SERVICES MARKETING - Cambridge Marketing...

Cambridge Marketing Handbook: Services Marketing

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MARKETING KNOWLEDGE

Cambridge Marketing PressMiddlewatchSwaveseyCambridge CB24 4AA

Tel: +44 (0)1954 234940http://www.cambridgemarketingpress.com

ISBN: 978-1-910958-24-7

Price £22.00

Services Marketing - A Cambridge Marketing HandbookThis book takes a fresh look at the world of marketing of services (the Servicescape) as the world transitions from the information age into what is being called the Age of Awareness, a period where individuals move away from information browsing and collection to the application of knowledge, emotion and responsibility to consumption, production and relationships. It uses these changes to highlight the impact that they will have on the marketing of services, with a specific focus on the role or people and processes in delivering success.

About the AuthorAndrew Hatcher is a Chartered Marketer and Director of Publishing and a senior tutor at Cambridge Marketing College on the CIM Professional Diploma programme. He is Managing Director of The Applied Knowledge Network, which develops training courses and software applications focused on strategy planning. Andrew has over 20 years’ experience in marketing services in a wide range of contexts from corporate to start-up and has written several other books on innovation and marketing strategy.

“ Both my colleagues and I are excited by the content of the book. It is speaking very directly to the work we are doing which is framing up and planning for the creation of a new government agency and its service.”

Judith Forman, Senior Advisor, Information Management Services, Ministry of Justice, New Zealand

9582477819109

ISBN 9781910958247

This set of guides provides an invaluable resource for anyone wishing to further their career in marketing.

Professor Malcolm McDonald MA (Oxon) MSc PhD DLitt DSc

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SERVICES MARKETINGA HANDBOOK FOR PROFESSIONAL MARKETERS

CAMBRIDGE MARKETING PRESS

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MARKETING KNOWLEDGE

Pantone 308 c

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Andrew Hatcher


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Publisher’s noteEvery possible effort has been made to ensure that the information contained in this

book is accurate at the time of going to press, and the publishers and authors cannot

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or damage occasioned to any person acting, or refraining from action, as a result of

the material in this publication can be accepted by the editor, the publisher or any of

the authors.

First published in Great Britain and the United States in 2013 by Cambridge Marketing Press.

This revised edition published by Cambridge Marketing Press, 2015 © Cambridge Marketing Press, 2015.

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ISBN Paperback: 978-1-910958-24-7

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About the authorAndrew Hatcher BSc MBA FCMC Chartered Marketer

Andrew initially studied as a Mechanical Engineer before joining Reuters, the information company as a journalist. He then spent 15 years with the company around the world in a variety of technology, sales and marketing roles ultimately working with the Greenhouse, Reuters corporate venture capital arm,

based in New York. He subsequently established an internal incubator for Reuters in three centres around the world before setting up a new electronic trading venture in Singapore.

After Reuters, Andrew moved to Cambridge in the UK and has been involved in setting up a number of companies including Investing for Good which offers philanthropists a structured way to invest in charities, The Working Knowledge Group which delivers enterprise activities to students in Higher and Further education and, most recently, the Applied Knowledge Network which develops training courses and software applications focused on strategic planning.

Andrew has been involved in marketing training since 2003 and has since delivered programmes for a wide variety of clients including Statoil the Norwegian State oil company, British Telecom, Yell, Smith & Williamson, NTT DoCoMo and Eversheds among many others.

He is the co-author of Inventuring – Why big companies must think small (McGraw Hill 2003), which is a handbook for corporate venture capitalists, Metrics for Marketers and Innovation for Marketers (both Cambridge Marketing Press 2015)

Andrew is a fellow of Cambridge Marketing College where he teaches mainly on services marketing and marketing planning on the CIM Professional Diploma and Post Graduate Diploma courses.

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ContentsWord cloud VIPreface VIIAcknowledgements IX

Chapter 1: Immaterial Products Services Marketing in the Age of Awareness

1.1 Introduction 11.2 The Services Marketing Triangle 11.3 The Services Marketing Mix 3

Chapter 2: Defining the Servicescape

2.1 Introduction 92.2 Services and the economy 102.3 Servicescape 102.4 Implications of marketing services 132.5 Challenges of marketing services 15

Chapter 3: Understanding Customers and their Behaviour 3.1 Introduction 233.2 Understanding service quality gaps 233.3 Customer behaviour 26

Chapter 4: Customer Expectations and Perceptions 4.1 Introduction 334.2 Customer expectations 334.3 Perceptions of service 374.4 The moment of truth 40

Chapter 5: Customer Relationships

5.1 Introduction 475.2 Lifetime value 485.3 Loyalty and customer retention 50


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Chapter 6: Standards and Quality 6.1 Service development process 556.2 Service design 576.3 Standards 61

Chapter 7: People Power 7.1 The role of the service employee 687.2 HR strategies 707.3 The role of customers 74

Chapter 8: Physical Evidence 8.1 Servicescape environment 79

Chapter 9: Powerful processes

9.1 Introduction 879.2 Marketing process design 899.3 Delivery process design 90

Chapter 10: Keeping the Promise

10.1 Delivering the service promise 9710.2 Delivering the financial promise 101

References 106

Index 108

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Word clouds produced through WordleTM (www.wordle.net)


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PrefaceMarketing has always had its detractors, especially those that have been brought up with a world full of bricks and mortar and nuts and bolts. To many of them, marketing appears ephemeral, intangible, unmeasurable and therefore of questionable value.

Educators and practitioners have all tried to define the role and ultimate value of marketing; the perfume industry valiantly demonstrates that the cost of producing the liquid inside a bottle of Chanel is the same or potentially less than that of producing a more mundane offering, yet the price can be set at a significant multiple when presented to the consumer; the entertainment world flexes its muscles showing how it can turn talent-starved young people into global cash generating machines. Marketing must, therefore, be the magic that turns mundane into desirable, turns talent (or lack of it) into money and turns the intangible into tangible. Clearly not everyone is convinced.

So it is with some trepidation that I created this book where we engage with the concept of marrying the magical intangibility of marketing with the mystical intangibility of services. It can feel a little like staring down both barrels of the marketing cynic’s shotgun.

Why then a book on services marketing? If you are in the early majority you may well be reading this book on an electronic device, and for that the planet thanks you, but that action alone neatly illustrates one of the key factors in the new equilibrium. No longer do you need to carry the physical product, only the means to read it. No longer do you walk into physical premises to buy the product, you enter the store online using your Facebook ID.

The rise of the availability and importance of services has driven (or perhaps been driven by) the equally dramatic rise in the availability and quality of technology. This has, in many cases, handed the power in purchasing transactions almost completely over to the consumer who, with relatively little effort, can exhaustively research and evaluate any potential purchase options in advance of actually parting with her or his money.

It has also created a situation where the buyer has become harder to

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access. Technology has enabled consumers to avoid TV ads, banner ad click-throughs are now less than 0.1%, and you can pretty much get all the info you need on any product or service from others that have bought before you rather than from the entity selling it.

This all works very well if you are buying something that has dimensions, technical data and mass, but it works less well in the world of services where the parameters that define the offering can only really be measured and evaluated at ‘the moment of truth’ – the point at which the service is delivered and experienced and where customer satisfaction is either created or destroyed.

The principle aim of this book as a result is to provide a resource for marketers that leads them across the basic terrain of services marketing theory and also maps out the reaches of the Servicescape – a comforting and familiar way to refer to the environment in which services are created and used.

I have written it to highlight how much more prepared the services marketing professional has to be in terms of designing, delivering, maintaining and supporting the service within that environment. It describes how crucial communication is in the delivery of quality, how the customer’s own behaviour before, during and after the service delivery has significant impact on their perception of satisfaction. Ultimately it asks the reader to understand that the relationship they need to develop with their target customer through service delivery is fundamentally different from the one generated through most product purchases.

But fear not. In the end it is the figures that come to the rescue of the doubting services marketer. Income and tax receipts tell the tangible end to the intangible story and perhaps no more obviously than in the city of London – nominally the world’s new capital of money.

The 2012 PwC report entitled ‘The Total Tax Contribution of UK Financial Services’ estimated in 2012 that total tax receipts from the financial services sector reached £63 billion or 11.6% of total UK tax receipts while only employing 3.8% of the UK workforce – enough to pay for a year’s worth of transport (£22 billion) and defence (£39 billion) and still have some change.


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AcknowledgementsFirstly, I would like to express my sincere thanks to Charles Nixon, the inspiration behind the creation of the Cambridge Marketing Colleges adventure and who, with very little evidence and with true entrepreneurial spirit, gave me my first opportunity to teach marketing my way to unsuspecting marketing students way back in 2002, and has allowed me to continue to do so ever since.

There were no other specific persons involved in the writing of this book but I would like to recognise the role of everyone who has written on the subject and inspired me to agree or argue, and those that I have met in my various roles in large and small organisations who have all unwittingly had an influence on my understanding of the world and of marketing in particular.

I would like to express my gratitude to my wife, Ruth, who patiently listened to me reading out large sections of the book without once looking bored or indicating that there was something more useful she could be doing.

Lastly, thanks to my trio of tea-makers and concentration interrupters, Maria, Laila and Beatriz who kept resuscitating me when I was drowning in marketing text.


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Chapter 1: Immaterial ProductsServices Marketing in the Age of Awareness

1.1 IntroductionFrench economist Jean-Baptiste Say argued that production and consumption were inseparable in services, coining the term ‘immaterial products’ to describe them. This book takes a fresh look at the world of marketing of services (the Servicescape) as the world transitions from the Information Age into what will be called the Age of Awareness, a period where individuals move away from information browsing and collection, to the application of knowledge, emotion and responsibility to consumption, production and relationships.

Key conceptsAlthough the world of Services Marketing is constantly changing and progressing, there remain a few key and persistent concepts which need to be understood before travelling too far.

1.2 The Services Marketing TriangleOne of these involves the acceptance that there is a specific set of unique characteristics and challenges that are encountered when working with the marketing of services. These characteristics drive the delivery of that marketing to be more sharply focused on the effectiveness of communication between the four main constituents in the process which are the Company, its Employees, its Customers and the Technology ‘glue’ that in many cases holds them all together. This system is captured in the Services Marketing Triangle as shown in Figure 1.1 which shows these interactions and describes the different types of marketing that can exist in this system.

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The key elements in the triangle are:

External marketing – sometimes referred to as the marketing that ‘Sets the Promise’ to the customer by initially engaging them and then by informing them about what is on offer by expressing the proposition, its positioning and pricing.

Internal marketing – sometimes referred to as the marketing that ‘Enables the Promise’ to the employee group that is engaged in the delivery of the service. This type of marketing includes elements of training, teamwork and other information and knowledge that allows the employee to adequately provide the service as defined to the customer.

Interactive marketing – sometimes referred to as the marketing that ‘Delivers the Promise’ and is more often concerned with the physical interaction between the employee and the customer usually at the point of delivery of the service. This marketing carries the most risk as it is the

Figure 1.1 The services marketing triangle (Parasuraman, 2004)

Immaterial Products


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most tangible for the customer and on its own can determine their level of satisfaction with the purchase they are involved in.

At the centre of the triangle lies Technology, the glue that creates the opportunity to enable each of the three types of marketing. Technology at one extreme can replace the need for a customer to be present throughout the transaction (insurance, banking, travel) but can also assist at all other stages of the process including engaging the client with the Promise through electronic media; enabling the Promise with communication and training through video, email and intranet services to employees; and to some extent assisting with delivery of the Promise at the point of client interaction (queuing systems, ordering consoles). Technology may also reduce the cost of all types of marketing enabling all elements of the Promise to be implemented more efficiently and at a lower cost.

Using the services marketing triangle enables the creation and ongoing management of an appropriate balance and alignment of activity that can support the marketing efforts to all three parties involved. It can be used as a way to deliver an overall strategic assessment of how well the company is performing in the creation and implementation of marketing activity on all three sides of the triangle and with technology, highlighting strengths and weaknesses in each area. It can also be used to manage the implementation of a specific service identifying what is being promoted, delivered and supported and how well technology is being leveraged to optimise the implementation.

1.3 The Services Marketing MixThe 4Ps of marketing were first coined in 1960 by E. Jerome McCarthy from Michigan State University and have been used in a more or less unaltered form since the idea’s inception.

The basic premise is that the production and development of any marketing campaign has four elements – Product, Price, Promotion and Place – which all affect the company’s ability to communicate with its

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stakeholders and which have an influence on customer satisfaction and loyalty. More specifically the 4Ps are:

Product – which addresses the physical specification of the goods being marketed and might include size, colour, shape, and function. This has been extended to include the specification of services in its scope which may include parameters such as usage, user numbers, support and training.

Price – which refers to the process of understanding the value of what is being marketed and then setting and adjusting the price of it accordingly. This also includes management of discounts, time or volume-based adjustments and rental rates.

Promotion – which includes all the ways in which the customer can be reached with a message and covers advertising, personal selling, sales promotion, PR and direct marketing. It also covers the wider area of branding and corporate image and now also extends into the digital domain to include social media and other online promotional activities.

Place – which focuses on how the product reaches the customer specifically through retail premises, although this area now also encompasses the wider concept of channel intermediaries, both physical and digital and may also in some cases extend backwards down the value chain to the source of raw materials, production, transportation and handling as well as forwards to post sale support and ultimately to disposal.

By 1981 it had become clear that the 4Ps had their limitations, not just because they were restricted in their ability to deliver marketing management for ever more complex products, but more importantly because they really struggled to work as a framework for the comprehensive marketing of services. So the framework was extended to include three new areas of focus: (Booms and Bitner, 1981).

People – with the understanding that the success of marketing services is often placed at the feet of communication, the involvement and management of the actions and words of people form a significant part

Immaterial Products


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of the extended mix. Most believe that this element was missing from the original 4Ps framework, as people were clearly a significant part of the marketing effort when it came to marketing products. The People element covers everyone involved in the service – either directly or indirectly. This includes consumers themselves, staff, agents, retail staff, delivery staff, call centre workers, etc.

The impact of People is particularly significant in the Servicescape as often the service is produced (delivered) and consumed together and are therefore inseparable. The impact of the person delivering the service is acutely experienced by the consumer, and any shortfall in service delivery is instantly detectable and measurable. This intimate link at the point of purchase means that organisations need to focus on the training of these staff to ensure they understand the potential impact they have on the customer experience. Just think how easily a good experience can be effectively ruined by the poor performance of one person often involved in a less important part of the delivery chain.

Physical evidence – as a direct response to the lack of a physical product which the customer can touch and feel, services marketing uses the concept of physical evidence to replace the physical cues that customers look for when evaluating a product. This evidence covers a wider range of assets including:

• The nature of a building, its design, convenience, age, history, accessibility and so on which represent the scenery of the Servicescape

• The nature of where the service is delivered including cleanliness (food), aroma (coffee), perceived busy-ness (restaurants), equipment (healthcare), comfort and temperature (waiting areas)

• The look and feel of any paperwork including brochures, invoices and documentation in terms of its design, effectiveness and quality

• Presentation of the business in the form of uniforms, business cards, reception area

• Any digital properties including websites, social media pages and blogs

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All of these elements can have an often silent but dramatic effect on the customer’s journey through the servicescape and at each stage communicate the attitude that the organisation has towards its customers. Dependent on the context, these elements can have either a positive or a negative impact on the consumer experience and can significantly influence the customer’s views about the service they will be offered and the company offering it.

