Service Failure and Recovery Assignment- Background in the understand of Service Marketing and Provider Gap.
Chapter 1 lntroduction to Seryices 3
It requires changes in management mind-set, changes in culture, changes In tne ways people work and are rewarded, and new ways of implementing customer solutions. At IBM thls change has evolved over decades and continues today. This switch to service has carried over into IBM's research division as well, where hundreds of researchers worldwide currently focus on service science and service innovation. Many large manufacturing and lT companies have viewed IBM's success and are pushing to make the same transition to services. lt is not as easy as it looks. In moving into services, companies discover what service businesses such as hospitality, consult-- ing, health care, financial services, and telecommunications have known"for years: services marketing and management are different-not totally unique, but difierent from marketing and management for consumer goods and manufactured products. Selling and delivering a computer is not the same as selling and delivering a service that solves a customer's problem.l
As the opening vignette suggests, services are not lirnited to service industries, ser- vices can be very profitable, and services arb challenging to manage ald market. Ser- vices represent a huge and growing percentage of the world economy, yet in many countries, including the United States, customer perceptions of service-arl not good3 Iu fact, the University of Michigan's American Customer Satisfbction Index has ihow' consistently lower scores for services when compared to other products.3 Others have noted that productivity for many service industries also lags the lralufacturing sector. Given the econornic growth in services, their profit and competitive advantag! poten- tial' and the overall lower levels of customer satisfaction and productivity fo, seivices, it seems that the potential and opportunities for companies ihut ,un excel in service marketing, nanagement, and delivery have never been greater. This text will give you a lens with which to approach the marketing and manage- tneut of services. What you learrt can be applied in a company like tgV with a tra- ditional manufacturing history or in pure service busin.ri.r. you will learn tools, strategies, and approaches for developing and delivering profitable services that can provide competitive advantage to firms. At the base of services rnarketing and man- agement you will find a stroug customer focus that extends across all functions of the fimr-thus the subtitle of this book, "integrating custonrer focus across the firm.,'
tt, HAT ARE SERVICES?
Put in the most sirnple terms, ,;ervices are deecls, processes, ctncl per.fbrmance. pro- vided or coproduced by one entity or person for another entity o. p.rron. Our op.ning vignette illustrates what is meant by this definition. The services offered Uy mH,l are not tangible things that can be touched, seen, and fblt, but rather are intangible deeds and perforrnances provided and/or coproduced for its customers. To be concrete, IBM offers repair and maintenance service for its equipment. consulting services for IT and e-commerce applications, training services, web design and hosting, and other services. These services may include a final, tangible r.po.l, a website, oi in the case of training, tangible instructional n-raterials. But for the most part, the entire service is represented to the client through problem analysis activities, meetilgs with the client, follow-up calls, and reporting-a series of deeds, processes, and p.ifo.-unces. Simi- larly, the core offerings of hospitals, hotels, banks, ind utilities are primarily deeds and actions performed for customers, or coproduced with them Chapter 1 lntroduction to Seryices 19
-r! LE 1.1 Eight central paradoxes of rechnological products
- --'r;r 1t)981, pp. 123 111 . C'op-v-right,e, 1998 LJniversity of ('hicago press. Reprinted bv perrnrssion.
*rradox Description
- : -:':;ichaos
:--: : n/enslavement
",n ', tosolete
- : - :::ence/incompetence
i- : =-cylrnefficiency
-- -: ; :.eates needs
:i: - ::ron/isolation
.- ==:'gldisengaging
Technology can facilitate regulation or order, and technology can lead to upheaval or disorder.
Technology can facilitate independence or fewer restrictions, and technology can lead to dependence or more restrictions.
New technologies provide the user with the most recently developed benefits of scientific knowledge, and new technologies are already or soon to be outmoded as they reach the marketplace.
Technology can facilitate feelings of intelligence or efficacy, and technology can lead to feelings of ignorance or ineptitude.
Technology can facilrtate less effort or time spent in certain activities, and technology can lead to more effort or time in certain activities.
Technology can facilitate the fulfillment of needs or desires, and technology can lead to the development or awareness'of needs or desires previously unrellized. Technology can facilitate human togetherness, and technoloqv can lead to human separation
Technology can facilitate involvement, flow, or activity, and technology can lead to disconnection, disruption, or passivity.
are simply not interested in using or ready to use technology.25 Ernployees ca' also be reluctant to accept and integrate technology into their *oi[ lives-especially when they perceive, rightly or wrongly, that the technology will substitute foi human lubo,- and perhaps eliminate their jobs.
