CHAPTER ONE

WHAT IS SERVICE?
Chapter Objectives
Upon completion of this chapter students are expected to:
 explain what services are
 explain the need for special services marketing concept and practices.
 outline the basic differences between goods and services and the resulting challenges for
service businesses.
 describe the six levels of the service classification scheme.
 introduce the services marketing triangle and gaps model of service quality as powerful
frame works that can aid in addressing the challenges of managing and marketing
services.

1.1. Definition Services

One of the major world trends in recent years has been the dramatic growth of services. As a
result of rising of effluence, more leisure time, and the growing complexity of products that
requires servicing. Services are growing even faster in the world economy, making up a
quarter of the value of all international trade. Putting in the simplest terms, services are
deeds, processes, and performances. Relying on the simple, broad definition of services,
businesses but are also integral to the offerings of many manufactured goods producers for
example, car manufactures offer warrants and repair services for their cars, computer
manufacturers offer warranties, maintenance contracts, and training industrial equipment
producers offer delivery in venture management and maintenance services. All of these
services are examples of deeds, processes, and performances.
The most quoted definitions of services are given below:
- A service is enacting of performance offered by one party to another. Although
the processes may be tied to a physical product, the performance is essentially
intangible and does not normally result in colonelship of any of the factory of
production.

Zerihun H. Msc
Service Marketing (MKMT-301) 1
 - Services are deeds (insurance), processes (customs clearing), and performances
(surgery, hair cut, or teaching). Services are not triangle things that can be
touched, seen, and felt, but rather are intangible deeds and performances.
- Services are economic activities that create value and provide benefits for
customers at specific times and places as a result of bringing about a desired
change in the recipient of the service.
- Services include all economic activities whose out put is not a physical product, is
generally consumed at the time it is produced, and provides added value informs
that are essentially intangible concerns of its purchaser.

1.2. Nature and Characteristics of a Service

Activities such as renting a hotel room, depositing money in a bank, traveling on an
airplane, getting a haircut, having a car repaired, watching a professional sport, seeing
a movie, and getting advice from a lawyer all involve buying a service. Company
must consider four special service characteristics when redesigning marketing
programs: intangibility, insurability, variability, and perish ability.

1.2.1. Service intangibility

Service intangibility means that services can not be seen, tasted, felt, heard, or smelled
before they are bought. For example, people undergoing cosmetic surgery can not see the
result before the purchase, and air line passengers have nothing but a ticket and the promise
of safe delivery to their destinations. To reduce uncertainty, buyers look for “signals” of
service quality. They draw conclusions about quality from the place, people, price,
equipment, and communications that they can see. Therefore, the service providers’ task is to
make the service tangible in one or more ways. Where as product marketers try to add
intangibles to intangible offers. So, service intangibility is a major characteristic of services.

1.2.2. Service Inseparability

Physical goods are produced, then stored, later sold, and still later consumed. In contrast,
services are first sold, then produced and consumed at the same time service inseparability
means that services cannot be separated from their providers, whether the providers are
people or machines. If a service employee provides the service, then the employee is a part of
the service. Because the customer is also present as the service is produced, provider –
customer interaction is a special feature of services marketing both the provider and the
customer affect the service outcome.
1.2.3. Service Variability
Service variability means that the quality of services depend son who provides them as well
as when, where and how they are provided. For example, some hotels soy, Marriott – have
reputations for providing better varies according to his or her energy and frame of mind at the
time of each customer encounter service variability is a major characteristic of services.

1.2.4. Service Perish Ability

Service perishes ability means that service cannot be stored for later sale or use. Some
doctors charge patients for missed appointments because the service value existed only at the
point and disappeared when the patient did not show up. The perish ability of services is not
a problem when demand is steady. However, when demand fluctuates, service firms often
have difficult problems. For example, because of rush – hour demand, public transportation
companies have to own much more equipment than they would if demand were even through
out the day. Thus, service forms often design strategies for producing a better much between
demand and supply. For instance hotels and resorts charge lower prices in the off- season to
attract more guests, and restaurants hire part time employees to serve during peak periods.

1.3. Services versus Customer Service

As we begin our discussion of services marketing and management, it is important to draw
the distinction between services and customer service services as broadly defined above,
encompass a wide range of industries. However, manufactures and technology companies
can offer services to the market place as well.

Services are offered for sale by companies’ customer service is also provided by all types of
companies – manufactures, IT companies, service companies. Customer service is the service
provided in support of a company’s core products. Customer service most often includes
answering questions, taking orders, dealing with billing issues, handling complaints, and
perhaps scheduling maintenance or repairs. Typically, there is no charge for customer
service.
Quality customer service is essential to building customer relationships. It should not,
however, be confused with the services provided for sale by a company.

1.4. Why Services Marketing?

Many forces led to the growth of services marketing
 A service based economy
Economic importances of services are as follows:
- The service sector represents as a major share of GDP
- The service sector has become a major employer
- Trade in services is growing world wide.
 Services as a business imperative in manufacturing and IT
- Manufacturing and technology industries revenues and profit are coming from
services.
- Customers not only expect excellent, high – quality goods, they also expect high
levels of services all with them.
- As manufactures and IT companies become more and more service – focused, the
need for special concepts and approaches for managing and marketing services
becomes even more apparent.
 Services marketing is different
- More variable exists in the marketing mix of services than for customers’ goods.
- In service business, marketing and operations are more closely linked than in a
manufacturing business. The service production process is part of the marketing
process.
- Customer/employee interface is a major difference between goods marketing and
services marketing.
- Pricing of services is difficult because determining the costs associated with
service product and delivery is very difficult.
- The benefits of using price as a promotional weapon are not apparent in services.
Promotional price cuts tended to erode hard frugal positioning and image.
1.5. Differences in Goods versus Services Marketing
Goods Services Resulting Implications
Tangible Intangible - Services cannot be inventories
- Services cannot be patented
- Services cannot be readily displayed or
communicated.
- Pricing is difficult
Standardized Heterogeneous - Service delivery and customer satisfaction
(Variable) depend on employee actions
- Service quality depends on many un
controllable factors
- There is no sure knowledge that the service
delivered matches what was planned and
promoted
Production separate Simultaneous - Customers participate in and affect the
from consumption production and transaction
consumption - Customers affect each other
(inseparable) - Employees affect the service out come
- Employees affect the service out come
- Decentralization may be essential
- Mass production is difficult
Non perishable Perishable - It is difficult to synchronize supply and
demand with services.
- Services cannot be returned or resold.

1.6. Classification of Services

Classifying a service offers several benefits, such as:
- Providing a better understanding of the particular service under consideration.
- Highlighting the similarities as well as the differences between the service being
classified and other services, and
- Assisting in the development of marketing strategies and tactics.
Services in the same categories will face the same types of challenges and the same
marketing strategy will normally work for all services in a given category. However
application of the strategy may have some variation with in each category. The same is true
of marketing activities such as promotion, pricing, and distribution; the same tactics tend to
work for all services within a single category.

The classification scheme offers several advantage advantages including it:

1. Is comprehensive, incorporating the major classification schemes already introduced?
2. Follows a systematic order, allowing marketers to classify services based on common
characteristics.
3. Allows the development of marketing strategies for groups of services with common
characteristics.

1.6.1. Levels of classification of services

1.6.1.1. Nature of the organization
The first level of classification system deals with nature of the organization. At this level the
purposes, structure, and type of their service is identified. Who is the target customer a house
hold customer or business organizations? It is a profit or a non – profit venture? For instance
AAUCC is a government institution without a profit motive. The college offers a formal
education for individuals in its regular and extension program. Besides it offers an external
training and consultancy service to external business, government offices, and NGOs.

1.6.1.2. Nature of the Service

Of the service addresses the nature of the service in terms of the degree of trade ability and
merchantability.

Tradability refers to the trade off between goods and services offered by a service firm. It is
the relative involvement between goods and services in the production of the service.
Merchantability refers to distance from which a customer can make a transaction with a
service firm. It is a relative distance between the customer and the service provider in the
acquisition performance of the service.

In terms of tradability, AAUCC is a pure service directed to ward people. It is low interns of
merchantability, which means the customer and the service provider both must be present
when the service is performed, it can not be performed at arm’s length such as in the case of
cable television /like DSTV/, long distance telephone service, or through computer. AAUCC
is a pure service provider and as such it has to address the issues of intangibility and perish
ability. To market services low in merchantability, intangibility. To marketed services low in
merchantability, management must provide physical space for both customers and service
providers. The number of customers that can be served simultaneously is limited by the
physical space an available. Travel agents are high in merchantability, so they have
flexibility in terms of how many customers they can serve a tone and when the service can be
performed. Since few customers actually come to the service, the amount of physical space
needed for a travel agent is quite small.

1.6.1.3. Customer Relationship

At the third level, relationship can be either formal overformal. Formal relations ships are
used by facilities as Ethiopian television (ETV) or DSTV that the charge individuals an
annual fee or Ethiopian Telecommunication corporation (ETC) that charges a monthly fee, in
formal relationships is pay – as –use systems like most of the fitness centers in town. Where
there is an informal relationship, demand is more difficult to forecast.

1.6.1.4. Nature of demand

In terms of the fourth level demand can be greater, equal or less than supply capacity of the
firm. To reduce the negative impact of perish ability, service providers must develop
strategies to cope with fluctuating demand. This goal can be accomplished by making
simultaneous adjustments in demand, supply, and capacity. The goal of these strategies is
achieve parity and balance among the three. Demand currently exceeds capacity for AAUCC
during September to June. However, during July and August the capacity is edge in the
program.
1.6.1.5. Service Package
Service package is a group services and goods offered by a service firm. AAUCC offers
multiple of services like formal education in different degree and diploma programs,
consultancy, and an external training services. Service package involves two components.
a) Customization – customization refers to services designed to meet the needs and
wants of individual customers. AACC, for instance, designs a customized and tailor
 made training programs for various organizations based on their unique requirements.
By customizing part of the service, costs are increased.
b) Degree of durability – it refers to the life span of the service after purchase. For
instance, once a student has graduated in accounting, he has the basic skills necessary
to be an accountant for a long time with some refreshment training arrangements.

6.1.6. Delivery Method

The six level of the classification scheme deals with the delivery of the service. Delivery
method involves issues like whether the service is provided only at one site or in multiple
sites, whether the type of consumption is independent or collective, and whether capacity is
allocated based on reservation; order of arrival, or on preferential terms.

Summary of the service classification scheme

Level: Natural of organization
Category Option AAUCC
Purpose satisfy needs of Individuals Purpose is to satisfy the needs of
Business both individuals government NGOs
Both and business

Structure Profit structure is an on profit

Non profit organization
Type public Type is a public institution

Level 2: Nature of service

Degree of tradability Embodied service pure Degree of tradability is a
service pure service
Service directed to ward Individuals things Service is directed to ward
individuals
Degree of merchantability High medium low Degree of merchantability
is low
Level 3 Customer relation ship
Type of relation ship Formal informal both Type of relationship is
formal
Degree of participation Customer must be present The customer must be
customer must start and present
finish the service customer
has to start customer has to
finish the service.
Level 4: Nature of Demand
Level of demand Demand exceeds capacity Demand exceeds capacity
 Capacity exceeds demand
Degree of fluctuation Wide Degree of fluctuation is
Narrow variable
Variable
No fluctuation
Levels: service package Package
Number of services and goods One service Multiple service
One service, one good
One service, multiple goods
Multiple services, one good
Multiple services, multiple goods
Degree of equipment base High Degree of equipment base is
Medium medium
Low
Degree of customization High Degree of customization is
Medium medium
Low
Degree of durability High Degree of durability is high
Medium
Low
Can not be defined
Level 6 delivery Method
Availability of service One site multiple sites Availability of service is at
multiple sites
Nature of delivery Continuous Nature of delivery is
Discrete discrete
Both
Type of consumption Independent Type of consumption is
Collective collective
Both
Allocation of capacity Reservation Allocation of capacity is
Order of – arrival preferential
Preferential
Issues that service firms must address at each level of the classification schemes:
- Level 1 will impact a service firms promotional strategies and its strategic
approach to business.
- Level 2 will affect the operations, efficiency, productivity, distribution, and
personnel.
- Level 3 will impact operation, efficiency, supply and demand strategies, pricing,
and personnel.
 - Level 4 will affect supply and demand strategies, distribution and efficiency.
- Level 5 will impact distribution, capital investment, differentiation strategies,
efficiency, productivity, staffing, and pricing.
- Level 5 affects facility design and distribution
Industries classified with in the service sector
Transportation and public utilities Other services
Transportation Hotels and other lodging places
Rail read transportation Personal services
Local and ware housing Auto repair, services, and parking
Water transportation Miscellaneous repair services
Air transportation Motion pictures
Pipelines, except natural gas Amusement and recreation services
Transportation service Health services
Communication Legal services
Telephone and telegraph Educational services
Radio and television broad casting Social services
Electric, gas and sanitary services Membership organization
Whole sale trade Miscellaneous services
Retail trade Private household services
Finance, insurance, and real estate Federal government
Depository institutions State and local government
Security and commodity brokers, and services
Insurance agents, brokers and services
Real state
Holding and other investment companies
 CHAPTER TWO
THE SERVICES MARKETING MIX

Chapter objectives:
Up on completion of this chapter the students should be able to:
- Explain the traditional marketing mix in relation to service
- Describe the forms of physical evidence
- discuss the service scope usage
- Illustrate the critical importance of service employees in creating customer
satisfaction and service quality.
- demonstrate the challenges in the rent in boundary – spanning roles
- Providing examples of strategies for creating customer oriented service delivery
through hiring the right people.

2.1. The Traditional Marketing Mix

The traditional marketing mix involves in the following four components.

