Service encounters are dyadic (both parties), ranked in duration and complexity.
Service-dominant (S-D) logic is that customers now are seen as actively involved in creating
value, instead of being only passive recipients of service and the associated value
Characteristics of services
Intangible
A promise me is a risk. How to build trust and reduce risks for customers?
Inseparable
The service provider plays a very important role. Problem: the loyalty is with
the single worker.
Customer plays a role in production and delivery
Heterogeneous
Difference or variability in the service that different people provide.
Perishable
Services cannot be stored or returned.
Ownership
No direct ownership but stored as memories.
Value is defined and co-created with the consumer. Move to “sense-and-respond”
strategy. Organisations only offer value propositions that constitute experiences and
solutions. They assist customers with value creation, it is only through the interactive
co-creation process that the customer is enabled to evaluate this proposition and
assess its actual value.
So the best way to co-create value is to focus on the experiences of the
customer. Intrinsic value.
Customers as co-producers, participate by supplying:
1. Labour (effort)
2. Knowledge (information)
Lecture 2 buyer behaviour
Differences based on a product:
Search qualities: looking, feeling, enjoying, smelling, etc.
Experience qualities: taste, satisfaction, beauty services, etc.
Factors influencing evaluation of service encounter
Congruence with customer and service worker’s role and script
Perceived control of the service encounter. How to enhance?
Mood state or emotions, negative effect
Perceived risk
Functional/performance
Temporal
Psychological
Physical
Sensory
Emotion and mood manipulation
Service factory ambience and physical setting
Ensure delivery process is efficient
Keep service employees happy
So marketers need to cultivate positive moods and emotions and discourage
negative emotions.
Lecture 3 service quality and satisfaction
SD is short term temporal focus on specific encounter, it is experience dependent, both
cognitive and affective in nature
SQ is long term temporal for overall assessment, even prior to actual experience,
predominately cognitive
Performance against expectations. But SQ uses ideal expectations, SD uses predictive
expectations
The Nordic model
Functional quality: the way the service is delivered
Technical quality: what outcome the customer receives from the service
The Gaps model (PZB model)
Gap 1: knowledge gap (client’s expected service and management perceptions of client’s
expectations)
What causes that?
1. Lack of marketing research orientation
Insufficient marketing research
Inadequate use of research findings
Lack of interaction between management and customers
2. Inadequate upward communication
3. Too many levels of management
Gap 2: the standards gap (service quality specifications and management perceptions of
client’s expectations)
Management may not explicitly state out the quality requirements or the goals are too high to
achieve.
What causes that?
1. Inadequate management to service quality
2. Perception of infeasibility
3. Inadequate task standardisation
4. Absence of goal setting
Gap 3: delivery gap (service delivery and service quality specifications) Goals exist but are
ignored
What causes that?
1. Role ambiguity and conflict
2. Poor employee job fit
3. Poor technology job fit
4. Inappropriate supervisory control systems
5. Lack of perceived control
6. Lack of teamwork
Gap4: communication gap (service delivery intention and external communications to target
market)
Promises given by promotion activities are not consistent with the service delivered
What causes that?
1. Inadequate horizontal communication between:
Ads and operations
Salespeople and operations
HR, marketing and operations
Differences in policies across branches
2. Propensity to over-promise
Gap 5: the perceived service quality (what customers expect and what they receive)
Dimensions of service quality
Based on a generic 22 items survey, cover the 5 broad dimensions of service quality, on a 7
point Likert scale measures gap 5 in the gaps model
Responsiveness most important
How willing to help clients and provide prompt service
Assurance
The knowledge and skills and courtesy of employees and their ability to convey trust and
confidence.
Reliability
The ability to perform the promised service dependably and accurately. Unless can’t
assess reliability. (KEY)
Empathy
The provision of caring, individualised attention to clients, value-creation, gain
perspectives,
Lecture 4 expectations, zone of tolerance, customer perceived value
Four types:
1. Desired- the optimal level
2. Equitable or deserved- what should receive
3. Expected or predictive- what a customer thinks he or she will actually get
4. Adequate or minimum tolerable standard
Zone of tolerance
The extent to which customers are willing to accept some degree of variation in service
received. Desired expectations minus minimum tolerable standard expectations.
