1. Exam Revision: October
2013
Service Quality
MKTG 1268
1
July 2013 Semester
Note: all students are to understand that these notes are
provided as a guideline on how to prepare more
effectively for the examination. It is NOT intended to be
a ‘spotting exercise’ or model answers- all students must
read the text and your lecture notes in the first instance.
The lecturer has mentioned many times in class that it is
the responsibility of students to READ THE ASSIGNED
TEXT CHAPTERS IN FULL. Those who rely completely on
studying from the PowerPoint slides may end up under-
performing in the exams.
Please take note of this carefully before you start your
revision

2. Sections in the Paper
• There are THREE Parts in the SQ Exam Paper
• Part A consists of 10 multiple choice questions
worth 2 marks. (= 20 marks)
• Part B consists of two 'Discussion Questions'
worth 20 marks each (=40 marks)
• Part C consists of two Applied Theory Cases -
questions related to each case totals to 20
marks each (i.e., section totals 40 marks)

3. Coverage and Focus
• In terms of the examinable chapters... MCQs
cover chapters 7 to 15
• For the discussion and case questions
(Sections B and C), they cover chapters 1, 2, 4,
8, 10, 11, 12, 13, 14
• The exam is more applied in nature:
– Mere regurgitation of theory is NOT enough
– You need to apply the concepts of SQ to the case
or scenarios

4. The cases for Section C
• There are TWO cases in Section C
• One is a one-paragraph scenario and there are
two questions (two questions totaling to 20
marks) related to that case/scenario.
• The other, student will need to read a
newspaper article then answer all the
questions associated with the case (four
questions totaling to 20 marks).
Take around 20 -25
minutes to finish
these 2 questions
These will be short
answers, be concise, get
to the point and APPLY.
Estimate around 5
minutes to answer each
question.

5. Techniques for doing well in mini-cases
• Read the case in detail
• Pick out the key issues; try to assess WHICH area
of SQ is it referring to – there are so many areas
that is possible. The questions will give you the
hints of course.
• Apply the relevant SM (service marketing)
concept BUT do not elaborate too much on what
the concept is BUT how it is RELEVANT to the
case study issues. Application more important
than regurgitation of theory!

6. Time management
• Do justice to each Part; don’t over-write on one area
even if you know a lot because you will sacrifice the
quality of later questions
• Write the content in proportion to the marks
• Assuming you take 15 minutes to finish MCQ then you
have 105 minutes to do Parts A and B; proportion half
for each part – around 50 minutes
• Part B – 2 Discussion Questions 20 marks each; take 25
minutes to finish each question
• Part C – Two Case Studies (take 50 minutes to finish
this part)

7. 7
Here is a sample of what a case study from a newspaper
cutting might look like (this is NOT coming out for your exam)
You can see that this case is about the SQ gaps. So questions will
appear on that. But more importantly, read the case in detail, find
out what are the problems. Can you link these to any of the service
4 characteristics? Is the service high or low contact? Which box
does it belong to in the Lovelock matrix? Who are the target
customers and what is the buyer behavior? What aspect of the 7 Ps
are relevant in your case study and why? Are there any special SM
issues such as CRM, Change Leadership, Capacity Management and
Queues, etc, etc can be applied here. THINK – THINK – APPLY!

8. The following are just extract of slides from my lectures
DO NOT interpret these as being
the only content that you need to
read!!
COVER all the text chapters AND my lecture
notes on the exam-assigned chapters of the text
And practice the end of chapter questions + the
sample exam questions that have been given.
Review of content from the key chapters8

9. Chapter One – Introduction to Services Marketing
9
 You must also know:
 Characteristics of services
 The Lovelock Classification Model
 The External Factors affecting the Service Industry
 Be prepared to give good examples for each
Marketing Mix element
 And show how each element helps to address one
or more of the characteristics of service

10. Government
Policies
Business
Trends
Social
Changes
Advances
in IT
Globalization
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power
Success hinges on:
● Understanding customers and competitors
● Viable business models
● Creation of value for customers and firm
● New markets and product categories
● Increase in demand for services
● More intense competition
Forces Transforming the Service Economy
10

11. Four Categories Of Services (Fig 1.10)
11
11

12. Characteristics of Services
Compared to Goods
Intangibility
Perishability
Simultaneous
Production
and
Consumption
Heterogeneity
Learn the meaning of
each of these terms
well!

13. Services Pose Distinctive Marketing Challenges
 Marketing management tasks in the service sector differ from those in
the manufacturing sector.
 The eight common differences are:
1. Most service products cannot be inventoried
2. Intangible elements usually dominate value creation
3. Services are often difficult to visualize and understand
4. Customers may be involved in co-production
5. People may be part of the service experience
6. Operational inputs and outputs tend to vary more widely
7. The time factor often assumes great importance
8. Distribution may take place through nonphysical channels
13

14. Differences, Implications, and
Marketing-Related Tasks (1) (Table 1.2)
Difference
 Most service products
cannot be inventoried
 Intangible elements
usually dominate
value creation
 Services are often
difficult to visualize &
understand
 Customers may be
involved in co-
Production
Implications
 Customers may be
turned away
 Harder to evaluate
service & distinguish
from competitors
 Greater risk &
uncertainty perceived
 Interaction between
customer & provider;
but poor task execution
could affect satisfaction
Marketing-Related Tasks
 Use pricing, promotion,
reservations to smooth
demand; work with ops to
manage capacity
 Emphasize physical clues,
employ metaphors and vivid
images in advertising
 Educate customers on
making good choices; offer
guarantees
 Develop user-friendly
equipment, facilities &
systems; train customers,
provide good support
14
14

15. Implications
 Behavior of service
personnel & customers
can affect satisfaction
 Hard to maintain quality,
consistency, reliability
 Difficult to shield
customers from failures
 Time is money;
customers want service
at convenient times
 Electronic channels or
voice telecommunications
Difference
 People may be part of
service experience
 Operational inputs and
outputs tend to vary
more widely
 Time factor often
assumes great
importance
 Distribution may take
place through
nonphysical channels
Marketing-Related Tasks
 Recruit, train employees to
reinforce service concept
 Shape customer behavior
 Redesign for simplicity and
failure proofing
 Institute good service
recovery procedures
 Find ways to compete on
speed of delivery; offer
extended hours
 Create user-friendly,
secure websites and free
access by telephone
Differences, Implications, and
Marketing-Related Tasks (2) (Table 1.2)
15
15

16. Traditional 4 Ps Applied to Services (1)
 Product elements
 Service products are at the heart of services marketing
strategy
 Marketing mix begins with creating service concept
that offers value
 Service product consists of core and supplementary
elements
 Core products meet primary needs
 Supplementary elements are value-added enhancements
16 Note: as part of your preparations
make sure you understand all the 7
Services Marketing Ps

17. Traditional 4 Ps Applied to Services (2)
 Place and time
 Service distribution can take place through physical and
non-physical channels
 Some firms can use electronic channels to deliver all (or
at least some) of their service elements
 Information-based services can be delivered almost
instantaneously electronically
 Delivery Decisions: Where, When, How
 Time is of great importance as customers are physically
present
 Convenience of place and time become important
determinants of effective service delivery
17

18. Traditional 4 Ps Applied to Services (3)
 Price and other user outlays
 From the firm’s perspective, pricing generates income and creates profits
 From the customer’s perspective, pricing is key part of costs to obtained
wanted benefits
 Marketers must recognize that customer costs involve more than price
paid to seller
 Identify and minimize non-monetary costs incurred by users:
 Additional monetary costs associated with service usage (e.g., travel
to service location, parking, phone, babysitting, etc.)
 Time expenditures, especially waiting
 Unwanted mental and physical effort
 Negative sensory experiences
 Revenue management is an important part of
pricing
18