2.1.1. Service out Come/Product

The product component of the marketing mix is the outcome of the service. It consists of two
components the technical and the functional.
- The technical outcome is the end result of the service or the “what” of the service.
For dental services, it would be the completed crown.
- The functional outcome is the process of receiving the service or “how” the
service was provided. Functional is the way the customer or client was treated by
the firm’s staff. For dental service, it is the way the dentist, the dental assistant,
and receptionist inter acted with the patient.
2.1.2. Price
- Piece is the sum of all the values that consumers exchange for the benefits of
having or using the product or service.
- Price has been the major factor affecting buyer choice; non price factors have
become increasingly important in buyer choice be savior.
- Price is the only element in the marketing mix that produces revenues; all others
pep resent costs.
Price is totally the second component of the service. Because service is intangible and
experiential in nature, the price becomes.
More important to consumers as acute of what to expect. Higher prices tend to convey
higher quality. However, an extremely high price may be viewed by consumers as rip off.
The converse is also true; lower prices tend to convey lower quality but for some services
and for some consumers, this acceptable.

2.1.3. Distribution
A distribution channel is set of inter depend organizations (intermediaries) involved in
the process of making a product or service available for use or consumption by the
consumer or business user. According to this distribution channel manufacturers should
pay attention to how the product moves with in the foreign country. In other words, the
internal company must take a whole – channel view of the problem of distributing its
product to the final users.
- With in – country channels of distribution vary considerably a mong countries or
from place to place.
- All these distribution levels can mean that the consumers’ price ends up double or
triple the importers price.
- Distribution has the in herent characteristics of services distribution become
challenging. Distribution is availability and accessibility of a service to
consumers.
 2.1.4. Promotion
Service firms have several means of promoting the firm. Advertising, sales promotion,
and personal selling are the major components. Since services are experiential in nature,
promoting a service is more complex than promoting a good.
- Companies can run the same advertising and promotion used in the home market
or change them for each local market, a process called communication adaptation.
If it adapts both the product and a adaptation, the company engaged indual
adaptation.
- Considering the message, the company can change the message at fouy different
levels:
1. The company cause one message every where, varying only the language, name ,and
colors.
2. The second possibility is to use the some the magically but adapt the copy to each local
market.
3. The use of media also requires infernational adaptation be calls media availability varies
from country to country
4. Marketers must also adapt this sales-promotion techniques to different markets Generally,
the result of these varying preferences and restrictions is that internal companies assign
sales promotion as a responsibility of local management.

2.2. Expanded Mix for Services

Because services are usually produced and consumed simultaneously, consumers are present
in the firm ‘s factory, interact directly with the firms personnel, and are actually part of the
service production process. also, personnel services are intangible customers will often be
looking for any tangible cue to help them under the nature of the service experience .These
facts have led services markets to conclude that they can use additional variables to
communicate design and décor of the hotel as well as the appearance and attitudes of its
employees will influence customer per caption and experiences.
Acknowledgment of the importance of these additional communication variables hassled
services marketers to adopt the con kept of an expanded marketing mix.
In addition of the trade ton al four Po’s, the services marketing includes:
1.people
2.physical evidence and
3.process
2.2.1. People
I t refers to all human cafés who ploy apart in serviced delivery and thus influence the
buyer’s perceptions, the firm’s personnel ,the customer, and the other customers in the
service environmental of the human actors participating in the delivery of a service provide
cues to the customer regarding the nature of the service itself. How these people are dressed,
theist personal appearance,
And theis attitudes and behaviors all in fluence the customer’s perceptions of the service. The
service provides or contact person cane very important.
In many service situations, customers themselves can also influence service delirery, thus
affecting serrice duality and theist own satisfaction for example health care patients greatly
affect the quality of service they receive when they either complier don’t comply with health
negiments prescribed by the provides. customers not only influence the irown service
outcomes, but they influence other customers as wall In a theater, at aball game, or in a
classroom, customers can influence the quality of service received by others-eithes enhancing
or detracting from other custom mars’ experiences.

2.2.1.1 The Critical Importance of Service Employees

People front line employees and those supporting them from behind the scenes, are critical to
the success of any service organization .people in the services marketing mix in voles all the
human actors who apart in service delivery and thus influence the buyer’s perceptions;
namely, the firm’s personnel, the customers, and other customers in the service environment.
In this chapter we focuses service employs because they are:
- the service.
- the organization in the customer’s ayes.
- marketers.
In many cases , the contact employee is the service for example, in most personal service
cog, hair counseling physical trainers child care cleaning maintenance counseling legal
services the contact employee provides the entire service single handedly.
The offering is the employee Thus investment in the improvement of manufacture red
product.

Even if the contact employee doesn’t perform the service entirely he or she may still
personify the firm in the customer’s eyes. All of the employees alas firm or health clinic from
the professionals who provide to the receptionists and office staff-represent the firm to the
captions of the organization.

Because contact employees represent the organization and can directly influence consumer
satisfaction they per form the role of marketers They physically embody the product and are
walking billboards from a promotional standpoint Whether acknowledge deed or not actively
selling or not service employees perform marketing functions . They can perform these
functions well to the organization’s advantage or poorly the organizations detriment In this
chapter we will examine strategies for ensuring that service employees perform their
marketing functions will.

2.2.1.2. Employee Satisfaction Customer Satisfaction and Profits

There is a concrete evidence that satisfied employees make for satisfied customers (and
satisfied customers can intern rein force employees sense of satisfaction in their jobs) some
have been gone soarasto suggest that unless service employees are happy in their jobs
customer satisfaction will be difficult to achieve

Through this research with customers and employees Bowen have shown that both acclimate
for service and climate for employee well- being were highly correlated with over all
customer captions of service quality It is also found that customer satisfaction to be strongly.

Related to employee turnover. Ultimately there is connection between employee tension

levels, poorer quality service, and negative customer reactions.
Customer satisfaction:
- Whether the buyer is satisfied after purchase depends on the offer’s performance in
relation to the buyer’s expectations.
- In general satisfaction is a person’s feelings of pleasure or disappointment resulting from
comparing a product’s perceived performance (or outcome) in relation to his or her
expectations.
- As this definition makes clear, satisfaction is a function of perceived performance and
expectations. If the performance falls short of expectations, the customer is dissatisfied. If
the performance matches the expectations, the customer is satisfied. If the performance
exceeds expectations, the customer is highly satisfied or delighted.

2.2.1.3. Service Quality Dimensions are Driven by Employee Behaviors

All of the dimensions of service quality (reliability, responsiveness, assurance, empathy, and
tangibles) can be influenced directly by service employees.
Delivering the service as promised – reliability is often totally with in the control of front line
employees. Even in the case of automated services (such as AT MS or automated ticketing
machines), behind the scenes employees are critical for making sure all of the systems are
essential for setting things right and using their judgment to determine the best course of
action for service recovery.

Front line employees directly influence customer peer captioned of responsiveness through
their personal willingness to help and their prompt in serving customers consider the range of
responses you receive from different retail store clerks when you need help finding a
particular item of clothing. One employee may ignore your presence, while another offers to
help you search and calls other stores to locate them. One may help you immediately and
efficiently, white another may move slowly in accommodating even the simplest request.

The assurance dimension of service quality is highly dependent on employees’ ability to

communicate their credibility and to inspire trust confidence. The reputation of the
organization will help, bat in the end, individual employees with whom the customer
interacts confirm a and b build trust in the organization or detract from its reputation an
ultimately destroy trust. For startup or relatively unknown organizations, credibility, trust,
and confidence will be tied to tally to employee actions.

It is difficult to imagine how an organization would deliver “carring”, individualized

attention” to customers independent of its employees. Empathy implies that employees will
pay attention, listen, adapt, and be flexible in delivering what individual customers need.
Organizations that leave his quality dimension to chance are likely to find extreme variation
in this dimension a cross employees and customer experiences. Employee appearance and
dress are important aspects of the tangibles dimension of quality, along wihg many other
factors that are independent of service employees (e.g, the service facility, décor brochures,
and signage).

2.2.1.4. Boundary – spanning roles

Our focus in this chapter is on front – line service employees who interact directly with
customers, although much of what is described and recommended can be applied to internal
service employees as well. The front – line service employees are referred to as boundary
spanners because they operate at the organization’s boundary. Boundary spanners provide a
link between the external customer and environment and the internal operations of the
organizations. They serve a critical function in understanding, filtering, and interpreting
information and resources to and form the organization and its external constituencies.

Who are these boundary spanners? What types of people and positions comprise critical
boundary- spanning roles? Their skills and experience cover the full spectrum of jobs and
careers. In industries such as fast food, hotels telecommunication, and retail, the boundary
spanners are the least skilled, lowest – paid employees in the organization. They are order
takers, front – desk employees, boundary spanners are well paid, highly educated
professionals, for example, doctors, lawyers, accountants consultants, architects and teachers.

No matter what the level of skill or pay, boundary – spanning positions are often high stress
jobs. In addition to mental and physical skills, these positions require extraordinary levels of
emotional labor, frequently demand an ability to handle interpersonal and inter organizational
conflict, and call on the employee to make real time trade – offs between quality and
productivity on the job. Sometimes these stresses and trade – offs result in a failure to deliver
services as specified, which widens gap.

Requisite skills for boundary spanners:

a. mental and physical labor
b. emotional labor
c. ability to handle interpersonal and inter – organizational conflicts
d. ability to maintain a quality/ productivity trade off
The term emotional labor was coined by Artile hochschild to refer to the labor that goes
beyond the physical or mental skills needed to deliver quality service. It means delivering
smiles, making eye contact, showing sincere interest, and engaging in friendly conversation
with people. Friendliness, courtesy, empathy, and responsiveness directed toward customers
all people. Friendliness, courtesy, empathy, and responsiveness directed toward customers all
require huge amounts of emotional labor from the front – line employees who shoulder this
responsibility for the organization. Emotional labor draws on people’s feelings (often
requiring them to suppress their true feelings) to be effective in their jobs. A front – line
service employee who is having a bad day or isn’t feeling just right is still expected to put on
the face of the organization when dealing with customers. One of the clearest examples of
emotional labor is the story (probably apocryphal) of the flight attendant who was
approached by a businessman who said, “Let’s have a smile.” “Okay,” she replied, “I will tell
you what, first you smile and then I’ll smile, okay?” He smiled. “Good,” she said. “Now hold
that for 15 hours,” and walked away.

Many of the strategies we’ll discuss later in the chapter can help organizations and
employees deal with the relities of emotional labor on the job. For the organization such
strategies include carefully selecting people who can handle emotional stress, training them
in needed skills (e.g., listening skills, problem solving), and teaching or giving them coping
abilities and strategies (e.g., job rotation, schedules breaks, team – work).

Other companies train employees in how not to absorb a customer’s bad mood, by having
them spend hours role playing to suppress the natural reaction to return an insult with an
insult. Providing good physical working conditions and allowing employees to take
scheduled breaks to rely on each other for support, and to rotate positions among the most
demanding front – line jobs also help to reduce the stress of excessive emotional labor.

Front line employees often face interpersonal and inter – organizational conflicts on the job.
Their frustration and confusion can, if left unattended, lead to stress, job dissatisfaction, a
dimensioned ability to service customers, and burnout. Because they represent the customer
to the organizations and often need to manage a number of customers simultaneously, front
liners inevitably have to deal with conflicts, including person/ role conflicts, organization/
client conflicts, and inter conflicts.

2.2.1.4.1. Sources of Conflict

a). Person/Role Conflicts
 Boundary spanners may feel conflicts between what they are asked to do and their
own personalities, orientations, or values.
 Sometimes there may be a conflict between role requirements and the self-image or
self – esteem of the employee.
 Role conflicts may arise when employees are required to wear clothing or change
some aspect of their appearance to conform to the job requirements.

b). Organization/Client Conflict

Organization/client conflict may arise when:
 rules and standards are not customer based.
 a customer makes excessive demands
 the employee believes the organization is wrong in its policies

c). Inter – client conflict

 Inter – client conflict occurs when there are incompatible expectations and
requirements from two or more customers.

2.2.1.4.2. Quality/ productivity trade – offs

From – line service workers are asked to be both effective and efficient: they are expected to
deliver satisfying service to customers and at the same time to be cost effective and
productive in what they do. A physician, for example, is expected to deliver caring, quality,
individualized service to her patients but at the same time to serve a certain number of
patients within a specified time frame. A checker at a grocery store is expected to know his
customers and to be polite and courteous, yet also to process the groceries accurately and
move people through the line quickly, an architectural draftsperson is expected to create
quality drawings, yet to produce a required quantity of drawings in a given period of time.
These essential trade – offs between quality and quantify, and between maximum
effectiveness and efficiency, place demands and pressures on service employees.

Peter Drucker suggest that productive performance in all service jobs will combine both
quality and quantity objectives. For some jobs, such as that of a research scientist, quality is
really all that matters the number of results, or quantity, is quite secondary. If a scientist can
develop one new drug with the potential of saving millions of lives and generating substantial
revenues for a company, that one quality result is invaluable. At the other extreme, there are
service jobs that are almost totally quantity dominated for example, filing papers, processing
claims, clearing rooms, servicing fast food. In these jobs, once certain customer based
standards are set and systems are in place to ensure conformance, the measure based
standards are set and systems are in place to ensure conformance, the measure of
performance is largely that of how much the worker can accomplish in a certain period of
time. Most service jobs fall some where between that of the research scientist and that of the
claims processor.

However, technology is being used to an ever- greater degree to balance the quality/ quantity
trade – off to increase productivity of service workers and at the same time to provide higher
quantity service for the customer.

2.2.1.5. Strategies for Closing Gap

A complex combination of strategies is needed to ensure that service employees are willing
and able to deliver quality services and that they stay motivated to perform in in customer
oriented, service – minded ways. As described in chapter 1, we are focusing on strategies for
ensuring that service promises can be kept. These strategies for enabling service promises are
often referred to as internal marketing. By approaching human resource decisions and
strategies from the point of view that the primary goal is to motivate and enable employees to
deliver customer-oriented promises successfully, and organization will move toward closing
gap.

The strategies presented here are organized around four basic themes. To build a customer –
oriented, service minded workforce, an organization must
I. Hire the right people
1. Compete for the best people
2. Hire for service competencies and service inclination
3. Be the preferred employer
II. Develop people to deliver service quality
1. Train for technical and interactive skills
2. Empower employees
3. Promote team work
III. Provide the needed support systems
1. Develop service oriented internal processes
2. Provide supportive technology and equipment
3. Measure internal service quality
IV. Retain the best people
1. Measure and reward strong service performers
2. Treat employees as customers
3. Include employees in the company vision
Within each of these basic strategies are a number of specific sub strategies for
accomplishing the goal.