Process – this element of the mix is perhaps the most eclectic in terms of what it covers and how it can be manipulated to affect the customer experience. Process includes all the procedures, mechanisms and flow of activities that a customer experiences before during and after the service has been delivered. If we look at the simple ordering of a book on Amazon we can see that our satisfaction is determined to a great extent by elements such as:

• How easy it is to find the book – does the search bring it up or do I need to filter through categories?

• Can I ‘Look Inside’ the book to evaluate some of the pages and see if it is what I really want?

• Can I buy a used copy instead of new from an Amazon seller?• What have other people said about the book and how is it rated?• Can I use my stored details to buy it?• Can I send it to my office for delivery?• How long is it going to take to arrive?

Amazon has spent many years and millions of dollars making the purchasing experience right, but that does not mean that customer satisfaction can only be achieved that way. Simple process management can have a huge effect on customer attitudes and surprising the customer

US clothing retailer Abercrombie & Fitch, pumps its signature citrus and musk fragrance, Fierce, through its stores and it has transformed its scent branding strategy directly into sales. Fierce is now the bestselling men’s fragrance in-store and a popular choice in the US.

Immaterial Products


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with simplified processes can often intensify the impact. ‘We really appreciate your call’ every 10 seconds never really works when ‘leave us your number and we will call you back’ is so much more welcoming (as long as the promise is kept).

In essence, Process involves the operational aspects of the service such as the procedures, time duration and sequence of activities leading to the consumer experience of the service. Creating an effective service process is essential for the success of a service firm.


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Chapter 2: Defining the Servicescape

2.1 Introduction

It is surprisingly difficult for most individuals to provide a concise and confident answer when they are asked the question ‘What is a service?’. Ask them ‘What is a product?’ and most will have a ready answer – pulling something out of a bag or a pocket to support their description. This neatly demonstrates the most obvious (but not only) major difference between the two concepts which is the nature of tangibility, or more simply, the ability to be touched.

This problem does not stop people trying to come up with definitions, of course, and here are a few to start things off:

“A service is a means of delivering value to customers by facilitating outcomes customers want to achieve, but without the ownership of specific costs and risks.” IT service provider

“Services are not the same as the organisation that delivers the service; neither should they be confused with documents which either describe the service (e.g. brochures, web pages) or are used in transacting the service (e.g. application forms).” Dublin Core Metadata Initiative

“Activities, benefits and satisfactions, which are offered for sale or are provided in connection with the sale of goods.” American Marketing Association

“Facebook” – 13-year old student

“Services are a diverse group of economic activities not directly associated with the manufacture of goods, mining or agriculture.” OECD

“A service is the method by which the ball is put into play by the server to commence a rally.” Anon

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2.2 Services and the Economy

The rise of the importance of services within the economy of most developed countries has been well documented and seems, in the early part of the 2nd decade of the 21st century, to be stabilizing at between 70 and 80% of GDP with the US at 75%, Germany at 71%, UK at 77%, and Japan at 75%. The split in terms of employment levels roughly tracks the GDP level, but at a global level it seems to show that approximately 40% of the world’s population is working in service jobs.

Developing economies are showing a similar pattern, with Brazil at 67%, South Korea at 58% and India at 56%. Amongst the world’s largest economies only China still has goods delivering a majority of its GDP with services at 43%. With this in mind it may seem strange that it was not until 1982 that the first services firm, American Express, was added to the main Dow Jones index.

Despite being referred to historically as the tertiary sector (primary being agriculture and mining, and secondary effectively manufacturing), services play a large part in international trade with the European Union enjoying a surplus in service transactions of around €109bn in 2011, of which the UK represented the lion’s share at €76bn and Germany experienced a deficit of €22bn. The EU as a whole recorded a deficit in services with the US to the value of €107bn.

So, as usual, statistics only provide part of the picture but they do show that services are a large and important part of both national and international trade and to a great extent can define the competitive advantage of one nation over another.

2.3 Servicescape

So how do services fit in with the overall economic landscape as they play such a key role? The concept of defining the Servicescape can help to shed some light on the position of services within the wider spectrum of economic activity. The Servicescape concept was originally defined by Booms and Bitner in 1981 as (Booms and Bitner, op.cit):

Defining the Servicescape


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This approach is useful as it reminds us that, in the vast majority of cases, services form part of a continuous spectrum that provides the delivery of customer satisfaction in response to a need. Where the spectrum becomes unclear is in the centre where delivering exactly what the customer wants can only be achieved through various combinations of products and services. Traditionally we have become used to showing this spectrum using a diagram as shown in Figure 2.1 below to illustrate the transition from product or tangible dominant to service or intangible dominant.

Figure 2.1 Scope of tangibility spectrum

“The environment in which the service is assembled and in which the seller and the customer interact, combined with tangible commodities that facilitate performance or communication of the service.”

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This provides a useful but potentially limited view of the Servicescape. As the last 30 years have shown the situation has changed somewhat in terms of what customers expect to receive to gain satisfaction as well as how that satisfaction is delivered. Just think how cars are sold today compared with 30 years ago. Then it was all about gadgets like air conditioning, electric windows and a cassette player and these could differentiate one car from another.

Today, all cars are expected to have a standard set of gadgets possibly including in-built SatNav, digital radio and hands free phoning as they have become fairly cheap to include. What is becoming more important to buyers now is insurance, tax class, warranty periods, servicing contracts and financing. So whereas in 1972 the actual product represented 90% of how the customer gained satisfaction, today it is much lower and in some cases even below 50%. This change in consumer perception must drive us to look at the delivery spectrum in a different but associated way. Customers always seek satisfaction whether they are buying a basket of goods from a pound/dollar store or purchasing the latest Aston Martin. So if we take another view and start to consider how that satisfaction is

Figure 2.2 The new product/service spectrum



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is delivered we will start to see that much, and an increasing part, is delivered by the service element.

Similar stories can be found across the widest range of products as we are now in a situation where very few products come without significant levels of service and perhaps more importantly seem to surround the acquisition of product from first interactions online to post purchase experiences.

If we return to a very simple process of buying something on Amazon, although the customer’s intention is to purchase a tangible item such as a book (although increasingly less so) or an electronic device (often to read a book), most of what will happen before the item is in their hands is service driven. The customer will use the Amazon search facility to identify the item, customer reviews to evaluate it, a financial transaction service to purchase it, and a postal or courier service to deliver it. So in this case although the desire is for a physical product, the impact and importance of the services that the customer uses to acquire the book have a huge effect on overall customer satisfaction. So we can perhaps redraw the spectrum with a new approach which focuses on the importance of the service/product balance in terms of customer satisfaction. It is clear from this new Service/Product importance spectrum that traditional views may need to be adjusted to focus on importance rather than just nature.

Redefining the product/service spectrum does not fundamentally change the nature of the service part of that balance and more specifically those items that are primarily or totally delivered via a service. The difference between services and products can still be defined by using a number of tests.

2.4 Implications of Marketing Services

Consumers who buy services naturally ask different questions from those that buy products. Because they are often buying something they cannot pick up, they need to take the risk out of the purchase process so they usually want things to be simplified.

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They will ask questions like:

• Does it give me everything that I need?• Do I need a full understanding of how it works or will work?• Will it be the same each time I use it? At any location? Any time of

day?• Will it do everything I expect it to do?

These questions are driven by the inability of the purchasers to discover the answers themselves in advance as they could if they were buying a product. They rely on more information from the supplier to lower the risk of purchase and to provide a higher level of confidence before committing. They are also driven by the sense that services fundamentally operate differently from products in the following ways:

Ownership – you generally have no right of ownership of the service, you merely experience it. Consider a cleaner who cleans your office. You do not own what they do or the cleaning equipment and you cannot sell it on once it has been used.

Credibility – service quality can often be based on the credibility of the person who is providing it, the reputation of the lawyer or interior designer. Consumers use credibility to lower the risk of purchase and raise the likelihood of quality when the service is dependent on the professionalism of the service deliverer.

Search – consumers can search for a service easily in advance of buying. Because of the nature of the intangibility of services, the quality of the search provides a greater perception in the mind of the consumer of the quality of the service prior to purchase.

Experience – as a direct result of the consumer being part of the delivery of the service, (feeling the massage, tasting the food), the quality of what is delivered is easier to assess immediately. Your experience allows you to evaluate and respond to the level and nature of the service immediately, so it has to be right when that experience occurs.



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2.5 Challenges of Marketing Services

If we review the four categories or ‘tests’ that separate products and services we can uncover some of the major challenges that marketers encounter when developing marketing strategies for services.

Intangibility Ultimately this test is all about whether you can touch what is being provided, rented or purchased. If you cannot touch it, how can you assess the benefit provided by it or assess its quality? Car insurance only physically exists when a certificate is printed out (which in itself is becoming less important) and so has no real, physical presence as a product does. This makes it tricky to evaluate the quality of service prior to consuming it since there are fewer attributes of quality in comparison to a product. Other issues that intangibility affects include:

• Inventory – the intangibility means that there are no warehouses full of shelves with things on that can be counted. All of the value of the service may be included in a digital file of a few megabytes that can be stored once on a USB stick.

• Protection – although many jurisdictions are adjusting, it has been historically hard to protect service innovation by using existing patent processes which makes the provision and sustainability of the value of the service more risky. Amazon again has bucked the trend by successfully registering a patent (US 5960411) for its 1-Click purchasing process in 1999 and defending it on a number of occasions, most recently in 2010.

• Promotion – a huge challenge for marketers is how to display or communicate the features and benefits of a service when the target user cannot touch or feel them. This area has spawned endless strands of innovation in the effort to engage potential customers – a great example being the campaign to advertise a resort by the Queensland tourist board. Just Google ‘The best job in the world Australia’ to see how they did it.

• Pricing – if we think about the actual value of the digital file on the USB stick we might, at one extreme, just take into account the

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time it took the person to create the file and at the other try and understand how many years of experience, learning and failure it took to be able to compress the value into that file.

Essentially, because in many cases most of the cost of production is upfront and often not related to volume, pricing can often become an exercise in imagination rather than logic.

The sense of tangibility can also be inspected in terms of the nature of the service being provided and whether it impacts on individuals or on objects. This division can help to define more precise marketing activity as the emotional response of the customer will be different.

Individuals Objects

Tangible Transport, Personal Care, Health Care

Cleaning, Garages, Parcel Couriers

Intangible Education, Advertising, Psychotherapy

Accountancy, Law, Insurance

Table 2.1 Scope of tangibility

InseparabilityIn the vast majority of cases the producer of the service cannot be separated from the point at which the service is consumed and moreover the consumer cannot be separated from the point of consumption – it

TotalCare® – How Rolls Royce turned a product into a service

Rolls Royce is one of the largest makers of aero engines in the world, selling each engine for anything from £2m-£8m. The expenditure of such large amounts was seen to be affecting the ability of many airlines to purchase new engines, so Rolls introduced a new business model called Power by the Hour. This model allows the airline to lease the engine from Rolls and pay on a £ per engine flying hour basis, enabling it to effectively ‘pay as it goes’ and spread out its cost of ownership. A product has also become a service.



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would be difficult to have your hair cut with either you or the hairdresser absent. Equally you cannot take a live theatre performance home to consume it (a DVD of the same performance would be a product, not a service).

This test is very effective when used on services that have a tangible result but less so when we consider services such as insurance where the service is paid for and exists intangibly but where the producer and consumer are to all intents and purposes separated. The key issues that affect inseparability include:

• Customer participation – because in many cases the customer has to participate in the transaction, they can easily affect how well the transaction is delivered and perhaps more importantly can change the underlying business logic behind the transaction. Can a graphic designer just stop designing when the allocated time for the job has expired even if the customer still does not like what has been created? Conversely, one benefit is that if the customer is unhappy with what is being provided that dissatisfaction can be instantly communicated and that feedback enables the service quality to be improved.

• Customer reference – the experience of sitting in a restaurant and hearing someone at the next table either complain about or praise the quality, temperature or authenticity of the food being provided, directly impinges on the experience of the person nearby, especially if they are yet to order. The provider of the service is almost completely unable to manage this instant referencing of one experience to the next but have an equally instant opportunity to demonstrate the quality of the response to the situation especially when the referencing is negative.

• Employee performance – we have all stood at a desk waiting for the person behind it to get off the phone in order to deal with us. Admittedly the person is potentially managing an even more intangible customer process over the phone, but the impact of the employee’s performance at the time you are experiencing the service has an immediate and intense impact on the perception of the value of the service being provided.

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• Standardisation – because of all of the above the last issue here is all about whether the service being provided can be supplied in the same way in locations or contexts that are far away from each other. As there is no inventory, mass production does not really exist and therefore the quality of delivery is often determined by the person delivering it. And that, of course, is dependent on what has happened in that person’s life in the previous hour, day, week, month or year.

PerishabilityAs this book is being updated in 2015, FIFA, the Governing body of world football is in turmoil and the fate of the upcoming Word Cups in Russia and Qatar hang in the balance. Each World Cup provides a specific experience with opening ceremonies, goals and fouls and eventually a Final. None of it can be repeated in exactly the same way and even though the event will be repeated every four years , everything will be different. The opportunity that each World Cup provides perishes after the closing ceremonies.

Extracting this idea to a purely commercial level we can see a parallel in that, for instance, once a flight has taken off the flight operator cannot sell a seat that did not have someone in it once the plane has left the tarmac, and consequently the airline makes no profit on that seat. The opportunity to sell the seat perished.

This drives the adoption of different pricing models with perceived scarcity to the customer competing with maximising capacity to the provider. One drives pricing up and the other may drive prices down.

In another context many pubs and restaurants offer discounted meals and vouchers that are only redeemable in off-peak times and the same applies to transport, entertainment and many other sectors.

The key issues for marketing that perishability raises include:

• Matching supply to demand – all the research and forecasting in the



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world is unlikely to provide a perfect match of supply with demand. With products the matching issue is less important as goods remain on the shelf or in the store until the next day or week and, in most cases, can be used to satisfy demand at a later stage. With services the fact that the service perishes means that cannot happen and therefore matching supply to demand more closely becomes a key driver of profitability and success.

• No returns – if the product that is purchased is faulty or does not meet expected requirements, its physical existence enables it to be returned to the place of purchase or manufacture, where the purchaser may have a range of choices to remedy the situation. If the service that has been supplied has not delivered on its promise, it may be difficult if not impossible for that shortfall or fault to be remedied – once a hairdresser cuts a customer’s hair too short there are few remedies except time.

VariabilityThe provision of most services requires some level of human involvement and this inevitably results in that provision varying in delivery and quality from one instance to the next, even if the same person is involved in both. This variability or heterogeneity is driven by the actions of the provider and this in turn can be driven by a wide range of factors that affect that individual. For example, returning to the same garage time and time again for a service on your car might see different levels of customer satisfaction dependent on the day of the week, the health or level of tiredness of the mechanic, or the quality of the management of the business.