19. Traditional 4 Ps Applied to Services (4)
 Promotion and Education
 Plays three vital roles:
 Provide information and advice
 Persuades the target customers of merit of service product
or brand
 Encourages customer to take action at specific time
 Customers may be involved in co-production so:
 Teach customer how to move effectively through the service
process
 Shape customers’ roles and manage their behavior
19

20. Extended Mix for Managing the Customer Interface
(1)
 Process
 How firm does things may be as important as what it does
 Customers often actively involved in processes, especially when acting as co-producers of
service
 Operational inputs and outputs vary more widely
 Quality and content varies among employees, between employees
 Variations can be with different customers
 Variations from time of the day
 Variability can be reduced by:
 Standardized procedures
 Implementing rigorous management of service quality
 Training employees more carefully
 Automating tasks
 Train employees in service recovery procedures
 Manage process design and “flow of customers
20

21. Extended Mix for Managing the Customer Interface
(2)
 Physical environment
 Design the servicescape and provide tangible evidence of service performances
 Create and maintain physical appearances
 Buildings/landscaping
 Interior design/furnishings
 Vehicles/equipment
 Staff grooming/clothing
 Sounds and smells
 Other tangibles
 Manage physical cues carefully— can have profound impact on customer
impressions
21

22. Extended Mix for Managing the Customer Interface
(3)
 People
 Interactions between customers and contact personnel
strongly influence customer perceptions of service
quality
 Well-managed firms devote special care to selecting,
training and motivating service employees
 Other customers can also affect one’s satisfaction with a
service
22

23. How would you LINK the 4 characteristics of
services to the 7 Ps?
23
Intangibility Perishability Heterogeneity Inseparability
PRODUCT X X
PRICE X
PROMOTION X X
PLACE X
PEOPLE X
PHYSICAL EV X
PROCESS X X
This is just an illustration to show how the different elements of the marketing mix can
address the challenges of the services characteristics; the links are not necessarily
definitive but rather indicative. What do you think?
My favorite diagram: remember in whatever question
you handle in the SQ paper, whatever topic it may be,
always LINK back to one or more of the problems that
services marketing mix is trying to address.

24. Sample Practice Exam Essay Questions
24
1. The marketing of services is different to the
marketing of tangible goods”. Provide support for
this statement by:
(a.) Identifying and explaining the unique
characteristics of services.
(b.) Describing the expanded marketing mix for
services, highlighting how it may be different to the
“traditional marketing mix of 4Ps”.

25. 25
2. List and describe each of the expanded marketing
mix elements and contrast the expanded marketing
mix for services to the traditional marketing mix for
tangible goods
3. List and discuss each of the four broad categories of
services.
 Demonstrate your understanding of these four
categories of services by giving at least three
examples of each and highlighting the implications
of such services
Sample Practice Exam Essay Questions

26. Sample Practice Exam Essay Questions
26
 List and explain why the unique characteristics of
services (that makes them different to tangible
goods).
 Classify the following two services into
people/possession/mental-stimulus/information-
processing services and explain your selection:
 Funeral service
 Online dating service

27. 27
 The marketing mix for services is different to that of
tangible goods. Explain the marketing mix elements
applicable to service contexts, and highlight its
differences to the marketing mix elements of
tangible goods. Select a service that you are
familiar with, and describe its marketing mix
elements.
Sample Practice Exam Essay Questions

28. 28
Chapter 2: Consumer Behavior in a Service Context
High and Low
Contact Service
Systems
The 3
stages of
Consumer
Decision
Making

29. Pre-purchase Stage
Service Encounter Stage
Post-purchase Stage
Pre-purchase Stage - Overview
 Customers seek solutions to aroused
needs
 Evaluating a service may be
difficult
 Uncertainty about outcomes
Increases perceived risk
 What risk reduction strategies can
service suppliers develop?
 Understanding customers’ service
expectations
 Components of customer
expectations
 Making a service purchase decision
29
A

30. 30
Service Attributes

31. Pre-purchase Stage – Evaluation of Alternatives
Service Attributes
 Search attributes help customers evaluate a product
before purchase
 Style, color, texture, taste, sound
 Experience attributes cannot be evaluated before
purchase—must “experience” product to know it
 Vacations, sporting events, medical procedures
 Credence attributes are product characteristics that
customers find impossible to evaluate confidently
even after purchase and consumption
 Quality of repair and maintenance work
31

32. Pre-purchase Stage – Evaluation of Alternatives
Perceived Risks
 Functional – unsatisfactory performance outcomes
 Financial – monetary loss, unexpected extra costs
 Temporal – wasted time, delays leading to
problems
 Physical – personal injury, damage to possessions
 Psychological – fears and negative emotions
 Social – how others may think and react
 Sensory – unwanted impact on any of five senses
32

33. 33

34. Pre-purchase Stage – Evaluation of Alternatives
Perceived Risks – Strategies for Firms to Manage Consume
Perceptions of Risk
34
•Display credentials
•Use evidence management (e.g., furnishing, equipment
etc.)
•Give customers online access to information about order
status
•Offer guarantees

35. Pre-purchase Stage – Evaluation of Alternatives
Service Expectations – Factors Influencing Consumer
Expectations of Service (Fig. 2.14)
35

36. Pre-purchase Stage – Purchase Decision
 When possible alternatives have been compared
and evaluated, the best option is selected
 Can be quite simple if perceived risks are low and
alternatives are clear
 Very often, trade-offs are involved. The more
complex the decision, the more trade-offs need to
be made
 Price is often a key factor in the purchase decision
36

37. Service Encounter Stage - Overview
Pre-purchase Stage
Service Encounter Stage
Post-purchase Stage
● Service encounters range from high-
to low-contact
● Understanding the servuction system
● Theater as a metaphor for service
delivery: An integrative perspective
 Service facilities
 Personnel
 Role and script theories
37
37
B

38. 38
Service Encounter Stage : Overview

39. Service Encounter Stage
 Service encounter – a period of time during which a
customer interacts directly with the service provider
 Might be brief or extend over a period of time (e.g., a phone
call or visit to the hospital)
 Models and frameworks:
 “Moments of Truth” – importance of managing touchpoints
 High/low contact model – extent and nature of contact points
 Servuction model – variations of interactions
 Theater metaphor – “staging” service performances

40. Distinctions between High-contact
and Low-contact Services
 High-contact Services
 Customers visit service facility and remain throughout
service delivery
 Active contact between customers and service personnel
 Includes most people-processing services
 Low-contact Services
 Little or no physical contact with service personnel
 Contact usually at arm’s length through electronic or
physical distribution channels
 New technologies (e.g. Web) help reduce contact levels
 Medium-contact Services Lie in between These Two
40

41. The Servuction System (Fig 2.21)
41
41

42. Servuction System:
Service Production and Delivery
 Servuction System – visible front stage and invisible
backstage
 Service Operations (front stage and backstage)
 Technical core where inputs are processed and service
elements created
 Includes facilities, equipment, and personnel
 Service Delivery (front stage)
 Where “final assembly” of service elements takes place
and service is delivered to customers
 Includes customer interactions with operations and other
customers
 Other contact points
 Includes customer contacts with other customers
42

