of need Need arousal

• Information search Evoked set
• Clarify needs Consideration set
• Explore solutions
• Identify alternative service products and
suppliers
Multi-attribute model
Evaluation of alternatives (solutions and Search, experience, and
suppliers) credence attributes
Pre- • Review supplier information Perceived risk
purchase (e.g. advertising, brochures, websites)
Stage • Review information from third parties
(e.g. published reviews, ratings, comments on
web, blogs, complaints to public agencies,
satisfaction ratings, awards)
• Discuss options with service personnel
• Get advice and feedback from third-party Formation of expectations:
advisors and other customers desired service level,
6
predicted service level,
Make decisions on service purchase and adequate service level, zone
often make reservations of tolerance
Trong khi đi giải phẫu thẩm
mỹ, bạn muốn điều gì?
What do you want during
cosmetic surgery?
 Stages of Service
Key Concepts
Consumption
Request service from a Moments of truth
chosen supplier or initiate Service encounters
self-service (payment may Servuction system
Service be upfront or billed later) Theater as a metaphor
Encount Role and script theories
er Stage Service delivery by Perceived control theory
personnel or self-service

Evaluation of service Confirmation/ Disconfirmation of

performance expectations
Dissatisfaction, satisfaction and
Post- Future intentions delight
encount Service Quality
er Stage Word-of-mouth
Repurchase
Loyalty
Sau khi đi giải phẫu thẩm
mỹ, bạn muốn điều gì?
After cosmetic surgery, what do
you want?
10
 How Might Consumers Handle
Perceived Risk?
• Seeking information from trusted and respected personal sources
such as family, friends and peers.
• Using the Internet to compare service offerings, to search for
independent reviews and ratings, and to explore discussions on
social media.
• Relying on a firm that has a good reputation.
• Looking for guarantees and warranties.
• Visiting service facilities or trying aspects of the service before
purchasing, and examining tangible cues or other physical evidence.
• Asking knowledgeable employees about competing services to
learn about what to look out for when making this decision.

11
 Strategic Responses to Managing
Customer Perceptions of Risk (1 of 2)
• Encourage prospective customers to preview the
service through their company websites and videos.
• Encourage prospective customers to visit the service
facilities before purchase.
• Offer free trials suitable for services with high
experience attributes.
• For services with high credence qualities and high
customer involvement, advertising helps to
communicate the benefits, usage and how
consumers can enjoy the best results.
12
 Strategic Responses to Managing
Customer Perceptions of Risk (2 of 2)
• Display credentials
• Use evidence management, an organized approach where
customers are presented with coherent evidence of the
company’s targeted image and its value proposition
• Have visible safety procedures that build confidence and
trust
• Give customers access to online information about the
status of an order or procedure.
• Offer service guarantees such as money-back guarantees
and performance warranties

13
Components of Customer Expectations

Desired Service Level

• wished-for level of service quality that customer believes can and
should be delivered

Adequate Service Level

• minimum acceptable level of service

Predicted Service Level

• service level that customer believes firm will actually deliver

Zone of Tolerance
• Acceptable range of variations in service delivery

14
 Moments of Truth
[We could say that the perceived quality is realized at
the moment of truth, when the service provider and
the service customer confront one another in the
arena. At that moment they are very much on their
own… It is the skill, the motivation, and the tools
employed by the firm’s representative and the
expectations and behavior of the client which
together will create the service delivery process.

Richard Normann

15
 Moments of Truth

4. Brussels Airlines

www.themegallery.com
17
 Distinctions between High-Contact
and Low-Contact Services
• High-Contact Services
– Customers visit service facility and remain
throughout service delivery
– Active contact
– Includes most people-processing services
• Low-Contact Services
– Little or no physical contact
– Contact usually at arm’s length through electronic or
physical distribution channels
– Facilitated by new technologies 18
 Perceived Control Theory:
The New Dimension

Control is a major driving force of their behavior

and satisfaction

19
 Customer Satisfaction
In the post-encounter stage, customers evaluate
the service performance they have
experienced and compare it with their prior
expectations.
The Expectancy-Disconfirmation Model of
Satisfaction
– Satisfaction is a judgment following a series
of consumer product interactions.

20
 How is Customer Delight Different
from Satisfaction?
• Research shows that delight is a function of three
components
– Unexpectedly high levels of performance
– Arousal (e.g., surprise, excitement)
– Positive affect (e.g., pleasure, joy, or happiness)
• Achieving a customer’s delight requires focusing on
what is currently unexpected.
• Once a customer is delighted, it has a strong impact
on a customer’s loyalty

21
 Service Quality
Excellent service quality is a high standard
of performance that consistently meets or
exceeds customer expectations.

22
 Customer Satisfaction
versus
Service Quality
• Customer satisfaction is an evaluation of a
single consumption experience, a fleeting
judgment, and a direct and immediate
response to that experience.
• Service quality refers to relatively stable
attitudes and beliefs about a firm, which can
differ significantly from satisfaction.

23
24
Dimensions of Service Quality
Measuring Service Quality
By SERVQUAL scales

25
Dimensions of
Definition Sample illustrations
service quality

1. Tangibles Appearance of - Are the hotel’s facilities attractive?

physical facilities, - Is my account dressed appropriately?
equipment, - Is my bank statement easy to understand?
personel, &
communication
materials.

2. Reliability Ability to perform the - Does my lawyer call me back when

promised service promised?
dependably and - Is my telephone bill free of errors?
accurately - Is my TV repaired right the first time?

3. Wilingness to help - When there is a problem does the firm

Responsivene customers and resolve it quickly?
ss provide prompt - Is my stockbroker willing to answer my
service questions?
- Is the cable TV company willing to give me a
specific time when the installer will show up?
Dimensions of
Definition Sample illustrations
service quality
4. Assurance Trustworthiness, - Does the hospital have a good reputation?
Credibility believability, honesty - Does my stockbroker refrain from pressuring me to
of the service provider trade?
- Does the repair firm guarantee its work?

Security Freedom from - Is it safe for me to use the bank’s ATMs at night?
danger, risk, or doubt - Is my credit card protected against unauthorized use?
- Can I be sure that my insurance policy provides
complete coverage?

Competence Possession of the - Can the bank teller process my transaction without
skills and knowledge fumbling around?
required to perform - Is my health insurance able to obtain the information I
the service need when I call?
- Does the dentist appear to be competent?

Courtesy Politeness, respect, - Does the flight attendant have a pleasant demeanor?
consideration, and - Are the phone operators consistently polite when
friendliness of contact answering my calls?
personel - Does the gardener take off his muddy shoes before
stepping on my carpet?
 Dimensions of
Definition Sample illustrations
service quality

5. Empathy Approachability and ease - How easy is it for me to talk to supervisor when I
Access of contact have a problem?
- Does the airline have a 24-hour, toll-free phone
number?
Is the hotel conveniently located?

Communication Listening to customers - When I have a complaint, is the manager willing to

and keeping them listen to me?
informed in the language - Does my doctor avoid using technical jargon?
they can understand - Does the electrician call when he or she is unable to
keep a scheduled appointment?

Understanding the Making the effort to know - Does someone in the hotel recognize me as a
customer customers and their regular guest?
needs - Does my stockbroker try to determine my specific
financial objectives?
- Is the moving company willing to accommodate my
schedule?
29
 Measuring Service Quality
• Valarie Zeithaml and her colleagues developed a
survey instrument called SERVQUAL
• SERVQUAL is seen as a generic measurement tool
that can be applied across a broad spectrum of
service industries.
• Respondents answer 21 questions measuring their
expectations of companies in a particular industry on
a wide array of specific service characteristics
• Can be customized to suit different service
situations
30
 The SERVQUAL Scale (1 of 2)
• The SERVQUAL scale includes five dimensions -- Tangibles, Reliability,
Responsiveness, Assurance and Empathy.
Within each dimension, several items are measured. There are many
different formats in use, and we show the most basic 21 items for ideal
perceptions below. The statements are accompanied by a seven-point
scale, ranging from “strongly disagree = 1” to “strongly agree = 7”.
• The firm’s performance is measured by rewording the same items (e.g.,
for item 1 in the table below: “XYZ firm has modern-looking
equipment”). The difference between the scores for each item,
dimension and for overall service quality is the computed and used as
an indicator of a firm’s level of service quality.
• If measuring both ideal (or expected) and actual performance
perceptions is not possible due to time constraints during the
interview, both measures can also be combined by using the same 21
items (e.g., “modern looking equipment”) and scale anchors “Lower
than my desired service level”, “The same as my desired service level”,
and “Higher than my desired service level”.
31
 Customer Loyalty
• Loyalty is a customer’s willingness to continue
patronizing a firm over the long-term
• Customer loyalty extends beyond behavior and
includes preference, liking, and future intentions.
• Loyalty is an important outcome of satisfied
customers who believe that the firm delivers great
service.
• The opposite of loyalty is defection, which is used to
describe customers who drop off a company's radar
screen and transfer their loyalty to another supplier

32
33
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 3
Positioning Services In Competitive
Markets

1
 Learning Objectives
• Understand how the customer, competitor and company analysis (i.e., the 3 ‘C’s)
helps to develop a customer-driven services marketing strategy.
• Know the key elements of a positioning strategy (i.e., STP), and explain why
these elements are so crucial for service firms to apply.
• Segment customers on needs first before using other common bases to further
identify and profile the segments.
• Distinguish between important and determinant attributes for segmentation.
• Use different service levels for segmentation.
• Target service customers using the four focus strategies for competitive
advantage.
• Position a service to distinguish it from its competitors.
• Understand how to use positioning maps to analyze and develop competitive
strategy.
• Develop an effective positioning strategy.