1. Hire the right people

One of the best ways to close gap 3 is to start with the right service delivery people from the
beginning. This implies that considerable attention should be focused on hiring and recruiting
service personnel. To theat end service providing companies should.

1. Compete for the best people to get the best people, an organization needs to identify
who the best people are and compete with other organizations to hire them. Leonard
Berry and A. Parasuraman refer to this as “Competing for talent market share”. Given
 the multidimensional nature of service quality service is than their service
competencies. They must also be screened for service inclination.
2. Hire for service competencies and service inclination once potential employees have
been identified, organizations need to be conscientious in interviewing and screening
to truly identify the best people from the pool of candidates. It has been suggested
that service employees need two complementary capacities.
1. Competencies and
2. Service inclination
Service competencies are the skills and knowledge necessary to do the job. In many cases.
Competencies are validated by achieving particular degrees and certifications. In other cases,
service competencies may not be degree related. But may instead relate to basic intelligence
or physical requirements. A retail clerk, for example, must possess basic math skills and the
potential to operate a cash register. An airport shuttle driver must be able to drive a large van
and be physically capable of loading and unloading heavy luggage. In a typical applicant
pool for a service job, service competencies vary widely.

Employees must also be screened for service inclination – their interest in doing service
related work – which is reflected in their attitudes toward service and orientation toward
serving customers and others on the job. Self – selection suggests that most service jobs will
draw applicants with some level of service inclination, and that most employees in service
organizations are inclined toward service. However, some employees clearly have a greater
service inclination than others. Research has shown that service effectiveness is correlated
with having service – oriented personality characteristics such as helpfulness, thoughtfulness,
and sociability. This same research defines service orientation as a syndrome containing
elements of good adjustment, likeability, social skill, and willingness to follow rules.
An ideal selection process for service employees assesses both service competencies and
service inclination, resulting in employee hires who are high on both dimensions.
3. Be the preferred Employer one way to attract the best people is to be known as the
preferred employer in a particular industry or in particular location. To be a preferred
employer, firms should have an equitable and attractive benefit packages with a
conductive working environment. Other strategies that support a goal of being the
 preferred employer include providing extensive training, career and advancement
opportunities, excellent internal support, and attractive incentives, and offering
quality goods services that employees are proud to be associated with.

II. Develop people to deliver service quality

To grow and maintain a workforce that is customer oriented and focused on delivering
quality, an organization must develop its employees to deliver service quality. That is, once it
has hired the right employees, the organization must train and work with these individuals to
ensure service performance.
1. Train for technical and interactive skills to provide quality service, employees need
on going training in the necessary technical skills and knowledge and in process or
interactive skills. Examples of technical skills and knowledge are working with
accounting systems in hotels, cash machine procedures in retail store, underwriting
procedures in an insurance company, and any operational rules company has for
running its business.

In addition to the type of technical skills and knowledge training just described, service
employees need training in interactive skills that allow them to provide courteous, caring,
responsive, and empathetic service. Successful companies invest heavily in training and
make sure that the training fits their business goals and strategies.

It isn’t just front- line service personnel who need this combination of service skills and
interactive training. Support staff, supervisors, and mangers need service training as well.
Unless contact employees experience the same values and behaviors from their supervisors,
they are unlikely to deliver high – quality service to customers.
2. Empower Employees many organizations have discovered that to be truly responsive
to customer needs, front- line providers need to be empowered to accommodate
customer requests and to recover on the spot when things go wrong. Empowerment
means giving employees the desire, skill, tools, and authority to serve the customer.
While the key to empowerment is giving employees authority to make decisions on
the suctomer’s behalf, authority alone is not enough. Employees need the knowledge
and tools to be able to make these decisions, and they need incentives that will
encourage them to make the right decisions.
Potential costs and benefits of empowerment
Benefits
o Quicker online response to customer needs during service delivery
o Quicker online responses to dissatisfied customers during service recovery.
o Employees feel better about their jobs and themselves.
o Employees will interact with customers with more warmth and enthusiasm.
o Empowered employees are a great source of service ideas.
o Great word – of – mouth advertising from customers.

Costs
o A potential greater dollar investment in selection and training
o Higher labor costs
o Potentially slower or inconsistent service delivery

3. Promote Teamwork the nature of many service jobs suggests that customer
satisfaction will be enhanced when employees work as teams. Because service jobs
are frequently frustrating, demanding, and challenging, a teamwork environment will
hip to alleviate some of the stresses and strains. Employees who feel supported and
that they have a team backing them up will be better able to maintain their
enthusiasm and provide quality service.

III. Provide needed support systems

To be efficient and effective in their jobs, service workers require internal support systems
that are aligned with their need to be customer focused. This point cannot be
overemphasized. In fact, without customer – focused internal support and customer –
oriented systems, it is nearly impossible for employees to deliver quality service no matter
how much they want to. For example, to be effective a patient – focused doctor requires that
the hospital have internal systems that allow him/her to get access to patient information,
modern surgical and testing equipment, and staff who share her commitment to patient
satisfaction. The following sections suggest strategies for ensuring customer oriented internal
support.
1. Develop service oriented internal processes
To best support service personnel in their delivery of quality service on the front line, an
organization’s internal processes should be designed with customer value and customer
satisfaction in mind. Other words, internal procedures must support quality service
performance.

In many companies internal processes are driven by bureaucratic rules, tradition, cost
efficiencies, or the need of internal employees. Providing service – and customer – oriented
internal processes can therefore imply a need for total redesign of systems which has become
known as “process reengineering.” While developing service – oriented internal processes
through reengineering sounds sensible, it is probably one of the most difficult strategies to
implement, especially in organizations that are steeped in tradition.

2. Measure internal service Quality one way to encourage supportive internal service
relationships is to measure and reward internal service. By first acknowledging that
everyone in the organization has a customer and then measuring customer perceptions of
internal service quality, an organization can begin to develop an internal quality culture.
Internal customer service audits and internal service guarantees are two strategies used to
implement a culture of internal service quality.
 Through the audit, internal organizations identify their customers, determine their needs,
measure how well they are doing, and make improvements and enhancing internal
service quality.
A cautionary note: risk of measuring and focusing on internal service quality and internal
customers is that the people can sometimes get so wrapped up in meeting the needs of
internal customers that they forget they are in business to serve the ultimate, external
customers. In measuring internal service quality, therefore, it is important to constantly draw
the linkages between what is being delivered internally and how it supports the delivery of
the final service to customers.
Steps in conducting an internal customer service audit
Define your customer
1. List all the people or departments in the organization who need help from you or your
department in any way. This may include specific department, particular staff people,
the CEO, certain executives, or the board of directors.
2. Prioritize the names on the list, placinf the people or departments that rely on you.

Identify your contribution

3. Fore each of these customers, specify the primary need you think they have to which
you can contribute. Take to your internal customers about what problems they are
typing to solve and think about how you can help.

Define service Quality

4. What are the critical moments of truth that really define the department – internal
customer interface from you customer’s point of view? Map the process, and list the
moments of truth.
5. Fore ach major internal customer, design a customer report card (based on customer
input) and a set of evaluation criteria for your department’s service package, as seen
through the eyes of that customer. The criteria might include such dimensions as
time- line, reliability, and cost.

Validate your criteria

6. Talk to your customers. Allow them to revise, as necessary, how you saw their needs
and the criteria they used in assessing your performance. This dialogue itself can go a
long way toward building internal service teamwork.
7. Evaluate your service (using internal measures and/or customer surveys) against the
quality criteria you established in talking to your customers. See how you score.
Identify opportunities for improvement. Set up a process and timetable for following
through.
Develop a mission statement based on what you contribute
8. Consider drafting a brief, meaningful service mission statement for your operation. Be
certain to frame it in terms of the value you contribute, not what you do. For example,
the mission of the HR department should not be “to deliver training” (the action); it
would be “to create competent people” (the contribution).
3. Provide supportive technology and equipment
When employees don’t have the right equipment, or their equipment fails them, they can be
easily frustrated in their desire to deliver quality service. To do their jobs effectively and
efficiently, service employees need the right equipment and technology. Having the right
technology and equipment can extend into strategies regarding workplace and work station
design.

IV. Retain the best people

An organization that heres the right people, trains and develops them to deliver service
quality, and provides the needed support must also work to retain the best ones. Employee
turnover, especially when the best service employees are the ones leaving, can be very
detrimental to customer satisfaction, employee morale, and overall service quality. And, just
as they do with customers, some firms spend a lot of time attracting employees but then tend
to take them for granted (or even worse), causing these good employees to search for
alternatives.

1. Treat Employees as customers If employees feel valued and their needs are taken care off,
they are more likely to stay with the organization. Many companies have adapted the idea
that employees are also customers of the organization, and that basic marketing strategies
can be directed at them. Most successful companies have a goal of “ Becoming the best
place to work” by doing the following:
 Treating employees as customers
 Using employee input and a fact – based approach for decision making in the
design and implementation of human resources policies, programs, and processes.
  Measuring employee satisfaction and trying to continuously improve the work place
environment.
 Benchmarking and incorporating best practices.
3. Measure and reward strong service performers if a company wants the strongest service
performers to stay with the organization, it must reward and promote them. This may
seem obvious, but often the reward systems in organizations are not set up to reward
service excellence. Reward systems may value productivity, quantity, sales, or some
other dimension that can potentially work a gainst a good service. Even those service
workers who are intrinsically motivated to deliver high service quality will become
discouraged at some point and start looking elsewhere if their efforts are not recognized
and rewarded. Alternatively, they may may stop providing high levels of service and
simply sink to meet the service performance of the lost common denominator.
Reward systems need to be linked to the organization’s vision and to outcomes that are
truly important. For instance, if customer retention is viewed as a critical outcome,
service behaviors tat increase retention need to be recognized and rewarded.

4. Include employees in the company’s vision for employees to remain motivated and
interested in sticking with the organization and supporting its goals, they need to share an
understanding of the organization’s vision. People who deliver service day in and day out
need to understand how their work fits in to the big picture of the organization and its
goals. When the vision and direction are clear and motivating, employees are more likely
to remain with the company through the inevitable tough spots along the path to the
vision.

2.2.1.6. Service Culture

Most of this chapter has focused on strategies for enabling customer – oriented service
delivery. Looking at the bigger picture, beyond the specific strategies, it is apparent that the
behavior of employees in an organization will be heavily influenced by the culture of the
organization, or the pervasive norms and values that shape individual and group behavior.
Corporate culture has been defined as “the pattern of shared values and beliefs that give the
members of an organization meaning, and provide them with the rules for behavior in the
organization. Culture has been defined more informally as “what we do around here,” or
“organizational glue,” or “central themes.”
Experts have suggested that a customer – oriented, service – oriented organization will have
at its heart a “service culture” defined as “ 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”.
o First, a service culture exists if there is an “appreciation for good service.” This
doesn’t mean that the company has an advertising campaign that stresses the
importance of service, but that “in that underneath sort of way” people know that
good service is appreciated and valued.
o A second important point in this definition is that good service is given to internal as
well as external customers. It is not enough to promise excellent service to final
customers; all people within the organization deserve the same kind of service.
Finally, in a service culture good service is “a way of life” and it comes naturally
because it is an important norm of the organization.

2.3. Physical Evidence and the Service Cape

Physical evidence is the environment in which the service is delivered and where the firm
and the customer interact, and any tangible commodities that facilitate performance or
communication of the service. The first part of this definition encompasses the actual
physical facility where the service is performed, delivered, and consumed; throughout this
chapter the physical facility is referred to as the services cape.

Because services are intangible, customers often rely on tangible cues, or physical evidence,
to evaluate the service before its purchase and to assess their satisfaction with the service
during and after consumption. Effective design of physical, tangible evidence is important for
closing gap 2.

General elements of physical evidence are shown in the following table. They include all
aspects of the organization’s physical facility (the services cape) as well as other forms of
tangible communication. Elements of the services cape that affect customers include both
exterior attributed (such as signage, parking, land scape) and interior attributes (such as
design, layout, equipment, décor).

Services cape Other tangibles

Facility Exterior Business cards
Signage Stationery
Signage Billing statements
Parking Reports
Landscape Employee dress
Surrounding environment Uniforms
Facility Interior Brochures
Interior design Internet/web pages
Equipment
Signage
Layout

Examples of physical evidence from the customer’s point of view

Service Services cape Other tangibles
Insurance Not applicable Policy itself
Billing statements
Company brochure
Letters/cards
Hospital Building exterior
Parking Uniforms reports
Waiting areas Billing statements
Admission office
Patient care room
Medical equipment
Recovery room
Airline Airline gate area Tickets
Airplane exterior Food
Airplane interior (décor, seats, Uniforms
air quality)
Express mail Not applicable Packaging
Trucks
Uniforms
Computers

Services cape usage

Organizations differ in terms of who the services cape will a ctually have an effect on. That
is, who actually comes into the service facility and thus is potentially influenced by its design
– customers, employees, or both groups. The three types of service organizations that differ
on this dimension are presented in the following table.
Service cape usage Examples
Self service (customer only) ATM
Movie theaters
Express mail drop- off facilities
Self service entertainment like golf
Interpersonal service (both customer and Hotel
employee) Restaurant
Hospital
Bank
Airline
School
Remote service Telephone company
(employee only) Insurance company
Utility

In a self service environment the customer performs most of the activities and few if any
employees are involved. Examples include ATM’s, movie theaters etc. in these primarily self
– service environments the organization can plan the services cape focusing exclusively on
marketing goals such as attracting the right market segment and making the facility pleasing
and easy to use.

In a remote service there is little or no customer involvement with the services cape.
Telecommunication, utilities, financial consultants, editorial, and mail – order services are
examples of services that can be provided without the customer ever seeing the service
facility. In these remote services, decision about how the facility should be designed can
focus on the employees’ needs and preferences almost exclusively. The place can be set up to
keep employees motivated and to facilitate productivity, teamwork, operational efficiency, or
whatever organizational behavior goal is desired without any consideration of customers,
since they will never need to see the services cape.

