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