2
Developing A Services Marketing
Positioning Strategy

3
4
 Customer, Competitor And
Company Analysis (3 ‘C’s) (1 of 2)
Customer Analysis
• Market Analysis –
• Establish attractiveness of overall market and potential segments
within
• Look at overall size and growth of market, margins and profit
potential, and demand levels and trends affecting the market
• Customer Needs Analysis –
• Who are the customers in that market in terms of demographics
and psychographics?
• What needs or problems do they have?
• Are there potentially different groups of customers with differing
needs that require different service products or different levels of
service?
• What are the benefits of the service each of these groups values
most?
5
 Customer, Competitor And
Company Analysis (3 ‘C’s) (2 of 2)
Competitor Analysis –
• Identification and analysis of competitors
• Analysis of competitors’ strengths and weaknesses
• Understanding opportunities for differentiation

Company Analysis –
• Identify the organization’s strengths
• Understanding organization’s limitations or constraints

6
 Segmentation, Targeting And
Positioning (STP)
Segmentation:
• A market segment is composed of a group of buyers who share
common characteristics, needs, purchasing behavior, and/or
consumption patterns
• Grouping based on demographic, geographic, psychographic and
behavioral variables
Targeting:
• Understanding segment(s) that would most likely be interested in the
service, and focus on how to serve them well
Positioning:
• The unique place that the firm and/or its service offerings occupy in the
minds of its consumers.
• Differentiation is the first step towards creating a unique positioning for
a service.
7
Elements and Key Concepts of a Services
Positioning Strategy
Elements of a Positioning Strategy Key Concepts
Segmentation • Segmenting service markets
• Service attributes and service levels relevant for
segmentation
- Important versus determinant attributes
- Establishing service levels
Targeting • Targeting service markets through four focus
strategies:
- Fully focused
- Market focused
- Service focused
- Unfocused
Positioning • Positioning services in competitive markets
• Using positioning maps to plot competitive
strategy
• Developing an effective positioning strategy

8
 Segmenting Service Markets
Segmentation Bases
• Demographic segmentation
• based on age, gender and income
• Psychographic segmentation
• people’s lifestyles, attitudes and aspirations
• Behavioral segmentation
• usage based: non-users, light users or heavy users
• Needs-based segmentation
• multi-attribute decision models: the purpose, who makes
the decision, the timing of use (time of
day/week/season), whether the individual is using the
service alone or with a group, and if the latter, the
composition of that group
9
 Segmentation based on
Service Levels
Some service attributes are easily quantified, while
others are qualitative.
Quantitative Aspects:
• Price, for instance, is a quantitative attribute.
• Punctuality of transport services can be expressed in terms
of the percentage of trains, buses, or flights arriving within
a specified number of minutes from the scheduled time
Qualitative Aspects:
• Quality of personal service
• A hotel’s degree of luxury

10
Segmentation based on
Service Levels

Quatitative Aspects
(yếu tố định lượng)
 Segmentation based on
Service Levels

Qualitative Aspects
(yếu tố định tính)
14
 Targeting Service Markets
Companies focus their efforts on those
customers they can serve best — the target
segment
1. Market focus is the extent to which a firm
serves few or many markets
2. Service focus describes the extent to
which a firm offers few or many services.

15
Basic Focus Strategies For Targeting
Service market

16
 Basic Focus Strategies For Targeting
Service market
1. Market focus is the extent to which a firm serves few or
many markets
2. Service focus describes the extent to which a firm offers
few or many services.
3. Fully focus: provides a very limited range of services
(perhaps just a single core product) to a narrow and
specific market segment
4. Unfocused: is the extent to which a firm try to market to
anyone that happens to be close by whether you know
they'll have interest or not

17
Basic Focus Strategies For Targeting
Service market

Market
focus

18
Basic Focus Strategies For Targeting
Service market

Service
focus

19
 Basic Focus Strategies For Targeting
Service market

Fully focus (service & market)

https://oxalisadventure.
com/vi/
20
Basic Focus Strategies For Targeting
Service market

Unfocused

21
22
 Principles of Positioning Services
Positioning strategy – creating, communicating, and
maintaining distinctive differences that will be noticed
and valued by the customers

Positioning Principles (Jack Trout ):

• A company must establish a position in the minds of its
targeted customers.
• The position should be singular, providing one simple and
consistent message
• The position must set a company apart from its
competitors
• A company cannot be all things to all people — it must
focus its efforts.
23
24
Singapore Airlines is positioned
as a premium carrier with high
levels of innovation and
excellent levels of service, and
has made a strategic choice of
giving priority to profitability over
size.

27
• JW Marriot has positioned itself as a
firm that offers affordable luxury.
Thus, customers associate the firm
with luxury.

28
 Developing An Effective
Positioning Strategy
Basic elements to writing a good positioning statement
• Target audience — the specific group(s) of people that the brand
wants to sell to and serve (e.g., professionals as primary target
customers, and employers and advertisers as secondary target
audiences).
• Frame of reference — the category that the brand is competing in
(e.g., in the social networking space).
• Point of Difference — the most compelling benefit offered by the
brand that stands out from its competition (e.g., largest network of
professionals and recruiters to help advance your career, develop
your business acumen, industry knowledge and personal
development).
• Reason to believe — proof that the brand can deliver the benefits
that are promised. (e.g., our network is many times bigger than that
of our nearest competitor).
29
 Example of a Positioning Map

Figure 3.12 Positioning map of Belleville’s principal business hotels: service

level versus price level
30
31
32
33
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 4
Developing Service Products And Brands

1
 Learning Objectives (1 of 2)
• Understand what constitutes a service product.
• Be familiar with the Flower of Service model.
• Know how facilitating supplementary services relate
to the core product.
• Know how enhancing supplementary services relate
to the core product.
• Understand branding at the corporate and individual
service product level.
• Examine how service firms use different branding
strategies.

2
 Learning Objectives (2 of 2)
• Understand how branding can be used to tier
service products.
• Discuss how firms can build brand equity
• Understand what is required to deliver a branded
service experience.
• List the categories of new service development,
ranging from simple style changes to major
innovations.
• Describe how firms can achieve success in new
service development.

3
 Creating Service Products
• A product implies a defined and consistent
“bundle of output” as well as the ability to
differentiate one bundle of output from
another.
• Service firms differentiate their products
using the various “models” offered by
manufacturers

4
The Components of a Service Product
Core Product
• ‘What’ the customer is fundamentally buying
• The core product is the main component that supplies the
desired experience
Supplementary Services
• The core product is usually accompanied by a variety of other
service-related activities referred as supplementary services
• Supplementary services augment the core product, both
facilitating its use and enhancing its value
Delivery Processes
• The processes used to deliver both the core product and
each of the supplementary services

5
The Flower Of Service

The Flower of Service: Core Product Surrounded by Clusters of

Supplementary Services
6
Facilitating Supplementary Services:
Information
To obtain full value from any good or service, customers
need relevant information.
Information includes the following:
• Direction to service site
• Schedules/service hours
• Price information
• Terms and conditions of sale/service
• Advice on how to get the most value from a service
• Warnings and advice on how to avoid problems
• Confirmation of reservations
• Receipts and tickets
• Notification of changes
• Summaries of account activities
7
 Facilitating
Supplementary Services:
Information

8
9
 Facilitating Supplementary
Services: Order-taking
Once customers are ready to buy, a key supplementary
element comes into play — order-taking.
• Order-taking includes:
• Order entry
• On-site order entry
• Mail/telephone/e-mail/online/mobile app order
• Reservations or check-ins
• Seats/tables/rooms
• Vehicles or equipment rental
• Professional appointment
• Applications
• Memberships in club/programs
• Subscription services
• Enrolment-based services
10
Facilitating Supplementary Services:
Order taking

11
12
 Facilitating Supplementary
Services: Billing
Billing is common to almost all services (unless
the service is provided free-of-charge).
• Billing can be:
• Periodic statements of account activity.
• Invoices for individual transactions.
• Verbal statements of amount due.
• Online or machine display of amount due for self-payment
transactions.

