Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions Customers Operations Management Marketing Management Human Resources Management

Chapter 2 Consumer Behavior in Service Encounters

Managing Service Encounters-- Service encounter: A period of time during which customers interact directly with a service Moments of truth: Defining points in service delivery where customers interact with employees or equipment Critical incidents: specific encounters that result in especially satisfying/dissatisfying outcomes for either customers or service employees

The Purchase Process for Services Prepurchase Stage Awareness of need Information search Evaluation of alternative service suppliers Service Encounter Stage Request service from chosen supplier Service delivery Postpurchase Stage Evaluation of service performance Future intentions

Perceived Risks in Purchasing and Using Services Functional – unsatisfactory performance outcomes Financial – monetary loss, unexpected extra costs Temporal – wasted time, delays lead to problems Physical – personal injury, damage to possessions Psychological – fears and negative emotions Social – how others may think and react Sensory – unwanted impacts to any of five senses

Factors that Influence Customer Expectations of Services Predicted Service Explicit & Implicit Service Promises Word-of-Mouth Past Experience Desired Service ZONE OF TOLERANCE Adequate Service Personal Needs Beliefs about What Is Possible Perceived Service Alterations Situational Factors Source: Adapted from Zeithaml, Parasuraman & Berry

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: range within which customers are willing to accept variations in service delivery

Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate Search attributes – Tangible characteristics that allow customers to evaluate a product before purchase Experience attributes – Characteristics that can be experienced when actually using the service Credence attributes – Characteristics that are difficult to evaluate confidently even after consumption Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes Credence attributes force customers to trust that desired benefits have been delivered

How Product Attributes Affect Ease of Evaluation ) Source: Adapted from Zeithaml Most Goods High in search attributes High in experience attributes High in credence attributes Difficult to evaluate Easy to evaluate Most Services Clothing Chair Motor vehicle Foods Restaurant meals Lawn fertilizer Haircut Entertainment Computer repair Legal services Complex surgery Education

Service Marketing System: (1) High Contact Service--e.g., Hotel Service Operations System Backstage (invisible) Front Stage (visible) Service Delivery System Other Contact Points Service Marketing System

Service Marketing System: (2) Low Contact Service--e.g., Credit Card Technical Core Mail Self Service Equipment Phone, Fax, Web site etc. The Customer Service Operations System Service Delivery SystemOther Contact Points Backstage (invisible) Front Stage (visible) Advertising Market Research Surveys Random Exposures Facilities, Personnel Word of Mouth Service Marketing System

The Dramaturgy of Service Delivery Service dramas unfold on a “stage”--settings may change as performance unfolds Many service dramas are tightly scripted, others improvised Front-stage personnel are like members of a cast Like actors, employees have roles, may wear special costumes, speak required lines, behave in specific ways Support comes from a backstage production team Customers are the audience—depending on type of performance, may be passive or active

Role and Script Theories Role: A set of behavior patterns learned through experience and communication Role congruence: In service encounters, employees and customers must act out defined roles for good outcomes Script: A sequence of behavior to be followed by employees and customers during service delivery –Some scripts (e.g. teeth cleaning) are routinized, others flexible –Technology change may require a revised script –Managers should reexamine existing scripts to find ways to improve delivery, increase productivity, enhance experiences

Chapter 3 Positioning Services in Competitive Markets

Search for Competitive Advantage in Services Requires Differentiation and Focus Intensifying competition in service sector threatens firms with no distinctive competence and undifferentiated offerings Must decide how many service offerings with what distinctive (and desired) characteristics

Basic Focus Strategies for Services BREADTH OF SERVICE OFFERINGS NUMBER OF MARKETS SERVED Narrow Many Few Wide Service Focused Unfocused (Everything for everyone) Market Focused Fully Focused (Service and market focused) Source: Robert Johnston

Four Principles of Positioning Strategy 1. Must establish position for firm or product in minds of customers 2. Position should be distinctive, providing one simple, consistent message 3. Position must set firm/product apart from competitors 4. Firm cannot be all things to all people--must focus Jack Trout

Developing a Market Positioning Strategy ( - Size - Composition - Location - Trends Marketing Action Plan MARKET ANALYSIS INTERNAL ANALYSIS - Resources - Reputation - Constraints - Values COMPETITIVE ANALYSIS - Strengths - Weaknesses - Current Positioning Define, Analyze Market Segments Select Target Segments To Serve Articulate Desired Position in Market Select Benefits to Emphasize to Customers Analyze Possibilities for Differentiation Source: Adapted from Michael R. Pearce

Positioning of Hotels in Belleville: Price vs. Service Level Expensive Shangri-La High Service Moderate Service Grand Regency Sheraton Italia Castle Alexander IV Airport Plaza PALACE Atlantic Less Expensive

Positioning Maps Help Managers to Visualize Strategy Positioning maps display relative performance of competing firms on key attributes Research provides inputs to development of positioning maps Challenge is to ensure that –attributes employed in maps are important to target segments –performance of individual firms on each attribute accurately reflects perceptions of customers in target segments Predictions can be made of how positions may change in the light of new developments in the future Simple graphic representations are often easier for managers to grasp than Charts and maps can facilitate a “visual awakening” to threats and opportunities and suggest alternative strategic directions