43. 43
Service Encounter Stage
Theater as a Metaphor for Service Delivery
“All the world’s a stage and all the
men and women merely players.
They have their exits and their
entrances and each man in his time
plays many parts”
William Shakespeare
As
You Like It

44. 44
Theatrical Metaphor: An Integrative Perspective
 Good metaphor as service delivery is a series of events that customers
experience as a performance
Service facilities
• Stage on which drama
unfolds
• This may change from
one act to another
Personnel
• Front stage personnel are
like members of a cast
• Backstage personnel are
support production team
Roles
• Like actors, employees
have roles to play and
behave in specific ways
Scripts
• Specifies the sequences
of behavior for customers
and employees

45. Post-encounter Stage - Overview
Pre-purchase Stage
Service Encounter Stage
Post-purchase Stage
 Evaluation of service
performance
 Future intentions
45
45
C

46. © Pearson Education South Asia Pte Ltd 2013. All rights reserved46
Post-purchase Stage : Overview

47. Sample Practice Exam Question:
47
 Explain each of the following:
Search, experience and credence
attributes (6 marks)
At least four out of the seven types of
perceived risks involved in the purchase
and/or use of services (4 marks)

48. Chapter 4 - Product
48
 You should have an advantage studying this for the exam
because it was the key topic used in the writing of your group
report.
 All areas need to be covered in this chapter- do NOT attempt
to spot topics
 Designing a Service Product
 The Flower of Service
 Branding Service Products and
Experiences
 New Service Development

49. Refer back also to the key concepts that underpin
the service product
49
 Chapter one: recall and understand the implications of
the 4 characteristics of the service product
 Chapter two: remember that service products being
intangible are assessed by customer based on three
qualities – search, experience and credence qualities
 Services can be high or low contact
 Service can be visible (front stage) and non-visible to
the customer (back stage)
 Above all, the service product is derived from the
positioning of the service brand.

50. Designing a Service Concept (1)
 Core Product
 Central component that supplies the principal,
problem-solving benefits customers seek
 Supplementary Services
 Augment the core product, facilitating its use and
enhancing its value and appeal
 Delivery Processes
 Used to deliver both the core product and each of the
supplementary services
50

51. Designing a Service Concept (2)
 Service concept design must address the
following issues:
How the different service components are
delivered to the customer
The nature of the customer’s role in those
processes
How long delivery lasts
The recommended level and style of service
to be offered
51

52. Integration of Core Product, Supplementary
Elements and Delivery Process (Fig. 4.3)
52
52

53. The Flower of Service (Fig 4.4) (1)
Core
Information
Consultation
Order-Taking
Hospitality
Payment
Billing
Exceptions
Safekeeping
Facilitating elements
Enhancing elements
KEY:
53
53

54. Managerial Implications
 Not every core product is surrounded by
supplementary elements from all eight clusters
 Nature of product helps to determine:
 Which supplementary services must be offered
 Which might usefully be added to enhance
value and ease of doing business with the
organization
 People-processing and high contact services tend
to have more supplementary services
 Firms that offer different levels of service often
add extra supplementary services for each
upgrade in service level
54

55. Make sure you have some examples ready for illustrating the
different elements of the Flower or Service (example SISTIC)
55
Efficient and
reliable event
ticket services
Online, telephone
and counter service
Hotline and counter
staff to provide advice
on best seatsPayment and
billing done online-
instantaneous
transaction
Detailed website
with all event
details
Customer hotline
and email for
feedback and
after-sales
Special bookings
for corporate and
group sales
(prepare your own examples!)
(your answer?)

56. Product Lines And Brands
 Most service organizations offer a line of products
rather than just a single product.
 They may choose among 3 broad alternatives:
Single brand to cover all products and services
A separate, stand-alone brand for each
offering
Some combination of these two extremes
56

57. Spectrum of Branding Alternatives
(Fig 4.18)
Source: derived from Aaker and Joachimsthaler
57
57

58. A Hierarchy of New Service Categories (1)
1. Style changes
Visible changes in service design or scripts
2. Service improvements
Modest changes in the performance of
current products
3. Supplementary service innovations
Addition of new or improved facilitating or
enhancing elements
4. Process-line extensions
Alternative delivery procedures
58

59. A Hierarchy of New Service Categories (2)
5. Product-line extensions
Additions to current product lines
6. Major process innovations
Using new processes to deliver existing
products with added benefits
7. Major service innovations
New core products for previously undefined
markets
59

60. Achieving Success in Developing New Services
 In developing new services,
Core product is of secondary importance
Ability to maintain quality of the total
service offering is key
Accompanying marketing support
activities are vital
Market knowledge is of utmost
importance
60

61. Sample Exam Question
 Draw a diagram of the Flower of Service
model, distinguishing between the
‘facilitating’ and ‘enhancing’ supplementary
elements. (4 marks)
 Explain and give examples of each of the
eight petals/elements (16 marks)
61

62. Practice Exam Question
 List and explain the five(5) of the
seven types of a ‘new service’.
62

63. Practice Exam Question : A Case Situation
63
 Café Rende is a small café well known among the locals for its
delicious cakes, well blended coffee and nice décor. To cater for
rising customer expectations, the owner has decided to update
her shop by painting the walls, changing the furniture and also
installing credit card payment facility because she noted that
more customers ask to pay by credit card. She also introduced,
due to popular demand, a series of cake baking classes. She also
introduced home delivery service for locations within a 3 km
radius and for purchases of more than $50.
Question for discussion:
 There are seven new service development categories. Categorize
and define each of the new services introduced at Café Rende.
This is a good example of a
scenario-type applied question

64. Chapter 8 – Service Processes
 Flowcharting Service Delivery
 Blueprinting Services to Create Valued
Experiences and Productive Operations
 Service Process Redesign
 The Customer as Co-Producer
 Self-Service Technologies (SST)
64

65. Developing a Blueprint
 Identify key activities in creating and delivering
service
 Define “big picture” before “drilling down” to
obtain a higher level of detail
Advantages of Blueprinting
 Distinguish between “front-stage” and “backstage”
 Clarify interactions between customers and staff,
and support by backstage activities and systems
 Identify potential fail points; take preventive
measures; prepare contingency
 Pinpoint stages in the process where customer
commonly have to wait
Blueprinting
65

66. Key Components of a Service Blueprint
1. Define standards for front-stage activities
2. Specify physical evidence
3. Identify main customer actions
4. Line of interaction (customers and front-stage personnel)
5. Front-stage actions by customer-contact personnel
6. Line of visibility (between front stage and backstage)
7. Backstage actions by customer contact personnel
8. Support processes involving other service personnel
9. Support processes involving IT
- Identify fail points and risks of excessive waits
- Set service standards and do failure-proofing
66

67. Identify ‘Fail Points’
 Analysis of reasons for failure often reveals opportunities for
failure proofing to reduce/eliminate future risk of errors
 Need fail-safe methods for both employees and customers
 Have poka-yokes to ensure service staff do things correctly, as
requested, or at the right speed
 Customer poka-yokes focus on preparing the customer for:
 The encounter
 Understanding and anticipating their roles
 Selecting the correct service or transaction
 See Service Insights 8.1 – Framework to prevent customer
failures
67

68. Why Redesign?
 Revitalizes process that has become outdated
 Changes in external environment make existing practices obsolete and
require redesign of underlying processes
 Creation of brand-new processes to stay relevant
 Rusting occurs internally
 Natural deterioration of internal processes; creeping bureaucracy; evolution
of spurious, unofficial standards
 Symptoms:
- Extensive information exchange
- Data that is not useful
- High ratio of checking or control activities to value-adding activities
- Increased exception processing
- Customer complaints about inconvenient and unnecessary procedures
68