13
14
15
 Facilitating Supplementary
Services: Payment
A variety of payment options exist
• Self-service
• Inserting card, cash or token into machine
• Electronic funds transfer
• Mailing a check
• Entering credit card information online
• Online payment systems such as PayPal, Google Wallet or Bitcoins
• Direct to payee or intermediary
• Cash handling or change giving
• Check handling
• Credit/charge/debit card handling
• Coupon redemption
• Automatic deduction from financial deposits
• Automated systems
• Pre-arranged automatic deduction for bill payment through direct debit
16
19
 Enhancing Supplementary Services (1 of 2)

Consultation - involves a dialog to probe for

customer requirements and then develop a
tailored solution
oCustomized advice
oPersonal counseling
oTutoring/training in service use
oManagement or technical consulting

20
1800 and 1900

21
22
 Enhancing Supplementary Services (1 of 2)

Hospitality - reflect pleasure at meeting new

customers and greeting old ones when they return
• Greeting
• Food and beverages
• Toilets and washrooms
• Waiting facilities and amenities
o Lounges, waiting areas, seating
o Weather protection
o Magazines, entertainment, newspapers
• Transport

23
24
25
26
Bạn thường ấn tượng điều gì ở người mới
gặp?
What is your first impression when looling at
someone?
Smiling face???

28
Keep eyes - contact
b. Attitude
Phòng ngừa hơn chữa
bệnh
Prevention is better than
cure
Vệ sinh
cá nhân
Privacy to customers
37
 Enhancing Supplementary
Services (2 of 2)
Safekeeping - assistance with safekeeping customers’
personal possessions
• Child care, pet care
• Parking for vehicles, valet parking
• Coat rooms
• Baggage handling
• Storage space
• Safe deposit boxes
• Security personnel

38
 Enhancing Supplementary
Services (2 of 2)
Exceptions - supplementary services that
fall outside the routine of normal service
delivery
• Special requests
• Problem-solving
• Handling of complaints/suggestions/compliments
• Restitution

39
40
 Branding Service Firms, Products
and Experiences
• Branding helps marketers to establish a mental
picture of the service in customers’ minds and to
clarify the nature of the value proposition.
• Distinctive brand names of individual service
products enables the firm to communicate the
distinctive experiences and benefits associated
with a specific service concept to the target market
• Branding can be employed at both the corporate
and product levels by almost any service business.

41
 Branding Strategies For Services
• Service organizations offer a line of products rather
than just a single product.
• Four broad branding alternatives:
• Branded House – used to describe a company, that applies
its brand name to multiple offerings in often unrelated
fields
• Sub-brands – the corporate or the master brand is the
main reference point, but the product itself has a
distinctive name
• Endorsed Brands – the product brand dominates but the
corporate name is still featured
• House of Brands – the corporate brands and its well-
known sub brands

42
Branding Alternatives

43
 Tiering Service Products With
Branding
• In a number of service industries, branding is not only
used to differentiate core services, but also to clearly
differentiate service levels. This is known as service
tiering.
• It is common in industries such as hotels, airlines, car
rentals, and computer hardware and software support.
• Other examples of tiering include healthcare
insurance, cable television, and credit cards.

44
 Building Brand Equity
• Brand equity is the value premium that comes with a brand - what
customers are willing to pay for the service, beyond what they are
willing to pay for a similar service that has no brand.
• Components of Brand Equity
• Company’s presented brand — mainly through advertising, service facilities
and personnel.
• External brand communications —from word of mouth and publicity. These
are outside of the firm’s control.
• Customer experience with the company —what the customer has gone
through when they patronized the company.
• Brand awareness — the ability to recognize and recall a brand when
provided with a cue.
• Brand meaning — what comes to the customer’s mind when a brand is
mentioned.
• Brand equity — the degree of marketing advantage that a brand has over its
competitors.
45
46
47
A Service-branding Model

48
Delivering Branded Service Experiences
• Aligning the service product and brand with its delivery
process, servicescape and people with the brand
proposition.
• Having processes in place
• Creating the emotional experience can be done
effectively through the servicescape
• Building of interpersonal relationships, where trust is
established between the consumers and the firm’s
employees
• Investing in employees for they will be the ones who
can deliver the brand experience that creates customer
loyalty
49
 New Service Development (1 of 2)
A Hierarchy of New Service Categories
• Style changes represent the simplest type of innovation,
typically involving no changes in either processes or
performance.
• Service improvements involve small changes in the
performance of current products, including
improvements to either the core product or to existing
supplementary services
• Supplementary service innovations take the form of
adding new facilitating or enhancing service elements to
an existing core service or significantly improving an
existing supplementary service.

50
 New Service Development (2 of 2)
• Process line extensions offer more convenience and a
different experience for existing customers, or attract
new customers who find the traditional approach
unappealing.
• Product line extensions are additions to a company’s
current product lines.
• Major process innovations consist of using new
processes to deliver existing core products in new
ways with additional benefits.
• Major service innovations are new core products for
markets that have not been previously defined.

51
 Achieving Success In New Service
Development
• Services like products are not immune to the
high failure rates
• Reasons for failure include not meeting a
consumer need, inability to cover costs from
revenues, and poor execution
• Three factors contribute most to success:
oMarket synergy
oOrganizational factors
oMarket research factors

52
53
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 5
Distributing Services Through
Physical And Electronic Channels

1
 Learning Objectives (1 of 2)
• Know the four key questions that form the foundation of any service
distribution strategy: What, How, Where and When.
• Describe the three interrelated flows that show what is being
distributed.
• Be familiar with how services can be distributed using three main
options, and understand the importance of distinguishing between
distributing core and supplementary services.
• Recognize the issues of delivering services through electronic
channels and discuss the factors that have fueled the growth of
service delivery via cyberspace.
• Understand the determinants of customers’ channel preferences.
• Know the importance of channel integration.
• Describe the where (place) decisions of physical channels and be
familiar with the strategic and tactical location considerations.
2
 Learning Objectives (2 of 2)
• Describe the when (time) decisions of physical channels and the
factors that determine extended operating hours.
• Understand the role, benefits and costs of using intermediaries in
distributing services.
• Know why franchising is a common way of delivering services to
end users.
• Understand the challenges of distributing services in large domestic
markets.
• Be familiar with the forces that drive service firms to go
international.
• Appreciate the special challenges of distributing services
internationally.
• Understand the key barriers to international trade in services.
• Explain the determinants of international market entry strategies.
3
Distribution In A Services Context

Figure 5.2 The Flow Model of Service Distribution 4

 What Is Being Distributed?
• Information and promotion flow — distribution of
information and promotion materials relating to the service offer.
• Negotiation flow — reaching an agreement on the service
features and configuration, and the terms of the offer
• Product flow — people processing or possession processing -
physical facilities for delivery and development of a network of
local sites.
• Information-processing services - electronic channels,
employing one or more centralized sites.

5
 How Should A Service Be
Distributed?
Options for service delivery

6
 The Service Transaction Is Conducted
Remotely
• A customer may never see the service facilities
or meet service personnel face-to-face when
dealing with a service firm through remote
transactions.
• Logistics providers offer service firms integrated,
reliable and cost-effective solutions
• Examples:
– Repair services
– Information-based product
– Web and app-delivered services

7
Factors That Attract Customers To Use
Online Services
• Convenience.
• Ease of search
• A broader selection.
• Potential for better prices.
• 24/7 service with prompt delivery.

8
 Channel Integration
• New delivery channels have created an inconsistent
and frequently disjointed experience for many
customers.
• Customers take advantage of price variation among
channels and markets, a strategy known as channel
arbitrage.
• Service providers need to develop effective pricing
strategies that will enable them to deliver value and
capture it through the appropriate channel.

9
Where Should A Service Facility Be
Located? (1 of 3)
Strategic Location Considerations
– Understanding customer needs and expectations,
competitive activity, and the nature of the service
operation.
– Firms should make it easy for people to access
frequently purchased services, especially those
that face active competition
– Markets can be segmented by accessibility
preferences and price sensitivity.