With technology infusion comes a loss of human contact, which many people believe is detrimental purely from a quality of life and human relationships perspecti"e. parents
may lament that their children spend hours in front of cornputer screens, interacting with garnes, seeking inforrnation, and relating to their friends only through instant mes- saging and Facebook without any face-to-face human contact. And workers in organi- zations become more and more reliant on communicating through technology-even commutricating via e-rnail or online chat sessions with the person in the next oifice! Finally, the payback in technology investments is often uncertain. it may take a long tirne for an investtnent to result in productivity or customer satisfaction gains. Some- times it never happens. For exatnple, McKinsey & Company reports that a firlr pro- jected a $40 rnillion savings frommoving its billing and service calls to the Web. Instead, it suffered a $ 16 million loss as a result of lower usage by customers than pro- jected, r"rnanticipated follow-up calls and e-rnails to the iall center from those who had used the Web application initially, and loss of revenue from lack of cross-sellins opportr"rnities."'
}IARACTERISTICS OF SERVICES
There is general agreement that differences between goods and services exist and that the distinctive characteristics discussed in this section result in challenges (as well as advantages) for managers of services.2T [t is also important to realize that each of these 20 Part One Foundations for Services Marketing
characteristics could be arranged on a co.ntinuum similar to the tangibility spectrum
srrown in Figure r. r. That is, sErvices tend to be more heterogeneous, more intangible"
a'd more difficult to evaluat;;;t good', bu,t the differences between goods and ser-
vices are not black arrd rvhite by arry neans'".,
Table 1.2 summarizes the differ.n.., between goods and services and the inrplica-
tions of- these characteristics. Marry of the strate"gies, tools, and frameworks in this
text were crevelopea to address these characteristiJs, which, until the 1980s, had been
largely ignored by marke*rr. n..ently it has been suggested that these distinctive
characteristics should not be viewed ai ur'riq.o to serviiJs but that they are also rel-
evant to goods, that..all proJ,.rcts are services," and that "econon-ric exchange is funda-
rnentally abour service pr"riri"".;;te This ui* suggests that all types of organizations
may be abre to gai' valuable insights fro'r ,.ruiJ.-rnarketing frameworks, tools, and
strategies.
Intangibility '; of services is intangibility. Because ser-
The most basic distinguishing characterlstl(
vices are pertbrmances o. u.tl,-,, rather than objects, they cannot be seen, felt, tasted,
or touched in the salre l-nanner that you .u,r ,.nJ. tangibre goods. For example' health
care services are actio's (such u, ,*g.ry, diagnosis, Jxamination, and treatment) per-
tbrrned by providers and directed toward patlents and their families. These services
ca'not be seen or toucheO t, the patient, although the patient may be able to see
ancl toucrr certain tangible co,',pon.nt: ol the seriice (rike the equipment or hospital
roonr). ln fact, rnally serr,ices sucl' as lrealth care are difficult to grasp even mentally.
Evenafteradiagnosisor.ttrg.ryhasbeencompletedlhepatientrnaynotfullycom-
prehend ,lr. ,..ii.. p..tor-Jd, ut,t,o.rgh tangibie evidence of the service (e.g'' inci-
iio,-,, bandaging, pain) may be apparent'
TABLE 1'2 Comparing Goods and Services
S.ttrce: l\' l-itrit5t{r'1rrr.rI' ll'tlie Anrericarr N4artcting Assoctattctn -19 t|all lq85) pp.:tr1 5t) lteprintccl by pertlrtsston t
Resulting lmPlications Goods Services
Production separate Simultaneous production
from consumPtion and consumptlon
Services cannot be inventoried'
Services cannot be easily patented'
Servtces cannot be readily displayed or communicated'
Pricing is difficult'
Service delivery and customer sattsfaction depend on
emploYee and customer actlons'
Service quality depends on many uncontrollable factors'
There is no sure knowledge that the service delivered
matches what was planned and promoted'
Customers participate in and affect the transaction'
Customers affect each other'
Employees affect the service outcome'
Decentralizatron may be essential'
Mass Production rs difficult'
It is difficult to synchronize supply and demand with servlces'
Tangible
Standardized
lntangible
Heterogeneous
Nonperishable Perishable Services cannot be returned or resold Chapter 1 lntroduction to Seryices 21
Resulting Marketing Intplicutions Intangibility presents several marketing challenges.