69. Levels of Customer Participation (2)
 3 levels
 Low – Employees and systems do all the work
- Often involves standardized service
- Medium – Customer helps firm create and deliver service
- Provide needed information and instructions
- Make some personal effort; share physical possessions
 High – Customer works actively with provider to co-produce the service
- Service cannot be created without customer’s active
participation
- Customer can jeopardize quality of service outcome (e.g.
weight loss, marriage counseling)
69

70.  Customers can influence productivity and quality of
service processes and outputs
 Customers not only bring expectations and needs,
they also need to have relevant service production
competencies
 Customers also need to be recruited as they are
“partial employees”. Firms need to get those with the
skills to do the tasks
 For the relationship to last, both parties need to
cooperate with each other
Customers as Partial Employees
70

71. Self-Service Technologies (SSTs)
Many companies and government organizations seek
to divert customers from employee contact to Internet-
based self-service
Disadvantages:
 Anxiety and stress
experienced by
customers who are
uncomfortable with
using them
 Some see service
encounters as social
experiences and prefer
to deal with people
Advantages:
 Time and Cost savings
 Flexibility
 Convenience of location
 Greater control over
service delivery
 High perceived level of
customization
71
PsychologicalFactorsRelatedtoUseof
SSTs

72. • You are about to open a cafeteria business. To ensure
that all your service staff understands the service
process you have designed for your business, you
have decided to develop a blueprint to identify key
activities in creating and delivering your service.
• How would you explain the advantages of your
blueprint to your service staff?
• What are the key components of a service blueprint?
• Present the service blueprint that you have
developed for your cafeteria business.
72
Sample Practice Exam Essay Question:

73. 73
Sample Practice Exam Essay Question: read the following
case study and answer the question (next page)

74. Question for the exam case study:
• Suggest how restructured hospitals can
reduce the bed crunch using the following
service process redesign strategies
a) Getting rid of non-value added steps
b) Redesign the physical aspects of the service
process
c) Offering direct service
74

75. 75
a) What are SSTs?
b) Give two examples of how SST have replaced
traditional forms of delivery of core
products, and two examples of how SST have
replaced traditional forms of delivery of
supplementary services
c) What are some of the advantages and
disadvantages of SSTs?
Sample Practice Exam Essay Question:

76. (a) Identify and describe three clearly different
uses of Self-Service Technologies (SSTs). Give
real-life examples of each. (12 marks)
(b.) What are the benefits of SSTs for customers
and the service organization? (8 marks)
76
Another Sample Practice Exam Essay
Question on SSTs:

77. Chapter 10 : Crafting the Service Environment
 Physical environment
 Design the servicescape and provide tangible evidence of
service performances
 Key point to note: when the service is intangible, the
strategy is to create a tangible or physical environment in
which service delivery takes place
 Create and maintain physical appearances
 Buildings/landscaping
 Interior design/furnishings
 Vehicles/equipment
 Staff grooming/clothing
 Sounds and smells
 Other tangibles
 Manage physical cues carefully— can have profound
impact on customer impressions
77
Key Issues

78. 1. Shape customers’ experience and their behavior
 Message-creating medium: symbolic cues to
communicate the distinctive nature and quality of the
service experience
 Attention-creating medium: make servicescape stand
out from competition and attract customers from
target segments
 Effect-creating medium: use colors, textures, sounds,
scents and spatial design to enhance desired service
experience
2. Support image, positioning and differentiation
3. Part of the value proposition
4. Facilitate service encounter and enhance
productivity
Purpose of Service Environments
78

79.  Physical surroundings help shape appropriate
feelings and reactions in customers and
employees
 Servicescapes form a core part of the value
proposition
 Banyan Tree (consider all the different stimuli that
help to create the total luxury spa experience)
 The Transformers Ride at Universal Studios
Servicescape as Part of Value Proposition
79

80. The Russell Model of Affect
(Fig. 10.8)
80
80

81. An Integrative Framework: Bitner’s Servicescape Model (Fig. 10.9)
81
81

82. An Integrative Framework:
The Servicescape Model
82

83. 83
Design
elements in
a retail store
environment

84. PUTTING IT ALL TOGETHER
84

85. Selection of Environmental Design Elements
 Consumers perceive service environments
holistically
 Design with a holistic view
Servicescapes have to be seen
holistically: No dimension of design can
be optimized in isolation, because
everything depends on everything else
Holistic characteristic of environments
makes designing service environment an
art
 Must design from a customer’s perspective
85

86. Practice Exam Question
86
 Describe four core purposes of service environment
(8 marks)
 Explain the effects of the service environment on
consumer behaviour using the servicescape model.
Suggest 4 ways in which ambient conditions can be
used to improve the service experience of a
customer in a spa service. (12 marks)
(Total = 20 marks)

87. Practice Exam Questions
87
 The servicescape of a service outlet serves
several important functions (in terms of
influencing buyer/customer behavior). What
are they?
 Draw the Bitner servicescape model, and
explain each of its component. Using real-life
examples, contrast ‘good’ and ‘bad’
servicescape designs.

88. Chapter 11 : Managing People for Service
Advantage
 People
 Interactions between customers and contact personnel
strongly influence customer perceptions of service
quality
 Well-managed firms devote special care to selecting,
training and motivating service employees; HR function
 Empowerment for improving customer service
 Other customers can also affect one’s satisfaction with a
service; customers are considered part of the ‘people’
element
88
Key Issues

89. Overview of Chapter 11
 Service Employees Are Extremely
Important
 Frontline Work Is Difficult and Stressful
 Cycles of Failure, Mediocrity, and
Success
 Human Resources Management – How
To Get It Right?
 Service Leadership and Culture
89

90. Importance of Service Personnel
 Help maintain firm’s positioning. They are:
 A core part of the product
 The staff represent the service firm
 The staff are a core part of the service brand
 Frontline is an important driver of customer loyalty
 Anticipate customer needs
 Customize service delivery
 Build personalized relationships
 Key driver of productivity of frontline operation
 Generate sales, cross-sales and up-sales
90

91. Front Line in Low-Contact Services
 Many routine transactions are now conducted without
involving front-line staff, e.g.,
 ATMs (Automated Teller Machines)
 IVR (Interactive Voice Response) systems
 Websites for reservations/ordering, payment etc.
 Though technology and self-service interface is
becoming a key engine for service delivery, front-line
employees remain crucially important
 “Moments of truth” affect customer’s views of the
service firm
91

92. Boundary Spanning and Role Stress
 Boundary spanners link the organization to outside
world
 Multiplicity of roles often results in service staff having
to pursue both operational and marketing goals
 Consider management expectations of service staff:
 delight customers
 be fast and efficient in executing operational tasks
 do selling, cross selling, and up-selling
 enforce pricing schedules and rate integrity

93. Boundary Spanning and Role Stress
 Boundary spanners link inside of organization to
outside world and often experience role stress from
multiple roles they have to perform
 3 main causes of role stress:
a) Organization vs. Client: Dilemma whether to follow
company rules or to satisfy customer demands
 This conflict is especially acute in organizations that are not
customer oriented
b) Person vs. Role: Conflicts between what jobs require
and employee’s own personality and beliefs
c) Client vs. Client: Conflicts between customers that
demand service staff intervention
93