Interpersonal services are placed between the two extremes and represents situations where
both the customer the employee must be present in the services cape. Examples include
hotels, banks, and educational settings. In these cases the servicrscape must be planned to
attract, satisfy, and facilitate the activities of both customers and employees simultaneously.
Special attention must also be given to how the service scope affects the nature and quality
the social interactions between and among customers and employees.
2.3.1 Roles of the Service scope
An examination of the variety of roles and how they interact makes clear how strategically
important it is to provide appropriate evidence of the service

1. Package
similar to tangible product’s package, the services cape and other elements of physical
evidence essentially “wrap” the service and convey an external image of what is “inside” to
consumers product packages are designed to portray a particular image as well as to evoke a
particular sensory or emotional reaction The physical setting of a service does the same thing
through the interaction of many complex stimuli The seviescape is the outward appearance of
the organization and thus can be critical in forming initial impressions or setting up customer
expectation- it is a visual metaphor for the intangible service. This packaging role is
particularly important in creating expectations for new customer and for newly established
service organizations that are trying to build a particular image. The packaging role extends
to the appearance of contact personnel through their uniforms or dress and other elements of
their outward appearance.

2. Facilitator
The services cape can also serve as a facilitator in aiding the performances of persons in the
environment. How the setting is designed can enhance or inhibit the efficient flow of
activities in the service setting, making it easier or harder for customers nad employees to
accomplish their goals. A well – designed, functional facility can make the service a pleasure
to experience from the customer’s point of view and a pleasure to perform from the
employee’s. on the other hand, poor and inefficient design may frustrate both customers and
employees.

3. Socialize
The design of the services cape aids in the socialization of both employees and customers in
the sense that it helps to convey expected roles, behaviors, and relationships. For example, a
new employee in a professional services firm would come to understand his/ her position in
the hierarchy partially through noting his/her office assignment, the quality of his/her office
furnishings, and his/her location relative to others in the organization. The design of the
facility can also suggest to customers what their role is relative to employees, what parts of
the services cape they are welcome in and which are for employees only, how they should
behave while in the environment, and what types of interactions are encouraged.

5. Differentiator
The design of the Physical facility can differentiate a firm from its competitors and signal the
market segment the service is intended for. Given its power as differentiator, changes in the
physical environment can be used to reposition a firm and/or to attract new market segments.
The design of a physical setting can also differentiate one area of a service organization form
another. This is commonly the case in the hotel industry where one large hotel may have
several levels of dining possibilities, each signaled by differences in design. Price
differentiation is also often partially achieved through variations in physical setting.

2.4. Process
It refers to the actual procedures, mechanisms, and flow of activities by which the service is
delivered – the service delivery and operating systems. The actual delivery steps the
customers experiences, or the operational flow of the service, will also provide customers
with evidence on which to judge the service. Some services are very complex, requiring the
customer to follow a complicated and extensive series of actions to complete the process.
Highly bureaucratized services frequently follow this pattern, and the logic of the steps
involved often escapes the customer. Another distinguishing characteristic of the process that
can provide evidence to the customer is whether the service follows a production –
line/standardized approach or whether the process is an empowered/customized one. None of
these characteristics of the service is inherently better or worse than a another. Rather, the
point is that these process characteristics are another form of evidence used by the consumer
to judge service.
Discussion questions
1. Why are service employees critical to the success of any service organization?
2. What is emotional labor? How can it be differentiated form physical or mental labor?
3. Reflect on your own role as a front – line service provider, whether in a current job
or in any full – or part – time service job you’ve had in the past. Did you experience
the kinds of conflicts described in the boundary – spanning roles section of the
chapter? Be prepared with some concrete examples for class discussion.
4. Describe the four basic human resource strategy themes and why each plays an
important role in building a customer – oriented organization.
5. What is the difference between technical and interactive service skills? Provide
examples (preferably from your own work context, or from another context with
which yo are familiar). Why do service employees need training in both?
6. Is empowerment always the best approach for effective service delivery? Why are
employee empowerments controversial?
7. Define service culture. What is the impact of a service culture? Why or why not?
 CHAPTER THREE
CONSUMER BEHAVIOR IN SERVICES
The objectives of this chapter are as follows:
1. Overview the generic differences in consumer behavior between services and goods.
2. Introduce the aspects of consumer behavior that a marketer must understand in four
categories of consumer behavior:
 information search
 evaluation of service
 service purchase and consumption
 post purchase evaluation

3.1. Introduction
The primary objective of service producers and marketers is identical to that of all marketers:
to develop and provide offerings that satisfy consumer needs and expectations, there by
ensuring their own economic survival. In other words, service marketers need to be able to
close the customer gap between expectations and perceptions. To achieve this objective,
service providers need to understand how consumers choose and evaluate their service
offerings.

This chapter shows that services’ unique characteristics necessitate different consumer
evaluation processes from those used in assessing good. Recognizing these differences and
thoroughly understanding consumer evaluation processes are critical for the customer focus
on which effective services marketing is based. Because the premise of this course is that the
customer is the heart of effective services marketing, we begin with the customer and
maintain this focus throughout the course.

Consumers have a more difficult time evaluating and choosing services than goods, because:
 Services are intangible and non- standardized and
 Consumption is so closely intertwined with production.
These characteristics lead to differences in consumer evaluation processes for goods and
services in all of the following four stages of the buying process.
1. information search,
2. evaluation of alternatives,
3. purchase and consumption, and
4. post purchase evaluation
Lack of understanding of the way customers assess and choose services in these four
fundamental stages leads to a customer gap that must be closed by service marketers.

3.2. Consumption value

Consumers purchase goods and services because they satisfy certain needs or wants in their
lives. Businesses purchase goods and services for the same basic reasons: to satisfy the needs
and wants of themselves or their clients. Due to time and financial restraints, consumers must
make choices in their purchase decisions.

In addition to choosing a good or service category, consumers and businesses are faced with
choosing a particular vendor from which to purchase that good or service. Buyers are
constantly forced to make choices in their purchase decisions. These types of choices are
influenced by consumption values.

Consumption value is the perceived value or utility that an individual believes a specific
choice will provide. Consumption value includes:
1. functional value
2. social value
3. emotional value
4. epistemic value
5. conditional value
It must keep in mind that these values are not mutually exclusive; a particular choice may
provide multiple consumption values.
Functional value is the perceived utility acquire when a particular choice provides utilitarian
or functional benefits for the consumer. These benefits are based on the attributes a particular
choice possesses and the benefits those attributes a particular choice possesses and the
benefits those attributes provide the consumer. For instance the functional value of any
automobile is to provide a transportation service or the functional benefits of consmetics are
to increase ones personal attractiveness.

Social value is the perceived utility acquired from making a purchase decision that is
associated with a particular reference group. This group could be friends or it could be based
on demographics such as age, sex, ethnic origin, or religion. For many people, for instance,
Mercedes Benz is perceived as a symbol of status which enhances ones social value.

Emotional value is the feeling derived from a choice, with in a consumer. For many services,
especially entertainment services, perceived emotional utility is an important motivating
factor in the purchase decision. For examples, common reasons given for getting tattoos are
as a means of self – expression or rebellion, both of which are products of the consumers’
emotions.

Epistemic value is the value acquired when a purchase decision is perceived to satisfy a
desire for knowledge, provide novelty, or arouse curiosity. Most museums, historical sites.
Zoos, and botanical gardens are visted because of the epistemic value provided.

Conditional value is the perceived utility provided when an alternative is chosen because of
temporary situational factors that will enhance one of the consumption values. Finance may
be a temporary situational factor that would alter a purchase decision. Assume it is one day
before payday and you eat to eat at a restaurant. You would like to go to an expensive
restaurant but since you don’t have much money and it is moderately expensive, you will
instead go to a cheaper food outlet.

3.3. Classification of Properties of Offerings

One framework for isolating differences in the evaluation processes between goods and
services is a classification of properties of offerings proposed by economists. Economists
distinguish between three categories of properties of offerings:
 1. Search qualities are attributes that a consumer can determine before purchasing a
product. Search qualities include color, style, price, fit, feel, hardness, and smell.
Goods such as automobiles, clothing, furniture, and jewelry are high in search
qualities, for their attributes can be almost completely determined and evaluated
before purchase.
2. Experience qualities are attributes that can only be discerned after purchase or during
consumption. Experience qualities include taste and wearability. Goods and services
such as vacations and restaurant meals are high in experience qualities, for their
attributes cannot be known or assessed until they have been purchased and are being
consumed.
3. Credence qualities are characteristics that the consumer may find impossible to
evaluate even after purchase and consumption. Examples of offerings high in
credence qualities are appendix operations and brake relining on automobiles. Few
consumers possess medical and mechanical skills sufficient to evaluate whether these
services are necessary or are performed properly, even after they have been
prescribed and produced by the seller.
 Goods high in search qualities are the easiest to evaluate (left end of the
continuum).
 Goods and service high in experience qualities are more difficult to evaluate
because the consumer may be unaware of or may lack sufficient knowledge to
appraise whether the offerings satisfy given wants or needs even after
consumption (right end of the continuum).
The major premise of this chapter is that most goods fall to the left of the continuum, while
most services fall to the right due to three of the distinguishing characteristics described in
chapter 1- intangibility, heterogeneity, and inseparability of production and consumption.
These characteristics make services more difficult to evaluate than goods. Difficulty in
evaluation, in turn, forces consumers to rely on different cues and processes when evaluating
services.
Because experience and credence qualities dominate in services, consumers employ different
evaluation processes than those they use with goods, where search qualities dominate. They
are also likely to experience the steps in the decision-making process in different orders and
at different times from the steps in the classic goods driven decision- making process.
Specific characteristics of services may lead to divergent evaluation processes and altered
consumer behavior. The major differential factors of consumer behavior in services are:
 information search,
 evaluative criteria,
 size and composition of the evoked set of alternatives,
 perceived risk,
 adoption of innovations,
 brand loyalty,
 assessment of value, and
 attribution of dissatisfaction
3.4. Services: Categories in the Decision – making Process
Using and adaptation of the basic consumer decision – making process, we have organized
this chapter into four main categories:
1. information search,
2. evaluation of alternatives,
3. Purchase and consumption, and
4. Post purchase evaluation
In purchase of services, these categories do not occur in a linear sequence the way they most
often do in the purchase of goods. As you will see in this chapter, one of the major
differences between goods and services is that a greater portion of the evaluation of services
succeeds purchase and consumption that is the case with goods. Therefore, while our
categorization here follows the sequence consumers use with goods, we will show how these
stages in services depart from evaluation of goods.
3.4.1. Information search
1. Use of personal sources
Consumers obtain information about products and services from personal sources (e.g.,
friends or experts) and from non- personal sources (e.g, mass or selective media). When
purchasing goods, consumers make generous use of both personal and non- personal sources
because both effectively convey information about search qualities. When purchasing
services, on the other hand, consumers seek and rely to a greater extent on personal sources
for several reasons.
 First, mass and selective media convey information about search qualities hat can
communicate little about experience qualities. By asking friends or experts about
services, however, the consumer can obtain information vicariously about experience
qualities.
 Second, non – personal sources of information may not be available because:
a) Many service providers are local, independent merchants with neither the experience
nor the funds for advertising:
b) “ cooperative” advertising, or advertising funded jointly by the retailer and the
manufacture, is used infrequently with services because most local providers are both
producer and retailer of the services because most local providers are both producer
and retailer of the service: and
 Third, because consumers can discover few attributes before purchase of a service, they
may feel greater risk in selecting a little – known alternative.
Personal influence becomes pivotal as product complexity increases and when objective
standards by which to evaluate a product decreases (i.e., when experience qualities are high).
Most managers in service industries recognize the strong influence of word of mouth in
services.

Next, consumers may find post purchase information seeking more essential with services
than with goods because services possess experience qualities that cannot be adequately
assessed before purchase.
One model of audience response to communication describes the situation that occurs
frequently when consumers select services:
1. The consumer selects from among virtually indistinguishable alternatives.
2. Through experience the consumer develops an attitude toward the service.
3. After the development of an attitude, the consumer learns more about the
service by paying attention to messages supporting his or her choice. In
contrast to the conventional view of audience response to communication,
where consumers seek information and evaluate products before purchase,
with services most evaluation follows purchase.

2. Perceived Risk
While some degree of perceived risk probably accompanies all purchase transactions, more
risk would appear to be involved in the purchase of services than in the purchase of goods
because services are intangible, non- standardized, and usually sold with out guarantees or
warranties.
o First, the intangible nature of services and their high level of experience qualities
imply that services generally must be selected on the basis of less pre- purchase
information than is the case for products.
o Second, because services are non- standardized, there will always be uncertainty
about the outcome and consequences each time a service is purchased.
o Third, service purchases may involve more perceived risk than product purchases
because, with few exceptions, services are not accompanied by warranties or
guarantees. The dissatisfied service purchaser can rarely “return” a service; he has
already consumed it by the time he realizes his dissatisfaction.
o Finally, many services (e.g., medical diagnosis, pest control etc) are so technical or
specialized that consumers possess neither the knowledge nor the experience to
evaluate whether they are satisfied, even after they have consumed the service.
The increase in perceived risk involved in purchasing services suggests the use of strategies
to reduce risk. Where appropriate, guarantees of satisfaction may be offered. To the extent
possible, service providers should emphasize employee training and other procedures to
standardize their offerings, so that consumers learn to expect a given level of quality and
satisfaction.
When purchasing a service, there are seven types of risk that are potentially involved in the
consumer’s decision – making process. These are:
1. performance risk,
2. financial risk,
3. time loss risk,
4. opportunity risk,
5. psychological risk,
6. social risk, and
7. physical risk
Performance risk is the chance that the service will not perform or provide the benefit for
which it was purchased. For example, in the selection of a firm to clean carperts for a retail
business, buyers face the risk that the carpets will not be cleaned properly. Even for
professional services, there is a certain degree of performance risk. For example, with
dentists there are risks that services provided will not turn out as patients expect.