Services cannot be inventoried, and therefore fluctuations in demand are often difficult
to manage. For example, there is tremendous demand for resort accorunodations in
Phoenix in February but little demand in July. Yet resort owners have the same number of
rooms to sell year-round. Services cannot be easily patented, and new service concepts
can therefore easily be copied by competitors. Services cannot be readily displayed or
easily communicated to customers, so quality may be difficult for consumers to assess.
Decisions about what to include in advertising and other promotional materials are
challenging, as is pricing. The actual costs of a "unit of service" are hard to determine
and the price*quality relationship is complex.
Heterogeneity
Because services are performances, frequently produced by humans, no two services
will be precisely alike. The employees delivering the service frequently are the ser-
vice in the customer's eyes, and people may differ in their perfbrmance from day to
day or even hour to hour. Heterogeneity also results because no two customers are
precisely alike; each will have unique demands or experience the service in a unique
way. Because services are often coproduced and cocreated with custoners, customer
behaviors will also introdr.rce variability and uncertainties, resulting in heterogeneity
of outcomes. Thus, the heterogeneity connected with services is largely the result of
human interaction (between and among employees and customers) and human behav-
iors, as well as all of the vagaries that accompany them. For example, a tax accountant
may provide a different service experience to two different customers on the same day
depending on their individual needs and personalities and on whether the accountant is
interviewing them when he or she is fresh in the morning or tired at the end of a long
day of meetings.
Resulting Marketing Implicutions Because services are heterogeneous across time,
organizations, and people' ensuring consistent service quality is challenging. Quality actually depends on many factors that cannot be fully controlled by the service supplier,
such as the abiliry of the customer to arliculate his or her needs, the ability and willingness
of personnel to satisfy those needs, the presence (or absence) of other customers, and
the level of demand for the service. Because of these complicating factors, the service
manager cannot always know for sure that the service is being delivered in a manner
consistent with what was originally planned and promoted. Sometimes services are
provided by a third party, further increasing the potential heterogeneity of the offering.
Simultaneous Production and Consumption
Whereas most goods are produced first, then sold and consumed, many services are
sold first and then produced and consumed simultaneously. For example, an automo-
bile can be manufactured in Detroit, shipped to San Francisco, sold two months later,
and consumed over a period of years. But restaurant services carlrlot be provided until
they have been sold, and the dining experience is essentially produced and consumec
at the same time. Frequently in service situations like the restaurant this also means
that customers are present while the service is being produced and thus view and may
even take part in the production process as coproducers or cocreators of the service.
Simultaneity also means that custolxers will frequently interact with each other dur-
ing the service production process and thus may affect each others' experiences. For
example, strangers seated next to each other in an airplane rnay well affect the nature
of the service experience for each other. That passengers understand this fact is clearly 22 Part One Foundations for Services Marketing
Students in a univer- sity class cocreate the service experience with each other and the professor.
apparent in the way business travelers rvill often go to great lengths to be sure they
are not seated next to families with small children. Another outcome of sirnultaneous
production and consumption is that service producers f ind themselves playing a role
is part of the product itself and as an essential ingredient in the service experience for
the consumer. The accompanying photo illustrates a common aud complex example
of simultaneous cocreation of a service-a university classroom. Interestingly, with
the advent of technology, many services can llow be produced and consumed at differ-
ent points in time, resulting in fewer challenges related to this characteristic for some
providers.3o
Resulting Marketing Implicatiorts Because services often (although not always) are
produced and consumed at the same time, fiIass production is difficult. The quality
of service and customer satisfaction will be highly dependent on what happens
in "real time," including actions of employees, the interactions between employees
a1d customers, arrd interactions among customers themselves. Clearly the real-time
nature of services also results in advantages in tertls of opportunities to customize
offerings for individual consufflers. Sirnultaneous production and consumption aiso
means that it is not usually possible to gain significant economies of scale through
centralization. Often, operations need to be relatively decentralized, so that the service
can be delivered directly to the custonrer in cotrveuient locations, although the growth
of technology-delivered services is changing this requirement for marry services. Also
because of simultaneous production and consumption, the customer is involved in
and observes the production process and thus n-ray affect (positively or negatively) the
outcome of the service transaction.
Perishability
Peri.shubill/r,refers to the fact that services cannot be saved, stored, resold, or retltrned.