94. Emotional Labor
 “The act of expressing socially desired emotions
during service transactions” (Hochschild, The Managed
Heart)
 Occurs when there is gap between what employees
feel inside, and emotions that management requires
them to display to customers
 Performing emotional labor in response to society’s or
management’s display rules can be stressful
 Good HR practice emphasizes selective recruitment,
training, counseling, strategies to alleviate stress
94

95. Cycle of Failure (1) (Fig 11.6)
95

96. Cycle Of Mediocrity (1)
(Fig. 11.9)
96

97. Cycle of Success (1)
(Fig. 11.11)
97

98. The Service Talent Cycle for
Service Firms (Fig. 11.12)
98

99. Service employees need to learn:
 Organizational culture, purpose and strategy
 Get emotional commitment to core strategy and core
values
 Get managers to teach “why”, “what” and “how” of job
 Interpersonal and technical skills
 Both are necessary but neither alone is enough for
performing a job well
 Product/service knowledge
 Staff’s product knowledge is a key aspect of service
quality
 Staff must explain product features and help consumers
make the right choice
Train Service Employees Actively
99

100. Is Empowerment Always Appropriate?
Empowerment is most appropriate when:
 Firm’s business strategy is based on personalized,
customized service and competitive differentiation
 Emphasis on extended relationships rather than short-
term transactions
 Use of complex and non-routine technologies
 Service failures are non-routine and cannot be
designed out of the system
 Business environment is unpredictable, consisting of
surprises
 Managers are comfortable letting employees work
independently for benefit of firm and customers
 Employees seek to deepen skills, like working with
others, and have good interpersonal and group
process skills
100

101.  Suggestion involvement
 Employee make recommendation
through formalized programs
 Job involvement
 Jobs redesigned
 Employees retrained, supervisors
reoriented to facilitate performance
 High involvement
 Information is shared
 Employees skilled in teamwork,
problem solving etc.
 Participate in management decisions
 Profit sharing and stock ownership
Levels of Employee Involvement
101

102. Motivate And Energize The Frontline
 Use full range of available rewards effectively,
including:
 Job content
 People are motivated and satisfied knowing they are
doing a good job
 Feedback and recognition
 People derive a sense of identity and belonging to an
organization from feedback and recognition
 Goal achievement
 Specific, difficult but attainable and accepted goals
are strong motivators
102

103. SERVICE LEADERSHIP
AND CULTURE
103

104. Service Leadership and Culture
 Charismatic/transformational leadership:
Change front line’s values, goals to be
consistent with firm
Motivate staff to perform their best
 Service culture can be defined as:
Shared perceptions of what is important
Shared values and beliefs of why they are
important
 A strong service culture focuses the entire
organization on the frontline and top
management is informed and actively involved
104

105. The Inverted Organizational Pyramid
(Fig. 11.25)
105

106. Sample Practice Exam Essay Question
106
The owner of “Tasty Restaurant” noticed that profits had been
decreasing over the last year. Staff turnover had also been
particularly high. In an effort to ‘fix’ this situation, he decided to hire a
marketing manager (i.e. you) for advice. As the newly appointed
marketing manager of this restaurant, you found out that the owner
had been focusing on cost-cutting to maximize revenues.
(a) Drawing on the most appropriate services marketing theories, what
will you say to this owner to convince him of the links between investing
in human resources and profitability, and vice-versa (i.e. the link
between poor human resource management and negative profit
performance)?
(b) How will you implement Human Resource Management (HRM) to
move the restaurant towards success as a service organization
(Describe five clearly different HR tasks to be implemented)?

107. Sample Exam Question:
107
 Draw and explain in detail all the three of the
HRM cylces (eg Cycle of Success, Cycle of
Mediocrity and Cycle of Failure). Why is good
HRM (Human Resource Management) important
within service organizations? Give examples of
good HRM practices.

108. Chapter 12 : Managing Relationships and Building
Loyalty
 The Search for Customer Loyalty
 The Wheel of Loyalty
 Building a Foundation for Loyalty
 Strategies for Developing Loyalty Bonds with
Customers
 Strategies for Reducing Customers Defections
 CRM: Customer Relationship Management
Systems
 What a Comprehensive CRM Strategy
Includes
108

109. Why Is Customer Loyalty Important to A
Firm’s Profitability?
 Customers become more profitable the longer they
remain with a firm:
 Increase purchases and/or account balances
 Customers / families purchase in greater quantities as they grow
 Reduced operating costs
 Fewer demands from suppliers and operating mistakes as customer
becomes experienced
 Referrals to other customers
 Positive word-of-mouth saves firm from investing money in sales and
advertising
 Price premiums
 Long-term customers willing to pay regular price
 Willing to pay higher price during peak periods
109

110. © Pearson Education South Asia Pte Ltd 2013. All rights reserved110
Assessing the Value of a Loyal Customer
• Must not assume that loyal customers are always
more profitable than those making one-time
transactions
 Large customers may expect price discounts in return for
loyalty
 Revenues don’t necessarily increase with time for all types
of customers
• Tasks:
 Determine costs and revenues for customers from different
market segments at different points in their customer
lifecycles
 Predict future profitability

111.  Customers stay loyal when we create value for them
 Value can be created for customers through
 Confidence benefits
Confidence in correct performance
Ability to trust the provider
Lower anxiety when purchasing
Knowing what to expect and receive
Why are Customers Loyal? (1)
(Service Insights 12.1)
111

112. Why are Customers Loyal? (2)
(Service Insights 12.1)
 Social benefits
Mutual recognition and friendship between
service provider and customer
 Special treatment
 Better price
 Discounts not available to most customer
 Extra services
 Higher priority when there is a wait
112

113. The Wheel of Loyalty (Fig. 12.6)
113
113
Learn all sections
of this model!

114. 114
 Service companies should consider the financial value to the
firm of each customer, rather than just count how many
customers can be served. Heavy users (who buy more
frequently and in larger volumes) are generally more
profitable than occasional users. And because customers
interact with each other in many services, managers need to
think about whether different target segments are compatible
with one another.
 Attracting the right customers is important as they bring in
long-term revenues, continued growth in referrals, etc. Emphasis
must also be given to prevent attracting the wrong customers
that typically results in costly churn, a diminished company
reputation and disillusioned employees.
Targeting the Right Customers and
Searching for Value, Not Volume

115. Effective Tiering of Service :The Customer Pyramid (Fig 12.8)
115
115

116. 116
 Service tiering, building loyalty bonds, and creating
membership programs are three of the strategies.
 Customer tiers can be developed around different levels of
profit contribution, needs (including sensitivities to variables
such as price, comfort, and speed), and identifiable
personal profiles such as demographics. Each customer tier
requires significantly different service levels based on
customer requirements and customer value to the firm.
 Slicing the customer base per se allows the firm to see
clearly where the profits and the loss making segments are
and tailor their marketing accordingly in response.
Effective Tiering of Service :The Customer Pyramid
(Fig 12.8)
Read up on the four tiers of customers (platinum, gold, iron
and lead (page 369)

117. Relationship between Satisfaction and Loyalty
117
The satisfaction-loyalty relationship can be divided
into three zones:
 zone of defection—occurs at low satisfaction levels
 zone of indifference—found at moderate
satisfaction levels
 zone of affection—occurs at very high satisfaction
where customers do not find the need to seek
alternative service providers