Financial risk is the amount of monetary loss incurred by the consumer if the service fails.
Purchasing services involves a higher degree of financial risk than purchasing goods because
fewer service firms have money – back guarantees or warranties of any kind. For example,
money invested in personal tutoring that does not help a student is lost and cannot be
recovered. A trucking firm that fails to arrive on time with a critical raw material may force
an assembly line at a factory to shut down, costing the manufacturer thousands of dollars an
hour.

Time loss risk refers to the amount of time lost by the consumer as a result of the failure of
the service. A consumer who takes his or her automobile into a repair shop for servicing
because it is running poorly will experience time loss if the vehicle is left there for six hours
and the service performed does not correct the problem. Not only was the consumer without
the use of the vehicle for six hours but the time invested in taking the car to the repair shop
and picking it up was also wasted.

Opportunity risk refers to the risk involved when consumers must choose one service over
another and deals with the lost opportunity a consumer experiences when he or she makes a
decision between the two opportunities. Suppose an individual is faced with a decision to go
to a business trip during a time when his final examination is scheduled. Both are occurring
at the same time so attendance at both is not possible. Selecting one will automatically
eliminate the other. If the one selected turns out to be un enjoyable, then the individual has
lost the opportunity he or she had to purchase the other.

Psychological risk is the chance that the purchase of a service will not fit the individual’s self
–concept or are high in epistemic and emotional value tend to have a high in epistemic and
emotional value tend to have a high degree of impact on individuals’ self – concept or are
high in epistemic and emotional value tend to have a high degree of psychological risk.
Services with a high psychological risk include education, entertainment, fitness facilities,
and religious organizations.

Social risk refers to the probability that a service will not meet the approval of others who are
significant to the consumer making the purchase. Services with high visibility, such as
restaurants and hair and beauty salons, tend to be high in social risk.

Physical risk is the chance that a service will actually cause physical harm to the customer.
Many services contain some degree of physical risk. When going to a physician for a medical
procedure, there is the risk that the procedure will create undesirable side effects. In
purchasing public transportation, there is a small chance there will be an accident causing
physical harm.

Risk reduction strategies used by consumers

During the pre – purchase phase, consumers evaluate the type and extent of risk involved
with each option. When comparing several vendors within a service industry, consumers
normally look at the uncertainty component of risk since the consequence component is the
same.
How do consumers and businesses reduce the risk of a purchase?
 First, they examine their own personal experiences. Consumers tend to continue to
patronize the same firm if they have not received bad service from that firm in the
past. This is especially true if one has patronized a particular firm regularly. Going to
 a new service firm has a much higher element of the unknown, thus is a higher risk.
As a result, there tends to be higher loyalty toward service firms than toward sellers
of tangible gods.
 A second strategy used by consumers to reduce risk is to seek the opinion of others
such as friends, relatives, business associates, local opinion leaders, or experts in the
field. Because of the experiential nature of the services and the fact that a service
usually cannot be evaluated until after it is performed, consumers tend to rely more
on personal sources of information than company – produced sources.
 The third source of information would be service – produced sources of information.
The primary source of information is advertising, promotions, and the questions or
concerns. Information may also be obtained through direct inquiry to either sales
personnel or service providers with in the service firm.

Risk Reduction strategies used by service firms

Service firms should be aware of the risk involved in the purchase of their services and use
appropriate strategies to reduce the perceived risk of consumers. Further more, there are
different strategies to reduce the uncertainty component of risk than would be used to reduce
the consequence component of risk.

To reduce the uncertainty component of risk, service firms must reduce the perceived
probability of a service failure. The word “perceived” must be emphasized because the actual
chances of service failure are immaterial. What is important to consumers is the perceived
chances of something going wrong. Service firms must, therefore, reduce what consumers
perceive is the chance or probability of a service failure. The lower the perceived probability
of a service failure, the more likely the consumer will purchase the service. If a consumer is
comparing several service firms, the one chosen wil usually be the one with the lowest
perceived risk.

To reduce the uncertainty of performance risk, service firms must increase the perceived
probability the service will perform as consumers desire. This can be done through
communication, branding, and certification. Many fields in the service industry require
employees to become certified in the service they provide. Certification indicates to the
consumer that the service providers are qualified to perform the service there by reducing the
chances of receiving poor service.

Financial risk can be reduced by offering trail purchases, sampling, and promotional
incentives. An attorney may offer a free initial consultation visit for bankruptcy and auto
accident cases. This offer is an example sampling and allows the customer to evaluate the
service provider with no financial risk. Instead of a free first visit, fitness centers may offer a
special one- month trial membership for a minimal fee to encourage people to try the facility.
This is a trial purchase, which allows the consumer to evaluate the service without the full
financial risk of a membership fee. Incentives such as coupons, premiums, and price – off
deals can also be used stimulate consumers to try a service.

To reduce the consequences of financial risk, service firms can offer money back guarantees.
Although prominent in retailing and manufacturing, full money back guaranteed are rare in
the service sector. An exception is attorneys who accept cases on a contingency basis; that is,
they get a percentage of any recovery received by a client, but nothing if they lose the case.

The uncertainty of time loss risk and opportunity risk can be reduced by branding the
presence of a brand name such as Microsoft will reduce the perceived chances of poor
service performance, which in turn will reduce the perceived chances of time loss on the part
of the consumer. The same is true or opportunity risk.

To reduce the consequences of time loss risk, service firms can offer some type of
compensation in the case of service failure, such as financial reimbursement for time lost or
coupons for future purchases. For opportunity risk, the firm must ensure that there are quality
control standards and procedures in place and that these are followed by service personnel. If
consumers receive the service expected they will not feel they lost an opportunity.

The uncertainty of psychological and social risk can be reduced by branding and
communication. Again, recognized brand names carry the assurance to the consumer that the
service will coincide with the consumer’s self – image and will be well received by his or
her relelvant social group Both sales and service personnel can reassure customers of the
service and its or her relevant and its acceptability with the indivdual’s self concept and
the perception within a relevant social group In addition communication aimed at the
consumer through advertising and interact ion with service personnel can reduce the
uncertainty of psychological and social risk testimonials are especially effective because
they to be more believable.

The or her relevant social group. Both sales and service personnel can reassure customers of
the service and its and its or ter relevant and its acceptability with the individual’s self-
concept and the perception within a relevant social group. In addition, communication aimed
at the consumer through advertising and interaction with service personnel can reduce the
uncertainty of psychological and social risk. Testimonials are especially effective because
they tend to be more believable .
 The conseque safety standards nce of psychological and social risk can be reduced by
following strict quality control standards and procedures , and thus reducing
variability of service. If consumers receive the service expected , the chances of the
service outcome being unacceptable to themselves or to others within their social
circle are greatly reduced.
Physical risk is reduced by service providers adhering to strict safety standards instruction,
and communication. The consequences of the physical risk are reduced by establishing and
following safety standards. The uncertainty of physical risk is reduced by giving consumers
instruction to reduce the Chances of physical injury occurring. For example, gyms can give
customers instruction on the proper use of weight equipment to prevent injury.

Evaluation of service Alternatives

1. Evoked set
The evoked set of alternatives refer to a group of products a consumer considers
acceptable options in a given product category. Evoked set is likely to be smaller with
services than with goods for the following reasons.

 One reason involves differences in retailing between good and To purchase goods,
consumers generally shop in retail stores that display competing products in close
proximity, clearly demonstrating the possible alternatives . To purchase services, on
 the other hand, the consumer visits an establishment (e.g,a bank, a dry cleaner, or a
hair salon) that almost always offers only a single “brand” for sale.
 A second reason for the smaller evoked set is that consumers are unlikely to find
more than one or two businesses providing the same service in a given geographical
area, whereas they may find numerous retail stores carrying the identical
manufacture’s product.
 A third reason for a smaller evoked set is the difficulty of obtaining adequate
prepurchase information about services
Faced with the task of collecting and evaluating experience, consumers may simply select the
first acceptable alternative rather than searching many alternatives. In consumer behavior
terms, the consumer’s evoked set of alternatives is smaller with services than with goods

Service Purchase and Consumption

1. Emotion and mood
Emotion and mood are feeling states that influence people’s (and there fore customer’)
perception and evaluation of their experiences. Moods are distinguished from emotions in
that moods refer to transient feeling sates that occur at specific times and in specific situation,
whereas emotions are more intense, stable, and pervasive.

Because services are experiences, moods and emotions are critical factors that shape the
perceived effectiveness of service establishment, service provision will likely be interpreted
more negatively than if he were in a buoyant, positive mood . similarly, If a service provider
is irritable his/her interaction with customers will likely be interpreted more negatively that if
he were in a buoyant, positive mood. Similarly, if a service provider is irritable his/her
interaction with customers will likely be adversely affected by that mood. Furthermore, when
another customer in a service establishment is frustrated, whether from problems with the
service or from existing emotions unrelated to the service his or her mood affects the
provision of service for all customers who sense the negative mood. In sum, any service
characterized by human interaction is strongly dependent on the moods and emotions of the
service provider, the service customer, and other customers receiving the service at the same
time.
In what specific ways can mood affect the behavior of service customers?
First, positive moods can make customers more obliging and willing to participate in
behaviors that help service encounters succeed. A customer in a good emotional state is
probably more willing to follow an exercise regimen prescribed by a physical therapist or
completing homework assigned in a class.

A second way that moods and emotions influence service customers is to bias the way they
judge service encounters and providers. Mood and emotions enhance and amplify
experiences, making them either more positive or more negative than they might seem in the
absence of the moods and emotions. After losing a big account, a sales woman catching an
airline flight will be more incensed with delays and crowding than she might be on a day
when business went well. Conversely, the positive mood of a services customer at a dance or
restaurant will heighten the experience, leading to positive evaluations of the service
establishment. The direction of the bias in evaluation is consistent with the polarity (that is,
positive or negative) of the mood or emotion.

Finally, moods and emotions affect the way information about service is absorbed and
retrieved. As memories about a service are encoded by a consumer, the feelings associated
with the encounter become an inseparable part of the memory. If travelers fall in love during
a vacation in warm places, they may hold favorable assessments of the destination due more
to their emotional state than to the destination itself.

Service marketers need to be aware of the moods and emotions of customers and of service
employees and should attempt to influence those moods and emotions in positive ways. They
need to cultivate positive moods and emotions such as joy, delight, and contentment and
discourage negative emotions such as distress, frustrations, anger, and disgust.

2. Service Provision as Drama

Researchers and managers of service businesses have compared service provision with
drama, observing that both aim to create and maintain a desirable impression before an
audience, and both recognize that the way to accomplish this is by carefully managing the
actors and the physical setting of their behavior. In fact, the service marketer must play many
drama – related roles (including director, choreographer, and writer) to be sure the
performances of the actors are pleasing to the audience.

The skill of the service “actor” in performing their routines, the way they appear and their
commitment to the “show” are all pivotal to service delivery. While service actors are present
in most service performances, their importance increases when the degree of direct personal
contact increase (such as in a hospital, resort, or restaurant), when the service invole repeat
contact, and when the contact personnel as actors have discretion in determining the nature of
the service and how it is delivered (as in education, medical services, and legal services).

The physical setting of the service can be likened to the staging of a theatrical production
including scenery, props, and other physical cues to create desired impressions. Among a
setting’s features that may influence that character of a service are the colors or brightness of
the service’s features that may influence that character of a service are the colors or
brightness of the service’s surroundings; the volume and pitch of sounds in the setting; the
smells, movement, freshness, and temperature of the air, the use of space; the style and
comfort of the fumishings; and the setting’s design and cleanliness. The setting increases in
importance when the nature of a service is disnguished by its environment. In essence, the
delivery of service can be conceived as drama, where service personnel are the “actors,”
service customers are the “audience,” physical evidence of the service is the “setting” and the
process of service assembly is the “performance.”

The drama metaphor offers a useful way to conceive of service performances. Among the
aspects of a service that can be considered in this way are selection of personnel (auditioning
the actors), creation of the service environment (setting the stage), and deciding which
aspects of the service should be performed in the presence of the customer (onstage) and
which should be performed in the back room (backstage).

3. The compatibility of service customers

We have just discussed the roles of employees and customers receiving service. We now
want to focus on the role of other customers receiving service at the same time. Consider
how central the mere presence of other customers is in churches, restaurants, dances, bars,
lounges, and spectator sports: if no one else shows up, customers will not get to socialize
with others, one of the primary expectations in these types of services. However, if the
number of customers becomes so dense that crowding occurs, customers may also be
dissatisfied. The way other customers behave with many services such as airlines, education,
clubs, and social organizations also exerts a major influence on a customer’s experience. In
general, the presence, behavior, and similarity of other customers receiving services has a
strong impact on the satisfaction and dissatisfaction of any given customer?

Customers can be incompatible for many reasons – differences in beliefs, values,

experiences, abilities to pay, appearance, age, and deal with heterogeneous consumers who
have the potential to be incompatible. The service marketer can also bring homogeneous
customers together and solidify relationships between them, which increases the cost to the
customer of switching service providers. Customer compatibility is a factor that influences
customer satisfaction, particularly in high – contact services.

3.4.4. Post purchase Evaluation

1. Attribution of dissatisfaction
When consumers are disappointed with purchases- because the products did not fulfill the
intended needs, did not perform satisfactorily, or were not worth their price- they may
attribute their dissatisfaction to a number of differenct sources, among them the producers,
the retailers, or themselves.

Because consumers participate to a greater extent in the definition and production of services,
they may feel more responsible for their dissatisfaction when they purchase services than
when they purchase goods. As an example, consider a female consumer purchasing a haircut;
receiving the cut she desires depends in part upon her clear specifications of her needs to the
stylist. If disappointed, she may blame either the stylist (for lack of skill) or herself (for
choosing the wrong stylist or for not communicating her own needs clearly).
The quality of many services depends on the information the customer brings to the service
encounter: A doctor’s accurate diagnosis requires a conscientious case history and a clear
articulation of symptoms. Failure to obtain satisfaction with any of these services may not be
blamed completely on the service provider because the consumer must adequately perform
his or her part in the production process also.