Watching a musical performance using Netflix or Lovefilm will be the same every time it is downloaded and played, but the quality of the performance of the same piece at live events may depend on the nature of the venue or on the size and enthusiasm of the audience.

Even with services that have focused on standardisation, such as in the fast food sector, there will be slight variations in service – Saturday

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lunchtimes may be very busy, and Monday evenings not so, meaning that the service will vary from one user experience to another.

The key issues for marketing that variability raises include:

• Staff training and consistency – many different employees may be in contact with an individual customer which drives the need for those employees to demonstrate a level of consistency of behaviour. The understanding of why consistency is important and what is therefore expected, has to be provided through regular training and communication by the service owner.

• Expectation matching – although this will be discussed in more detail later, one of the problems that this area raises is the potential difference that can exist between what the customer expects to receive having purchased the service and the internal understanding of what needs to be delivered to provide the service. Too much difference in these two approaches can result in expectations not being met.

• Customer variability – no two customers will be the same and although the service being delivered may be fairly standard, the different customers’ perception of the service may be variable with one being satisfied and another dissatisfied as they have differing expectations of quality. Additionally a customer’s expectation of the service may change over time although the delivery may stay constant. For instance if they are loyal they may expect a higher level of service than if they were a first time user of the service.



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Table 2.2 Inherent differences between services and products

Products Services Implications for services marketing

Tangibility Tangible Intangible

Services:- usually cannot be stored- often cannot be legally

protected- are not easily

communicated or demonstrated

- are hard to price

SeparabilityProduced and consumed separately

Produced and Consumed Simultaneously

The Service:- is affected by the

customer’s direct participation in its delivery

- is affected by customers’ impact on each other

- is affected by the employee’s performance

- is affected by the inability to mass produce

Perishability Non-perishable Non-perishable

The Service:- is affected by the

synchronisation of appropriate supply and demand

- cannot be returned, repaired or sold again

Variability or heterogeneity

Standardised Variable

Service delivery can depend on the actions of employees; quality can be affected by factors outside the provider’s control; and perception by the customer may not match the planned delivery

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Summary Key concepts in this chapter were:

1. Defining the Servicescape – development of the notion that the environment within which services are developed and delivered is different from that for products.

2. The Product /Service Tangibility Spectrum – an understanding of how the balance of product and service elements combine to provide customer satisfaction.

3. The Challenges within Services Marketing – using the dimensions of Tangibility, Separability, Perishability and Variability to highlight the key challenges for service marketers.



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Chapter 3: Understanding Customers and their Behaviour

3.1 Introduction

In the light of everything we covered in Chapter 2 we can conclude that in general customers are likely to be more suspicious of, and apply more risk to, the purchase of services than they would to products. This means the Servicescape is inherently a more fragile environment to operate in because consumers have more power before and during the delivery of the service – as, in the majority of cases, they are intrinsically part of the success or failure of the service. This makes it hard for marketers to manage the customer experience and underlines the huge importance of how key aspects of services are described and communicated.

3.2 Understanding Service Quality Gaps

It is important for the service deliverer to be aware of and understand why and where service quality gaps can appear. This relates especially to those gaps that directly affect customer perception and satisfaction within the Servicescape as determines the kind of communication that needs to happen when organisations develop and deliver services for consumers.

The Service Quality Gaps model, illustrated overleaf, highlights where service delivery might fail and shows that these potential points of failure lie across five communication gaps:

• The Customer Satisfaction Gap• The Customer Understanding Gap• The Service Design Gap• The Conformance Gap• The Managing Evidence Gap

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Figure 3.1 Service quality gaps

The model above highlights where service delivery might fail and shows that these potential points of failure lie across five communication gaps:

1. The Customer Satisfaction Gap or “What I received was not as good as I expected to receive.”

This gap opens when the customer’s expectation of what they want to receive in terms of service quality and satisfaction does not match what they actually receive. An example here might be the purchase of a broadband service advertised as 20Mbps (megabits per second) which the customer expects to be 20 Mbytes per second, in effect 8 times faster. When the movie takes 8 times longer to download, the customer is dissatisfied and is likely to change supplier.

2. The Customer Understanding Gap or “This is what we have theorised that the customer wants.”

Understanding Customers and their Behaviour


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This gap opens when, despite conducting extensive research and insight surveys, the organisation’s perception of what the customer wants is not congruent with what the customer actually wants or expects. A good example here might be in healthcare where hospitals might believe that what patients want is an efficient service when what they actually want is friendliness and respect.

3. The Service Design Gap or “What we must do to deliver what we have theorised the customer wants.”

This gap opens when the organisation believes it has to deliver a service in a specific way but has not developed the appropriate standards or service design to be able to deliver the required service in that way. This gap often appears when an organisation diversifies from its original successful strategy and convinces itself that it can also deliver a complementary service to the same customer but about which it has no experience or knowledge.

4. The Conformance Gap or “What we can deliver considering the constraints of the organization.”

This gap, sometimes called the Service Performance Gap, opens when the ability to deliver the expected service is hindered by the organisation’s lack of capability to do so – either due to lack of experience or training, or insufficient incentive or ability to perform to the required standard. Long queues in any service situation tend to indicate that the provider has not made, or is unable to make, appropriate provision of staff to deal with actual demand.

5. The Managing Evidence Gap or “It does not look like that in the TV ad.”

The final gap opens when the organisation’s communications department conveys messages about the nature and quality of the service which do not match the eventual customer experience. The hamburger shown so clearly on the menu rarely looks like the article that arrives in its paper wrapping.

It is these gaps, and the fine line that exists between bridging them

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and falling through them which make the successful delivery of service so difficult to achieve and maintain, and ultimately create higher-risk operations.

It is these gaps, and the fine line that exists between bridging them and falling through them which make the successful delivery of service so difficult to achieve and maintain, and ultimately create higher-risk operations.

3.3 Customer Behaviour

The customer that buys a service will inevitably act in a different way from one that is buying a product due to some or all of the reasons already defined in Chapter 2. For marketers to ensure that they bridge the service gaps and reduce the risk of losing the customer, a wider and deeper understanding of how the customer behaves in this environment is needed.

We can identify five distinct factors that affect the ways in which a customer behaves differently when operating in the servicescape and they are shown in Figure 3.2:

Figure 3.2 Factors that affect customer behaviour in the Servicescape



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1. The role of information and the ability to search2. Ease of service comparison and evaluation3. Purchase and consumption4. Cultural influences5. After service context

1. Information and searchWith ever easier access to the internet, customers, whatever they are planning to buy, are inevitably going to try and find out as much as possible about their purchase in advance of making it.

Products are inherently easier to find information about as much of the data will be standardised and captured in an approved way.

Consider a search for a new car where the consumer can compare standard specifications on fuel economy, acceleration times, and CO2 emissions using a wide array of sources.

They can then supplement that information with expert reviews and finally the views of other buyers like them.

Trying to find similarly regularised and formatted data on services is harder, as often the services are difficult to measure and vary in too many ways from one provider to another thereby preventing like-for-like comparisons.

2. Comparison and evaluation

Experience As formal data is often hard to find, the consumer may turn to experience data to affect a comparison between similar service providers – how can you compare the service of two psychologists for instance? This absence of data drives consumers to look for sources of experience that they can trust and therefore use to make a purchasing decision. This trust may come from the volume of responses – lots of people have had the service and have reported that it is excellent or appalling – or increasingly will come from personal influences and

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recommendations which become incrementally more important as the complexity of the service under consideration increases.

As a result communication from one consumer to another or ‘word of mouth’ becomes increasingly important in the decision process. The power of this factor is increased by the use of social media where a much wider range of opinions can be accessed and evaluated instantly.

CredenceFor those services where their attributes cannot be fully assessed even after their use or consumption, such as surgery and professional services like law and accountancy, the consumer may look for the credence or believability of the quality of the service provider as a way to make a choice. How this attribute will be accessed by the consumer will vary and may come from a physical or ‘gut’ feeling or may be driven by more tangible elements such as tone of voice, their ‘academic’ credentials or other indirect stimuli.

The pursuit of reference data is a way to reduce the perceived risk of purchase which can be felt in a number of ways including:

• Functional risk – the service does not provide a satisfactory outcome (the car still makes the same noise)

TripAdvisor has forecast a bumper summer for Swansea’s tourism thanks to the newfound notoriety of one of its beaches.

Last week Rhossili Bay was voted the number one beach in the UK, third in Europe and 10th in the world in TripAdvisor’s beaches poll.

According to figures released today, its TripAdvisor views increased by 58 times in the five days following the announcement.

“Judging from the increased interest in the Bay, the village of Rhossili should be prepared for what could be a bumper summer,” said TripAdvisor spokesperson, Emma Shaw.

Travelmole 26 March 2013



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• Financial risk – the service may not deliver and money may be wasted or there may be further hidden costs (low cost airline baggage costs)

• Time risk – the service may incur wasted time through queuing or delays (doctor’s surgery)

• Physical risk – the service may result in personal injury or damage (from surgery through to carpet cleaning)

• Psychological risk – the service may generate fear or negative responses (psychiatrist, financial advice)

• Social – the service may affect how others perceive the buyer (psychiatrist, plastic surgery)

• Sensory risk – the service may create an unwanted impact on the senses (building, cleaning)

Marketing responsesIn order for marketers to mitigate the potential for customers to either not consider or reject the services on offer a number of issues will need to be addressed including:

• Making available objective comparative data so that the consumer can make a considered choice

• Monitoring word-of-mouth, especially through social media to catch and address any issues before they become problems

• Managing the perceived risk through better and more extensive training and through the standardisation of the offerings

EvaluationWhen the consumer enters into their pre-evaluation phase, they will tend to produce in their heads what is termed an ‘evoked set’ (or sometimes a ‘consideration set’) of alternatives from which they will choose to purchase. The evoked set will result from the consumer feeling comfortable and in some cases familiar with the brand or service on offer. Just thinking about the brands that are traditionally associated with hotels or clothes stores and we all immediately create a ‘familiar’ list in our heads.

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So all providers have to try and develop their brands and services to a specific level of awareness so that they are not naturally excluded from the evoked set, which of course can takes years and lots of cash to achieve.

Although some level of evaluation will be made in a calm and factual way, most consumers will be influenced by their mood and emotional state when making purchasing decisions as well as when they are evaluating the service post-delivery. There is little a provider can do to ensure that the consumer is in the most appropriate mood to understand and accept the value of the service, as moods are naturally transient and emotions are often intense and pervasive. All the provider can do is to understand the potential context and ensure that they do nothing to magnify negative responses and everything they can to magnify positive ones.

3. Purchase and consumptionAs already mentioned, the quality of the process and environment within which the service is delivered and consumed will directly impinge on the satisfaction of the client. It is here where the highest risk occurs, as the delivery of quality may come down to the words that one person says to another. It is more likely that the overall customer experience will be affected by a range of factors including temperature, aroma, cleanliness, the nature of ambient noise (including types of music as well as volume), decoration and overall environmental design.

Many believe that services should be delivered as if they represent a dramatic production in order to create a sense of occasion and importance to the whole process. This will entail staff becoming actors in the drama and ensuring that their timing and delivery are correct and appropriate. High-end restaurants take this concept to another level including everything from the pompous ‘sommelier’ through to flambés being cooked at the table with all the theatre that goes with it.



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4. Cultural influencesThe cultural background of each individual will have an impact on all stages of the service buying process and will be driven in part by all elements that go into that cultural makeup, including social class, educational level, nationality, religion and political point of view.

This means that service providers need to be aware during the service design process which factors in the delivery of their service may have cultural implications. During evaluation, for instance, in some cultures the potential buyer might defer to an older person who has more experience and may not actually make the buying decision themselves.

During service provision, someone from California for example may be less likely to be worried about the dress code of the service deliverer than someone from Dusseldorf.

It is important to recognise that culture is the result of a combination of factors that can include language, beliefs, traditions, value and behaviours and that, ultimately it is probably impossible to ensure that service delivery can cater for all potential types of customers.

5. After service contextThe post purchase context is different with services, often due to the lack of a physical token associated with the purchase which in the product context enables the customer to continue to review and evaluate. As the service provision expires, the time distance from the delivery of the service will, in most cases, affect the sense of whether satisfaction was achieved or not and whether the performance met, surpassed or fell below expectations.

A Hindu bride wears red, maroon or a bright colour lehenga or saree whereas a Christian bride wears a white gown on her wedding day. It is against Hindu culture to wear white on auspicious occasions. Muslims on the other hand prefer to wear green on important occasions.

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Product marketers can learn from and respond to customer behaviour in terms of disposal – how long the product was retained, reused, stored, resold, etc. – but these are unavailable to the service marketer who has to depend on broader indications of behaviour such as feedback and repeat purchasing.


1. The Service Quality Gaps Model – the model that describes and highlights the key communication gaps that can arise internally and externally when developing and delivering services.

2. The Customer Behaviour Cycle – the series of processes that the service customer goes through before, during, and after service delivery and how they affect their behaviour.



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Chapter 4: Customer Expectations and Perceptions

4.1 Introduction

If we have a fair understanding of how customers go through the buying process of a service and also have a good awareness of the range of factors that will affect them as they pass from realising a need to evaluating what happened after the service delivery is complete, we stand a reasonable chance of designing a service that can meet customer requirements. It is important, however, to take into account that however well we design the services, different customers will have a range of expectations about what they will receive from the same service. Many of these expectations are difficult to discover in advance and even harder to control during the buying process.

The challenge for marketers is to balance the equation between what the customer expects and their perception of what they actually receive. The potential difference between these two concepts is perhaps a simple definition of customer satisfaction. If they are met and the equation balances, the customer is happy – if the perception falls below expectation then they are likely to be unhappy and, of course, if the perception rises above expectation we have achieved true success.

4.2 Customer Expectations

In every service delivery context, each customer will have two definable points on a spectrum of happiness which the service provider can make an approximation of before the service delivery takes place. These points are:

Desired service level – this is the upper (but not the maximum) point in the range of expectations and is a personal definition of what the customer actually hopes to receive from the service. This level may be determined by all the factors previously mentioned including personal

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recommendations, targeted marketing messages and experience and, if it is met, the customer in most cases will depart happy.

• Acceptable service – this is the level at which the customer believes the service delivered is not as good as they had hoped for but is still acceptable when compared to their expectations. This level is crucial to understand because, immediately the quality of service falls below this point and out of what is called the Zone of Tolerance, the customer will leave dissatisfied.

Figure 4.1 Zone of tolerance

If we look at this concept in more detail it becomes clear that this Zone of Tolerance is not necessarily the same for all aspects of the service delivery, especially if that delivery is made up of a combination of distinctly different delivery parts.

In a health care context, for example, customers may be more tolerant of a lower level of cleanliness in the reception area and less so of the same in the consulting room where their zone of tolerance is narrower and expectations generally higher (Zeithaml et al., 1993).