A seat on an airplane or in a restaurant, an hour of a lawyer's time, or space in a ship-
ping container not used or purchased cannot be reclaimed and used or resold at a later
iin .. Perishability is in contrast to goods that can be stored in inventory or resold
another day, or even returned if the consurner is unhappy. Would it not be nice if a
bad haircut could be returned or resold to another customer? Perishability makes this
action an unlikely possibility for nrost sen'ices. ='3 U RE 1.5
:.Irnuunl of
: r, u ation for
l,-t:'ent Tr pes
' P:,-'ducts
Chapter 1 lntroduction to Services 23
Resulting Murketing Implications A primary issue that marketers face in relation
to service perishability is the inability to inventory. Demand forecasting and creative
planning for capacity utilization are therefore irnportant and challenging decision
areas. The fact that services cannot typically be returned or resold also implies a need
for stroug recovery strategies when things do go wrollg. For example, although a bad
haircut cannot be returned, the hairdresser can and should have strategies for recover-
in-e the custonter's goodwill if and when such a problem occllrs.
Search, Experience, and Credence Qualities
One framework for isolating differences in evaluation processes between goods
and services is a classification of properties of offerings proposed by economists.3l
Economists first distinguished between two categories of properties of products:
seqrch qucrlities, attributes that a customer can determine before purchasing a prod-
uct, and experience qualities, attributes that can be discerned only after purchase or
during consumption. Search qualities include color, style, price, fit, feel,, hardness,
and smell; experience qualities include taste, wearability, and cornfbrt. Products such
as automobiles, clothing, furniture, and jewelry are high in search qualities because
their attributes can be ahnost completely determined and evaluated before purchase.
Products such as vacations and restaurant meals are high in experience qualities
because their attributes cannot be fully known or assessed until they have been pur-
chased and are being consumed. A third category, c'redenc'e qualities, inchrdes char-
acteristics that the_consumer may find impossible to evalnate even after purchase
and consumption." Examples of offerings high in credence qualities are appendix
operations, brake relinings on a car, and computer software updates. Few consum-
ers possess medical, mechanical, or technical skills sufficient to evaluate whether
these services are necessary or are performed properly, even after they have been
prescribed and produced by the provider.
Figure I.5 arrays products that are high in search, experience, or credence qualities
along a continuum of evaluation ranging from easy to evaluate to difficult to evaluate.
Products high in search qualities are the easiest to evaluate (left end of the continuum).
Products high in experience qualities are more difficult to evaluate because they must
be purchased and consumed before assessment is possible (center of the continuum).
Evaluation Qualities of Goods and Services
Easy to evaluate Ditficult to evaluate
EEE$EeEEiqHEFgo-drEEjr=b!g!*
EE '*_$oti
E PJ E g----------.-=.----.=--3
High in search High in experience High in credence qualities qualities qualities 24 Part One Foundations for Services Marketing
Products high in credence qualities are the most difficult to evaluate because the cus-
tomer rnay be unaware of or may lack sufficient knowledge to appraise whether the
offerings satisty given wants or needs even after usage and/or consumption (right end
of the continuum). Most goods fall to the left of the continuum, whereas most services
fall to the right because of the characteristics of services just described. These charac-
ferisfics make services more difficult to eva/uate than goods, particularly in advance of pr-rrchase. DifFiculty in evalttation, itr tllrn, forces consumers to rely on different cues and processes when deciding Llpon and assessing services.
challenges and Questions for service Marketers
Because of the basic characteristics of services, marketers of services face some very distinctive challenges. Atrswers to questions such as the ones listed here still elude managers of services:
Hovv c'an sert;ic'e quctlih, be tlefinecl and improved when the product is intangible and nonstandardized?
How'can new servic:es he cle.signecl and tested ffictivell, when the service is essentially an intangible process?
Httv' can the.firm be certuin it i.s communicating a consistent ancl relevant image when so many eletnents of the marketing mix communicate to customers a1d some of these elements are the service providers themselves?
Hotu tloes the.firm eccontmodate.fluc'tuating clentqnd when capacity is fixed and the service itself is perishable?
flov'Can the.fit'm he.rt ntotit,ate and selec't.service ernplovees who, because the service is delivered in real tirne, become a critical part of the product itselfi
Hov' 'thoulcl pric'e.s be sel when it is difficult to determine actual costs of produc- tion and price may be inextricably intertwined with perceptions of quality'?