With products, on the other hand, a consumer’s main form of participation is the act of
purchase. The consumer may attribute failure to receive satisfaction to her own decision
making error, but she holds the producer responsible for product performance. Goods usually
carry warranties or guaranteed with purchase, emphasizing that the producer believes that if
something goes wrong, it is not the fault of the customer. With services, consumers attribute
some of their dissatisfaction to their own inability to specify or perform their part of the
service. They also may complain less frequently about services than bout goods because of
their belief that they themselves are partly responsible for their dissatisfaction.

2. Innovation diffusion
The rate of diffusion of an innovation depends on consumers’ perceptions of the innovation
with regard to five chrematistics.
1. Relative advantage,
2. Compatibility
3. Communicability
4. Divisibility, and
5. Complexity
An offering that has a relative advantage over existing or competing products; that is
compatible with existing norms, values, and behaviors; that is communicable; and that is
divisible (i.e., that can be tried or tested on a limited/sample basis) diffuses more quickly than
others. An offering that is complex, that is, difficult to understand or use, diffuses more
slowly than others.

Considered as a group, services are less communicable, less divisible, more complex, and
probably less compatible than goods. They are less communicable because they are
intangible (e.g., their features cannot be displayed, illustrated, or compared) and because they
are often unique to each buyer (as in a medical diagnosis or dental care). Services are less
divisible because they are usually impossible to sample or test on a limited basis (e.g., how
does one “sample” a medical diagnosis? A lawyer’s services in setting a divorce? Even a
haircut?). Services are frequently more complex than goods because they are composed of a
bundle of different attributes, not all of which will be offered to every buyer on each
purchase.

Finally, services may be incompatible with existing values and behaviors, especially if
consumers are acuustomed to providing the service for themselves. As an illustration,
consider a novel day care center that cooks breakfast for children so that parents can arrive at
work early. Mothers accustomed to performing this service for their children may resist
adopting the innovation because it requires a change in habit, in behavior, even in values.
Consumers adot innovations in services more slowy than they adopt innovations in goods.

Marketers may need to concentrate on incentives to trial when introducing new services. The
awareness – interest – evaluation stages of the adoption process may best be bypassed
because of the difficulty and inefficiency of communicating information about intangibles.
Offering free visits, dollars – off coupons, and samples may be appropriate strategies to
speed diffusion of innovations in services.

3. Brand loyalty
The degree to which consumers are committed to particular brands of goods or services
depends on a number of factors the:
1. cost of changing brands (switching cost),
2. availability of substitutes
3. perceived risk associated with the purchase, and
4. degree to which they have obtained satisfaction in the past.
Because it may be more costly to change brands of services, because they may have more
difficulty being aware of the availability of substitutes, and because higher risks may
accompany services, consumers are more likely to remain customers of particular companies
with services than with goods.
Greater search costs and monetary costs may be involved in changing brands of services than
in changing brands of goods. Because of the difficulty of obtaining information about
service, consumers may be unaware of alternatives or substitutes for their brands, or may be
uncertain about the ability of alternatives to increase satisfaction over present brands.

If consumers perceive greater risks with services, as is hypothesized here, they probably
depend on brand loyalty to a greater extent than when they purchase products. Brand loyalty,
described as a “means of economizing decision effort by substituting habit for repeated,
deliberate decision,” function as a device for reducing the risks of consumer secessions.

A final reason consumers may be more brand loyal with services is the recognition of the
need for repeated patronage in order to obtain optium satisfaction from the seller. Becoming
a “regular customer” allows the seller to gain knowledge of the customer’s tastes and
preferences, ensures better treatment, and encourages more interest in the consumer’s
satisfaction. Thus, a consumer may exhibit brand loyalty to cultivate a satisfying relationship
with the seller.
Brand loyalty has two sides. The fact that a service provider’s own customers are brand loyal
is not a problem. The fact that the customers of the provider’s competition are difficult to
capture, however, creates special challenges. The marketer may need to direct
communications and strategy to the customers of competitors, emphasizing attributes and
strengths that he or she possesses and the competitor lacks. Marketers can also facilitate
switching from competitors’ services by reducing switching costs.

Summary
Intangibility, heterogeneity, and inseparability of production/consumption lead services to
possess high levels of experience and credence properties, which in turn, make them more
difficult to evaluate than tangible goods. We isolated and discussed four categories of
consumer behavior that reflect the differences between goods and services:
(1) information search,
(2) evaluation of service alternatives,
(3) service purchase and consumption, (
4) post – purchase evaluation.
Consumer behavior in services was discussed, accompanies by strategic implications for
marketers. To be effective, service providers may need to alter their marketing mixes to
recognize these different consumer behaviors and evaluation processes.
Discussion questions
1. This chapter focused on aspects of consumer behavior that are different depending on
whether goods or services are being purchased. What aspects of consumer behavior in
the purchase of goods and services are similar?
2. What are examples (other than those given in the chapter) of services that are high in
credence properties?
3. For what types of services might consumers depend on mass communication (non –
personal sources of information) in the purchase decision?
4. List five services for which customer compatibility is essential.
5. What are examples of services where brand switching is difficult for consumers?

Exercises
1. Choose a particular end – consumer service industry and one type of service provided
in that industry (such as the financial services industry for mortgage loans or the legal
services industry). Talk to five customers who have purchased that service and
determine to what extent what we have said into this chapter described their behavior
in information search. Evaluating alternatives, purchase and consumptions, and post
purchase and consumption for that service.
2. Choose a particular business – to – business service industry and one type of service
provided in that industry (such as the information services industry for computer
maintenance services or the consulting industry for management consulting). Talk to
five customers in that industry and determine to what extent what we have said in this
chapter described their behavior in information search, evaluation of alternatives,
purchase and consumption, and post purchase evaluation for that service.
 CHAPTER FOUR
CUSTOMER EXPECTATIONS OF SERVICE

The objectives of this chapter are as follows:

1. Recognize that customers hold different types of expectations for service
performance.
2. Discuss the sources of customer expectation of service including those that are
controllable and uncontrollable by marketers
3. Delineate the most important current issues surrounding customer expectations.
In this chapter we provide a framework for thinking about customer expectations. The
chapter is divided into four main sections:(1) the meaning and types of expected service,
(2) factors that influence customer expectations of service, (3) a model of service
expectations, and (4) current issues involving customer service expectations.

4.1 Meaning and Types of Service Expectations

4.1.1 Expected service: Two Levels of Expectations
Customer expectations are pretrial beliefs a consumer has about the performance is service
that are used as the standard or reference against which service performance is judged
customers hold several different types of expectations about service

The first can be termed desired service and defined as the level of service the customer hopes
to receive the ”wished for” level of performance. Desired service is a blend of graduate whet
the customer believes belies “can be” and “should be” for example, a blend of what the
customer believes of your college’s placement office when you are ready to graduate. What
are your expectations of the service? In all likelihood, you want the office to find you a job –
the right jot in the right geography for the right salary – because thaw you hope and wish for.
Customers hope to achieve theist service desires but recognize that this is not always possible
for this reason they hold anther lower level expectation for the threshold of acceptable
ser vices this lower expectation has been termed adequate service the level of service the
customer will accept Adequate service represents the minimum tolerable expectation the
bottom level of performance acceptable to the customer and reflects the level of service
customer believe they will get on the basis of their experience with services For example
under circumstances where unemployment rate is the highest some graduates may accept
any job for which they could earn a salary and others agreed to nonpaying short term
positions as interns to gain experience.
Figure 4.1shows these two expectation standards as the upper nd lower boundaries for the
expectations . This figure portrays the idea that customers assess service performance on the
basis of two standards: what they desire and what they deem acceptable.

Desired service

Adequate service

4.1.2 The Zone of Tolerance

As we discussed in earlier of this course, services are heterogeneous in the performance may
vary across providers, across employees from the same provider, and even within the same
service employee . The extent to which customers recognize and are willing to accept this
variation is called the zone of torlance and is shown in
Figure 4-2

Desired service

Adequate service

If service drops below adequate service – the minimum level considered acceptable –
customers will be frustrated and their satisfaction with the company undermined. If am
exceeds desire service –customers will be very pleased and probably quite surprised as well.
You might consider the zone of tolerance as the range or window in which customers do not
particularly notice service performance. When it falls outside the range (either very low or
very high) the service gets the customers attention in ether a positive o negative way . As an
example, consider the service and airline passenger receives from the ticket counter when
checking luggage . most customers should a range of acceptable times for this service
encounter –probably some – where between 10 and 15 minutes . If service consumes that
period of time , customers probably do not pay much attention to the wait. If a customer
enters the line and finds sufficient airline personnel at their station to serve him/her in the
first five or seven munutes, he /she may notice the service and judges it as excellent . On the
other hand, if a customer has to wait in line for 30 munutes, he ( and most likely all the other
passengers in the line ) begins to grumble, looks at his watch , and glares at the personnel
behind the stations marked position not open” who are not waiting on customers. The longer
the wait is outside the zone of tolerance , the more frustrated he becomes .

Customers service expectations are characterized by a range of levels, bounded by desired

and adequate service, rather than a a single level. This tolerance zone, representing the
difference between desired service and the level of service considered adequate , can expand
and contract within a customer , an airline customer’s zone of tolerance will narrow when he
is running late and is concerned about making his plan. A minute seems much longer and his
adequate service level increases . On the other hand , a customer who arrives at the airport
early may have an expanding tolerance zone , making the wait in line far less noticeable than
when he or she is pressed for time. This example shows that the marketer must understand
not just the size and boundary levels for the zone of tolerance but also when and how the
tolerance zone fluctuates within a given customer , the most important issues in line with this
conclusion are presented below.
1. Different customers possess different zones of tolerance
another aspect of variability in the range of reasonable services is that different
customers possess different tolerance zones . Some customers have narrow zones of
tolerance ,requiring a tighter range of service from providers , while other customers
 allow a greater range of service . For example, very busy customers would likely
always be pressed for time and therefore desire short wait times.
2. Zones of tolerance vary for service dimensions
customers tolerance zones also vary for different service attributed or dimensions .
The more important the factor, the narrower the zone of tolerance is likely to be. In
general , customers are likely to be less tolerant about unreliable service ( broken
promises , service errors) than other service deficiencies i.e the zone of tolerance for
the most important service dimension is smaller and the desired and adequate service
levels are higher.
3. Zones of tolerance vary for first – ime and recovery service
While customers expectations are higher for both the result of the service ( the service
outcome ) and the way the service is delivered (the process ) during recovery service, the
opportunity for recovery is greater with the process dimensions because of lower expectation
and a larger zone of tolerance.

In summary, customers have two different levels of expectations: desired service and
adequate service. The desired service level is less subject to change than the adequate service
level. A zone of tolerance separates these two levels. This zone of tolerance varies across
customers and expands or contracts within the same customer.

4.2 Factors that Influence Customer Expectations of Service

Because expectations play a critical role in customer evaluation of services, marketers need
and want to understand the factors that shape them. Marketers would also like to have control
over these factors as well, but many of the forces that influence customer expection as are
uncontrollable: service expectations are formed by many uncontrollable factors from the
experience of customer with other companies and their advertising to a customer’s
psychological state at the time of service delivery. Strictly speaking, what customers expent
is as diverse ax their education, values and experience. In this section of the chapter we try to
separate out the many influences of customer expectations.

4.2.1 Sources of Desired Service Expectations

As shown in figure 4-3 two of the largest influences on desired service level are personal
needs and philosophies about service.

Expected
Service

Enduring service Desired service

intensifiers

Zone
Of
Personal needs Tolerance

Adequate service

Personal needs – those states or conditions essential to the physical or psychological

well-being to the customer , are pivotal factors that shape the level of desired service
personal needs can fall into many categories , including physical, social psychological
and functional. A fan who regularly goes to a football game right from work , and is
therefore thirsty and hungry , hopes and desires that the food and drink vendors will pass
by his sections frequently , whereas a fan who regularly has dinner elsewhere has a low
or zero level of desired service from the vendors. A customer with high social and
dependency needs may have relatively high expectations of a hotel’s ancillary services
hoping, for example, that the hotel has a bar with live music and dancing.

Some customers are more demanding than others , having greater sensitivity to , and
higher expectations of , service enduring service intensifiers are individual , stable
factors that lead the customers to a heightened sensitivity to service . one of the most
important of these factors can be called derved service expectation , which occur when
 customer expectations are drive by another person or group of people . For a large
computer vendor , when the computer equipment is down his customers complain hence
his need to keep the system up and running is not just the own expectation but is derived
form the pressure of his customers .

4.2.2 Sources of Adequate Service Expectations

A different set of determinates affect adequate service, the level of service the customer
finds acceptable . in general, these influences are short term in a nature and tend to
fluctuate more than the somewhat table factors that influence desired ser vice.
In this section we explain the five factors shown in figure 3-4 that influence adequate
service .
(1) transitory service intensifiers
(2) perceived service alternatives
(3) customer self – perceived service role ,
(4) situational factors , and
(5) predicted service.
The first set of elements transitory s service intensifiers are temporary usually short term
individual factors that make a customer more aware of the need for service personal
emergency situations in which service is urgently needed [such as an accident and the need
for automobile insurance or a breakdown in office equipment during a busy period ] raise
the level of adequate service expectation particularly the level of responsiveness required
and considered acceptable

Perceived service alternatives are other providers form whom the customer can obtain
service If customers have multiple service providers to choose from or if they can provide
the service for themselves their levels of adequate service are higher than those of customer
who believe it is not get better services elsewhere An airline customer who lives in a
very small town a tiny airport for example has a reduced set of options in travel this
customer will be more tolerant of the service performance of the carriers in the town
because few alternatives exist she well accept that scheduling and lower levels of service
more than the customer in a big city who hasmyriad flights and airlines to choose from. The
influence of this vector was clearly articulated by business insurance customer who said
“sometime you just don’t have many options …so you have to effectively settle for less. The
customer’s perception that service alternative exist raises the level of adequate service and
narrows the zone of tolerance.
A third factor affecting the level of adequate service is the customer’s self perceived service
role. We define this as customer perceptions of the degree to which customers exert an
influence on the level of service they receive In other words, customers’ expectation are
partly shaped by how well they believe they are performing their own roles in service
delivery one role of the customer is specifying the level or service expected the
customer ‘s active participation in the service also affects this factor A final way the
service is poor A dissatisfied customer who complains will be less tolerant than one who
does not voice his or her concerns.