118. The Customer Satisfaction Loyalty Relationship (Fig. 12.10)
118
118

119. Strategies for Developing Loyalty Bonds with
Customers (1)
 Deepening the relationship
 Bundling/Cross-selling services makes switching a
major effort that customer is unwilling to go through
unless extremely dissatisfied with service provider
 Customers benefit from buying all their various
services from the same provider
One-stop-shopping, potentially higher service
levels, higher service tiers etc
119

120. Strategies for Developing Loyalty Bonds
with Customers (2)
 Reward Based Bonds
 Can be financial or non-financial bonds or a
combination of both
 Financial bonds
 Discounts on purchases, loyalty program rewards (e.g. frequent
flier miles), cash-back programs
 Non-financial rewards
 Priority to loyalty program members for waitlists and queues in
call centers; higher baggage allowances, priority upgrading,
access to airport lounges for frequent flyers
 Intangible rewards
 Special recognition and appreciation
 Reward-based loyalty programs are relatively easy to
copy and rarely provide a sustained competitive
advantage
120
See example of rewards used by British
Airways in Service Insights 12.4 on page
375 of the text (see Table 12.1)

121. 121
ServiceInsight12.4

122. Strategies for Developing Loyalty Bonds
with Customers (3)
 Social Bonds
 Based on personal relationships between providers
and customers
 Harder to and takes a longer time to build, but also
harder to imitate and thus, better chance of
retention in the long term
 Customization Bonds
 Customized service for loyal customers
 e.g. Starbucks
 Customers may find it hard to adjust to another
service provider who cannot customize service
122

123. Analyze Customer Defections and Monitor
Declining Accounts
 Understand reasons for customer switching
 Churn Diagnostics common in mobile phone
industry
 Analysis of data warehouse information on
churned and declining customers
 Exit interviews:
Ask a short set of questions when
customer cancels account; in-depth
interviews of former customers by third
party agency
123

124. What Drives Customers to Switch? (Fig 12.14)
124
124

125. Address Key Churn Drivers
 Deliver quality service
 Reduce inconvenience and non-monetary costs
 Have fair and transparent pricing
 Industry specific drivers
 Cellular phone industry: handset replacement a common
reason for subscribers discontinuing services – offer handset
replacement programs
 Take active steps to retain customers
 Save teams: specially trained call center staff to deal with
customers who want to cancel their accounts
 Be careful about how save teams are rewarded (see Service
Insights 12.5) 125

126. Other Ways to Reduce Churn
 Implement Effective Complaint Handling
and Service Recovery Procedures
 Increase Switching Costs
 Natural switching costs
 e.g. Changing primary bank account – many
related services tied to account
 Can be created by instituting contractual
penalties for switching
 Must be careful not to be perceived as holding
customers hostage
 High switching barriers and poor service quality
likely to generate negative attitudes and bad
word of mouth
126

127. Common Applications Of CRM Systems (1)
(Service Insights 12.6)
 Data collection
 Customer data such as contact details, demographics,
purchasing history, service preferences, and the like
 Data analysis
 Data captured is analyzed and categorized
 Used to tier customer base and tailor service delivery
accordingly
 Sales force automation
 Sales leads, cross-sell and up-sell opportunities can be
effectively identified and processed
 Entire sales cycle from lead generation to close of sales
and after- sales service can be tracked and facilitated
through CRM system
127

128. Common Objectives Of CRM Systems (2)
(Service Insights 12.6)
 Marketing automation
 Mining of customer data enables the firm to target its market
 Goal to achieve one-to-one marketing and cost savings, often in
the context of loyalty and retention programs
 Results in increasing the ROI on its marketing expenditure
 CRM systems also allows firms to judge effectiveness of
marketing campaigns through the analysis of responses
 Call center automation
 Call center staff have customer information at their finger tips
and can improve their service levels to all customers
 Caller ID and account numbers allow call centers to identify the
customer tier the caller belongs to, and to tailor the service
accordingly
 For example, platinum callers get priority in waiting loops.
128

129. © Pearson Education South Asia Pte Ltd 2013. All rights reserved129
What a Comprehensive CRM Strategy Includes
Integrated Framework for CRM Strategy
Development
Strategy Development
• Assessment of business strategy
• Business strategy guides
development of customer strategy

130. Implementation of CRM- key questions to ask when
defining customer relationship strategy:
 How should our value proposition change to increase
customer loyalty?
 How much customization or one-to-one marketing and
service delivery is appropriate and profitable?
 What is the increase in profit from increasing share-of-
wallet with current customers? How much does this vary
by customer tier and/or segment?
 How much time and resources can we provide to CRM
right now?
 If we believe in customer relationship management, why
haven’t we taken more steps in that direction in past?
 What can we do today to develop customer
relationships without spending on technology?
130

131. Practice Examination Questions
131
 The implementation of profitable service strategies
can include building relationships and customer
loyalty as well as putting effective complaint
handling/service recovery processes in place.
Describe the various strategies for building customer
loyalty (10 marks) and complaint handling/service
recovery (10 marks)

132. Practice Examination Question
132
 As a graduate who has undertaken and successfully
completed the MKTG 1268 Service Quality course,
and a potential manager and owner of your own
service business, you know the importance of
building customer loyalty for the long-term success
of your business, as well as good service recovery
strategies when ‘things go wrong’. Recall and list the
key theories and concepts you have learnt that are
important to building customer loyalty and
implementing good service recovery, and give
examples of how these may be implemented.

133. Practice Exam Question
133
 Café Rende is a small café well known among the locals for its delicious
cakes, well blended coffee and nice décor. To cater for rising customer
expectations, the owner has decided to update her shop by painting the
walls, changing the furniture and also installing credit card payment
facility because she noted that more customers ask to pay by credit
card. She also introduced, due to popular demand, a series of cake
baking classes. She also introduced home delivery service for locations
within a 3 km radius and for purchases of more than $50.
 Question: Discuss the customer feedback collection took from which the
owner’s service improvement ideas evolved and suggest TWO other
feedback collection tools that can potentially be implemented in the
future (by a small business like Café Rende), identifying each of their
strengths and weaknesses.
This is a good example of a
scenario-type applied question

134. Chapter 13: Service Recovery
 Customer Complaining Behavior
 Customer Responses to Effective Service
Recovery
 Principles of Effective Service Recovery
Systems
 Service Guarantees
 Discouraging Abuse and Opportunistic
Customer Behavior
134

135. Customer satisfaction formula: linking the topics
135
Service Quality
(chapter 14)
This chapter (13) Chapter 12

136. Customer response to service failures
1. Do nothing
2. Complain in some form to the service firm
3. Take some kind of overt action with a third
party (e.g. complain to a consumer claims
tribunal)
4. Defect and simply not patronise this firm again
136

137. Customer Response Categories to Service Failures (Fig. 13.3)
137

138. Why do customers complain?
 Compensation for a monetary loss—either in the
form of a refund and/or by having a service
performed again.
 Complain to rebuild self-esteem. When customers
feel service employees have mistreated them,
their self-esteem, self-worth, or sense of fairness
may be negatively affected.
 Help to improve the service
 Because of concern for others
138

139. The types of ‘justices’ (see page 342 and Figure
13.7)
139
 Procedural justice
 Concerns policies and rules that customer has to go
through in order to seek service recovery
 Interactional justice
 Dealing with employees of the firm; their behaviors
towards the aggrieved customer
 Outcome justice
 Compensation received by the customer

140. 3 Dimensions of Perceived Fairness in Service Recovery
Process (Fig. 13.6)
140