10
 Where Should A Service Facility Be
Located? (2 of 3)
Tactical Location Considerations
Key Factors:
– Population size and characteristics.
– Pedestrian and vehicular traffic and its characteristics.
– Convenience of access for customers.
– Competitors in this area.
– Nature of nearby businesses and stores.
– Availability of labor.
– Availability of site locations, rental costs, and
contractual conditions and regulations.
11
Where Should A Service Facility Be
Located? (3 of 3)
• Locational Constraints
– The need for economies of scale and operational
requirements may restrict choice of locations.
• Innovative Location Strategies
– Innovative distribution strategies can be at the
core of powerful new service models.
– Mini Stores - An interesting innovation among multi-site
service businesses involves creating numerous small
service factories to maximize geographic coverage.
– Locating in Multi-purpose Facilities - The most obvious
locations for consumer services are close to where
customers live or work
12
13
When Should Service Be Delivered?
• 24/7 service — 24 hours a day, 7 days a week,
around the world.
• Factors determining the opening hours -
customer needs and wants and the economics of
opening hours
• Extended Operating Hours - Pressure from
consumers, Changes in legislation, Economic
incentives to improve asset utilization, Availability
of employees to work during "unsocial" hours,
Automated self-service facilities
14
24/7 service — 24/24 service

15
Analysis Of Benefits And Costs Of
Alternative Distribution Channels

16
 Franchising (1 of 2)
Definition:
A franchise is the agreement or license between two
legally independent parties which gives: (a) a person or group of
people (franchisee) the right to market a product or service using
the trademark or trade name of another business (franchisor);
(b) the franchisee the right to market a product or service using
the operating methods of the franchisor; (c) the franchisee the
obligation to pay the franchisor fees for these rights, and (d) the
franchisor the obligation to provide rights and support to
franchisees.

17
 Franchising (2 of 2)
• Franchising has become a popular way to
expand delivery of an effective service concept,
embracing all of the 7 ‘P’s to multiple sites.
• A franchisor recruits entrepreneurs, who invest
time and effort into the business
• Local marketing activities are typically paid for
by the franchisee

18
 Disadvantages Of Franchising

• Loss Of Control
• Priorities And Procedures May Be
Different
• Legal Disputes

19
The Challenge Of Distribution In
Large Domestic Markets
• Physical logistics
• Multiculturalism
• Laws and tax rates

20
 How Does The Nature Of A Service
Affect International Distribution?
• People-Processing Services
– Export the service concept. Acting alone or in partnership with local
suppliers, the firm establishes a service factory in another country
– Import customers. Customers from other countries are invited to
come to a service factory with distinctive appeal or competences in
the firm’s home country

• Possession-processing Services
• Information-based Services
– Export the service to a local service factory. The service can be made
available in a local facility that customers visit.
– Import customers. Customers may travel abroad to visit a specialist
facility, in which case the service takes on the characteristics of a
people-processing service.
– Export the information via telecommunications and transform it
locally
21
 Barriers To International Trade In
Services
Notable developments in International Trade:
• NAFTA, linking Canada, Mexico, and the US.
• Latin American economic blocs such as Mercosur and
Pacto Andino.
• Birth of European Union, now 28 countries-strong.

Barriers:
• Government restrictions.
• Entry into regulated markets such as finance,
telecom and healthcare.

22
How to go international?

23
24
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 6
Setting Prices And Implementing
Revenue Management

1
 Learning Objectives (1 of 2)
• Recognize that effective pricing is central to the financial
success of service firms.
• Outline the foundations of a pricing strategy as
represented by the pricing tripod.
• Define different types of financial costs and explain the
limitations of cost-based pricing.
• Understand the concept of net value and how gross
value can be enhanced through value-based pricing and
reduction of related monetary and non-monetary costs.
• Describe competition-based pricing and situations where
service markets are less price-competitive.

2
 Learning Objectives (2 of 2)
• Define revenue management and describe how it works.
• Discuss the role of rate fences in effective revenue
management.
• Be familiar with the issues of ethics and consumer
concerns related to service pricing.
• Understand how fairness can be designed into revenue
management policies.
• Discuss the six questions marketers need to answer to
design an effective service pricing strategy.

3
 Effective Pricing Is Central To
Financial Success
Characteristics of Service Pricing
• Pricing of services is complicated
• Service organizations use different terms to describe
the prices they set – Fee, Interest, Charges,
Commission, Tolls, Tariffs etc.
• Consumers find service pricing difficult to
understand, risky, and sometimes even unethical
• Firms have to consider:
• (1) search costs,
• (2) purchase and service encounter costs, and
• (3) post-purchase or after costs, while pricing
services.
4
 Pricing Objectives
• Revenue and Profit Objectives
– Gain profit / Cover Costs
• Patronage And User Base-related
Objectives
– Build Demand / Develop A User Base

• Strategy-related Objectives
– Positioning / Competitive Strategy

5
Objectives for Pricing of Services

6
Pricing Strategy Stands On Three
Foundations
Outline the
foundations of a
pricing strategy as
represented by the
pricing tripod.

7
 Cost-based Pricing
• Establishing the Costs of Providing Service
– Fixed, semi-variable, and variable costs, contribution and break-even
analysis

• Activity-based Costing
– Indirect costs are linked to the variety and complexity of services
produced and not just on physical volume

• Pricing Implications of Cost Analysis

– A firm must set its price high enough to recover the full costs of
producing and marketing the service and add a sufficient margin to
yield the desired profit.
– Some firms promote loss leaders, which are services sold at less than
full cost to attract customers
8
 Value-based Pricing
• Understanding Net Value
– Net value equals perceived benefits minus perceived costs.

Valarie Zeithaml proposes four broad expressions of

value:
– Value is a low price.
– Value is whatever I want in a product.
– Value is the quality I get for the price I pay.
– Value is what I get for what I give.
• Managing the Perception of Value
– Effective communications and personal explanations are
needed to help customers understand the value they
receive.
9
 Related Monetary and
Non-Monetary Costs
Related Monetary Costs
– Customers incur significant financial costs in
searching for, purchasing, and using the service,
over and above the purchase price paid to the
supplier.
Non-monetary Costs
– Reflect the time, effort, and discomfort associated
with the search, purchase, and use of a service
– Time Costs
– Physical Costs
– Psychological costs
– Sensory costs
10
 Reducing the Related Monetary
and Non-Monetary Costs
• Working with operations experts to reduce the
time required to complete service purchase.
• Minimizing unwanted psychological costs of
service.
• Eliminating or minimizing unwanted physical
effort.
• Decreasing unpleasant sensory costs of service.
• Suggesting ways in which customers can reduce
associated monetary costs.

11
Defining Total User Costs

Service users can incur costs during any of the three

stages of the Service Consumption Model.
12
 Competition-based Pricing
• Price Competition Intensifiers
– Increasing number of competitors.
– Increasing number of substituting offers.
– Wider distribution of competitor and/or
substitution offers.
– An increasing surplus capacity in the industry.

• Price Competition Inhibitors

– Non-price related costs of using competing
alternatives are high
– Personal relationships
– Switching costs are high
– Services are often time and location specific
13
 Revenue Management:
What It Is And How It Works
• Revenue management is important in value
creation.
• Ensures better capacity utilization and
reserves capacity for higher-paying segments.
• A sophisticated approach to managing supply
and demand under varying degrees of
constraint.
• Also known as yield management.

14
Setting Capacity Allocation Targets By
Segment For A Hotel

The figure above is an illustration of the capacity allocation in a hotel setting,

where demand from different types of customers varies not only by day of the
week but also by season.
15
Measuring The Effectiveness Of A Firm’s
Revenue Management Strategy
• Maximizing the revenue per available
capacity for a given space and time unit
(RevPAST)
• Success in revenue management means
increasing RevPAST
• Competitors’ Pricing Affect Revenue
Management
• Price Elasticity

16
Illustration Of Price Elasticity

This figure shows the price elasticity for two

segments, one with a highly elastic demand
and the other with a highly inelastic demand.

To allocate and price capacity effectively, the

revenue manager needs to find out how
sensitive demand is to price and what net
revenues will be generated at different price
points for each target segment.

17
 Designing Rate Fences
• Price customization — charging different
customers different prices for the same product
• Rate Fences can be either physical or non-
physical.
– physical fences refer to tangible product
differences related to the different prices
– non-physical fences refer to differences in
consumption, transaction, or buyer
characteristics, but the service is basically the
same

18
Key Categories of Rate Fences (1 of 2)

19
20
Relating Price Buckets To The
Demand Curve
A good understanding of the demand curve is needed so that “buckets”
of inventory can be assigned to the various products and price
categories.
An example from the airline industry is shown below.