Levels of adequate service are also influenced by situational factorial factors; define as
service Performance conditions that customers view as beyond the control of the service
provider. For example, where personal emergencies such as serious automobile accidents
would likely intensify customer service expectations of insurance companies (because they
are transitory service intensifiers), catastrophes that affect a large number of people at one
time (tornadoes or earthquakes) may lower service expectations because customers recognize
that insurers are inundated with demands for their service. Customers who recognize that
these contingencies are not the fault of the service company may accept lower levels of
adequate service given the context. In general, situational factors temporarily lower the level
of adequate service, widening the zone of tolerance.

The final factor that influences adequate service is predicted service (Figure 4-5), the level of
service customers believe they are likely to get. This type of service expectation can be
viewed as predictions made by customers about what is likely to happen during an impending
transaction or exchange predicted service performance implies some objective calculation
of the probability of performance or estimate of anticipated service performance level
Predicted service is typically an estimate or calculation of the service a customer will receive
in an individual transaction rather than in the overall relationship with a service proceed
where desired and adequate service expectations are global assessments comprising many
individual service transactions, predicted service is almost always an estimate of what will
happen in the next service encounter or transaction the customer experiences. This is one of
the reasons predicted service is viewed in this model as an influencer of adequate service.

Because predictions are about individual service encounters, they are likely to be more
concrete and specific than the types of expectation levels customers hold for adequate service
or desired service for example, your predicted service expectations about the length of time
you will spend in the waiting room the next time you visit your doctor will likely be
expressed in terms of the number of minutes or hours you have set in the waiting room this
time

4.3 Sources of Both the Desired and Predicted Service Expectations

When consumers are interested in purchasing services, they are likely to seek or take in
information from several different sources for example, they call a store, ask a friend, or
deliberately track newspaper advertisements to find the needed service at the lowest price.
They may also receive information by watching television or hearing an unsolicited comment
from a colleague about a service that was performed well. In addition to these active and
passive types of external search for information, consumers may conduct an internal search
by reviewing the information held in memory about the service.

This section discusses one internal and three external factors that influence both desired
service expectations:
(1) explicit service promises,
(2) implicit service promises,
(3) word- or-mouth communications and
(4) past experience.
Explicit service is personal and non-personal statements about the service made by the
organization to customers. The statements are personal when they are communicated by a
salespeople or service or repair personnel; they are non-personal when they come from
advertising, brochures, and other written publication. Explicit customer Service promises are
one of the few influences on expectations that are completely in the control of the service
provider.

Promising exactly what will ultimately be delivered would seem a logical and appropriate
way to manage customer expectations and ensure that reality fits the promises. However,
companies and the personnel who represent them often deliberately over promise to obtain
business or inadvertently over promise by stating their best estimates about delay of a service
in the future. A particularly dangerous promise that many companies today make to their
business customers is to provide a “total solution” to their business needs. This promise is
very difficult to deliver.

Explicit service promises influence both the levels of desired service and predicted service
They shape what customers desire in general as well as what they predict will happen in the
next service encounter from a particular service provider or in a certain service encounter.
Implicit service promises are service-related cues other than explicit promises that lead to
inference about what the service should and will be like. These quality cues are dominated by
price and the more impressive the tangibles, the more a customer will expect from the
service. Consider a customer who shops for insurance, finding tow firms charging radically
different prices. She may make the inference that the firm with the higher price should and
will provide higher-quality service and better coverage. Similarly, a customer who stays at a
high class hotel is likely to desire and predict a higher standard of service then form a hotel
with less impressive facilities.

The importance of word-of mouth communication in shaping expectations of service is well

documented. These personal and sometimes non-personal statements made by parties other
than the organization convey to cometmers what the service will be like and influence both
predicted and desired service. Word-of-mouth communication carries particular weight as
the source of the information is perceived as unbiased. Word of mouth tends to be very
important in services that are difficult to evaluate before purchase and direct experience of
them. Experts (including consumer Reports, friends, and family) are also word-of-mouth
sources that can affect the levels of desired and predicted service
Past experience, the customer’s previous to service that is relevant to the focal service, is
another force in shaping predictions and desires. The service relevant for prediction can be
previous exposure to the service. For example, you probably compare each stay in a
particular hotel with all previous stays in that hotel. You may also compare each stay with
your experiences in other hotels and hotel chains. Customers also compare across industries:
Hospital patients, for example, compare hospital stays against the standard of hotel visits.
Cable service customers tend to compare cable service with the standards set by telephone
service, one reason cable service is often judged to be poor. In a general sense, past
experience may incorporate previous experience with the focal brand typical performance of
a favorite brand, experience with the brand last purchased or the top selling brand, as well as
the average performance a customer believes represents a group of similar brands.

4.4. Model of Customer Service Expectations

The full model of customer expectations and the forces that influence them is shown in
Figure 4-6. At the center of the model is the detailed view of expectations showing the two
levels, desired and adequate, and the zone of tolerance that separates them. The source or
antecedents of rach type of expectation are shown along the sides of the model.

How might a manager of a service organization use this model to create, improve, or market
services? First, managers need to know the pertinent expectation sources and their relative
importance for a customer population, a customer segment, and perhaps even a particular
customer. They need to know, for instance, the relative weight of word of mouth, explicit
service promises, and implicit service promises in shaping desired service and predicted
service. Some of these sources are more table and permanent in their influence (e.g, enduring
service intensifiers and personal needs) than the others, which fluctuate considerably over
time (e.g., perceived service alternatives and situational factors).

The different sources vary in terms of credibility as well as their potential to be influenced by
the marketer. Exhibit 4-1 shows the break down of typically controllable and uncontrollable
factors and offers suggestions about the ways services marketers can influence the factors.
Exhibit 4-1
Ways services marketers can influence factors
Controllable factors possible influence strategies
Explicit service promises make realistic and accurate promises that reflect the service
actually delivered rather than an idealized version of the
service. Ask contact people for feedback n the accuracy of
promises made in advertising and personal selling.
Avoid engaging in price or advertising wars with
competitors because they take the focus off customers
and escalate promises beyond the level at which they
can be met.
Formalize service promises through a service
guarantee that focuses company employees on the
promise and that provides feedback on the number of
times promises are not fulfilled.
Implicit service promises Ensure that service tangibles accurately reflect the type and level
of service provided.
Ensure that price premiums can be justified by higher
levels of performance by the company on important
customer attributes.
Less controllable factors possible influence strategies
Enduring – Service intensifiers use market research to determine sources of derived service
expectations and their requirements. Focus
advertising and marketing strategy on ways the
service allows the focal customer to satisfy the
requirements of the influencing customer.
Use market research to profile personal service
philosophies of customers and use this information in
designing and delivering services.
Personal needs educate customers on ways the service addresses their needs.
Transitory – service intensifiers Increases service delivery during peak periods or in
emergencies.
Perceived – service alternatives Be fully aware of competitive offerings and, where
possible and appropriate, match them.
Self – perceived service role Educate customers to understand their roles and perform
them better.
Word – of mouth communications Stimulate word of mouth in advertising by using
testimonials and opinion leaders.
Identify influences and opinion leaders for the
service and concentrate marketing efforts on
them. Use incentives with existing customers to
encourage them to say with similar services.
Situational factors use service guarantees to assure customer about
service recovery regardless of the situational
factors that occur.
Predicted service Tell customers when service provision is higher than what
can normally be expected so that predictions of
future service encounters will not be inflated.

4.5. Managing Consumer Expectations

Consumer buying decisions and patronage are based on consumer expectations. The higher
the expectations, the greater the probability of purchase. The lower the expectations, the
lower the probability of purchase. Also, remember that the higher the expectations, the
greater the chances that the service firm will not be able to meet consumer expectations and
that the customer will be dissatisfied. The reverse is true for lower expectations.

Service firms face this strange dilemma. Promoting high expectations will increase patronage
but also increase the chances of getting customers to buy the service are greatly reduced.
Therefore, the ideal goal is to promote the exact service customers will receive and to
provide the exact service customers expect. If firms can match expectations and service,
customers are satisfied.
Managing customer expectations is a critical component in the marketing plan of a service
business. Consumer expectations must be managed during the pre- purchase phase, the
service encounter, and the post – purchase phase. The following sections will discuss how
customer expectations can be managed during each phase of the purchase process.

4.5.1. During the Pre- Purchase Phase

Managing customer expectations during the pre- purchase phase consists three steps.
 first, learn what customers expect
 second, tell customers what they can expect.
 third, consistently provide the service that customers expect.
The first strategy, learning customer expectations, during the pre- purchase phase requires
communication. Service personnel and sales personnel must ask questions and be willing to
listen.

The second strategy for managing customer expectations during the pre- purchase phase is to
tell customers what they can expect. Advertising, sales personnel, service personnel, tangible
cues, point – of- purchase displays, and sales promotions are some of the methods that can be
used. Service firms must be careful, however, to communicate accurate information.
Businesses must resist the temptation to over promise and should promise only what can and
will be provided.

The third strategy consists of providing consistent service. Past experience and work – of –
mouth are two critical variables used by consumers in making purchase decisions. By
providing consistent service, customers form concrete expectation and tend to continue
patronizing the same firm. Buyers will also convey positive word –of-mouth communication
to other potential customers.

4.5.2. During the Service Encounter

Three strategies can be used during the service encounter to manage customer expectations.
 First, service personnel must communicate with the customer during the service
encounter.
  Second, if possible, service providers should modify the service to meet the
customer’s expectations.
 Third, if the service cannot be modified, the service personnel should explain why the
custommer’s expectations cannot be met. The goal during this phase is to ensure the
service being provided matches the consumer’s expectations.

4.5.3. During the Post – Purchase Phase

Managing consumer expectations does stop a fter the service is performed. Service firms
have three strategies they can use after the service has been completed.
 First, companies should companies should communicate with customers
immediately after the service is completed to see if expectations were met.
 Second, forms can use a follow – up program, such as an evaluation survey sent
to the cutomer through the mail or a phone call.
 Third, companies should have a procedure for dealing with dissatisfied customers
that will assist in managing future expectations. The goal during this phase is two
fold.
- The primary goal is to communicate with customer to see if expectations were met.
- The secondary gal is to modify future expectations to increase the chances of repeat
purchase.

4.6. Current Issues Involving Customer Service Expectations

The following issues represent current topics of particular interest to service marketers
regarding customer expectations. In this section we discuss four of the most frequently asked
questions about customer expectations.
1. What does a service marketer do if customer expectations are “unrealistic”
2. How does a company exceed customer service expectations?
3. Do customer service expectations continually escalate:
4. How does a service company stay a head of competition in meeting customer
expectation?
4.6.1. What Does A Service Marketer do if Customer Expectations Are Unrealistic?
 One of inhibitors to learning about customer expectations is management’s and
employee’s fear of asking. This apprehension often from the belief that customer
expectations will be extravagant and unrealistic, and that by asking about them a
company will set itself up for even loftier expectation levels (i.e., “unrealistic”
levels).

CHAPTER FIVE
POSITIONING A SERVICE
In the Market Place

5.1. Introduction
Ask a group of managers from different service businesses how they computer, and the
chances are high that many will say simply. “on service.” Press them a little further and they
may add words and phrases like “value for money.” Our people are the key,” or
“convenience.”

None of this particularly informative to a marketing specialist who is trying to develop

strategies to help an organization compete more effectively in the market place. At issue is
what makes consumers or institutional buyers select – and remain loyal to one service
supplier over another. Terms such as “service” typically subsume a variety of specific
characteristics tarnging from the speed with which a service is delivered to the quality of
interactions between customers and service personnel; and from avoiding errors to providing
desirable “extras” to supplement the core service. Likewise, “convenience” could refer to a
service that’s delivered at a convenient location, available at convenient times, to use with
out knowing which product features are of specific interest to customers, it’s hard for
manager to develop an appropriate computer strategy for their firm and its products, and
harder still to evaluate a product’s subsequent performance in the marketplace.

5.2. The Search for Competitive Advantage

As competition intensifies in the service sector, it’s becoming progressively non important
for service organizations to differentiate their products in meaningful ways in highly
developed economies, growth is slowing in such mature consumer service industries as
banking, insurance, hospitably, and education. Other industries, such as the passenger airline
business in the US, seem to be plagued by chronic overcapacity. So corporate growth will
have to be based on taking share from domestic competitors – or by expanding into
international markets, as exemplified by the strategies of major US- based credit card
compames (see pick a card: Visa, American express and master card vie in overseas
strategies,” p. 224). In each instance, firms should be selective in targeting customers and
distinctive in the way they present themselves.
Competitive strategy can take many different routes. As day has written.
The diversity of ways a business can achieve competitive advantage quickly defeats any
generalizations or facile prescriptions. First and foremost, a business must set itself provider
of attributes that are important to target customers.

5.3. The Need for Focus in Competitive Strategy

Marketers define a market as the set of all actual or potential buyers of a particular core
product. However, it is usually unrealistic for a firm to try to appeal to all buyers in that
market – or at least to all buyers in the same way. For in most instances, buyers, whether they
be individuals or corporations are too numerous, too widely scattered, and too varied in their
needs, purchasing behavior, and consumption patterns. Furthermore, different service firms
vary widely in their abilities to service different types of customers. Hence, rather than trying
to compete in an entire market, perhaps against superior competitors, each firm should adopt
a strategy of markets generation, identifying those parts, or segments, of the market that it
can serve best.

Because each person or corporate purchaser has distinctive (even unique) characteristics and
needs, any prospective buyer is potentially a separate target segment some personal and
professional services are, indeed, customized to the needs of individual buyers. A dentistrests
the needs of each patient on the basic of his or her specific dental condition; an architect may
design a unique house for a wealthy client; and a bank may develop a sophisticated loan
package tailored to the requirement of a large corporate customer. However, the majority of
service businesses do not find such micro segmentation worth while in their industries.
Instead, they look to achieve economies of scale by marketing to all customers within a
specific market segment and serving each in a similar fashion. Partial customization – what
has been described as a strategy of mass customization – may be achieved by offering a
standardized core product but tailoring supplementary service elements to fit the
requirements of individual buyers? We will have more to say about opportunities for
customization of supplementary services in chapter 8.