Customer Expectations and Perceptions


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Figure 4.2 Variable zone of tolerance

Customer expectations can be further affected by whether they are experiencing the service for the first time or are used to it and have experience of service levels, and this is where the service provider has to pay constant attention to maintaining standards so that the customer remains in the Zone (Zeithaml et al., 1993).

A specific case that merits attention is when the customer has had a bad experience and the service provider decides to respond to the situation by offering a second or ‘recovery’ service to attempt to make up for the poor initial service. In these situations the customer’s zone of tolerance is narrower still and at an even higher level of expectation. They will be highly sensitive to any shortfall in service level if they have offered the chance for the service provider to correct the satisfaction imbalance.

Influencing factorsKnowing that these boundaries of tolerance exist is useful for the marketer but generates a new problem in determining where the boundaries lie and what has influenced the customer to place them where they have.

Figure 4.1 Zone of tolerance

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It is thought that the factors that drive the definition of desired service for a customer involve a combination of personal needs which could be physical, psychological or social, and enduring service intensifiers which tend to be individual and usually stable factors that drive the customer to seek and expect a higher level of service. Examples of these service intensifiers include ‘derived service expectations’ which are generated by another person or group and ‘personal service philosophy’ which describes the customer’s underlying generic attitude towards what service means and how it should be delivered.

The factors that define the point at which a customer decides a service becomes inadequate at the lower level of the zone of tolerance are more varied and include:

• Situational factors – the customer may still feel the service deserves to remain in the zone because the factors that dropped it out were beyond the control of the provider. The organiser of an open air concert may not be at fault if it rains on the day.

• Perceived service role – this is where the customer has an understanding of how much their own actions have affected the delivery of the service – did they turn up late and thereby shorten the time available for them to experience the service?

• Service alternatives – if the customer has alternatives which they can switch to without much effort the tolerance of inadequate service may decline. The converse is true however – if no alternatives exist or the switching costs are high their tolerance of inadequate service may rise.

• Transitory service intensifiers – these tend to refer to shorter term factors that make a customer aware of the need for service. If the wedding is on Saturday getting any sort of service on Friday may be deemed acceptable.

Predicted serviceThe last extension of understanding customer expectations relates to a third level which lies between the desired and the adequate service levels and that is the concept of the ‘predicted service’ level. Irrespective



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of what the customer’s desire may be they will still come to the service delivery with an expectation of what they will experience which will be lower than they would ideally desire. They will be satisfied if the service delivered exceeds their predicted service level and will be dissatisfied if it falls below.

Figure 4.3 Predicted service level

The level that this is set at is again the result of a number of personal factors which include:

• What explicit service promises they have derived from the organisations promotion – the service will make your teeth whiter

• What implicit service promises they have derived from the same messages – whiter teeth will make me more confident

• Word-of-mouth – what the customer has heard from others about both promises

• Past experience – what happened last time the customer had this service either with this provider or elsewhere

4.3 Perceptions of Service

As we have already discovered, customer expectations of service quality and, ultimately, the delivery of customer satisfaction are driven by a range of influencing factors, but their actual perception of that service quality is seen to be driven by a combination of elements that make up the Service Quality Framework often referred to as SERVQUAL.

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SERVQUAL was developed in the 1980s by Zeithaml, Parasuraman & Berry as a standardised way of measuring service quality (Zetal, op. cit.). Its original 22 items of measurement were, thankfully, slimmed down to a more manageable 5 items by the early 1990s. The five elements are:

1. Reliability – the ability to deliver the service dependably and accurately

2. Assurance – the ability of staff to inspire confidence and trust in the delivery of the service

3. Tangibles – the nature of the physical facilities, equipment, staff appearance, etc.

4. Empathy – the extent to which caring and personalised service is provided

5. Responsiveness – the willingness of staff to help and respond to customer needs

It is clear, however, that satisfaction is not derived solely from service quality but also comes from factors that include, but are not limited to, service features, comparative evaluations and the purchaser’s emotional responses. In the end it is customer satisfaction that we are aiming for as that pleases the customer and may encourage them to return and purchase the service again.

It also lays the foundation for them to communicate their satisfaction to others which can generate further business through recommendation. Achieving customer satisfaction lays a clear path to higher revenues and profit.

1. ReliabilityThe Reliability measure can be summarised as “Do what you say you’re going to do when you said you were going to do it”. In this sense it covers the basic premise of providing the service as it was promised, especially with new customers. It also covers how well customer problems are handled, and creating and maintaining records that are error free.

2. AssuranceThe Assurance measure is related to making sure that the provider is



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naturally perceived as the expert in the delivery of the service, generally by instilling confidence in the customer. They do this by ensuring that the customer feels safe and well informed by knowledgeable and courteous staff who reflect the values and standards of the organisation.

3. Tangibles The Tangibles measure is driven by the nature of the physical items that exist in the Servicescape and can include everything from the state of the carpet to whether the staff member has clean hands and a well-pressed uniform. It is an easy trap to fall into where everything looks great but the delivery does not then match the environment.

4. EmpathyThe Empathy measure is focused on avoiding the situation where the service is delivered to an acceptable standard but almost as if the customer is not important. Empathy is shown through personal attention where the customer’s needs are cared for even if they are not necessarily part of the service delivery specification. Customers like to feel cared about and will feel more satisfied if their specific needs are catered for.

5. ResponsivenessThe responsiveness measure is all about ‘Respond quickly, promptly, rapidly, immediately, instantly’. The provider must also make sure that their responsiveness is communicated well to the customer as, even if the service deliverer is responding promptly, if the client does not know this they can become quickly dissatisfied. Responsiveness is demonstrated by willingness to help and a desire to address customer issues quickly and effectively.

Zeithaml found that these 5 elements have different impacts on the perception of service quality by customers. It is key for service marketers to understand these elements and design the delivery of the service and the customer experience to highlight those areas that the customer responds most to. If the service is vehicle roadside recovery, for instance, it is clear how these factors translate in terms of the relative importance of reliability

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Figure 4.4 Relative impact of service factors on service quality

4.4 The Moment of Truth

All of the theorising about expectation and perceptions counts for nothing when the moment of truth arrives – the point at which the service is delivered. It is at that crucial point when the customer actually decides whether they are satisfied or not and consequently whether they will come back or stay away, whether they will speak favourably or unfavourably of the experience at the dinner table, and whether they decide to give you their money ever again.

The moment of truth can occur in all parts of the servicescape from the phone call, through to booking agent, through to the expert applying the face pack and on to the person dealing with the delay to all services because of bad weather. In all instances the opportunity is either taken or lost to provide satisfactory service, and with that the chance to create loyalty and trust or to generate bad feeling and a sense of disappointment.

It is useful for service providers to map out the customer’s journey through their service as this enables them to identify all the service encounter

and responsiveness of the recovery person and their ability to fix the car rather than how clean and pressed the uniform is (Zeithaml,1990).



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moments, to determine which of those are most important to delivering quality and satisfaction, and consequently applying time and resources to those with greatest impact.

Let’s take the example of a customer going on a high-end holiday to an exotic location. Imagine it is a retirement trip, which itself indicates that if the customer is satisfied there are more potential trips to be had. We can break down the outward trip by looking only at the people they will be most likely to interact with and some of the risks associated with each stage.

Figure 4.5 Customer experience analysis

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Managing service problemsIrrespective of how much planning goes into service design, training or customer profiling and insight, it is inevitable that the service will fail at some point and, as a result, the customer will become dissatisfied.

The failure will immediately generate negative feelings and responses in the customer and will narrow their Zone of Tolerance for any further service failings.

All this means that the customer needs to be treated with even more care after a service failure as, although they can be ‘recovered’ by an effective response to failure, they will easily be further dissatisfied by an ineffective one and this may raise the likelihood of bad word-of-mouth and worse.

Figure 4.6 Responses to service failure

ComplaintsOnce the customer experience of the service drops out of the Zone of Tolerance and below a level where the customer perceives the provision as inadequate or unacceptable, they may decide to complain about



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what they experienced. Access to the internet and the spread of social media has made the process of complaining much easier and faster and to some extent has raised the customer’s expectations of their complaint being heard and actively addressed. Managing complaints effectively has a clear and proven effect on the future behaviour of the customer in terms of their intentions to buy from the provider again.

Research developed by the Technical Assistance Research Program demonstrates these effects in Figure 4.7:

Figure 4.7 Customer buying behaviour after complaints (Adapted from data reported by the Technical Assistance Research Programme)

So it is important, if not vital, for a provider organisation to have a strategy to manage complaints. This should include putting into place contingency for activities that are focused on making the recovery more effective, in order to avoid the customer switching to a competitor service provider and potentially developing negative word-of-mouth about the service failure.

Percentage of Customers who will buy again

Major Complaint

Unhappy customers who don’t complain

Unhappy customers who do complain

Complaints not resolved

Complaints resolved

Complaints resolved quickly

Minor Complaint

9%

37%

19%

46%

54%

70%

82%

95%

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One potential customer-orientated step than can be taken to manage expectations of service failure is the concept of providing a service guarantee which defines, in advance, what will happen when a service failure occurs and how the customer will be treated.

In some service scenarios the provision of a guarantee may have no validity as, once delivered, the service may have expired and so cannot be redelivered in exactly the same way – remember once the plane on which a seat was booked has taken off that seat can only be recreated at a later time on another plane.

This means that when creating service guarantees is it important to be clear what exactly is guaranteed and what is not, and to validate the organisational risk associated with the provision of the guarantee.


1. The Zone of Tolerance – the relationships between desired, predicted and adequate service and how they define the customer’s Zone of Tolerance of service performance.

Figure 4.8 Service recovery activities (Wilson, Zeithaml, Bitner, and Gremler, Services Marketing, 2009)



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2. The SERVQUAL Model – how the quality of delivery of a service is affected by service reliability, assurance, tangible elements, empathy and responsiveness.

3. The Moment of Truth – analysing the customer journey and the way in which the service is delivered to the customer.

4. Service Failure – approaches for customer management once a service has failed, and processes for service recovery.


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Chapter 5: Customer Relationships

5.1 Introduction

There is always a battle going on in marketing between those that that want and/or demand to see results in a short period of time and those that are happy to wait and play a longer game. The two fighters in the ring are Transactional Marketing and Relationship Marketing – where Transactional is focused on single, ‘point of sale’ transactions, maximising the efficiency and volume of individual sales; and Relationship is orientated on customer retention and on developing a longer term relationship with the buyer. The two approaches can, and do, sit alongside each other in most organisations driven by individual characters or by specific economic situations. It is generally true that building a longer term relationship can prove expensive and riskier at the start, but tends to lead to longevity and a greater business robustness in the longer term.

The environment of the servicescape tends to favour Relationship Marketing because of the relative intimacy between the delivery and the buyer and, considering the factors identified in Chapter 3, it is more attuned to delivering customer satisfaction, loyalty and longer term profitability.

Relationship Marketing was neatly defined by Gronroos in the Journal of Business and Industrial Marketing as follows (Gronroos, 2004):

“The relationship marketing perspective is based on the notion that on top of the value of products and/or services that are exchanged, the existence of a relationship between the two parties creates additional value for the customer and also for the supplier or service provider.”

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A quick comparison between the two types shows the key differences:

Transactional Relationship

Aim is to gain new customers Aim is to retain good customers

Focus on a single saleFocus on developing a customer

relationship

Intermittent customer contact Continuous customer contact

Product benefits are important Customer benefits are important

Shorter time scale Longer timescale

Quality comes from production Quality comes from interaction

Communication is direct Communication is more indirect

Table 5.1 Relationship marketing perspectives

Assuming the organisation can afford to wait to develop longer term relationships, this type of marketing means that a philosophy must be adopted that leads on keeping and developing the relationship with customers. Although the attraction of new customers remains important it is not the driving force.

The goal of developing longer term relationships can be expressed financially both in terms of the cost of retaining a customer versus the cost of acquiring a new customer, and of the ultimate profitability of retained customers over their lifetime as a customer. The cost argument applies in many, but not all, situations and the profit one is only valid if there is rigour in the sales process – it may be very easy to retain a non-profitable customer for ever!

5.2 Lifetime Value

One of the premises of relationship marketing is that over a longer period of time a customer will become more profitable as long as they keep on buying from you – they will have a lifetime value as a result. In order to calculate the Customer Lifetime Value (CLV) it is necessary to calculate the amount of revenue or profit a customer generates from the first order to the last one (difficult to know when this is, of course).

The other figure that businesses will calculate and try to drive down, is the

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Cost of Acquisition of a Customer (CAC). As already mentioned, different customers will have different lifetimes. Buying an ice cream from a street vendor is more likely to be a single transaction and the vendor has little interest in retaining you. Buying printer supplies for an office is much more likely to be a repeat transaction with a potential lifetime, in theory, of as long as the organisation continues to print documents.

Businesses will try and minimise the CAC to increase instant profitability at the point of sale, but if more analysis is done on the lifetime value of different customers, it should be possible to optimise the approach more effectively in the long run by evaluating the difference between CLV and CAC. What is inevitable is that there will always be at least one customer who is twenty times more valuable than another and consequently will qualify for a higher CAC as they are more valuable to capture.

One major challenge here is how to predict the future lifetime value of any customer. Historical research can offer some ideas on potential patterns but cannot be definitive because economic and market conditions change and could produce overly optimistic projections. Whichever method is used it is vital that checks against predictions are made regularly to test their validity.

Most CLV calculations focus on revenue or profit generated by the customer over time.

More in-depth reviews may take into account a number of more intangible elements such as:

• Retained customers’ positive recommendations to other buyers• Impact on brand value from the marketing effect of having retained

customers • Associated revenue from other offerings sold into the same organisation

because of existing customer relationships, or ease of purchase within the buyer’s systems

The other major challenge is ensuring that the actual costs of acquiring and maintaining the client are identified and understood. These costs do not stop at the marketing effort necessary to generate communications which encourage the buyer to purchase. They go much further, and include other

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elements such as market research, call centre costs, referral discounts, free usage periods and so on. What is often surprising when these analyses are run is that organisations find that the cost of management of long term customers may actually rise over time as customers become used to a certain way of being managed – perhaps with personal service or with preferential rates. If changes are not made to the manner in which the customer is managed, especially if the customer’s spend does not increase, the result can be that too much effort is spent on a relatively low income and the CLV of the client can drop dramatically.

5.3 Loyalty and Customer Retention

Customer loyalty results from both sides of the commercial equation getting something out of the relationship on a continuous basis. As soon as one side starts to perceive that the benefit is decreasing (the customer is less satisfied with the services or the provider sees revenue reduction), loyalty will dissolve.

The benefits of customer loyalty can be summarised:

Customer benefits Provider benefits

Ease of working with a single provider Customer does not have to be acquired

Personalised service allows customer to make specific demands

Customer does not require high levels of marketing

Economies of scale when buying more or from different ranges

Sales staff do not need to spend so much time for each £/$ of revenue

Cash flow predictability as changes happen regularly and with good warning

Provides an opportunity to sell more and from a wider range

Simplified purchasing through integration with supplier systems

Customer becomes less sensitive to price over time

Receive special status from the supplier such as Key Account

Customer refers provider to others to justify their loyalty

Fewer errors in delivery of services and familiar escalation processes creates lower overall risk

Customer costs less to manage as they are familiar with process

Involvement in general service design and enhancement

Switching costs can be high thus preventing competitive threat

Table 5.2 Customer loyalty benefits



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If the balance is retained in equilibrium the provider can move the customer up a loyalty ladder – seeing them graduate from simply being a prospect who has not yet bought, through intermediate stages where the relationship is developed and widened, to reaching the top of the ladder where the client is advocating on behalf of the provider and recommending them with intensity.