21
 Fairness And Ethical Concerns In
Service Pricing
Factors contributing to unethical pricing behavior
• Service Pricing is Complex
– Quoted prices used by consumers for price
comparisons may be only the first of several charges
that can be billed
– Pricing is mostly based on usage-related factors
– Consumers find it difficult to forecast their own usage

• Piling on the Fees

– “Hidden extras”
– Adding (or increasing) fines and penalties

22
 Designing Fairness Into Revenue
Management
• Designing price schedules and fences that are
clear, logical, and fair
• Using high published prices and frame fences as
discounts
• Communicating consumer benefits of revenue
management
• “Hiding” discounts through bundling, product
design and targeting
• Taking care of loyal customers
• Using service recovery to compensate for
overbooking
23
 Putting Service Pricing Into Practice
• How much to charge
• What should be the specified basis for pricing
– Price bundling
– Discounting
– Freemium
• Who should collect payment and where should
payment be made
• When should payment be made
• How should payment be made
• How should prices be communicated to the target
markets

24
25
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 7
Promoting Services And Educating
Customers

1
 Learning Objectives (1 of 2)
• Know the 5 ‘W’s of the Integrated Service Communications Model, i.e.,
Who, What, How, Where and When.
• Be familiar with three broad target audiences (“Who”) for any service
communications program.
• Understand most common strategic and tactical service communications
objectives (“What”).
• Be familiar with “Service Marketing Communications Funnel” and its key
objectives
• Know important specific roles assumed by service marketing
communications.
• Understand challenges of service communications and how service
communications can overcome these (“How”).
• Be familiar with marketing communications mix with reference to
services (“Where”).
2
 Learning Objectives (2 of 2)
• Know elements of traditional marketing communications channels.
• Know role of the Internet, mobile, apps, quick response (QR) code
and other electronic media in service marketing communications.
• Know elements of communications available via service delivery
channels.
• Know communications mix elements that originate outside the firm.
• Understand when communications should take place (“When”), how
to set budgets for service communications and programs, and how to
evaluate these programs.
• Appreciate ethical and consumer privacy related issues in service
marketing communications.
• Understand role of corporate design in communications.
• Know importance of integrated marketing communications to deliver
a powerful brand identity.

3
Integrated Service Communications Model

Figure 7.2 Integrated

Service Communications
Model

4
The Services Marketing
Communications Mix

Figure 7.10 The Marketing

Communications Mix for Services 5
6
Messages Transmitted Online
Messages Transmitted Online

8
 Messages Transmitted Online

Focus on Content via trendy, nice

copywriting, video, pics, music ….
Theo trend, hình ảnh, video phải đẹp, bắt
mắt, tạo sự thèm muốn
Messages Transmitted Online

Mlem Mlem!
Messages Transmitted Online

An Lam retreat Bình

Dương
 Messages Transmitted Online

Mlem Mlem!
Messages Transmitted Online

Từ khóa theo trend nào?

Messages Transmitted Online

Nice Contents
15
Three Key Sources Of Messages

16
 Sources Of Messages

1. Messages transmitted through traditional

marketing channels.
2. Messages transmitted online.
3. Messages transmitted through service
delivery channels.
4. Messages originating from outside the
organization.

17
 1. Messages Transmitted Through
Traditional Marketing Channels (1 of 2)
• Advertising
– The first point of contact between service marketers and their customers.
– Marketers are increasingly trying to be more creative with their advertising
to allow their messages to be more effective.
• Sales Promotion
– Employed for short-term objectives e.g., to accelerate the purchasing
decision or in motivating customers to use a specific service sooner.
– Sales promotions for service firms may take various forms e.g., samples,
coupons and other discounts, gifts, and competitions with prizes.
• Direct Marketing
– Offer the potential to send personalized messages to highly targeted micro-
segments.
– In the permission marketing model, the goal is to persuade consumers to
volunteer their attention.
18
 1. Messages Transmitted Through
Traditional Marketing Channels (2 of 2)
• Personal Selling
– Firms in business-to-business services maintain a sales
team or employ agents and distributors to undertake
personal selling efforts on their behalf.
• Public Relations
– PR tools can help a service organization build its reputation
and credibility, form strong relationships with its
employees, customers and the community.

19
 2. Messages Transmitted Online
• Company’s Website
– Creating consumer awareness and interest.
– Providing information and consultation.
– Allowing two-way communications with customers through
email and chat rooms.
– Encouraging product trial.
– Enabling customers to place orders.
– Measuring the effectiveness of specific advertising or
promotional campaigns.
• Online Advertising
– Banner Advertising
– Search Engine Advertising
20
 3. Messages Transmitted Through
Service Delivery Channels
• Service Outlets
– Both planned and unintended messages reach customers
through the medium of the service delivery environment itself.
• Frontline Employees
– Communication from frontline staff takes the form of the core
service and a variety of supplementary services, including
providing information, giving advice etc.
• Self-Service Delivery Points
– ATMs, vending machines, websites, and service apps can be
used effectively in communications with current and potential
customers.

21
 4. Messages Originating From Outside
The Organization
• Word-of-Mouth (WOM)
– Positive WOM is important as services tend to have a high
proportion of experience and credence attributes, and are therefore,
associated with high perceived risk by potential buyers
– Referral reward programs work well for close friends & family
• Blogs, Twitter, and other social media as a type of online WOM
– Service firms monitor blogs and view them as a form of immediate
market research and feedback

• Media coverage
– Traditional media coverage of firms and their services is often
through a firm’s PR activity. Even today, this sector in the firm
promises a wide reach.
22
Play a game

1) MỘT TÔ PHỞ TÁI CHÍN,

2) ÍT BÁNH

3) BÉO ÍT

4) ÍT GIÁ SỐNG

5) HÀNH TRỤNG ÍT

6) 2 TRỨNG CHÍN.

23
24
 Ethical And Consumer Privacy Issues
In Communications

• Unrealistic service promises

• Unethical advertisers and salespeople
• Deceptive promotions
• Unwanted intrusion

25
 The Role Of Corporate Design
• Key to ensure that a consistent style and message is
communicated throughout a firm’s communications mix
channels.
• Employ unified and distinctive visual appearance for all tangible
elements to facilitate recognition and reinforce a desired brand
image.
• A few popular corporate designs:
– Using the name as a central element in corporate design
– Using a trademark symbol
– Creating tangible and recognizable symbols to associate
with their respective corporate brand names
– Using colors in the corporate designs
26
Corporate Design Strategies

27
Corporate Design Strategies

28
Corporate Design Strategies
Corporate Design Strategies

30
31
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 8
Designing Service Processes

1
 Learning Objectives (1 of 2)
• Know difference between a service experience and a
service process.
• Differentiate between flowcharting and blueprinting.
• Develop blueprint for service process with all typical design
elements in place.
• Understand how to use fail-proofing to design fail points
from service processes.
• Know how to set service standards and performance
targets for customer service processes.
• Appreciate importance of consumer’s perceptions and
emotions in designing service processes.

2
 Learning Objectives (2 of 2)
• Explain necessity for service process redesign.
• Understand how service process redesign can help to
improve service quality and productivity.
• Understand levels of customer participation in service
processes.
• Be familiar with concept of service customers as “co-
creators” and implications of this perspective.
• Understand factors that lead customers to accept or reject
new self-service technologies (SSTs).
• Know how to manage customers’ reluctance to change
behaviors in service processes, wrt the adoption of SSTs.

3
4
 What Is A Service Process?
• Processes the architecture of services.
• Processes describing the method and sequence in
which service operating systems work.
• Poor processes make it difficult for front-line
employees to do their jobs well, thus, resulting in low
productivity, and increasing the risk of service failures.

5
 Designing and Documenting Service
Processes - Flowcharting
• A technique for displaying nature and
sequence of different steps involved when a
customer “flows” through the service process.
• Describes an existing process in a fairly simple
form.
• An easy way to quickly understand the total
customer service experience.