141. Dealing with Complaining Customers and
Recovering from Service Failure
 Take complaints professionally and not personally
 Be prepared to deal with angry customer who may
behave in an insulting way to service personnel who
may not be at fault
 Take the perspective that customer complaints allow
firm a chance to
 Correct problems,
 Restore relationships
 Improve future satisfaction for all
 Develop effective service recovery procedures
141

142. Service recovery
Service recovery involves actions taken
by the organisation to put things right
for the customer following a service
(core or supplementary) failure.
142

143. Importance of Service Recovery
 Plays a crucial role in achieving customer
satisfaction
 Tests a firm’s commitment to satisfaction and
service quality
 Employee training and motivation is highly
important
 Impacts customer loyalty and future
profitability
 Complaint handling should be seen as a profit
center, not a cost center
143

144. The Service Recovery Paradox
 Customers who experience a service failure that is
satisfactorily resolved may be more likely to make
future purchases than customers without problems
(Note: not all research supports this paradox)
 If second service failure occurs, the paradox
disappears—customers’ expectations have been
raised and they become disillusioned
 Severity and “recoverability” of failure (e.g.,
spoiled wedding photos) may limit firm’s ability to
delight customer with recovery efforts
 Best strategy: Do it right the first time
144

145. Principles of effective service recovery systems
145
 Table 13.1 recommends some strategies companies can
adopt to reduce customer complaint barriers. The activities
suggested have three main objectives;
 (1) Making feedback easy and convenient—make feedback
tools easily accessible to customers,
 (2) reassuring customers that their feedback would taken
seriously and acted upon—publish feedback from customers
and subsequent actions in company newsletters/publications,
and
 (3) make the feedback process a positive experience for the
customers—training frontline staff to make customers feel
comfortable giving feedback; thanking customers for
feedback.

146. Strategies to Reduce Customer Complaint Barriers (Table 13.1)
146
146

147. How to Enable Effective Service Recovery
 Be proactive
 On the spot, before customers complain
 Plan recovery procedures
 Identify most common service problems and have
prepared scripts to guide employees in service
recovery
 Teach recovery skills to relevant personnel
 Empower personnel to use judgment and skills to
develop recovery solutions
147

148. The Power of Service Guarantees
• Force firms to focus on what customers want
• Set clear standards
• Require systems to get & act on customer
feedback
• Force organizations to understand why they fail
and to overcome potential fail points
• Reduce risks of purchase and build loyalty
148

149. How to Design Service Guarantees
 Unconditional
 Easy to understand and communicate
 Meaningful to the customer
 Easy to invoke
 Easy to collect
 Credible
149
See Service Insights
13. 3 on page 408

150. Types of Service Guarantees
150

151. 151

152. Seven Types of Jaycustomers: (1)
The Cheat and Thief
 The Cheat: thinks of various way to cheat the firm
 The Thief: No intention of paying--sets out to steal or
pay less
 Services lend themselves to clever schemes to
avoid payment
 e.g., bypassing electricity meters, circumventing TV
cables, riding free on public transportation
 Firms must take preventive actions against thieves,
but make allowances for honest but absent-minded
customers
152

153. Seven Types of Jaycustomers: (2)
The Rulebreaker
 Many services need to establish rules to guide
customers safely through the service encounter
 Government agencies may impose rules for health
and safety reasons
 Some rules protect other customers from dangerous
behavior
 e.g. ski patrollers issue warnings to reckless skiers
by attaching orange stickers on their lift tickets
 Ensure company rules are necessary, not should not
be too much or inflexible
153

154.  Shouts loudly, maybe mouthing insults, threats and curses
 Service personnel are often abused even when they are not to be
blamed
 Confrontations between customers and service employees can
easily escalate
 Firms should ensure employees have skills to deal with difficult
situations
Seven Types of Jaycustomers: (3)
The Belligerent
Confrontations between Customers and Service Employees Can Easily Escalate
 In a public environment, priority
is to remove person from other
customers
 May be better to support
employee’s actions and get
security or the police if
necessary if an employee has
been physically attacked
154

155.  Family Feuders: People who get into arguments with
other customers – often members of their own family
 The Vandal:
 Service vandalism includes pouring soft drinks into
bank cash machines; slashing bus seats, breaking
hotel furniture
 Bored and drunk young people are a common
source of vandalism
 Unhappy customers who feel mistreated by service
providers take revenge
 Prevention is the best cure
Seven Types Of Jaycustomers: (4)
Family Feuders And Vandals
155

156. Seven Types Of Jaycustomers: (5)
The Deadbeat
 Customers who fail to pay (as distinct from “thieves”
who never intended to pay in the first place)
 Preventive action is better than cure--e.g., insisting
on prepayment; asking for credit card number
when order is taken
 Customers may have good reasons for not paying
- If the client's problems are only temporary ones,
consider long-term value of maintaining the
relationship
156

157. Consequences of Dysfunctional Customer Behavior
 Employees:
 Mood or temper negatively affected
 Long-term psychological damage
 Staff morale will fall, affecting productivity
 Other Customers:
 Positive – rally to support an employee who is perceived to
be abused
 Negative – Contagious bad behavior might escalate the
situation
157

158. Practice Exam Question
158
 You are the chief marketing officer at XCel Pte Ltd.
From your perspective, for the benefit of the
organization, it is worthy to have service guarantees in
place. However, you need approval from the executive
board before you proceed with designing the service
guarantees. Explain to the executive board:
(a) the power of service guarantees
(b) how to design a service guarantee
(c) present the different types of service guarantees to the
board for consideration

159. Practice Examination Question
159
 As a graduate who has undertaken and successfully
completed the MKTG 1268 Service Quality course,
and a potential manager and owner of your own
service business, you know the importance of
building customer loyalty for the long-term success
of your business, as well as good service recovery
strategies when ‘things go wrong’. Recall and list the
key theories and concepts you have learnt that are
important to building customer loyalty and
implementing good service recovery, and give
examples of how these may be implemented.

160. Practice Examination Question:
160
 Research suggests that many dissatisfied
customers never complain but simply defect to
a competitor. What are the management
implications of this finding and how might
managers try to minimise such defections?

161. Practice Examination Question:
161
 Using the most appropriate theory/conceptual
model taught in this course, explain why a
customer may be ‘satisfied’ with consistently
poor levels of service (quality) they experience
from the same service provider.

162. Chapter 14 – Service Quality and Productivity
 Integrating Service Quality and Productivity
Strategies
 What is Service Quality?
 The GAP Model – A Conceptual Tool to Identify
and Correct Service Quality Problems
 Measuring and Improving Service Quality
 Learning From Customer Feedback
162

163. Overview of Chapter 14 (cont’d)
 Hard Measures of Service Quality
 Tools to Analyze and Address Service
Quality Problems
 Return on Quality
 Defining and Measuring Productivity
 Improving Service Productivity
163

164. Productivity and quality in a service context
164
 Service managers need to focus on both productivity and
quality from the customer’s point of view to ensure long-term
financial success. Service quality is the extent to which a
service meets or exceeds customer expectations.
 Productivity measures how efficiently a service firm can turn
inputs into outputs. Productivity and quality were historically
seen as issues for operations managers, so companies
focused on making internal process improvements that were
not necessarily linked to customer service priorities.
Continuing efforts to understand and improve quality
reinforces the idea that quality is customer defined.