Fred Reicheld proposed that:

“Some companies enjoy a loyalty premium over competitors: they have more loyal customers, more loyal employees, and more loyal shareholders. The increased loyalty of one group results in and from the increased loyalty of the others (i.e. happy employees create happy customers and, in turn, happy customers create happy employees etc.). Companies that truly understand the importance of loyalty and commit to it from the leadership levels down, simply outperform peers that pay it lip service. These loyalty leaders reap benefits such as lower cost of capital, increased customer lifetime value, and higher employee engagement.” (Reicheld, 1996).

If this proposition is true, then loyalty has a wider importance than long term revenue and so needs to be addressed on a company-wide basis to ensure that the equilibrium remains, and is not disturbed. One element of caution: not all customers who get to the first rung will progress upwards, and it is a marketing discipline to be aware of which ones will move up and should therefore command profitable attention, and which ones will not and will potentially waste marketing resources.

In order to promote the rise of the appropriate customers up the ladder it may be necessary to develop a specific marketing mix that addresses retention and satisfaction directly. So we can look at the Ps matrix and see what key elements need to be addressed:

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Figure 5.1 The Loyalty Ladder (Christopher, et. al., 2002)

Service (Product)• Customisation to fit the customer’s needs• Selling of other associated services• Developing the service with input from the customer

Price• Volume or increased spend pricing incentives • Pricing driven by perceived value of loyalty

Promotion • Specific and focused marketing activity that reflects the customer’s

context• Targeted offers related to length of engagement or volume

purchased over time

Place • Priority or exclusive access to new services• Priority handling of customers



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People• Dedicated key staff with specific customer experience• Training with provider organisation on specific customer profiles

Physical evidence• Customised documentation that reflects the relationship• Special website properties focused on loyal customers• Dedicated space or facilities in provider premises for loyal clients

Process• Integration with customer purchasing and operational systems• Dedicated support services to manage support and problem

reporting

With a suitably optimised marketing mix the organisation should be able to develop higher levels of loyalty in a number of ways – all founded on the principles of delivering excellent service and satisfaction. These different aspects of connection are driven by the different ways in which the provider and the customer interact which include relationships around money, social interaction, innovation and development, and potentially structural loyalty.

Financial loyalty comes from repeat and increased volumes over time, from stable pricing regimes and from service bundling and up-selling.

Social loyalty is derived from relationships that are consistent and where contacts on both sides remain in place for extended periods, from the development of personal familiarity and potentially friendships.

Innovation and development loyalty is produced by intimate knowledge of the customer’s needs, and by sharing some elements of the provider’s competitive advantage with the customer in order to anticipate future needs.

Structural loyalty develops when the customer relationship has outgrown a normal provider/customer framework. This can result in system integration

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including IT, and joint service development which often leads to joint investment and partnerships.


1. Transactional versus Relationship Marketing – how services often tend to demand the development of a longer term relationship with the customer over and above the pure transaction.

2. Lifetime Value of a Customer (CLV) – how the long term value of a service customer can be determined and how that affects marketing focus.

3. Loyalty and Customer Retention – the importance of developing customer loyalty and creating an equilibrium of customer and service deliverer benefits.



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Chapter 6: Standards and Quality

6.1 Service Development Process

Before any service is designed, it has to be included within a wider service development process. This process manages the journey from strategic planning through to idea creation and on to service delivery and post use evaluation. This process is not markedly different in shape to that used to develop products. As shown in figure 6.1, the process is split into separate planning and implementation stages and involves some elements of business analysis, and multiple stages of evaluation.

In Chapter 4 the ‘Moment of Truth’ was highlighted as the point at which the service is delivered to the customer – the haircut, the airline flight, the financial advice session. Everything that is done prior to that moment is focused on making that moment as good an experience as possible for the customer.

Figure 6.1 The service development process (Booz-Allen & Hamilton, 1982)

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As a result, attention is shifting away from the notion of simply designing consistent service encounters towards the staging of ‘memorable personal experiences’.

Developing services that reflect the need to make the actual service delivery more theatrical and therefore more memorable requires a slightly different mind-set. In order to do this many providers have looked to the example set by the entertainment industry where, more than in any other service environment, customer satisfaction and quality is defined almost exclusively by the level of performance on stage.

The model of service development in this industry is similar to the more comprehensive one but is simpler and more focused on delivering that memorable moment. The process still requires an initial vision and focus which drives the storyline and the content of the experience. With that established the producers will look at the staff (actors and backstage expertise) they will need to deliver the story as part of the planning process. With planning complete the process then switches to implementation mode where artistic and technical design are laid out, and the process of rehearsal and refinement starts until the producers are ready to present the finished article to an audience.

Figure 6.2 Design process for a play (Booz-Allen & Hamilton, 1982)

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6.2 Service Design

Embedded within each of the models described above is the process of service design which relates to the details of how the organisation will deliver the service from an operational point of view and what process the customer will go through up to, during and after the service has been delivered.

Service design is a relatively new area of activity which emerged in the 1990s and which started to develop methods by which services could be designed so as to deliver quality and customer satisfaction from the start by adhering to pre-defined standards.

Service design had traditionally suffered from a lack of focus and attention, with a much larger share of marketing budgets spent on communicating the benefits and features of a service than in actually designing the service in the first place.

This highlights another very specific difference between products and services. It would almost be impossible to deliver and sell a product without there having been a significant period of time spent on designing the product at the start. Unfortunately the same cannot be said of services where in many cases they are often implemented without formalised design and with an assumption that the service will develop organically once it is being used by customers.

This assumption has meant that the way that services operate, and specifically how service quality is delivered as a result, has been addressed retrospectively rather than in advance. This practice in some ways guarantees that the quality of service delivery at introduction will be poor, as little time has been spent on testing and improving it before providing it to customers.

Typical service firms incur a 2535% penalty cost as a result of poor quality (Juran, 1992; Crosby, 1989).

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These attitudes have been driven by the three dominating views of design:

“Design is the transformation of existing conditions into preferred ones” – Simon’s Sciences of the Artificial, 1969 – this shows how service design has followed implementation rather than preceded it.

“Design as reflection-in-action” – Schon’s The Reflective Practitioner, 1985 – this suggests that designers reflect on existing processes and iterate to change.

“Design is making sense of things” – Krippendorff’s The Semantic Turn 2006 – this suggests that design can help to give the user an improved understanding of the items that surround them.

As the economy of the world changed it became clear that leaving intensive design purely to post-implementation was generating poor customer satisfaction issues that could be avoided through earlier design with a focus on standards and quality.

One important lesson learned from the quality movement is that the prevention of service failure, resulting in large part from design excellence, is the most effective and efficient route to achieving higher levels of quality and customer satisfaction (Bank, 1992; Edvardsson, 1993).

What also became clear was that if a service takes a customer through a series of touch points between the customer and the provider over time, then service design should ensure that all the identified touch points work well together to create high levels of customer satisfaction and leave the customer having had a positive experience.

So a different way to understand service design is to develop a map of the customer’s journey in advance which identifies all the touch-points identified above and allows the service provider to understand which parts of the service delivery need more or less design and attention.

Avis takes a very simple but effective approach to its service design,



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producing a customer journey that highlights the simple stages the customer passes through to rent and return a car:

Figure 6.3 Service design at Avis

Figure 6.4 Service delivery map

This model is very basic but clearly identifies the main touch points and allows the organisation to focus around them.

The model in Figure 6.4 is more complex and is used to map out simultaneously the points of contact across the service delivery. It shows each point of contact alongside the customer experience at that point in terms of the activities they are undergoing at each stage, what motivations

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and emotions they are experiencing, what questions they may have and what barriers they may see.

Added to this are the organisation’s responses to each of the stages ensuring that these responses maintain pre-defined levels of satisfaction and standards.

Most models of service design use a similar approach – to track the sequence of customer actions throughout the service delivery and then match those actions to staff, either ‘performing’ on the front line and interacting with the customer directly, or ‘backstage’ working to deliver the operational parts of the service. All these elements are then mapped onto the processes that are required to ensure the service is delivered as expected.

Good service design

Anyone who travels has a story to tell about how frustrating the process of getting from outside the airport to the departure gate can be. Security screening, long queues, document checking, baggage searching, shoe removal – the list goes on.

At Tel Aviv’s Ben Gurion Airport they have taken a different approach to designing this experience, ensuring that the airport’s main security issues – detecting and managing security breaches – are delivered alongside a passenger process which is un-intrusive and seamless.

• Interaction 1 – security at the kerbside. All passengers are stopped and asked two questions: ‘How are you?’ and, ‘Where are you coming from?’. Officers are not interested in the answers and are just looking for nervousness or other signs of ‘distress’ – behavioural profiling.

• Interaction 2 – the second interaction occurs as passengers approach the airport where armed guards are trained to observe passengers as they move toward the doors, again looking for odd behaviour.



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• Interaction 3 – once inside one of the 6 entrances, another set of security eyes are watching and it is here that anyone who has already aroused suspicion may be taken aside for personal and luggage screening.

• Interaction 4 – as passengers approach the airline check-in desk, a trained interviewer takes their passport and ticket and asks them the standard check-in security questions. The interviewer is trained to look straight into the passenger’s eyes as this is one of the ways they can detect if there is something suspicious.

• Interaction 5 – luggage checked in is immediately screened in a purpose-built explosion proof area, separated from the rest of the airport and is tested to withstand a blast of up to 100kg of plastic explosive.

• Interaction 6 – when passengers finally approach the body and hand luggage scanning area there are no queues. Security staff are now not checking for liquids or looking at shoes, but are observing the person who by now has already been checked 5 times.

This process aims to get passengers from the parking lot to the departure lounge in a maximum of 25 minutes. The same process in most large airports in the rest of the world takes much longer and potentially is not as effective in screening out problems.

Not only does this service design meet all security requirements, it also smoothly moves the passenger through the airport with minimal fuss and leaves them in a much better mood to shop and eat before their plane leaves.

6.3 Standards

All the effort put into service design can be wasted if, in the end, the service is actually delivered poorly. Setting service standards, therefore,

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becomes an integral part of delivering client service and effectively managing performance.

Standards help to clarify expectations for clients and employees, drive service improvement, contribute to better evaluation of service performance and can show an organisation’s commitment to service excellence.

Service standards serve two key purposes:

• To provide staff with performance targets (“Calls must be answered within four rings”)

• To inform clients what to expect (“Queuing time will be less than 5 minutes”)

To be effective, service standards need to be linked to established operational performance targets which have already taken into account the risks associated with process delays and uncertainties that can arise from unrelated factors such as workload fluctuations, staff changes, and seasonal variations.

When developing service standards, the organisation needs to take into account its available resources and the expected level of demand for normal service conditions. It should also, however, develop standards that apply in special situations where regular service standards may not be applicable including during peak times, in emergencies and in other situations that might be beyond the organisation’s control.

Setting good and appropriate service standards is not an easy task and will be dependent on a very wide range of factors including industry sector, level of staff involvement, and intimacy of the service delivery, among many others. In general, characteristics of a good service standard can be summarised as:

• Relevant to the customer – service standards match customer priorities and the address elements of the service they value most.

• Based on research – service standards should be developed through discussions with customers, managers, staff, and other service



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delivery partners to ensure that they are appropriate, understood and acceptable to all involved.

• Measurable – service standards should be easy to measure so that checks against performance can be made quickly and regularly thereby uncovering any divergence at the earliest opportunity.

• Consistent – service standards should be consistent throughout the organisation where possible to enable customers to have confidence that all parts of the service will meet the same standards.

• Realistic but not limited – service standards should be based on realistic analysis so that they are achievable but should not in any way limit the provision of service that goes beyond the standard.

• Championed by management – service standards should be publicly endorsed and supported by management to make sure that the standards are given appropriate credibility and authority.

• Communicated – service standards should be clearly communicated to employees, customers, service partners and all other stakeholders involved in service delivery to provide consistency and to manage expectations.

• Transparent – service standards should be diligently monitored and publicly reported to promote transparency and to engender customer trust and loyalty.

• Flexible – service standards should be regularly reviewed to ensure that they remain valid and achievable as customer, market or organisational change occurs.

To generate a set of customer-driven standards, a simple grid can be used to match measurements to customer requirements at each touch point in service delivery:

Touch Point Customer requirements Measurement

Reception Area Attended to quickly Registered within 3 minutes

Consulting RoomGreeted with courtesy and respect

Customer feedback survey rating

Post Visit call Called when expected Call within 48 hours of visit

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Hard and soft standardsIn terms of measurable service standards there are two different types that can be created and implemented and they are referred to as hard and soft.

Hard standards usually involve questions about numbers such as ‘How many?’, ‘How quickly?’ and ‘How accurately?’. Looking back at the SERVQUAL approach mentioned in Chapter 3 it can be seen that two of the five measures, reliability (timing, accuracy) and responsiveness (speed, waiting time) best suit hard standards.

Soft standards are usually harder to measure objectively as they are developed in response to questions that customers ask themselves such as ‘How was I made to feel?’, ‘Was I kept suitably involved and informed?’ and ‘Was I treated well?’. Again, for the SERVQUAL model, these standards are most appropriate for the empathy and assurance measures.

When used effectively, service standards can be a vital tool for organisations to manage the quality of their service delivery demonstrating a commitment to delivering and maintaining quality services that deliver customer satisfaction.

Insurance company hard standards:

• Send you a reply within 2 working days of receiving your communication

• Answer your telephone calls within 3 rings • Identify ourselves by name in all communications • If you have an appointment with a named person when

visiting our offices, they will see you within 5 minutes of the appointment. If you have not made an appointment, someone will see you within 10 minutes of your arrival.

• If we visit you we will arrive at the appointed time. If there are any unavoidable delays we will call you at least 15 minutes ahead of the appointment time to inform you of any delay.



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Summary Key Concepts in this chapter were:

1. The Service Development Process – why resources and time need to be spent on designing and testing service delivery before being presented to the customer.

2. Service Standards – the importance of setting and monitoring service standards to measure; adjust and improve service standards in relations to customer satisfaction.


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Chapter 7: People PowerIt is often said that the first person that presents a company’s brand to the customer is usually the lowest paid person in the organisation – the cold caller, the receptionist, the valet. This could present a problem, unless that person understands the role that he or she is playing in the delivery of the service and, where possible, understands the standards of service set by the company when managing customers as discussed in Chapter 6.

It is these people, and all the others involved at the other touch points in the service delivery, who represent the organisation in the customer’s eyes, and they can have an instant and long-lasting impact on that customer’s image and on the reputation of the company. When that employee delivers customer satisfaction by meeting that customer’s needs, the company can gain a positive reputation which can have a longer term effect on increased market share and profitability. Equally when the employee fails to deliver that value and satisfaction the impact on the customer can be negative and the opposite effects can be felt on the company’s business.