6
Example of a Simple Flowchart

Figure 8.2 Simple flowcharts for delivery of motel service

7
 Designing and Documenting Service
Processes – Blueprinting (1 of 2)
• Map customer, employee and service system
interactions
• Show full customer journey from service
initiation to final delivery of desired benefit
• Show key customer actions, such as how
customers and employees interact (the line of
interaction), front-stage actions by service
employees and how back-stage activities and
systems support these
8
 Designing and Documenting Service
Processes – Blueprinting (2 of 2)
• Show interrelationships among employee roles,
operational processes, supplies, IT and customer
interactions
• Help bring together marketing, operations and
HRM within a firm
• Consequently develop better service processes,
designing fail points and excessive customer waits
out of processes and setting service standards
and targets for service delivery teams
9
 Developing A Service Blueprint
1. Identify all key activities involved in creating and
delivering service
2. Specify linkages between activities
3. First, develop a simple flowchart documenting
process from customer’s perspective
4. Next, add more details (design characteristics of a
service blueprint)

10
 Design Characteristics Of
A Service Blueprint
• Front-stage activities map overall customer experience
• Physical evidence of front-stage activities involves what customer can see
and use to assess service quality
• Line of visibility distinguishes between what customers experience (front-
stage) and activities of employees and support processes (back-stage)
• Backstage activities that must be performed to support a particular front-
stage activity
• Support processes and supplies
• Potential fail points are instances where there is a risk of things going
wrong, resulting in diminished service quality
• Identifying customer waits
• Service standards and targets should be established for each activity to
reflect customer expectations
11
Key Components of Blueprint Example
1. Definition of standards for each front-stage activity
2. Principal customer actions
3. Physical and other evidence for front-stage activities
4. Line of interaction
5. Front-stage actions by customer-contact personnel
6. Line of visibility
7. Back-stage processes by customer-contact personnel
8. Support processes involving other service personnel
9. Support processes involving IT

12
 Stages In Service Processes
Most service processes can be divided into 3 main steps
1. Pre-process stage - the preliminaries occur
• E.g. making a reservation, parking the car, getting seated, and
being presented with the menu
2. In-process stage - main purpose of service encounter is
accomplished
• E.g. enjoying the food and drinks in a restaurant
3. Post-process stage - activities necessary for closing of
encounter happens
• E.g. getting the check and paying for dinner

Example of The Restaurant Drama, divided into three “acts”:

• Act I – Prologue and Introductory Scenes
• Act II – Delivery of the Core Product
• Act III – The Drama Concludes
13
Blueprinting “The Restaurant Drama” (1 of 2)

16
Blueprinting “The Restaurant Drama” (2 of 2)

17
18
 Fail-proofing
Tools commonly used for fail-proofing:
1. Total Quality Management (TQM) methods in
manufacturing is the application of poka-yokes or fail-
safe methods to prevent errors in the manufacturing
processes.
2. Designing poka-yokes is partly art and partly a science
venture
3. A three-step approach for effectively using poka-yokes
includes
– systematically collecting data on problem occurrence
– analyzing the root causes, and
– establishing preventive solutions

19
Setting Service Standards And Targets (1 of 2)
• Customers’ expectations range across a spectrum —
referred to as the zone of tolerance
• Service providers should design standards for each step
sufficiently high to satisfy and delight customers
• Process performance to be monitored against
standards, and compliance targets to be determined;
achieved by using service process indicators
• Service firms to draw a distinction between standards
and performance targets
• Set the right standards and be flexible on negotiating
performance targets that reflect operational reality
20
Setting Service Standards And Targets (2 of 2)

21
22
 Service Process Redesign
Need for Service Process Redesign:
• Service processes become outdated overtime
• A natural weakening of internal processes

Symptoms that Reflect Need for Process Redesigning

• A lot of information exchange is needed as the data available is not
useful.
• A high ratio of checking or control activities to value-adding
activities.
• Increased processing of exceptions.
• Growing number of customer complaints about ineffective
procedures.

23
 Service Process Redesign - Improving
Quality And Productivity
Redesign efforts focus on achieving the
following four key objectives:
• Reduced number of service failures.
• Reduced cycle time from customer initiation of a
service process to its completion.
• Enhanced productivity.
• Increased customer satisfaction.

24
 Steps In Service Process Redesign

• Examining the service blueprint with key

stakeholders
• Eliminating non-value adding steps
• Addressing bottlenecks in the process
• Shifting to self-service

25
26
How long actually could you wait for
some one? Or some things?
 Customer Participation In Service
Processes
• Customer participation refers to the actions and resources
supplied by customers during service production, including
mental, physical, and even emotional inputs
• Levels of customer participation
– Low Participation Level – employees and systems do all
the work. Ex: visiting a movie theater, taking a bus etc.
– Moderate Participation Level – customers’ inputs are
required to assist the firm. Ex: visiting a stylist, filing tax
returns etc.
– High Participation Level – customers work actively with
the provider to co-produce the service. Ex: marriage
counseling, educational services etc.

28
 Customers As Service Co-creators
• Value is created when the customer and
service providers interact during production,
consumption and delivery of the service.
• Service firms need to look at how customers
themselves can contribute effectively to value
creation.
• Firms need to educate and train customers.
• Firms should focus on preventing customer
failures.
29
 Self-Service Technologies (SSTs)
• Ultimate form of involvement in service production – customers
undertake an act on their own, using facilities/systems provided
by service supplier
• SSTs allow customers to produce a service without direct
employee involvement
• Examples include automated banking terminals, self-checkout
terminals at supermarkets, as well as information-based
services such as banking, research, even education
• Companies can divert customers from using more expensive
alternatives such as face-to-face contact with employees

30
32
Blueprint Of A Self-Service Internet-delivered
Banking Process

33
 Customer Benefits And Adoption
Of SSTs
Multiple attitudes drive customer intentions to use
a specific SST
• Overall attitudes toward related service technologies
• Attitudes toward the specific service firm and its
employees
• The overall perceived benefits, convenience, costs, and
ease of use customers see in using SST
Advantages of using SSTs
• Greater convenience, including time saving, faster service,
flexibility of timing, and location
• Greater control over service delivery
• Lower prices and fees involved

34
Customer Disadvantages And Barriers
In Adoption Of SSTs
• Get frustrated by poorly designed technologies
– E.g. difficulty navigating a website or completing online
forms
• Get frustrated when they themselves make a mistake
– E.g. forgetting a password, provide wrong information
– Customers may still blame service provider for not providing
a simpler and more user-friendly system
• Lack of efficient service recovery systems
– Customer may be forced to phone in, email or make a
personal visit to solve problems

35
• Áp dụng công nghệ hay vẫn giữ truyền thống?
Tùy vào sản phẩm, thị trường KH của bạn
VD: KH bạn là ng lớn tuổi thì k nên áp dụng

Tùy vào khả năng của DN mà đầu tư vào công

nghệ, vì tiền rất mắc và phải có phí bảo trì
hàng năm
Lỗi một cái là mất hết dữ liệu

36
 Managing Customers’ Reluctance To
Change Service
Shifting the process entirely to self-service requires the firm to
change customer behavior. This is a difficult task as customers
resent being forced to use SST.

Marketing communications can help prepare customers for this

change.

Six Steps Towards Change:

• Develop customer trust
• Understand customers' habits and expectations
• Pre-test new procedures and equipment
• Publicize the benefits
• Teach customers to use innovations and promote trial methods
• Monitor performance and continue to seek improvements
37
38
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 9
Balancing Demand And Capacity

1
 Learning Objectives (1 of 2)
• Know different demand-supply situations that fixed-
capacity firms may face.
• Describe building blocks of dealing with problem of
fluctuating demand.
• Understand what is meant by productive capacity in a
service context.
• Be familiar with basic ways of managing capacity.
• Recognize that demand patterns vary by segment, so that
segment-specific variations in demand can be predicted.
• Be familiar with five basic ways of managing demand.

2
 Learning Objectives (2 of 2)
• Understand how to use marketing mix elements of price,
product, place, and promotion to smoothen out
fluctuations in demand.
• Know how to use waiting lines and queuing systems to
inventory demand.
• Understand how customers perceive waits and how to
make waiting less burdensome for them.
• Know how to use reservations systems to inventory
demand.
• Be familiar with strategic approaches to utilize residual
surplus capacity even after all other options of matching
demand and capacity have been exhausted.
3
 Fluctuations In Demand Threaten
Profitability
• Services with limited capacity face wide swings in
demand
• Service capacity cannot be kept aside for sale at a
later date
• Effective use of expensive productive capacity is a
secret of success in service businesses
• Service marketers should develop strategies to bring
demand and capacity balance to create benefits for
customers & improve business profitability

4
 From Excess Demand To Excess
Capacity
A fixed-capacity service faces one of the four following
conditions:
• Excess demand — Level of demand exceeds maximum available
capacity.
• Demand exceeds optimum capacity — Conditions are crowded
and customers are likely to perceive a deterioration in service
quality.
• Demand and supply are well-balanced at the level of optimum
capacity — Staff and facilities are busy without being
overworked.
• Excess capacity — Demand is below optimum capacity and
productive resources are underutilized.
5
Implications Of Variations In
Demand Relative To Supply

6
Building Blocks In Managing Capacity And
Demand

7
Defining Productive Service Capacity (1 of 2)
Productive capacity takes several forms:
1. Facilities
• critical to capacity management
• relates to those that are designed to “hold” customers
and those that “hold” goods
2. Equipment
• used to process people, possessions, or information,
may encompass a large range of items
• can be very situation-specific.

8
Defining Productive Service Capacity (2 of 2)

1. Labor
• a key element of productive capacity in all high-contact
services and many low-contact ones
2. Infrastructure
• organizations are dependent on access to sufficient
capacity in the public, or private infrastructure, to be
able to deliver quality service to their own customers.