Firms can manage expectations by:
1. Managing the service promises they make
Ensure that basic services present an honest, cohesive picture both explicitly and implicitly
Ensure promises reflect reality, managers should:
Solicit pre-campaign feedback
Not mimic competitors who over-promise
Research on the influence of price on customers expectation levels
2. Dependably performing the promised service, right at the first time
3. Effectively communicating with customers
Keep clients informed of service issues widens tolerance zones.
Customer delight- not a sustainable strategy
Unexpected, extraordinary, positive surprise. Expectations exceeded to a surprising degree.
Unforgettable, memorable.
The value proposition: a statement about the total experience clients can expect
Equity theory or perceived fairness (comparison between what the client gives and gets)
Perceived costs are: money, time, energy, psychic.
Perceived value= sum of benefits/sum of costs
Total service product concept
Core products: key benefit and problem solving solution
Supplementary services:
Help differentiate product offering and help customer maximise value derived from offering
Facilitating services: facilitate the delivery and consumption of the core service,
reduce customer sacrifices
Supporting services: supplement or add value to the core product.
1. Consultation and counselling
Helps customers better understand their own situation and come up with their own
solutions and actions
2. Hospitality
Waiting area comfort, toilet facilities, drink and food availability
3. Safekeeping
4. Exceptions (develop contingency plans in advance)
The relationship between characteristics of service and communication
Intangibility
Higher perceived risk, greater reliance on word-of-mouth, managed by service marketers.
Inseparability
Credence qualities and the level of customisation can lead to a lack of consumer
understanding
Increased need for information in a non-standardised format
Importance of service personnel
Adjust supply to meet demand
Adjust demand to meet supply
Inventory demand
Deal with customers equitably
Queuing may be designed to allocate priority according to
Urgency of job
Duration of service transaction
First in line
Importance of customer
Psychological considerations in waiting!!!
Unoccupied time seems longer
Anxious, uncertain, unfair, uncomfortable, and solo waits seem longer
Pre and post process waits feel longer than in process
More valuable the service, the longer people will wait
Setting prices
Select pricing objective
Know your own costs
Know customer’s costs
Identify market forces
Select pricing strategy
Make pricing decision
Pricing strategies:
1. Satisfaction-based: reduce perceived risk
Benefit-driven: charges customers for services actually used as opposed to overall
membership fees
Flat-rate: fixed rate
2. Relationship
Long term contracts
Pricing bundling
3. Efficiency: appeal to economically-minded consumers, cost-leader pricing
Service blueprint
1. Client actions: central to the creation of the blueprint, laid out first, other activities
supports the value proposition offered to or co-created with the customer
2. Onstage/visible contact employee actions: separated from the customer by the line of
interaction.
3. Backstage/invisible contact employee actions: visibility
4. Support processes: separated from contact employees by the internal line of
interaction.
Service blueprint steps:
Identify sequence steps to deliver the service, (customer, visible and invisible process
and accountable personnel, support processes, assess physical evidence at customer
touchpoints)
Further identify degree of divergence at each step
Calculate process time by dividing the activity time by the number of stations at which
the activity is performed (evaluate quality)
Display minimum tolerable client expectations for steps
Identify bottlenecks/fail points
Relationship marketing:
A strategic orientation focuses on keeping and improving current customers, rather than on
acquiring new customers.
Building trusting relationships:
1. Expertise (credibility)
2. Dependability, consistency (reliability) important for sales people especially
3. Genuine concern for the customer’s welfare (benevolence)
Suitability for relationship marketing strategy
Ongoing customer desire for the service
Customer controls service selection
Service personally important to customer- high involvement
Customer desire for relationship
Service is variable in quality
Relationship marketing: keeping and improving current customers
How to improve customers?
Improve their profitability or purchase more to your brand
Service profit chain: showing the link between employee satisfaction with customer
satisfaction in high-contact services
Deliver internal service quality through job design, job fitness.
Need continuity of interaction to establish relationship.
Role stress
1. Emotional labour
Surface acting (masking): pretending to feel the emotions that are on public display
Deep acting (reworking): attempting to actually feel the emotions that are on public
display, similar to method acting, actually put yourself into customer’s shoes, genuinely
feel the emotions, more serious.
2. Role overload
Process large numbers of customers while attempting to maintain performance
standards
3. Customer misbehaviour
Behavioural acts by consumers which violate the generally accepted norms of
conduct in exchange settings.