It is these employees who not only span the Service Performance Gap (Provider Gap 3 in the Service Quality Gaps model) outlined in Chapter 3, but who also deliver the five dimensions of service quality within the SERVQUAL model discussed in Chapter 4. Consequently they may be viewed as the organisation’s most important asset: they are capable of achieving and sustaining competitive advantage. As a result, the organisation needs to understand the importance of these employees in delivering and championing the brand image of the company, and in creating competitive advantage and delivering customer satisfaction, by ensuring that they have all the information and training they need to perform these functions well.

As human beings, however, service employees will usually bring managing personal, interpersonal and organisational conflicts to the job. This is made even harder when it is understood that these staff have two bosses – the organisation and the individual customers.

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This conflict is greatest when the employee believes that the standards set or the policies put in place do not meet customer requirements and so they have to decide whether to follow the rules or make the customer happy.

7.1 The Role of the Service Employee

The service employee often is the service, in that they deliver the service encounter or ‘Moment of Truth’ to the customer – the tattoo artist working on a design on a customer’s arm, the photographer taking a group wedding photo, the funeral director handling a loved one. If a parallel is drawn here between the product and service industries it can be seen that any investment in the employee in the servicescape is the same as investing in the manufacture of a finished good in the product world, and in that sense it is essential to the success of the activity.

The employee is a walking, talking marketing entity and everything they do needs to be congruent with, and reflective of, the brand and organisational values. Customers have an acute ability to sense when the employee moves away from that discipline and they may often exploit it to their advantage as will be discussed later.

If we return to the theatrical comparison outlined in Chapter 6 it can be derived that the customer and service deliverer who are participating in the service encounter, can be seen as actors on a stage reading from a shared service ‘script’ that describes each counterparty’s role and expectations of their own behaviour as well as that of the other. Their roles are the result of training and experience on the side of the deliverer and a range of personal and external influences on the side of the customer which are both in turn dependent on the specific service context and subject to any extra emotional factors.

Both sides in this equation need to understand the role and situation of the other for the service to be delivered in a satisfactory and stable way. Employees must adapt to the varying needs of different customers, although the service may be homogeneous in nature, and respond to the particular way an individual customer wants the service to be performed.

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If either side fails to live up to their expected role in the encounter, the service delivery may suffer and can result in customer dissatisfaction.

Ultimately these people are ‘boundary spanners’ who have to manage relationships with other stakeholders inside the organisation as well as those outside with their main and immediate focus on the customer. This split responsibility can be a significant source of stress on the employee and this can, in turn, affect their ability to deliver the required service to an appropriate level. The main causes of this stress can be summarised as:

Person versus role – this conflict arises when what the job requires is not compatible with the employee’s own personality and beliefs. The employee will have to wrestle with producing a professional and committed performance while disagreeing with the content and nature of the performance.

GPs working in the UK Health Service are given an average of 10 minutes to spend with each patient which, in many cases, the GP believes is insufficient to adequately address the patient’s health issues.

The visiting times at the hospital are 10-12. The partner of a very sick patient was delayed and arrives at 11:50. The nurse has to decide whether to bend the rules or send the visitor away.

Organisation versus client – this conflict arises when the employee is asked to choose between following company rules or satisfying customer demands. This is particularly relevant in those organisations that are not well orientated toward their customers.

Quality versus productivity – this conflict arises when the service deliverer has to decide whether to deliver a lower quality service to the customer in order to abide by the limits set to meet productivity targets.

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Graphic designers have to decide whether to stop working on a design which they feel has not quite met the customer’s brief although the time allocated for the work has been used up.

Client versus client – this conflict arises when a separate conflict arises between two customers in the same servicescape which requires the employee to intervene.

In most queuing systems there will be a set of customers who are rule-keepers and another set that are rule-breakers who will take advantage of rule-keepers to queue-jump. The service employee has to decide whether to intervene and protect the rule keeper.

7.2 HR Strategies

The opening of the Service Performance Gap is often attributed to deficiencies in Human Resources management including issues such as:

• Does the organisation have an effective recruitment system that engages the right sort of employees?

• Has the service delivery role been sufficiently well defined so that the employee fully understands what is expected of them and is aware of the performance standards related to the role?

• Does the role require new or additional skills, perhaps in terms of technology, that the employee does not have or is unable to access?

• Are the reward and evaluation schemes tailored to the specific role being undertaken or are they too generic so that actual targets are vague?

• How much autonomy or empowerment is given to the employee so that they can perform their role appropriately and create customer satisfaction?

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The model in Figure 7.1 can be used as a more comprehensive framework to work with when developing the HR strategy for the recruitment and management of staff involved in the delivery of a service.

Figure 7.1 HR strategy for recruitment and management service

EmpowermentAs we have already seen through many lenses, customer satisfaction is delivered by the provision of high quality services that are consistent at all touch points within the customer’s journey. Employees at each point need to maintain that level of quality and commitment to ensure the customer’s perception remains positive.

The empowerment of those employees to adopt a certain level of autonomy during the service delivery may make the difference between

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the customer being just satisfied and being surprised or even delighted by the level of service.

Giving the employee a sense of ‘personal power’ raises their own confidence and self-esteem and will often drive a personal desire to exceed expected standards.

The alternative of not allowing the employee on the front line to make decisions as the context changes, is to allow the organisation’s process to take over which may well delay or at worst endanger the customer experience.

In reality empowerment is discussed more than it is implemented as often organisations are wary of allowing too much autonomy to be exercised at the point of service delivery as it seems to raise the risk of service failure if the employee makes an incorrect decision. The likelihood of that employee making the right choice is, of course, linked to many other factors including how well they have been trained, how they are being rewarded, their emotional state of mind and a myriad of other influences.

In practice empowerment is often more of an employee perception than an employer instruction and is acquired through other routes which might be age, experience, educational background and so on.

The advantages of enabling empowerment are that employees:

• Respond faster• Take more responsibility• Show greater enthusiasm for the encounter• Generate more ideas• Are perceived as higher quality by the customer

But these advantages have to be weighed against the costs and drawbacks which may include:

• Increased training need• More expensive reward systems• Customers experiencing inconsistent delivery as some staff are

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empowered and some are not • Potential internal conflict if some employees believe they can make

decisions and others do not• Employees making incorrect decisions that affect the organisation

CultureIn general people will thrive in a service delivery context if the culture that surrounds them supports the ethos of service quality and customer satisfaction.

“A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organisation.” (Grönroos, 1990)

A service culture does not just come from overt organisational practices but also emerges from the nature and tone of the interaction and behaviour and core values of both the service employee and the organisation as a whole. There also appears to be a virtuous circle where, if an organisation develops an obvious and present service culture, this in itself will create more positive behaviour and attitudes by employees towards their customers.

Wilson, Zeithaml, Bitner and Gremler isolate three main implications for employee service providers (Wilson et al., 2009):

• Service culture exists when there is an appreciation for good service.• Good service is given to both internal and external customers.

Not only do organisations need to care for their external customers but they are also required to pay more attention to their service employees (internal customers) who play a crucial role in service.

• Within service culture, good service is a way of life and provided naturally as it is a crucial norm of the organisation. It is like a fuel that drives employees’ attitudes, behaviour and commitment towards giving good services to their customers.

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In practical terms there are a number of key elements and traits that must be developed and implemented to cement a high quality service culture in an organisation:

1. Measurement of service quality and feedback is part of every employee’s job description

2. Expectations of what employees are expected to deliver in terms of behaviour, both internally and externally are clear and definitive

3. An understanding of what the results of providing great customer service mean for the organisation and the individual

4. Simple communicated examples of excellent customer service are given so that there are always benchmarks present

5. Make the customer service ethos a key part of new employee training so that the concepts are implanted early in every career

6. Generate a sense that improved customer satisfaction comes from the whole team and not from just one individual

7. Ensure that all policies that affect the customer experience are written from the customer’s perceptive and not purely from an organisational one

8. Manage the employee ‘cast’ to remove anyone who is unable or unwilling to provide exceptional customer service

“On your first day of work, you will be attending Disney Traditions, the program that introduces each new generation of cast members to the culture and heritage of the world-famous Disney organization. With a focus on the past, present, and future of Disney, Disney Traditions will help you recognize and appreciate the connections you have to the Disney story, the daily impact you can have on the quality of the Disney Show, and the role you can play in our Company’s growth and success.” (Extract from Disney’s employee induction course.)

7.3 The Role of Customers

So far we have looked at the role of the organisation and the employee in particular in regard to the provision and perception of quality service,

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but it is important to realise that the customers themselves have a huge impact on the ability to deliver satisfaction and, dependent on the role they want or intend to play, will define how easy it will be to deliver that result. The level of their impact will naturally be a function of how involved they are in the provision of the service. Bitner, Faranda, Hubbert and Zeithaml defined three levels of customer participation which are:

Low: Customer presence is required

Moderate: Customer inputs required for service creation

High: Customer co-creates the service product

Examples:• Airline travel• Hotel stay• Concert/theatre

production• Pest control

Examples:• Hairdressing• Health examination• Car service• Marketing agency

Examples:• Psychologist• Fitness training• Decoration• Management

consulting

Characteristics:• Standardised offerings• Service is not

individualised and occurs anyway

Characteristics:

• Customisation results from customer input

• Purchase required for service to exist

Characteristics:• Customer drives the

nature of how the service proceeds

• Service dependent on customer’s input

Irrespective of the level of their involvement the customer’s own behaviour can directly affect the delivery of satisfaction and effectively widen the Service Performance Gap. Zeithaml also proposed that customers adopt one of three different roles during the service encounter which are as ‘productive resources’ and ‘contributors’ or as ‘competitors’ (Zeithaml, 1990).

Customers as productive resourcesIt has been mooted that organisations should see their service customers as ‘partial employees’, meaning that they represent human resources who can contribute to the organisation’s productive output. This can be interpreted as seeing the contribution of the customer, in terms of their

Table 7.1 Levels of customer participation across different services (Bitner et al., 1997)

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time and effort and resources, as being in some way equivalent to an employee who acts in a similar way.

The customer’s effort can have an accretive effect on the performance of the organisation through their insight and how that input affects and raises the quality of the service output. If a customer of a marketing agency can clearly articulate the nature and benefits of the required output, can input appropriate data and knowledge, communicate regularly and effectively, and monitor progress against expected output rigorously, they will have an overall positive impact on the productivity of the organisation in delivering the outcome. If the customer, however does not, or is unable to, take on this role they can become a non-productive resource and potentially a hindrance to the successful delivery of the service.

Customers as contributors Customers may not be concerned about whether they are assisting the productivity of the process that delivers the service they require but, at a minimum, they will be interested in the quality of the output. Customer involvement in the definition of and, in some cases, the delivery of a quality outcome, where their specific requirements are met, is something that is likely to be in their interest.

In the case of the services where the customer has high involvement, it becomes very clear very quickly that, if the customer does not play their part in the definition of the decoration, the weight loss programme or the psychologist’s chair, the outcome is likely to fall below expectations and customer satisfaction will be in jeopardy.

Customers as competitorsIf the concept of the ‘partial employee’ previously mentioned is extended slightly, it is not inconceivable that the customer could develop their involvement in the service further, partially from learning how to perform the service as a customer, and ultimately end up delivering the service themselves without the need for a service provider. In this sense the original customer can be converted to a competitor by fully replacing

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the service themselves (internal exchange) or by getting another entity to provide it for them (external exchange).

A good example of how these roles develop has been shown by Tesco and its move to self-service checkouts where the customer has moved from being a passive player in terms of service delivery to becoming totally self-sufficient:

Figure 7.2 Tesco’s shift in service delivery

In the end, it is up to the service provider to assist the customer to understand and participate appropriately in the desired roles for the specific service delivery context. They can prepare and educate the customer about the various roles by communicating the roles clearly

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and precisely and by incentivising them to adopt the preferred roles to maximise productivity and to raise the likelihood of higher quality and satisfaction.


1. The Role of the Service Employee – definition of the various roles of the service employee before during and after service provision.

2. HR Strategies – definition of the range of strategies that can be employed when recruiting and managing service-orientated staff.

3. Role of Customers – defining the specific roles the customer can play during service delivery and how their own behaviour can determine service satisfaction.

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Chapter 8: Physical Evidence

8.1 Servicescape Environment

Humans are used to inhabiting physical environments where they can use their senses to analyse, evaluate and understand their surroundings. This creates one of the greatest challenges for services marketing – how to give the customer a sense of the service they are encountering within the servicescape when the value being transferred in the encounter has no physical attributes. The challenge is one of managing the sense of risk that consumers feel when they cannot rely on their usual sensory analytical tools to determine whether the item they are considering is what they actually need or desire and is of good quality.

So marketers have to turn to the aid of a range of physical elements to provide a complement to the core service and so provide those consumers with some of the familiar cues that they are used to when purchasing physical products. They use physical evidence in the servicescape to effectively ‘wrap’ the service in a physical cloak to present it to customers as at least partially physical.

Examples of these physical cues include but are not limited to elements such as:

• Buildings• Interiors• Ambience• Internet properties• Furniture and decoration• Signage• Uniforms and employee dress codes• Paperwork (e.g. instructions, invoices and ticket)• Brochures• Business cards

The nature of the physical evidence associated with the service can have a significant impact on the behaviour of the customer (and of the

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service employee) and must, like all other marketing mix elements, remain congruent and relevant to all the others to ensure that the customer experience is consistent and credible.

The servicescape will be significantly different dependent on the type of service being delivered and on the level of involvement of the customer, each of which drives slightly different marketing approaches. These environments can be referred to as:

Self-service environment – where the customer performs most if not all of the activities associated with the service delivery such as using a cash machine or buying a train ticket from a machine.

Interpersonal service environment – where both the customer and the service employee need to be in the servicescape at the same time (schools, hospitals, hotels).

Remote service environment – where the customer has little or no interaction with the physical servicescape (online movie systems, mail order, internet shopping).

Within each of these categories the provision of the service can have varying levels of complexity which again provides useful cues as to how much to invest in the provision of appropriate physical evidence:

Servicescape type Complex Simple

Self service Sports centres Some supermarkets

Cash machines Ticket machines Some airline check ins

Interpersonal service Hotels Health centres Banks

Fish and Chip shop Barbers

Remote service Online banking Car insurance Some accountancy

Amazon Netflix Argos

Table 8.1 Servicescape attributes

Irrespective of the type of servicescape, they can act in a number of strategic ways to assist the service provider to engage with the customer

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in the most appropriate way, facilitating, socialising or differentiating the service encounter.

Facilitating – this is when the servicescape helps the performance of the employee and customer within the environment to deliver a higher standard. This could be as simple as better lighting or appropriate meeting rooms which enable better communication, and with effort can make the service delivery more interesting, useful or pleasurable.

Socialising – this is where the servicescape is designed to assist both employee and customer to understand their roles in the service delivery. It can define where various employee and customer activities take place and also what sort of interactions are expected in each area. The way that the IKEA shopping experience is designed with its definitive but connected departments and the traffic flow path painted on the floor exhibit this well.