9
 Managing Capacity (1 of 2)
Capacity can be stretched or shrunk
• Stretched Capacity Levels —
– The same capacity is stretched to absorb extra
demand. Ex: public transportation
– Utilizing the facilities for longer periods. Ex:
stretched working hours in banks

10
 Managing Capacity (2 of 2)
• Adjusting Capacity to Match Demand —
– Schedule downtime during periods of low demand
– Cross-train employees
– Use part-time employees
– Invite customers to perform self-service
– Ask customers to share
– Create flexible capacity
– Rent or share extra facilities and equipment

11
 Managing Demand
Five approaches to managing demand:
• Take no action and leave demand to find its own levels
• Reduce demand during peak periods
• Increase demand during low periods
• Inventory demand using a queuing system
• Inventory demand using a reservations system

12
Alternate Demand Management
Strategies for Different Capacity
Situations

13
14
 Marketing Mix Elements Used
To Shape Demand Patterns
• Use price and non-monetary costs to manage demand
– Lower prices may encourage some people to change timing of purchase.
• Change product elements
– A new service product targeted at different segments is created to
encourage demand.
• Modify place and time of delivery
– Varying timings when service is available, offering service to customers at
new locations.
• Promotion and education
– If other variables of the marketing mix remain unchanged,
communication efforts alone may be able to help facilitate smooth
demand.

15
 Inventory Demand Through
Waiting Lines And Queuing Systems
Demand can be inventoried in two ways:
1. By asking customers to wait in line, usually
on a first-come first serve basis
2. By offering customers the opportunity of
reserving or booking a service capacity in
advance

16
 1. Managing Waiting Lines
Managers may consider a variety of ways for managing waiting
lines
• Rethinking design of queuing system
➢ queue configuration and virtual waits.
• Tailoring queuing system to different market segments
➢ by urgency, price or importance of customer

• Managing customers’ behavior and their perceptions of

wait
➢ use the psychology of waiting to make waits less unpleasant

• Installing a reservations system

➢ use reservations, booking, or appointments to distribute demand

• Redesigning processes to shorten the time taken in each

transaction
➢ by installing self-service machines
17
 Different Queue Configurations (1 of 3)
• Single line sequential
stages
– Bottlenecks may occur
where process takes
longer to execute
• Parallel lines to multiple
servers
– Offer more than 1
serving station,
customers can choose
– However, not all lines
move at equal speed
18
 Different Queue Configurations (2 of 3)
• Single line to multiple servers
– Commonly known as a “snake”, used at post offices and
airport check-ins
• Designated lines
– E.g. Express lines at supermarkets or different check-ins for
first class, business class etc
• Taking a number
– Saves customers from standing in line
• Wait lists
– Commonly used in restaurants
– E.g. Party-size seating, VIP seating, call-ahead seating or
large party reservations
19
Different Queue Configurations (3 of 3)
• Virtual Waits
– Customers register their
place in line on a terminal
– Terminal estimates the time
customer will reach front of
virtual line for them to return
and claim their place
– E.g. Sushi Tei Restaurant has
a self-service touch screen
for diners to register; they
will receive a call 5 minutes
before their table is available

20
How long actually could you wait for
some one? Or some things?
Single lines to multi servers
Snake lines to multi servers
Designated line to designated servers
Waiting time problem solving – Taking a number

Virtual Waits

25
Waiting time problem solving – Wait list and self-service

Ecall wait list

26
e. Waiting time problem solving – Xử lý thông tin trước khi vào

27
 Waiting service

Changi airport

28
 Waiting service
Waiting service

Play a games at Charles de

Gaulle airport

www.themeg
 Waiting service

Partnerships

www.themeg
 16. Video clip

Hanuri Korean
Fastfood
33
 Winning service! – Winning sales!

see
you!
 Services Marketing:
People, Technology, Strategy
CHAPTER 10
Crafting The Service Environment

1
 Learning Objectives (1 of 2)
• Recognize the four core purposes service
environments fulfill.
• Know theoretical foundation from environmental
psychology that helps understand how customers
and employees respond to service environments.
• Be familiar with integrative servicescape model.
• Know the three main dimensions of the service
environment.

2
 Learning Objectives (2 of 2)
• Discuss the key ambient conditions and their effects
on customers.
• Determine the roles of spatial layout and
functionality.
• Understand the roles of signs, symbols, and
artifacts.
• Know how service employees and other customers
are part of the servicescape.
• Explain why designing, an effective servicescape,
has to be done holistically, and from the customer’s
perspective.

3
 Service Environments
An Important Element Of Service Marketing Mix

• Service environments (i.e., servicescapes)

relate to style and appearance of physical
surroundings and other experiential elements
encountered by customers at service delivery
sites
• Designing service environment is an art;
involves time and effort, and can be exensive
to implement.

4
Service Environments

5
The Purpose Of Service Environments
Four main purposes of servicescapes:
1. Shape customers’ experiences and behaviors
– Physical surroundings help to “engineer” appropriate feelings
and reactions in customers and employees, can help to build
loyalty towards firm
2. Signal quality and position, differentiate and
strengthen brand
– Customers use service environment as an important quality
proxy, and firms go to great lengths to signal quality and portray
desired image
3. Core component of value proposition
4. Facilitate service encounter and enhance both service
quality and productivity
6
The Theory Behind Consumer Responses To
Service Environments
Two models to understand consumer
responses to service environments:
1. The Mehrabian-Russell Stimulus-Response
Model
2. The Russell Model of Affect

7
1. The Mehrabian-Russell
Stimulus-Response Model

8
2. The Russell Model Of Affect

9
www.themegallery.com
www.themegallery.com
www.themegallery.com
www.themegallery.com
www.themegallery.com
www.themegallery.com
www.themegallery.com
www.themegallery.com
 V.S

Source : Internet
Source : Internet
6. Video clip
Indian crazy train
 7. Video clip

Singapore
Airlines
 The Servicescape Model
An Integrative Framework

24
 The Servicescape Model
• Mary Jo Bitner developed a comprehensive model
that she named “servicescape”
• An important contribution of Bitner’s model is the
inclusion of employee responses to the service
environment.
• Internal customer and employee responses can be
grouped into cognitive responses, emotional
responses and physiological responses.
• Dimensions of service environments:
1. ambient conditions
2. space/functionality
3. signs, symbols and artifacts

25
 Dimensions Of Service Environment
— Effect Of Ambient Conditions
• Ambient conditions refer to characteristics of
environment that pertain to the five senses.
• Composed of hundreds of design elements and
details that work together to create desired service
environment.
• Ambient conditions are perceived both separately
and holistically, and include music, sounds and
noise, scents and smells, color schemes and lighting,
and temperature and air movement.

26
Design Elements of a Retail Store Environment

27
 Ambient Dimensions
Music
• Various structural characteristics of music such as tempo,
volume and harmony are perceived holistically, and their
effect on internal and behavioral responses is moderated
by respondent characteristics.
• People tend to adjust their pace, either voluntarily or
involuntarily, to match tempo of music.
• In situations that require waiting for service, effective
use of music may shorten perceived waiting time and
increase customer satisfaction.
• Pleasant music has even been proved to enhance
customers’ perceptions of the service personnel.
28
 Ambient Dimensions
Scent
• Ambient scent or smell pervading an environment may
or may not be consciously perceived by customers and is
not related to any particular product.
• Service firms have recognized the power of scent, and
increasingly made it a part of their brand experience.
• Presence of scent can have a strong impact on mood,
feelings, and evaluations, and even purchase intentions
and in-store behaviors.
• Scents have special characteristics and can be used to
solicit certain emotional, physiological, and behavioral
responses.
29
 Aromatherapy
The Effects of Selected Fragrances on
People

30
 Ambient Dimensions
Colors
• Color is stimulating, calming, expressive, disturbing,
impressionable, cultural, exuberant, symbolic.
• Hue is the pigment of the color; value is the degree of
lightness or darkness of the color; chroma refers to hue
intensity, saturation, or brilliance.
• Warm colors encourage fast decision-making and are
best suited for low-involvement service purchase
decisions or impulsive buying.
• Cool colors are favored when consumers need time to
make high-involvement purchase decision.

