2006 The McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin
Part 1
FOUNDATIONS
FOR SERVICES
MARKETING
1
Chapter
Introduction to Services
What are services?
Why services marketing?
Characteristics of Services Compared to Goods
Services Marketing Mix
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
What are services?
All economic activities whose output is not a physical
product, is generally consumed at the time it is produced
and provides added value in forms (such as convenience,
amusement, timeliness, comfort or health) that are
essentially intangible concerns of its first purchaser
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Examples of Service Industries
Health Care
hospital, medical practice, dentistry, eye care
Professional Services
accounting, legal, architectural
Financial Services
banking, investment advising, insurance
Hospitality
restaurant, hotel/motel, bed & breakfast
ski resort, rafting
Travel
airline, travel agency, theme park
Others
hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club, interior design

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Figure 1.2
Tangibility Spectrum
Tangible
Dominant
Intangible
Dominant
Salt
Soft Drinks
Detergents
Automobiles
Cosmetics
Advertising
Agencies
Airlines
Investment
Management
Consulting
Teaching
Fast-food
Outlets
Fast-food
Outlets












2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Why Services Marketing
Services based economies
United States 80%
India 48%
Traditional marketing course has more focus on
manufacturing and packaged goods (like P&G, Unilever,
General Foods)
There is a need for Marketing concepts specifically for
Services
Service initiatives and promoting service quality leads to
competitive advantage and so to profits
Customer satisfaction index for services is declining
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Figure 1.1
Contributions of Service Industries to
U.A.E. Gross Domestic Product
Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Employment in Dubai - 2005
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Table 1.2
Goods versus Services
Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Journal of
Marketing 49 (Fall 1985), pp. 4150.
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Characteristics of Services
Compared to Goods
Intangibility
Perishability
Simultaneous
Production
and
Consumption
Heterogeneity
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Implications of Intangibility
Services cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult
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Implications of Heterogeneity
Service delivery and customer satisfaction depend on
employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered
matches what was planned and promoted
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Implications of Simultaneous Production
and Consumption
Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult
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Implications of Perishability
It is difficult to synchronize supply and demand with
services

Services cannot be returned or resold
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Traditional Marketing Mix
All elements within the control of the firm that
communicate the firms capabilities and image to
customers or that influence customer satisfaction with the
firms product and services:
Product
Price
Place
Promotion
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Expanded Mix for Services --
The 7 Ps
Product
Price
Place
Promotion
People
All human actors who play a part in service delivery and thus influence the
buyers perceptions: namely, the firms personnel, the customer, and other
customers in the service environment.
Physical Evidence
The environment in which the service is delivered and where the firm and
customer interact, and any tangible components that facilitate performance
or communication of the service.
Process
The actual procedures, mechanisms, and flow of activities by which the
service is deliveredthe service delivery and operating systems.
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Table 1.3
Expanded Marketing Mix for Services
2
Chapter
The Gaps Model of Service Quality
The Customer Gap
The Provider Gaps:
Gap 1 not knowing what customers expect
Gap 2 not having the right service designs and
standards
Gap 3 not delivering to service standards
Gap 4 not matching performance to promises
Putting It All Together: Closing the Gaps
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Expected
service
Perceived
service
Customer Gap
Figure 2.1
The Customer Gap
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Gaps Model of Service Quality
Customer Gap:
difference between customer expectations and perceptions
Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap):
not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):
not delivering to service standards
Provider Gap 4 (The Communication Gap):
not matching performance to promises
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Provider Gap 1: Not knowing what customers expect
Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering to service standards
Provider Gap 4: Not matching performance to promises
Customer
Expectations
Customer
Perceptions
Key Factors Leading
to the Customer Gap

Customer
Gap

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Customer Expectations
Company Perceptions of
Customer Expectations
Inadequate marketing research orientation
Insufficient marketing research
Research not focused on service quality
Inadequate use of market research
Lack of upward communication
Lack of interaction between management and customers
Insufficient communication between contact employees and managers
Too many layers between contact personnel and top management
Insufficient relationship focus
Lack of market segmentation
Focus on transactions rather than relationships
Focus on new customers rather than relationship customers
Inadequate service recovery
Lack of encouragement to listen to customer complaints
Failure to make amends when things go wrong
No appropriate recovery mechanisms in place for service failures
Figure 2.2
Not knowing what customers expect
Gap
1
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Customer-Driven Service
Designs and Standards
Management Perceptions of
Customer Expectations
Poor service design
Unsystematic new service development process
Vague, undefined service designs
Failure to connect service design to service positioning
Absence of customer-driven standards
Lack of customer-driven service standards
Absence of process management to focus on customer
requirements
Absence of formal process for setting service quality goals
Inappropriate physical evidence and servicescape
Failure to develop tangibles in line with customer expectations
Servicescape design that does not meet customer and
employee needs
Inadequate maintenance and updating of the servicescape
Figure 2.3
Not selecting the right service
designs and standards
Gap
2
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Service Delivery
Customer-Driven Service
Designs and Standards
Deficiencies in human resource policies
Ineffective recruitment
Role ambiguity and role conflict
Poor employee-technology job fit
Inappropriate evaluation and compensation systems
Lack of empowerment, perceived control, and teamwork
Customers who do not fulfill roles
Customers who lack knowledge of their roles and responsibilities
Customers who negatively impact each other
Problems with service intermediaries
Channel conflict over objectives and performance
Difficulty controlling quality and consistency
Tension between empowerment and control
Failure to match supply and demand
Failure to smooth peaks and valleys of demand
Inappropriate customer mix
Overreliance on price to smooth demand
Figure 2.4
Not delivering to service standards
Gap
3
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Service Delivery
Lack of integrated services marketing communications
Tendency to view each external communication as independent
Not including interactive marketing in communications plan
Absence of strong internal marketing program
Ineffective management of customer expectations
Absence of customer expectation management through all forms of
communication
Lack of adequate education for customers
Overpromising
Overpromising in advertising
Overpromising in personal selling
Overpromising through physical evidence cues
Inadequate horizontal communications
Insufficient communication between sales and operations
Insufficient communication between advertising and operations
Differences in policies and procedures across branches or units
External Communications to
Customers
Figure 2.5
Not matching the performance to promises
Gap
4
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
Perceived
Service
Expected
Service
CUSTOMER
COMPANY
Customer
Gap
Gap 1
Gap 2
Gap 3
External
Communications
to Customers
Gap 4
Service
Delivery
Customer-Driven
Service Designs and
Standards
Company Perceptions
of Consumer
Expectations
Figure 2.6
Gaps Model of Service Quality
2006 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin
The Customer Gap
Chapter 3 Consumer Behavior in Services
Chapter 4 Customer Expectations of Service
Chapter 5 Customer Perceptions of Service
Gap 1 Not Knowing What Customers Expect (The Knowledge Gap)
Chapter 6 Listening to Customers through Research
Chapter 7 Building Customer Relationships
Chapter 8 Service Recovery
Gap 2 Not Having the Right Service Quality Designs and Standards (The Service Design and
Standards Gap)
Chapter 9 Service Development and Design
Chapter 10 Customer-Defined Service Standards
Chapter 11 Physical Evidence and the Servicescape
Gap 3 Not Delivering to Service Standards (The Service Performance Gap)
Chapter 12 Employees Roles in Service Delivery
Chapter 13 Customers Roles in Service Delivery
Chapter 14 Delivering Service through Intermediaries and Electronic Channels
Chapter 15 Managing Demand and Capacity
Gap 4 Not Matching Performance to Promises (The Communication Gap)
Chapter 16 Integrated Services Marketing Communications
Chapter 17 Pricing of Services