165. Integrating Service Quality and
Productivity Strategies
 Quality and productivity are twin paths to
creating value for both customers and companies
 Quality focuses on the benefits created for
customers; productivity addresses financial costs
incurred by firm
If service processes are more efficient and increase
productivity, this may not result in better quality
experience for customers
Getting service employees to work faster to increase
productivity may sometimes be welcomed by
customers, but at other times feel rushed and
unwanted
 Marketing, operations and human resource
managers need to work together for quality and
productivity improvement
165

166. 5 Dimensions of Service Quality
Responsiveness: Promptness; helpfulness
Tangibles: Appearance of physical elements
Reliability: Dependable and accurate performance
Assurance: Competence, courtesy, credibility, security
Empathy: Easy access, good communication,
understanding of customer
166
166

167. 167
Table 14.1
Dimensions of
Service Quality

168. Six Service Quality Gaps
(Fig. 14.5)
168
168

169. Summary of the 6 Gaps
169
 Gap 1, the Knowledge Gap relates to a lack of management
understanding of what customers expect.
 Gap 2, the Standards Gap is a failure to translate managers’ perceptions
of customer expectations into the quality standards established for service
delivery.
 Gap 3, the Delivery Gap is the difference between specified delivery
standards and the firm’s actual performance.
 Gap 4, the Communications Gap is the difference between what the
company communicates and what is actually delivered to the customer.
 Gap 5, the Perceptions Gap is the difference between what the company
has actually delivered and what the customer perceives s/he has received
(note this perception may be wrong due to difficulty in evaluating the
service).
 Gap 6 (the overall gap) or the Service Gap is the difference between what
the customer perceives and his/her original expectations.

170. Suggestions for Closing the
6 Service Quality Gaps (1) (Table 14.2)
170
170

171. Suggestions for Closing the
6 Service Quality Gaps (2) (Table 14.2)
171
171

172. Suggestions for Closing the
6 Service Quality Gaps (3) (Table 14.2)
172
172

173. Suggestions for Closing the
6 Service Quality Gaps (4) (Table 14.2)
173
173

174. Soft and Hard Measures of Service Quality
 Soft measures —not easily observed, must be
collected by talking to customers, employees or
others
 Provide direction, guidance and feedback to
employees on ways to achieve customer satisfaction
 Can be quantified by measuring customer perceptions
and beliefs
 e.g. SERVQUAL, surveys, and customer advisory panels
 Hard measures —can be counted, timed or
measured through audits
 Typically operational processes or outcomes
 Standards often set with reference to percentage of
occasions on which a particular measure is achieved
174

175. SERVQUAL – See Appendix 14.1
(also see Table14.4 on page 396)
175
 Service-based components: The SERVQUAL Scale
 SERVQUAL (Appendix 14.1) is a survey research
instrument based on the premise that customers can
evaluate a firm’s service quality by comparing their
service perceptions with their prior expectations.
 In its basic form, the scale contains 21 perception
items and 21 expectation items, reflecting five
dimensions of service quality:

176. Key Objectives of Effective Customer Feedback
Systems
176
 Together, these allow the
company to understand
where it stands against the
best in the market, how it is
perceived by its customers,
and help improve its service
offering to satisfy (if not
delight) its customers.

177. Customer Feedback Collection Tools
 Total market surveys
 Annual surveys
 Transactional surveys
 Service feedback cards
 Mystery shopping
 Unsolicited customer
feedback
 Focus group discussions
 Service reviews
177

178. Hard Measures of Service Quality
 Service quality indexes
 Embrace key activities that have an impact on customers
 Control charts to monitor a single variable
 Offer a simple method of displaying performance over
time against specific quality standards
 Enable easy identification of trends
 Are only good if data on which based are accurate
178

179. Tools to Analyze and Address
Service Quality Problems
 Fishbone diagram
 Cause-and-effect diagram to identify potential causes
of problems
 Pareto Chart
 Separating the trivial from the important. Often, a
majority of problems is caused by a minority of causes
(i.e. the 80/20 rule)
 Blueprinting
 Visualization of service delivery, identifying points
where failures are most likely to occur
179
Covered in Chapter 8

180. Cause-and-Effect Chart for
Flight Departure Delays (Fig. 14.10)
180
180

181. Customer-driven Ways to Improve Productivity
 Change timing of customer demand
 By shifting demand away from peaks, managers
can make better use of firm’s productive assets and
provide better service
 Involve customers more in production
 Get customers to self-serve
 Encourage customers to obtain information and buy
from firm’s corporate Websites
 Ask customers to use third parties
 Delegate delivery of supplementary service
elements to intermediary organizations
181

182. Backstage and Front-Stage Productivity Changes: Implications for
Customers
 Backstage changes may impact customers
 Keep track of proposed backstage changes, and
prepare customers for them
 e.g., new printing peripherals may affect appearance of bank
statements
 Front-stage productivity enhancements are
especially visible in high contact services
 Some improvements only require passive acceptance,
while others require customers to change behavior
 Must consider impacts on customers and address
customer resistance to changes
 See Service Insights 14.3 : Managing Customers’
Reluctance to Change
182

183. Practice Exam Essay Question:
183
 List and describe each of the five service
quality (e.g. SERVQUAL) dimensions.
 How does/can your lecturer for MKTG1268
Service Quality (i.e. the provider of education
as a form of service), demonstrate each of
these five dimensions

184. 184
Sample Practice Exam Essay Question: read the following
case study and answer the question (next page)

185. Question for the exam case study:
185
• Using the GAPs model, identify THREE gaps
that explain why there is a difference in the
satisfaction levels between subsidized and
unsubsidized patients at the restructured
hospitals. Suggest FOUR ways restructured
hospitals can close the gaps.

186. Chapters 5 – 7 ? (the remaining
Service MM elements not tested)
Now what about the other chapters?186
These should be read as an overview because there will be a
question about applying the 7Ps - so, in that regards, the students
probably need to know those chapters to the extent of being
able to explain most of the 7Ps, and to generally know what is
involved in terms of the marketing decisions related to each of
those P

187. Chapter 5: Distributing Services Through Physical
and Electronic Channels
 Place and time
 Service distribution can take place through physical and non-
physical channels
 Some firms can use electronic channels to deliver all (or at
least some) of their service elements
 Information-based services can be delivered almost
instantaneously electronically
 Delivery Decisions: Where, When, How
 Time is of great importance as customers are physically
present
 Convenience of place and time become important
determinants of effective service delivery
 There are distribution channels for services – travel agency,
medical, education etc.
187
Key Issues

188. Chapter 6 : Setting Prices and Implementing
Revenue Management
 Price and other user outlays
 From the firm’s perspective, pricing generates income and creates profits
 From the customer’s perspective, pricing is key part of costs to obtained
wanted benefits. Marketers must recognize that customer costs involve
more than price paid to seller.
 Factors affecting pricing of services
 Identify and minimize non-monetary costs incurred by users:
 Additional monetary costs associated with service usage (e.g., travel to service location,
parking, phone, babysitting, etc.)
 Time expenditures, especially waiting
 Unwanted mental and physical effort
 Negative sensory experiences
 Revenue management is an important part of pricing
 Rate fencing
188
Key Issues

189. Chapter 7: Promoting Services and Educating
Customers
 Difficulty of marketing communication because of
intangibility issue
 Promotion and Education
 Plays three vital roles:
 Provide information and advice
 Persuades the target customers of merit of service product or
brand.
 Encourages customer to take action at specific time
 The promotions mix used in services marketing
 Customers may be involved in co-production so:
 Teach customer how to move effectively through the service
process
 Shape customers’ roles and manage their behavior
189
Key Issues

190. And Finally….
190
 The best of luck !!
 Go out there and SCORE!!
SQ LO1 Class of April 2013