1. MKTM028 Strategic Marketing
Services Marketing
Week 10
Dr Stephen Castle
Dr Elizabeth Kim
Iain Bromley

2. Learning Objectives:
By the end of this session students will understand and appreciate:
The nature of services
The complexity of services
The importance of the number one stakeholder - employees (customers come 2nd)
The nature of the ‘promise gap’

3. The Importance of Services
“There are no such things as service industries.
There are only industries whose service components are greater or less than those of other industries.
Everybody is in service” Levitt

4. The Product-Service Continuum (Shostack)
dominated:
intangible
Balanced
Product-
dominated:
tangible
Balanced item, equally
weighted between product
and service.

5. Characteristics of Services Intangibility
A service is a:
deed
performance
effort
which is experienced
It cannot be possessed
“A service is something that can be bought and sold, but which you can’t drop on your foot”Lovelock, Vandermerwe and Lewis(1999)

6. Services and the Marketing Mix
Product
Price
Place
Promotion
7Ps
People
Physical evidence
Processes
4Ps

7. Characteristics of ServicesP
Intangible
Heterogeneous
Inseparable
Perishable

8. The challenge of the intangible offer
No IP/patent protection
Low entry barriers
Difficult to price
Benefits of non-ownership need to be sold
Difficult to:
demonstrate
differentiate
communicate

9. Most
goods
Most
services
Easy to
evaluate
Difficult
to evaluate
Furniture
Restaurant
Holiday
TV repair
Dentistry
service
Car
Clothes
Jewellry
Haircut
Childcare
Diagnosis
House
Legal
Car
High in
credence qualities
High in search qualities
High in
experience qualities

10. Characteristics of Services Inseparability
Production and consumption simultaneous Mass production difficult Service inseparable from the provider Consumer involved in production - provider/client interaction and inter-customer conflict……………….

11. Characteristics of Services Variability
Services mainly labour-intensive
Standardisation/QC difficult
Service quality defined by customers:
subjective/comparative, NOT
objective/absolute

12. Characteristics of Services Perishability
Unused service capacity cannot be stocked/inventoried:
PRODUCT
Made
STORED
Sold
Consumed
Produced
SERVICE
Sold
Consumed

13. Characteristics of Services Perishability
Unused service capacity cannot be stocked/inventoried
Excess capacity to meet peaks
Mechanisms to match supply with demand:
part-time staff
differential pricing
reservations/appointments
multiskilling

14. COMPANY EMPLOYEES CUSTOMERS Managing Services The Promise Gap
Internal Marketing:
employee satisfaction
External Marketing:
creates the promise
The Promise Gap
EMPLOYEES CUSTOMERS
Interactive Marketing:
delivers the promise
“The promises organisations make to their customers (and) staff
……..are the most important determinants of their long-term success”.
“….marketers set unrealistic brand promises and…….work in
isolation from others in the business who are delivering the service”.
Marketing,7.7.04

15. Three types of satisfaction: Robert Heller, Observer, 5.11.00
When staff are mismanaged, customers inevitably suffer To put your customers first, put your employees first There is a clear link between three types of satisfaction: employee, customer and shareholder. Satisfy the first - customers love you more. Investors follow suit as sales and profits duly rise.

16. Albrecht and Bradford (1990)
The Service Encounter
Customer Inputs
Employee Inputs
Attitudes
Values
Beliefs
Wants
Feelings
Expectations
Attitudes
Values
Beliefs
Wants
Feelings
Expectations
SERVICE
EXPERIENCE
Customer frame
of reference
Employee frame
of reference
The “Moment of Truth”
Albrecht and Bradford (1990)

17. The Service Quality Wheel Heskett,J.L., HBR March-April 1987
Great employee
satisfaction
Increased volume
of business
Quality
wheel
High employee
motivation
Great customer
satisfaction
High level of service quality
compared with customer
expectations

18. Performance, satisfaction and customer loyalty
Hooley et al (2012)

19. The SERVQUAL Model Parasuraman et al (1985)
Personal needs
Word-of-mouth
communication
Past
experience
Expected
service
Perceived
service
GAP 5
CUSTOMER
GAP 1
Service
delivery
External
communications
SERVICE
PROVIDER
GAP 3
GAP 4
Translation of
perceptions into quality
GAP 2
Management perceptions
of customer expectations

20. SERVQUAL: 7 key gaps Parasuraman et al (1985)
1. Customer expectations v management expectations 2. Management perceptions v service spec 3. Service spec v service delivery 4. Service delivery v external communication 5. Customer expectations v perceived actual 6. Customer expectations v employee perceptions 7. Employee perceptions v management perceptions

21. SERVQUAL: 5 dimensions van Iwaarden et al (2001)
1. Tangibles 2. Reliability 3. Responsiveness 4. Assurance 5. Empathy

22. Quality gap analysis Hooley et al (2012)
Source: Adapted from Parasuraman, Zeithaml and Berry (1985).
Hooley et al (2012)

23. Service AUGMENTED PRODUCT People Values Features Packaging Basic brand
Process
CORE BENEFIT
Reputation
Developing
brand
Price
Quality
CORE
PRODUCT
Styling
TANGIBLE
PRODUCT
Promotion/
representation

24. From transactions to relationship
single sales
price
short-term
discontinuous contact
product quality
sales volume, profit
internal conflict
RELATIONSHIP
customer retention
value
long-term
continuous relationship
total quality
retention, profitability
Intra-organisation co-operation

25. The relationship marketing ladder
Hooley et al (2012)

26. New Variants The 4Cs The 4As Customer wants/needs Cost Convenience
Communications
Lauterborn (1990)
The 4As
Acceptability
Affordability
Accessibility
Awareness
Sheth and Sisodia (2012)
The 4Cs in communications:
Clarity; Credibility; Consistency and Competitiveness
Jobber & Fahy (2009)

27. Learning Objectives:
By the end of this session students will understand and appreciate:
The nature of services
The complexity of services
The importance of the number one stakeholder - employees (customers come 2nd)
The nature of the ‘promise gap’