Differentiating – this is where the servicescape is created to show specifically why one service provider is different from another and potentially indicates the type of target segment that the service is intended for.

A good example here is the British pub. If a customer walks into a pub and is greeted by popular music, gaming machines and a dartboard, the environment is instantly differentiated from another pub that is playing jazz, has a wood fire, a menu on the wall and candles on the tables. They have clearly targeted different segments and attitudes purely using physical evidence.

So different instances of physical evidence can deliver different strategic choices in terms of the way the service provider wishes the service to be experienced. What is also clear is that customers will react in different ways to these different environments and it is important that the marketer understands how these reactions come about.

Mary Jo Bitner developed a model that describes the process by which physical surroundings affect the behaviour of both customers and employees (Bitner, 1992).

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What her research showed was that there is a definitive link between environment and behaviour which affects how individuals appraise their situation and therefore how they respond and behave within it.

Figure 8.1 The effect of surroundings on behaviour

Servicescape evidenceFor service encounters that require physical involvement the servicescape is the arena within which physical evidence can be used to communicate with the customer. This means the physical nature of the surroundings including the buildings, access points, signage, waiting areas, furniture and so on.

If a customer journey to a bank by car for a consultation on a mortgage is reviewed, it becomes clear how physical evidence has an impact on the customer’s overall experience and feelings towards the organisation:

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Figure 8.2 Physical evidence at a bank

At each stage, the customer is presented with evidence that in their eyes represents how the bank operates, how it values its customers and what level of quality it is promoting. Using the behavioural model as a guide it is easy to see how any one of these elements could drive behaviour.

If the customer could not initially find the car park, and when she did it was full, and then when she entered the bank there was a long queue, nowhere to sit, and no appropriate space available for her consultancy session, the organisation may expect her behaviour to be less than friendly at the point of service delivery and her satisfaction level at the end of the experience to be very low.

Simple changes to each of the stages could avoid most of these issues

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and therefore reduce the risk of the customer having a poor experience. Changes to physical evidence can be made in each of the three major environmental dimensions of ambience; spatial layout and signs; signals and personal artefacts.

AmbienceAmbient conditions include background elements of the servicescape including:

• Lighting• Colour• Aroma• Background noise• Music

These elements can have a physical impact on the customer as they enter and experience the servicescape and as a result can have an immediate impact on their experience if the lights are too low, the music too loud, or the aroma too strong. The longer a customer or an employee spends in the servicescape the more impact these factors will have as they tend to build up over time.

North Carolina’s Bloomgrocery chain erected a gigantic billboard on Route 150 in Mooresville which aims to visually tantalise passing motorists with a towering fork piercing a juicy chunk of steak. An accompanying scent of charcoal-grilled pepper steak snares them by the nose as well.

The scent is emitted by a high-powered fan at the bottom of the billboard that blows air over cartridges loaded with fragrance oil. According to Murray Dameron, Marketing Director for Charlotte-based ScentAir, “It smells like grilled meat with a nice pepper rub on it.”

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Spatial layoutSpatial layout refers to the way in which the physical environment is configured including furniture, equipment and machinery, how large or small everything is and how well it is arranged within the space.

Customers may react badly to environments where crowding is the result of poor arrangement or where access to certain elements of the servicescape is made difficult or impossible. The space must be laid out to enable both the customer and the employee to achieve their specific goals and is even more important in a self-service environment where there may not be any staff to assist customers.

Barclays Bank

Barclays Bank’s flagship London store is located underneath the iconic electronic displays in Piccadilly Circus and when it came to a redesign the bank took a completely new look at the physical evidence. The bank now has a wide light entrance with a huge video wall display which users can interact with.

All tellers are in open space with no glass barriers, there are specialist areas for personal banking, local business, mortgage and Premier customers as well as a dedicated self-service area. Consulting areas are all held on a separate floor and in private pods and the waiting areas have comfortable seats and informational video displays.

Signs, signals and artefacts These elements concern the inclusion and display of a wide variety of primarily visual indications within the servicescape that directly or indirectly communicate, explicitly or implicitly, values associated with the service being supplied.

Signage inside and outside is seen as an explicit communication method which is used for providing the direct communication of factual information, rules or directions.

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Symbols and artefacts provide a more indirect route for communication and are seem as more implicit i.e. where the customer or employee has to make the connection to the intended message. Examples can include compliance certificates, awards and celebrity photo endorsements.

These are particularly important for first-time customers who are developing an initial opinion about the service as they can drive the credibility of the provider.

London Underground

London Underground developed an iconic signage and branding system that was standardised in 1947 and which has been able to adjust to manage both changes to the rail network and changes in passenger attitudes. The external signage called the ‘roundel’ provides a clear and consistent indication of where transport facilities exist in a complicated city.

The roundel has been adapted for use on the Docklands Light Railway and most recently in 2012 on the cable car system across the Thames in East London. The roundel is used in all stations so it is easy for all passengers to know which station they are in and is linked to the separately iconic Tube map which provides a topographical image of the system. Customers experience a consistent and clear message at every point in the system which drives confidence and credibility.


1. Servicescape Environments – understanding the differences between Self Service, Interpersonal Service and Remote Service Environments and how they drive different marketing strategies.

2. How Physical Surroundings Affect Behaviour – how the specific management of the physical nature of the servicescape can affect and drive customer behaviour.

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Chapter 9: Powerful Processes

9.1 Introduction

The previous chapters in this book have covered a wide range of aspects in services marketing which, when all marshalled together, can help to deliver a high quality of service delivery and consequently high levels of customer satisfaction.

The concept of a consumer moving through a series of touch points has been reviewed and what is clear is that, unless at all points service quality and consistency is maintained, there is a risk that customer satisfaction can be lost. Yet it is a commonly heard story that the service was excellent apart from that one thing that really upset the customer, or ruined the experience.

Maybe it was that the restaurant lost a coat, or the service provider’s post-event survey team kept calling back even after the survey was complete, or maybe it was just that the booking was not registered on the system. All of the preparation and planning will count for little if the customer remembers the small process element that failed to maintain the quality and upset them.

The concept of service design has been covered in Chapter 6 so this chapter focuses more on process design and on how process management within the servicescape, especially aided by technology, can be effectively manipulated so that the customer experience is maintained at a required quality level and can potentially be raised to a higher level above expectations.

The use of process in services marketing includes a wide array of elements such as:

• Demand and quality control• Policies• Procedures• Systems

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• Use of technology• Workflow

What is special about the process elements is that they affect every part of the customer journey, right from first contact through to post-use evaluation and beyond.

Process as part of the customer journeyProcesses populate every stage of the services marketing journey starting with outward and inbound marketing, through the stages of search and evaluation, through the service encounter itself and finally to post-sales interactions.

Even before a customer has been made aware of the existence of a service, a company has put in place a process to identify and communicate with them on the basis that they are a potential customer.

Figure 9.1 Service process design

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9.2 Marketing Process Design

The process of catching a customer’s attention and getting them to consider and evaluate a particular organisation’s service has changed. Marketers are faced with a rapidly changing marketplace in which the internet has allowed customers to take control of much of the purchase decision-making process. Individuals have more control over how and when they receive marketing messages and are more likely to respond to a ‘Like’ or a ‘Pin’ from someone they know, than they are to a

30-second TV ad which they have learned to tune out. They have taken over the model in which customers now engage with businesses on their own terms.

In order to take advantage of these changes organisations need to change their marketing processes to match the new customer-driven environment. Those changes include:

Data capture processes – organisations need to develop or improve systems that capture and organise profiles of customers and prospects. These systems have to cope with human input in a traditional way, combined with other electronic sources including website logs, CRM systems, survey and email marketing services. Processes that understand and analyse the data collected are required in order to manage and make use of the enhanced data now available.

Search, personalisation and evaluation – organisations need to develop new ways to ensure they are seen either through broad measures such as Search Engine Optimisation (SEO) or by more targeted messages and offers to individuals on a personal basis. This means that the company needs to create better processes to manage customer profiles and generate better knowledge of each customer’s individual preferences which can lead to customised experiences both online and offline.

Content development – content is seen to be the key asset in the world of user-centric marketing: content that interests the customer enough to read it and ultimately bring the organisation onto their radar.

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This means that the organisation has to develop new processes to identify and create relevant content that can be linked to its offerings in a more subtle way. Understanding the new customer journey and providing relevant content at each stage of discovery and evaluation becomes critical in terms of capturing the customer.

Social networking tools – the rise of the use of Social Networking tools, currently primarily Facebook, Twitter, LinkedIn and Pinterest, means that organisations need to develop new processes and policies to manage how content is created and posted, and how employees respond to the content of others that affects the company and the services it offers. These new channels of communication provide great opportunities to get a message out to more customers but unless managed well can become a new marketing risk.

Measurement – with so much new data available, organisations have to develop new and better processes which can collect, validate, analyse and report on important measurable indicators. The volume and variability of data makes it harder for marketers to extract useful information from the mass of operational data so these processes need to be defined precisely so that the output is useful.

Integration – with more channels at a marketer’s disposal the organisation needs to ensure that processes are implemented to ensure that marketing mix integrity is not damaged by incongruent messages being published across all platforms. Managing this process across channels as varied as blogs, podcasts, video, RSS, social networking as well as new, and emerging formats will be challenging.

9.3 Delivery Process Design

There is more pressure to ensure that processes that occur during the delivery of a service work well and reinforce service quality. The failure of a process when the customer is in the process of experiencing the service can potentially magnify the impact of the failure. So it is key to ensure that these processes are robust, well tested and constantly reviewed to make sure they remain relevant and appropriate for the context.

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Argos

Argos introduced ‘Text and Take Home’ which allows potential buyers to text at any time to discover if a product is available in their local store and, if they wish, reserve it to pick up later. The company expects 700,000 users per year for this service. Alongside the Argos website and telephone service, ‘Text and Take Home’ is designed to make buying from the company more convenient.

Argos has also improved the in-store buying experience by introducing ‘Quick Pay’ – a system that enables customers in store to check availability, order, and pay for goods themselves by credit or debit card, thereby avoiding the tills. This service makes shopping easier for customers and reduces the queues in-store in the busy periods. It currently accounts for 6% of all Argos sales.

There are potentially a myriad of processes that can be involved in the delivery of a service. These might include:

• Making contact• Making a booking• Registering• Form filling• Provision of evidence• Subscription• Payments

Many of these involve a degree of technology and in most cases this technology can be used to good advantage if its implementation is well managed and efficient (see the Argos buying process examples).

Capacity managementOne of the characteristics and challenges for many services is matching capacity constraints with demand patterns. Once the train has left the station no more seats can be sold on it from there and an opportunity to

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increase revenue and profitability may have been missed.

It is important, therefore, that marketing processes are developed to understand and monitor the constraints of service delivery whilst doing the same for demand patterns.

Capacity constraints Demand patterns

Time, staff, equipment and facilities Forecasting demand patterns by sector

Service standards and values Incorporating predictable demand cycles

Optimised rather than maximized use of capacity

Planning for random demand fluctuations

Processes can be developed to manage demand in advance including:

To manage high demand:

• Using signage to promote non-peak times• Generating incentives to promote usage in non-peak times• Prioritisation of loyal customers• Managing price to drive demand to maximise capacity

To manage insufficient demand:

• Flexible promotional mix to adjust for low periods• Extending the service offering to include other market segments• Managing price to stimulate demand• Extending opening hours• Increasing accessibility of the service

Queue managementCustomer perceptions of queuing are rarely positive so developing better queue management processes can go a long way to increasing quality and satisfaction.

Queuing generates customer frustration in all servicescape contexts, whether the customer is remote or present, and frustration and customer dissatisfaction risk is raised when waiting times are:

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• Without activity• Uncertain• Unaccompanied• Unexplained• Unfair

It seems to be also true that:

• The wait for the first touch point in a service delivery is more important than waits at subsequent ones

• Longer waits are more acceptable for higher value services• Customer anxiety makes the perceived wait seem longer

Helsinki-Vantaa airport has established a new method of monitoring security control queue times, utilising phones with Bluetooth enabled. When a passenger passes through security control, the system calculates the time taken to queue and be served based on time stamps registered by the sensors. The plan is to eventually display all queuing times, which will allow busy passengers to decide whether it would be better to move to another checkpoint.

Simple solutions can be applied to alleviate queuing or waiting frustration including:

• Providing indicators that confirm the waiting time, as has been installed on many bus and train systems

• Using call back systems on telephone lines that allow the organisation to call the customer back when there are no queues

In general it is clear that customer frustration needs to be avoided at all points during service delivery and in most cases the provision of information to the customer seems to alleviate this problem as it shows that they are being considered and managed in a structured way.

Support process designOnce the service delivery is over, the service organisation is likely to want

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to manage the post-sale process with care and attention to ensure that the customer feels that they are still being cared for and managed well.

It will want to achieve a few critical tasks in this period including:

• Collecting and responding to feedback about service opinion and future needs

• Collecting and responding to customer problems• Promoting post-sales services• Promoting reuse• Up-selling and cross-selling

Sainsbury’s

Sainsbury’s, the UK supermarket, received a letter from a three-year-old girl named Lily. “Why is Tiger Bread called Tiger Bread?” she asked, referring to one of their bakery items. “It should be called Giraffe Bread.” Lily was just being observant – the pattern on the bread does resemble a giraffe more than a tiger. To everyone’s surprise, Chris King, a customer service manager at the chain, responded. “I think renaming Tiger Bread Giraffe Bread is a brilliant idea – it looks much more like the blotches on a giraffe than the stripes on a tiger, doesn’t it? It is called Tiger Bread because the first baker who made it a long time ago thought it looked stripy like a tiger. Maybe they were a bit silly.” He enclosed a gift card, the news went viral, and the bread was renamed soon after.

Once again technology can provide extensive assistance with all of these processes primarily through systems such as Customer Relationship Management (CRM). Care needs to be taken to ensure that the customer is happy to be contacted post sale and that repeated attempts to contact them are not seen as harassment.

Employees in the service provider organisation will need extensive training to learn how to implement and manage the systems that deliver these processes effectively. Customers perceive fast and comprehensive post

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service support as a clear sign of service quality as it shows that the organisation has not just focused all of its efforts on marketing and delivery and forgotten about the customer once they have purchased.


1. Process as part of the customer journey – how the development and implementation of successful processes can affect customer satisfaction.

2. Marketing Process Design – how the effective collection, management and use of data can close quality gaps and improve customer perceptions.

3. Delivery Process Design – how the effective management of service delivery processes can enhance customer experience both in terms of service success and failure.


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Chapter 10: Keeping the PromiseService marketers are in the unenviable position of having to please two masters. They make promises to both their customers and to their organisations – about service quality and satisfaction to the former and about revenues and profitability to the latter. Ultimately, for service providers, the goal is to deliver a service that is greater than or equal to its original promise for both masters.

In both cases, the promises are made through diverse marketing communications and, also in both cases, the communication needs to be integrated and consistent across all channels so that the messages are made in a consistent and credible manner.