5.4. Identifying and Selecting Target Segments

A market segment is composed of a group of buyers who share common characteristics,
needs, purchasing behavior, or consumption patterns. Effective segmentation should group
buyers into segments in ways that result in as much similarity as possible on the relevant
characteristics within each segment but dissimilarity on those same characteristics between
each segment.

A target segment is one that a firm has selected from among those in the broader market.
Frequently, target segments are defined on the basis of several variables. For instance, a
department store in a particular city might target residents of the metropolitan area
(geographic segmentation) who had incomes within a certain range (demographic
segmentation), valued personal service from a knowledgeable staff and were not highly price
sensitive (both reflecting segmentation according to expressed attitudes and behavioral
intentions). Because competing retailers in the city would probably be targeting the same
customers, the department store would have to position itself in ways that created a
distinctive appeal; appropriate characteristics to highlight might include a wide array of
merchandise categories, breadth of selection with in each product category, and the
availability of such supplementary services as advice and home delivery.

An important marketing issue for any business is to recognize that some market segments
offer better opportunities than others. Target segments should be selected not only on the
basis of their sales and profit potential but also with reference to the firm’s ability to match or
exceed competing offerings directed at the same segment.
In order to select target segments and to design effective positioning strategies, managers
need insights into how the various components (or attributes) of a service are valued by
current and prospective customers with in different market within different market segments.
For instance, what level of quality and performance is required for each attribute? Are there
significant differences between segments in the importance that customers attach to different
attribute how well do competing products meets customer and it superior to competing
offering?

5.5. Understanding Consumer Choice Behavior

As noted in chapter 1, physical goods are usually easier for customers to evaluate than are
services. We discussed zeithaml’s framework for understanding search, experience and
credence qualities (refer to Figure 1.3, p. 38), which argues that most goods ae high in search
characteristics that can be evaluated prior to purchase. Buyers can usually examine goods
before purchasing them in order to determine their physical attributes. In the case of
consumer goods on retail display, they can be touched and explored visually; as relevant.
Samples may be smelled, tased, listened to, or weighed.

It’s not as easy to make such assessments with services. Zeihaml argues that services
emphasize experience qualities, which can only be discerned during consumption.
And credence qualities, which customers have to take on faith, since they involve
characteristics that are hard to evaluate even after consumption. Although front – stage
service facilities and personnel are tangible enough, these are imply the operational elements
needed to create service. The actual service is a ded or performance that can’t be wrapped up
and taken home afterward. As a result, it’s relatively harder to define the nature of a service
product prior to purchase and to evaluate it against competing alternatives. This problem is
most acute for first- time users without prior experience of the service in question.

5.6. Developing a Service Concept for a Specific Segment

How can a firm develop the right service concept for a particular target segment? Research is
needed to identify what attributes of a given service are important to specific market
segments and how well prospective customers perceive competing organizations as
performing against these attributes. But it’s dangerous to over generalize: strategists should
recognize that the same individuals may set different priorities for attributes according to:
 the purpose of using the service
 who makes the decision
 the aming of use (time of day/week/season)
 whether the individual is using the service alone or with a group
 the composition of the group

Consider the criteria that you might use when choosing restaurant for luch while on a
vacation trip with friends or family, verus selecting a restaurant for an expense account
business lunch at which you were meeting with a prospective client, cersus choosing
somewhere to eat for a quick lunchtime meal with a co- worker. Given a reasonable selection
of alternatives, it’s unlikely that you would choose the same type of restaurant in each
instance, let alone the same one. It’s also possible that if you left the decision to another
person in the party, he or she would make a different choice.

It’s also important to identify who is making the decision to select a specific service. In the
case of a hospital, the decision maker might be the end user (e.g., a patient) or some
intermediary (e.g., a doctor). In the latter situation, a two – step model prevails. The marketer
need to determine, first, what attributes are important to the customer in choosing the
intermediary and, second, what attributes are important to the intermediary in selecting the
service provider.

5.7. Importance versus Determinacy

Consumers usually make their choices between alternative service offerings on the basis of
perceived differences between them but the butes that distinguish competing services from
one another are not always the most important ones. For instance, many travelers rank
“safety” as their number one consideration in air travel. But, since major airlines are
generally perceived as equally safe (unless one has recently had a well- publicized crash),
safety is not usually an attribute that influences consumer choice between several large
carriers. Determinant attributes (i.e., those that actually determine buyers’ choices between
competing alternatives) are often some way down the list of service characteristics that are
important to purchasers, but they are the attributes on which customers see significant
differences between competing alternatives. Food and beverage service on board the aircraft,
or the courtesy of reservations personnel are examples of determinate characteristics in the
airline industry.

The marketer’s task in any service business is to identify which attributes are determinant
and to be aware how well each competing service performs on these determinant attributes.
Findings from such research form the necessary basis for developing a positioning campaign.
One further issue in evaluating service characteristics and establishing a positioning strategy
is that some attributes are easily quantified where as others are qualitative and highly
judgmental. Price for instance, is a straightforward quantitative measure. Punctuality of
transportation services can be expressed in terms of the percentage of trains, buses, or flights
arriving with in a specified number of minutes from the scheduled time. Both of these
measures are easy to understand and therefore generalizable. But characteristics such as the
quality of personal service or a hotel’s degree of luxury are more qualitative and therefore
subject to individual interpretation although in the case of hotels, travelers may be prepared
to trust the evaluations of independent rating services such as the Mobil Travel Guide, an
automobile association, or (in many parts of the world) a government authority.

5.8. Creating a Completive Position

Positioning is the process of establishing and maintaining a distinctive place in the market for
an organization and/or its individual product offerings. Heskett frames the issue nicely:

The most successful service firms separate themselves from “the pack” to achieve a
distinctive position in relation to their competition. They differentiate themselves by altering
typical characteristics of their respective industries to their competitive advantage.

Understanding the concept of product positioning is key to developing an effective

competitive posture. This concept is certainly not limited to services – indeed it had its
origins in packaged goods marketing – but it offers valuable insights by forcing service
managers to analyze their firm’s existing offerings and to provide specific answers to the
following questions:
Understanding the concept of product positioning is key to developing an effective
competitive posture. This concept is certainly not limited to services – indeed it had its
origins in packaged goods marketing – but it offers valuable insights by forcing service
managers to analyze their firm’s existing offerings and to provide specific answers to the
following questions:
1. What does our firm currently stand for in the minds of current and prospective
customers?
2. What customers do we now serce and which ones would we like to target for the
futre?
3. What are the characteristics of our current service offerings(core products and their
accompanying supplementary service elements ?
4. in each instance , how do our service offerings differ from those of the competition?
5. how well do customers in different market segments perceive each of our service
offerings as meeting their needs?
6. what changes do we need to make to our offerings in order to strengthen our
competitive position within the market segment ( s ) of interest to our firm?

Although, for simplicity, I use the terms “firm” or business “ in this chapter , the
principles of positioning apply equally to any public and nonprofit organization that must
compete for customs . Thus national pstal services compete with private health care
providers, and museums compete not only with other museums but also , at a generic
level , with alternative form of education entertainment and recreation. As shown in the
case , “Boston center for adult education” ) p. 254) , the marketplace for adult education
courses is extremely conductive consisting of both nonprofit and f profit operatins to
succeed an institution reade a clear sense of mission and a distncive pois on that sets it
apart from the competition in ways that appeal to prospective students.

Repositioning involves changing the existing position. Such a strategy could mean
revising sevice characteristics or redefining target market segments. At the firm level,
repositioning may entail abandoning certain products and withdrawing con-pletely from
some market segments, as when bankers trust ( a large new your based bank ) sought to
focus it is business exclusively on corporate financial services and private banking . As
 part of this repositioning effort the company sold off its retail branch network to national
Westminster bank and used media advertising to clarify its more narrowly focused
expertise to prospective corporate customers.

Copy positioning versus product positioning

In a competitive marketplace, a “position” reflects how consumers perceive the product’s (or
organizations)performance on specific attributes relative to that of one or more competitors .
Customers brand choces reflect which brands are even known and remembered and then,
how each of these brands is positioned within each customer’s mind. These positions are, of
course , simply perceptual, but we need to remember that people make their decisions based
on their individual perceptions of reality , rather than on an expert’s definition of that reality.
Many marketers associate positioning prmarny with the communicant elements of the
marketing mix , notably advertising , promotins and publicity . This view reflets the wid
spread use of advertising ,in packaged goods marketing to create

Positioning a service in the marketplace

Images and associations for broadly similar branded products so as t give them a special
distinction in the customer mind and approach sometimes known as copy positioning. A
classic example is the visual imager of the rugged western cowboy created fro a major
cigarette brad by the marlboror man . Note. However that this imagery has nothing to do
with the physical qualitites of the tobacco it’s jut a means of different ating and adding
glamour to what is essentially a commodity . Examples of how imagery may be used for
positioning puposes in the service sector are found in the distinctive bullish theme used by
Merrill lynch ( whose symbol is a bull ) and the profile of the rock of gibratar that is the
trademark of the prudential ( a major insurance company ) some slogans promise a specific
benefit , destgned to make the company stand out from its competitor , such as united airlines
: fly the friendly skce “ or KLM : the reliable Airline
Our primary concern in this chapter is the role of positioning in guiding marketing strategy
development for services that compete on more than just imagery or vague promises. This
entails decisions in that know from research to be important to customers, relating to product
preference, and service availability.

5.9 Positioning Role in Marketing Strategy

Positioning plays a pivotal role in marketing strategy because it links market analysis and
competitive analysis to internal corporate analysis. From these three a position statement can
be developed that enables the service organization to answer the questions, “what is our
product (or service concept), what do we want it to become. And what actions must we take
to get there?” table 4.1. Summarizes the principal uses of positioning analysis as a diagnostic
tool, providing input to decisions relating to product development, service delivery, pricing,
and communication strategy.

Developing positioning strategy can take place at several different levels, depending on the
nature of the organization involved. Among multisite, different levels, depending on the
nature of the organization involved. Among multisided, multiproduct, service businesses, a
position might be established for the organization, for a given service outlet, or for a specific
service offered at that out particularly important that there be some consists by between the
positions held by different services differed at the same location, since the image of one may
spill over onto the others. For instance, if a hospital has an excellent reputation for obstetrical
services, this may enhance perceptions of its services in gynecology pediatric sugary and so
forth.

Because of the intangible, experiential nature services, an explicit positioning strategy is

valuable in belping prospective customers to get a mental “fix” on a product that wood in
other wise be rather amorphous. Failure to select a desire position in the marketplace- and to
develop a marketing action plan designed to achieve and hold this position – may resell one
of several possible outcomes, all undesirele.
1. The organization (or one of its products) is pushed in to a position where it faces head-
on competition from stronger competitors.
 2. The organization (product) is pushed into a position which nobody else wants because
there is little customer demand there.
3. The organization’s (product’s) position is so fuzzy that nobody knows what its
distinctive competence really is
4. The organization (product) has no position at all the marketplace because nobody has
ever head of it

Steps in developing a positioning strategy

Competitive strategy is often narrowly focused at direct competitors- firms which market
product that offer customers a similar way of achieving the same benefits (e.g.. in the case of
education, another college offering similar classes). However, there may also be a serious
threat from generic competitors, which offer customers a different way of achieving similar
benefits benefits (for instance, extension education via broadeast programs or self- study
through use of books and videotapes both offer generic competition to conventional college
classes.)

The research and analysis that underlie development of an effective positioning strategy are
designed to highlight beth opportunities and to the hrm in the competitive marketplace,
including the presence of generic computers. Figure I identifies the basic steps invo a suitable
market position and developing a strategy to reach it.

Positioning a service in the marketplace

5.10 Anticipating Competitive Response

Before embarking on a specific plan of action however, management should consider the
possibility that one or more competitors might pursue the same market position perhaps
another service organization has independently conducted the same positioning analysis and
arrived at similsr conclusions? Or an existing competitor may feel threatened by the new
strategy Aiternavly, a lew entrant to the market may decide to play “follow the leader,”yet be
able to offer customers a nigher service level on one or more attributes and/or a lower price
The best way to anticipate possible competitive responses is to identify all current or
potential competitors and to put oneself in their own management’s shoes by conducting an
internal corporate analysis for each of these competitors 6 coupling the insights form the
analysis with data from exiting market and competitive analysis (with one’s own firm cast in
the role of competitor) should prould a good sense of how competitors might be likely to act
If chances seem high that a stronger competitor will mo to occupy the same niche with a
superior service conceit, then it would be wise to reconsider the situation
Some firms develop sophisticated models to analyze the impact of alternative competitive
momputer models to analyze to analyze the impact of alternative competitive moves. How
would a price cut affect demand market share and profits? Based on past experience , how
might customers in different segments respond to increases in the level of quality on specific
service attributes? How long would it take before customers responded to a new advertising
campaign designed to change perceptions?

Evolutionary positioning:
An example form Charles scharles schwab
Positions aer ratrly they need to evolve over time in response to changing market structuremp
technology competitive activity and the evolution of the firm itself Charles schwab & CO.,
Americas largest discoduct discount securities broker was founded in 1975, when fixed
comiagn rates were abolished in the united states the company’s initial strategy focused on
providing discounted commission financial services to that segment of investors who conduct
their own research and make their own investment decisions The firm’s unique was that.
Unlike “full-service” brokers it provided no research or advice and did not create its own
financial products (such as mutual funds) its service was a very basic one- accurate and
timely execution of transactions for clients at a lower price than they would pay at a full-
service broker.

By 1979-80, schwab’s customer base and transaction volumes had expanded sufficiently to
allow the firm to make significant investments in automation this enabled the company to
add services such as money market mutual funds and asset management accounts (combining
securities a checking account and credit card).By adding value through automation, schwab
strategically altred its market position from one based purely on low-priced transition

Reference

- Philip Koler, Mach 1999 – Marketing Management, Analysis, Planning

Implementation, and control 9th edition.
- Philip kotler and Gory Armstrong 1999 Principles of Marketing 8th edition Newoeli –
11001
- Christopher. H C 1996, Services Marketing third edition – love lock