31
32
33
Common Associations And Human
Responses To Colors

34
 Spatial Layout And Functionality

• Spatial layout refers to floor plan, size

and shape of furnishings, counters, and
potential machinery and equipment,
and ways in which they are arranged.
• Functionality refers to ability of those
items to facilitate performance of
service transactions.
35
 Signs, Symbols, And Artifacts
• Signs are often used to teach behavioral rules in service
settings
• Explicit signals include signs used (1) as labels, (2) for
giving directions, (3) for communicating the service script,
and (4) for reminders about behavioral rules
• Servicescape designers should use signs, symbols and
artifacts to guide customers clearly through process of
service delivery, and to teach the service script in as
intuitive a manner as possible
• Customers become disoriented when they cannot derive
clear signals from a servicescape

36
Signs, Symbols, And Artifacts
Benefits of Well-Designed Signage

38
 People Are Also A Part Of
The Service Environment

• Appearance and behavior of both

service personnel and customers can
strengthen or weaken impression
created by a service environment.
• Social dimensions should be considered
when assessing the quality of
servicescapes.
39
People Are Also A Part Of
The Service Environment

V.S
People Are Also A Part Of
The Service Environment

V.S
Why is the Service Environment important?
43
 Putting It All Together
Design with a Holistic View
• Servicescapes have to be seen holistically
• Professional designers focus on specific types of
servicescapes, and provide designs for specific
servicescapes
Design from a Customer’s Perspective
• Servicescape designs should be done to guide
and assist customers
• Simple and customer-friendly servicescapes
score above the state-of-the art and complicated
ones 44
 Aspects That Irritate Shoppers
Ambient conditions:
– Store is not clean.
– Too hot inside the store or the shopping center.
– Music inside the store is too loud.
– The store smells bad.
Environmental design variables:
– No mirror in the dressing room.
– Unable to find what one needs.
– Directions within the store are inadequate.
– Arrangement of store items has been changed in a way that
confuses customers.
– Store is too small.
– Losing one’s way in a large shopping center.

45
 Tools To Guide Servicescape Design

• Keen observation of customers’ behavior and

responses
• Feedback and ideas from frontline staff and
customers using a variety of research tools
• Photo audit
– Ask customers (or mystery shoppers) to take photos of
their service experience
• Field experiments to manipulate specific dimensions
in an environment for certain effects to be observed
• Blueprinting or flowcharting (see Chapter 8)
46
The Service Environment as Perceived
by Customers

47
48
 Winning service! – Winning sales!

see
you!
 Learning Objectives (1 of 2)
• Recognize actions that customers may take in
response to service failures
• Understand why customers complain
• Know what customers expect from firm when they
complain
• Understand how customers respond to effective
service recovery
• Explain the service recovery paradox
• Know principles of effective service recovery
systems
2
 Learning Objectives (2 of 2)
• Be familiar with guidelines for frontline employees
on handling complaining customers and on
recovering from service failures
• Recognize power of service guarantees
• Understand how to design effective service
guarantees
• Know when firms should not offer service
guarantees
• Be familiar with the seven groups of jaycustomers
and understand how to manage them effectively

3
What Drives Customers to Switch

4
19. An angry customer

5
Organizing
Framework
For Managing
Complaints
And Service
Recovery

6
 Customer Complaining Behavior

• Many “moments of truth” in service

encounters are vulnerable to breakdowns.
• Distinctive service characteristics can greatly
increase chance of service failures occurring
E.g. real-time performance, customer
involvement, and people as part of product
• How well a firm handles complaints and
resolves problems frequently determines
whether it builds customer loyalty
7
Customer Response Options To
Service Failure (1 of 2)

8
 Customer Response Options To
Service Failure (2 of 2)
• Courses of action a customer may take in
response to a service failure:
– Take some form of public action
– Take some form of private action
– Take no action
• Managers to be aware that the impact of a
defection can go far beyond the loss of that
customer’s future revenue stream

9
 Understanding Customer
Complaining Behavior (1 of 2)
• Studies of consumer complaining behavior have
identified four main purposes for complaining:
– Obtain restitution or compensation
– Venting their anger
– Help to improve the service
– For altruistic reasons
• Research shows that on an average, only 5% to 10%
of customers who have been unhappy with a
service, actually complain.

10
Impact Of Effective Service Recovery
On Customer Loyalty
• Research shows complainants who are satisfied
with service recovery experienced are 15 times
more likely to recommend a company than
dissatisfied complainants.
• If complaint is resolved to the satisfaction of the
customer, retention rate jumped to 54%.
• The highest retention rate of 82% was achieved
when problems were fixed quickly, typically on the
spot.

11
 The Service Recovery Paradox
• Describes phenomenon where customers who
experience an excellent service recovery after a
failure feel even more satisfied than customers who
had no problem in the first place.
• May lead to the thought that it may be good for
customers to experience service failure so they can
be delighted as a result of excellent service
recovery.
• Whether a customer comes out delighted from a
service recovery or not also depends on severity
and “recoverability” of failure.
12
 Principles Of Effective Service
Recovery Systems
• Recognize that current customers are a valuable
asset base, and managers need to develop effective
procedures for service recovery

Figure 13.7 Components of an Effective 13

Service Recovery System
 Components Of An Effective
Service Recovery System (1 of 3)
1. Make it easy for customers to give
feedback
• E.g. special toll-free phone lines, links on
websites and social media pages, and
display customer comment cards clearly in
their branches

14
 Components Of An Effective
Service Recovery System (2 of 3)
2. Enable effective service recovery
Service recovery should be proactive, planned, trained and
empowered
Recovery procedures need to be planned
• Contingency plans to be developed for service failures, especially for
those that occur regularly and cannot be designed out of the system.
• Recovery skills must be taught
– Effective training builds confidence and competence among frontline
staff, enabling them to turn distress into delight.
• Recovery requires empowered employees
– Service recovery efforts should be flexible and employees empowered
to use their judgment and communication skills to develop solutions
that will satisfy complaining customers.
15
 Components Of An Effective
Service Recovery System (3 of 3)
3. Establish appropriate compensation levels
• What is the positioning of your firm?
➢You charge a premium price for quality and customers expect
service failures to be rare
➢You should make demonstrable effort and offer something of
significant value
• How severe was the service failure?
➢Let the punishment fit the crime
➢Customers expect little for minor inconveniences and vice
versa
• Who is the affected customer?
➢Long-time customers vs. first-time user
16
 Dealing With Complaining
Customers
Guidelines for the Frontline (See Service Insights 13.3):
1. Act fast
2. Acknowledge the customer's feelings
3. Do not argue with customers
4. Show that you understand the problem from each
customer's point of view
5. Clarify the facts and sort out the cause
6. Give customers the benefit of doubt
7. Propose the steps needed to solve the problem
8. Keep customers informed of progress
9. Consider compensation
10. Persevere to regain customer goodwill
11. Self-check the service delivery system and improve it
17
Dealing With Complaining
Customers

Mô hình BLAST

18
Put yourself in your customer's shoes!
It’s time to fire a guest.
www.themegallery.com
 STOP

5 2 NAME THE
DECIDE
EMOTION
SELF
CONTROL

CHECK WHY
4 3
22
Seven Types Of Jaycustomers (1 of 2)
1. The Cheat
Cheating ranges from writing complaint letters with sole
purpose of exploiting service recovery policies, and
cheating on service guarantees to inflating, or faking
insurance claims and “wardrobing”
2. The Thief
The thief jaycustomer has no intention of paying, and sets
out to steal goods and services
3. The Rule-breaker:
In the case of legally enforceable ones, specific courses of
action needs to be laid down explicitly to protect
employees and to punish or discourage wrongdoing by
customers
23
Seven Types Of Jaycustomers (2 of 2)
4. The Belligerent or Angry Customer
If an employee lacks the power to resolve the problem,
the belligerent may become angrier still, to the point of
physical attack
5. The Family Feuders
People who get into arguments with members of their
own family — or worse, with other customers — make up
a subcategory of belligerents called “family feuders”
6. The Vandal
Paying customers who choose to misbehave
7. The Deadbeat
Customers fail to pay for services they have received

24
Dealing With Customer Fraud (1 of 2)

• Dishonest customers can take advantage of generous

service recovery strategies, service guarantees
• Crucial to keep track of customers who repeatedly
“experience service failures” and ask for compensation,
or invoke firm’s service guarantee.
• To effectively detect consumer fraud, maintaining a
central database of all compensation payments, service
recoveries, returned goods, and any other benefits
given to customers based on special circumstances are
needed.

25
Dealing With Customer Fraud (2 of 2)
• Customers are reluctant to cheat if service quality
provided was truly high (vs. when it was satisfactory)
• Findings suggest important managerial implications
1. Firms should ensure that their service recovery procedures
are fair
2. Large firms should recognize consumers are more likely to
cheat and thus have robust fraud detection systems
3. Firms can implement and reap bigger marketing benefits of
100% money-back guarantees without worrying
4. Guarantees can be offered to regular customers or as part
of a membership program, repeat customers are unlikely to
cheat
5. Truly excellent services firms have less to worry about
cheating
26
It’s time to fire a guest.
www.themegallery.com
It’s time to fire a guest.
It’s time to fire a guest.
www.themegallery.com
It’s time to fire a guest.
31
 Winning service! – Winning sales!

see
you!