It is useful to return to the marketing triangle which illustrates how these promises are made, and provides an opportunity to see how problems can occur during these communications which effectively span Gap 4 in the Services Quality Gap Model outlined in Chapter 3. This gap opens up when discrepancies appear between the actual service delivery and any external communications that were established beforehand that might have exaggerated the delivery promise or not provided accurate or appropriate information about the nature of the service delivery.

10.1 Delivering the Service Promise

To deliver on or exceed the promise, the customer (internal or external) has to constantly be made aware of the status and condition of the service delivery before, during and afterwards, using a system that provides consistent messages throughout and which reaches the recipient through the correct channel at the right time. This integration and effective delivery of these messages can be supported in four ways:

• Through the management of service promises• By managing customer expectations• By improving customer education• By managing internal marketing

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Figure 10.1 The service marketing triangle revisited

Managing service promisesServices promises are made through claims communicated to the customer and so it is vital that these claims are understood and standardised at the start. This ensures that there is organisational agreement on what the promises are as well as agreement that the promises are realistic and achievable by all involved in their delivery. Additionally if any guarantees are offered as part of the promise the validity and ability to deliver on the guarantee must be established in advance.

Once the claims have been established they can then be translated into communication messages that are appropriate for the target client as well as appropriate for the channel through which they are being sent. These narratives should clearly explain the actual service experience and can focus on some of the tangible (physical evidence) elements to give the customer some familiar cues to work with.

It is important that once the messages are created they are issued in a

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coordinated and planned way, especially as some of the messages will be aimed at different stages of the service delivery. There is little worse for a customer than to receive a recurring message asking for feedback before they have encountered the service, as this will unnecessarily generate doubt about potential quality in the mind of the consumer in advance of the service delivery.

Managing customer expectationsIn order for the customer to have any idea of what a particular service consists of or delivers, they will need to have information on which to start making decisions. Much of this will come through initial marketing communications which will grab their attention and allow the organisation to explain more about the nature of the services on offer.

As the need or requirement for the outcomes of a service will vary significantly from customer to customer it will be better to offer the customer choices at the outset. Those choices could simply be about where or when the service can be delivered or by whom, but ultimately the aim is not to put unnecessary limits on the delivery of the service at the outset. Once choice is established, the customer’s options can be opened out to different levels of service that can be purchased – from the ubiquitous gold, silver and bronze approach, to a more sophisticated and personalised service which can be constructed to suit the customer’s specific desires at a higher cost.

With all the choices now in front of the customer, it is useful to make sure that parameters for successful completion of the service are outlined so that the customer understands what the expected service should provide, and that any unrealistic expectation they may have for an outcome are managed. Plastic surgeons are strictly drilled in this form of expectation management so that their ‘patients’ do not always expect to leave the hospital looking like film stars.

Improving customer educationAs already discussed, customers can potentially be seen as ‘partial employees’ as their participation in the creation and delivery of the

Figure 10.1 The service marketing triangle revisited

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service may contribute to its productivity and quality. That said, it will be necessary in most cases to inform the customer that they have such a role from the outset so that they can behave in a way that assists with the delivery of quality.

One element of education that is simple for the customer to grasp, and is potentially easy to create incentives for, is the idea of guiding the customer to choose service periods that are not peak ones and to favour those that occur in less busy time slots. This is a simple attitude guide that once adopted can help to maintain and improve service provision in both periods.

It is also useful and good risk management to make sure that any expectations the customer has before the service encounter takes place are understood and shared, and any unrealistic expectations managed in advance of service delivery.

Once the service is performed it is very good practice to review whether the service met agreed performance standards as well as expectations, and this approach is also useful to use to manage expectations once the customer has left the servicescape so that any post-sale support expectations are similarly managed and shared.

Managing internal marketingThe last set of messages is reserved for the internal audience – those who are involved in the service delivery themselves as well as management who will have set satisfaction and profitability goals.

To ensure that the customer promise is kept, the promise and all the expectations that go with it need to be communicated to all involved in the delivery – who, for the purposes of the delivery, will most likely be part of a cross-functional team including front line and back stage actors. Extra effort should be made to ensure that those staff that are furthest from the customer in terms of service delivery are aligned with the promise as communicated as they may have no relevant perspective if they have no client contact.

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Internal communications must be created that work across the team so that everyone involved has the same song sheet and understands the rhythm and pace at which the performance must go to deliver satisfaction. A second set of communications must be created to make sure that the wider organisation as a whole understands the parameters of what is being offered to the customer and what it will take to deliver.

10.2 Delivering the Financial Promise

The majority of this Handbook has been focused on how best to deliver a high quality service and generate customer satisfaction, and if possible to exceed customer expectations by delighting them in the process. The other side to the story is that the reason for delivering those outcomes is a commercial one driven by the premise that the delivery of quality and satisfaction leads to higher revenues and profits.

The delivery of financial benefits comes from two main areas: the acquisition of new customers that bring in new revenues, and the retention of existing customers to provide continuing revenues and, with appropriate management, increase client profitability.

Customer retention also potentially brings with it a further benefit when those customers climb up the loyalty ladder as outlined in Chapter 5, and become advocates for the organisation and provide valuable recommendations and references to other new customers. The pursuit of consistent quality and satisfaction therefore not only has an instant effect on the value of the encounter that is underway, but could in itself lead to further and more profitable transactions should the customer’s expectations at least be met or preferably exceeded.

The right customerMuch insight can be gained from reviewing the composition of any organisation’s customer list with a view towards analysing their value to the business and if possible their Customer Lifetime Value or CLV as mentioned in Chapter 5.

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An organisation may be providing a superb service that consistently exceeds minimum standards and expectations, but if the customers it is serving are fundamentally unprofitable, then the extra effort in delivering that exceptional service may not be being used to maximum business effect. The discipline, therefore, is to constantly review the data associated with customer activity and analyse and segment customers according to a set of criteria. This might include customers or segments which are:

• growing fastest• creating most new revenues• creating most profit• referring most other customers• providing most service innovation and feedback • costing the least to maintain• have the fastest cycle time for the next encounter

This will identify more effectively where to spend focused marketing effort and resources in order to bolster those customers that provide better value and margin, and will conversely show how to reconfigure resource efforts to minimise the effort needed to maintain those that provide less value and who may be difficult to trade with.

MonitoringAs with all commercial operations, an essential management discipline for service companies is to monitor all activities consistently across the organisation to ensure that targets are being set and met according to the overall strategic plan.

There are many tools that can be used to perform this management function including the Balanced Score Card which neatly fits into place as a tool for measuring many of the factors mentioned in this Handbook.

The Balanced Scorecard takes a wider view of organisational performance than the purely financial. By looking at a range of other measures the Scorecard enables management to review the situation through other lenses that may throw light on areas that a financial lamp may not reveal. In addition to the Financial Perspective the Scorecard

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looks at Customer Perspective measures as well as Operational Perspective, Innovation and Learning measures.

Financial measuresIn the service sector the sort of financial measures over and above standard accounting ones might include:

• Price premium for retained customers• Volume increases for retained customers• Value of customer referrals• Value of cross-and-up sales• Lifetime value of customers or CLV

Operational measuresThe development of standards was covered extensively in Chapter 6 and the sort of measures that would be covered in this perspective would refer back to the SERVQUAL criteria, such as:

• Percentage of occasions delivery is right first time• Percentage of occasions delivery is on time• Percentage of times responses were on time• How long a service encounter takes• How long it takes to take a customer through the customer journey

Innovation and learning measuresThese measures tend to look at how well the organisation and the staff working within it are developing in terms of new skills, new service creation and process innovation. They could include:

• Number of new services developed/implemented in the last 12 months

• Return on innovation – comparing R&D spend to income and profit• Employee skills levels – specific training had by employees • Time to market – innovations implemented to reduce time to market• Time spent talking to customers

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Customer measuresThese measures in the service sector often carry the most weight as they reflect whether the organisation has actually delivered quality and customer satisfaction. They could include:

• Service perceptions• Service expectations • Perceived value• Behavioural intentions:

o Percentage that intend to stayo Percentage that intend to changeo Number of customer referralso Number of cross or up-sales per customero Number of customer losses

Using these measures can provide a comprehensive view of how the organisation is performing if the measures are collected on a regular basis, reviewed, and actions undertaken to address any deviations from plan.


1. Delivering the Service Promise – keeping the different pressures from inside the organisation and from customers in equilibrium in order to deliver service quality.

2. Delivering the Financial Promise – developing effective ways to measure the impact of quality service on profitability and organisational health.

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Bitner MJ, (1992), Servicescapes: The Impact of Physical Surroundings on Customers and Employees, Journal of Marketing, Vol. 56, April 1992

Bitner, Faranda, Hubbert & Zeithaml, (1997), International Journal of Service, Industry Management, Vol. 8, No. 3

Booms BH, & Bitner MJ, (1981), Marketing Strategies and Organisation Structures for Service Firms, In Donnelly J & George WR, Marketing of Services, Chicago, IL: American Marketing Association.

Booz-Allen & Hamilton, (1982), New Products Management for the 1980s, Booz Allen Hamilton

Christopher M, Payne A & Ballantyne D, (2002), Relationship Marketing: Creating Stakeholder Value, Butterworth-Heinemann, 2nd edition

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Edvardsson B, (1993), The Role of Service Design in Achieving Quality, In Scheuing EE & Christopher W (eds), The Service Quality Handbook, AMACOM

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Krippendorff K, (2005), The Semantic Turn: A New Foundation for Design, CRC Press


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Parasuraman A, (2004), Assessing and Improving Service Performance for Maximum Impact: Insights from a Two-decade-long Research Journey, Performance Measurement and Metrics, Vol. 5

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108

4Ps, 3, 4, 5

7Ps, 3-7, 52-53

Advertising, 4, 16, 98

Agency, 75, 76

Amazon, 6, 13, 15, 80

Attitudes, 6, 58, 73, 81, 86

Balanced scorecard, 102

Brand, 4, 29, 49, 52, 67, 68, 86

Competitive, 10, 50, 53, 67

Competitors, 51, 75, 76

Conformance gap, the, 25

Corporate image, 4

Costs, 9, 29, 36, 49, 50, 72

Cross-selling, 94

Culture, 26, 31, 73-74

Customer behaviour, 26, 32, 86

Customer expectations, 33-37

Customer retention 47, 50-54, 101

Customer satisfaction gap, the, 24

Customer understanding gap, the, 24

Direct marketing, 4

Economies of scale, 50

Email, 3, 89

Empowerment, 70, 71, 72

Expectations of service, 37, 44

Financial promise, 101, 104

Innovation, 15, 53, 102, 103

Inseparability, 17

Intangibility, 14, 15

Internal marketing, 97, 98, 100

International, 10

Internet, 27, 43, 79, 80, 89

Lifetime value, 48, 49, 51, 54, 101, 103

Loyalty, 4, 40, 47, 50-54, 63, 101

Managing evidence gap, the, 25

Marketing mix, 3, 51, 53, 80, 90

Media, 3, 4, 5

Moment of truth, 40, 45, 68

Monitoring, 29, 65, 93, 102

Orientated, 44, 47, 69, 71, 78

People, 68-74

Perishability, 18, 21, 22

Planning, 27, 42, 55, 56, 87, 92

Price, 3, 4, 18, 21, 50, 52, 92, 103

Process, 87-95

Process design, 87-95

Product, 1, 3, 4, 5, 9, 11, 12, 13, 14, 15, 16, 17, 19, 21, 22, 23, 26, 27, 31, 32, 47, 48, 52, 55, 57, 68, 77, 79, 91

Quality, 48, 55-65, 67, 69, 71, 73, 74, 76, 78, 79, 83, 87, 90, 92, 95, 97, 99, 100, 101, 104

Relationship marketing, 47, 48, 54

Retail, 4, 5

Sales, 4, 6, 47, 48, 50, 88, 91, 94, 98, 103, 104

Segments, 81, 92, 102

Service design, 23, 24, 25, 31, 42, 50, 55, 57, 58, 59, 60, 61, 87

Service design gap, the, 25

Service promise, 37, 97, 98, 104

Service quality, 14, 17, 24, 37, 38, 39, 40, 57, 67, 71, 73, 74, 87, 90, 95, 97, 104

Service quality gaps model, 23, 32, 67

Service recovery, 42, 43, 44

Services marketing triangle, 1, 2, 3

Servicescape, 1, 5, 6, 9, 10, 12, 22, 23, 26, 39, 40, 47, 68, 70, 79, 80, 81, 82, 84, 85, 86, 87, 92, 100

SERVQUAL, 37, 38, 45, 64, 67, 103

Social media, 4, 5, 28, 29, 43

Standards, 24, 25, 35, 39, 55, 57, 58, 60-65, 67, 68, 70, 72, 92, 100, 102, 103

Strategy, 6, 25, 43, 55, 71

Tangibility, 14, 15, 39

Value, 4, 9, 10, 15, 16, 17, 30, 31, 39, 47, 48, 49, 51, 52, 54, 62, 67, 68, 73, 79, 83, 85, 92, 93, 101, 102, 103, 104

Variability, 19, 20, 21. 22, 90

Website, 5, 53, 89, 91

Zone of tolerance, 34, 35, 36, 37, 42, 44

Index


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Cambridge Marketing Handbooks This Services Marketing Handbook is one in a series of Handbooks for marketing practitioners and students, designed to cover the full spectrum of the Marketing Mix. The other Handbooks include:

• Digital Marketing

• Distribution for Marketers

• Law for Marketers

• Marketing Communications

• Marketing Philosophy

• Marketing Planning

• Pricing for Marketers

• Product Marketing

• Research for Marketers

• Stakeholder Marketing

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MARKETING KNOWLEDGE

Cambridge Marketing PressMiddlewatchSwaveseyCambridge CB24 4AA

Tel: +44 (0)1954 234940http://www.cambridgemarketingpress.com

ISBN: 978-1-910958-24-7

Price £22.00

Services Marketing - A Cambridge Marketing HandbookThis book takes a fresh look at the world of marketing of services (the Servicescape) as the world transitions from the information age into what is being called the Age of Awareness, a period where individuals move away from information browsing and collection to the application of knowledge, emotion and responsibility to consumption, production and relationships. It uses these changes to highlight the impact that they will have on the marketing of services, with a specific focus on the role or people and processes in delivering success.

About the AuthorAndrew Hatcher is a Chartered Marketer and Director of Publishing and a senior tutor at Cambridge Marketing College on the CIM Professional Diploma programme. He is Managing Director of The Applied Knowledge Network, which develops training courses and software applications focused on strategy planning. Andrew has over 20 years’ experience in marketing services in a wide range of contexts from corporate to start-up and has written several other books on innovation and marketing strategy.

“ Both my colleagues and I are excited by the content of the book. It is speaking very directly to the work we are doing which is framing up and planning for the creation of a new government agency and its service.”

Judith Forman, Senior Advisor, Information Management Services, Ministry of Justice, New Zealand

9582477819109

ISBN 9781910958247

This set of guides provides an invaluable resource for anyone wishing to further their career in marketing.

Professor Malcolm McDonald MA (Oxon) MSc PhD DLitt DSc

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