Burnout: emotional exhaustion, cynical, dreadful, depersonalisation, diminished personal
accomplishment. Typical among boundary spanners who have high frequency and
intensity of interpersonal contact.
Burnout leads to reduced job satisfaction, decreased commitment and increased turnover
intentions.
Preventing burnout:
Adopt favourable HR practices
Increase perceived control in role, provide with technology, increase perception of control
Recruit right interpersonal skills, high self-monitors, congruence between job and
personality
Provide time-out front line
Provide social support
Strategies to discourage customer misbehaviour
Careful design servicescape
Educate service workers to recognise obstructionist traits and adjust their interactions
styles, be calm
Record incidents to allow tracking reoffending customers
Focus on successful service delivery and justice perceptions in service recovery
Participation drivers
1. Customer factors:
Involvement levels
Ability
Motivation
Traits
Self-efficacy (+ve)
Inherent novelty seeking (+ve)
Importance of human interaction (negative association with
participation)
Self-consciousness (-ive)
2. Process factors:
Accessible service personnel
Clear directional or illustrative signs
Simple instructions or script
3. Service factors:
Type of service, where outcome is dependent on customer input, level of required
customer expertise
Usage occasion
Unfamiliar service
Encouraging customer participation
1. Promote the benefits and stimulate trial
Greater perceived control of service encounter
Greater knowledge of service and convenience
Greater customisation
2. Socialise customer
Inform clients of desired behaviours: formal orientation programs, Teach the
script, online tutorials
Signs
Script important to customers, change in script is crucial to notify customers,
customers to customers socialising
Less socialised customers often take up valuable organisational resources due to:
incomplete or incorrect orders/forms,
Special or unreasonable requests
Frequent calls/contact to you
Potential customer participation problems
Loss of quality control, uncertainty
Shift of power from service provider to client, especially knowledge
Incompatible role expectations
Heavy reliance on technology
May lose out a target market
So, requires more flexible and responsive employees who can cope with increased
uncertainty.
Lecture 11 service recovery and guarantees
Service failure: death
Complaint behaviour:
verbally make a complaint (citizenship behaviour)
intend to stop using the service
give a warning to friends
take legal action, as consumers become more litigious
exit or reject the service
take no action
The higher you go, the less satisfaction, the problem escalates as the hierarchy goes up.
Factors influencing complain:
type of product
level of dissatisfaction
cost of complaining
benefits of complaining
likelihood of resolution
available resources (time, ability)
access to complaining
attribution of blame
demographics (above average income, well educated, more likely to complain)
culture, religion
customer disposition: some customers are more likely to complain because they
believe positive consequences
Service recovery: equity theory
The action, a service provider takes in response to service failure. To restore the reputation, to
mitigate if not fully recover.
Taps into perception of control.
Justice theory: a customer’s satisfaction and future loyalty depends on whether they were
treated fairly- whether justice was done.
Three forms of justice: needs to integrate all three
As it is unlikely that a customer knows what other customers have received for the same
service failure, so rely more on procedural and interactional justice assessments.
distributive/outcome
Compensation for loss and inconvenience that matches the level of their
dissatisfaction
Customers expect outcomes or compensation that matches the level of dissatisfaction
Equity in exchange: customer wants to feel that the firm has paid for its mistakes in a
manner at least equal to what the customer has suffered.
procedural
Customers are getting ping-ponged in receiving response, or at least some information
assume responsibility for failure
speed and convenience of complaint process
follow-up and resolution of complaint
perceived control over the recovery process
interactional, interpersonal treatment
Behaviour of service workers (Emotional intelligence): honesty, open
communication, politeness, genuine concern, treating customer with dignity
and respect, willingness to explain why situation occurred.
Judge client’s dominant coping response
Anxiety- provide instrumental support, i.e. attempt to alter the situation and
enable movement towards the client’s goal. Enable movement towards
customer’s goals.
Anger- provide instrumental and emotional support, i.e. empathy and
understanding, while showing affiliation and reassurance. Focus on helping the
client manage the emotions as well as resolving the situation.
Successful recovery
Act in real time
Recognise emotions in customer
Listen and show concern
Offer options and an apology
Consider compensation
Restore the confidence
Close the feedback loop
Easy to collect when compensation is due