Htsw shottlcl the.firm he organizecl so that good strategic ancl tec'tical clecisions are made when a decision in any of the functional areas of marketing, operations, a'd human resollrces mav have significant irnpact on the other two areas?
Hov'c'an the hqlctnc'e betvveen stanclurdization and personulizatioy be detepnined to maximize both the elhciency of the organization and the satisfaction of its cnstomers'l
How' cun the organizution protcc:t nev; ,service conc:ept,s frotll competitors when service processes cannot be readily patented?
Hov' doe.r the t'irftt cotnnlunic'ute qualin, qnd value to custontens when the offering is intangible and cannot be readily tried or displayed prior to the purchase decision?
Hov'cctn the ctrgunizcttion ensure the delit,erl, of con.si.stent clucrlih,service when both tlre orgattization's employees and the customers themselves call aflbct the service outcorne'/
SERVICE MARKETING MIX
The preceding questions are some of the many raised by rnalaeers and marketers of services that will be addressed throughout the text through a varietv of tools and strat- egies. Sometir-nes these tools are adaptations of traditional ntarketin{r tools. as with Chapter 1 lntroduction to Services 25
the service marketing mix presented here. Other times they are new, as in the case of service blueprinting presented in Chapter g.
Traditional Marketing Mix
One of tlre most basic coucepts in marketing is the marketing mix, d,efined as t6e elements an organization controls that can be used to satisfy o, .omnrunicate with customers. The traditional marketing mix is cornposed of the four Ps: procluc.t, plac.e (distribution), prorttotion, and price. These elements appear as core deciiion variibles in any market- ing text or marketing plan. The notion of a mix implies that all the variables are inter- related and depend on each other to some extent. Fuither, the rnarketing n-rix philosophy implies an optimal mix of the four factors for a given market segment at a given pol,rt in tirne.
Key strategy decision areas for each of the four Ps are captured in the top four groups in Table 1.3. Careful management of product, place, promotiol, and price will clearly also be essential to the successful marketing of r.ruices. How.u.r, th. strate- gies for the four Ps require some modifications when applied to services. For example, traditionally promotion is thought of as involving decislons related to sales, adveitis- ing, sales promotions, and publicity. In servicerlh.r. factors are also irnportant, but because many services are produced and consumed sirnultaneously, ,.r.,rir. delivery people (such as clerks, ticket takers, nurses, and phone personnel) aie involved in real- time promotion of the service even if their jobs are typically defined i' terms of the operational functions they perform.
-.:.: F 1 ?
:r:ied
r -. =ring \lir
'' -n ices
Product
Physical good features
Quality level
Accessories
Packaging
Warranties
Product lines
Branding
Place
Channel type
Exposure
Intermediaries
Outlet locations
Transportation
Storage
Managing channels
Promotion
Promotion blend
Salespeople
Selection
Training
Incentives
Advertising
Media types
Types of ads
Sales promotion
Publicity
InterneVWeb strategy
Process
Flow of activities
Standardized
Customized
Number of steps
Simple
Complex
Customer involvemenr
Price
Flexibility
Price level
Terms
Differentiation
Discounts
Allowances
People
Employees
Recruiting
Training
Motivation
Rewards
Teamwork
Customers
Education
Training
Physical Evidence
Facility design
Equipment
Signage
Employee dress Web pages
Other tangibles
Reports
Business cards
Statements
G ua rantees 26 Part One Foundations for Services Marketinq
Expanded Mix for Services
Because services are usually produced and consumed simultaneously, customers are often present in the firm's factory, interact directly with the firm's personnel, and are actually part of the service production process. Also, because seivices are intangr- ble, customers will often be looking for any tangible cue to help them understand the nature of the service experience. For example, in the hotel industry the design and decor of the hotel as well as the appearance and attitudes of its ernployees will inflr,r- ence customer perceptions and experiences.
Acknowledgment of the importance of these additional variables has led service nrarketers to adopt the concept of an expandecl marketing mix for services shown in the three remaining groups in Table 1.3.33 In addition to the traditional four Ps, the services marketing mix includes people, phv.sic.al ey'idence, and pro(te,ss.
People All human actors who play a part in scn,ice dclivery and thus influcnce the buyer's pcrceptions: namely, the firm's personnel. the customcr, and other customers jrr
thc scrr ice enr ilonrncnt.
All the human actors participating in the delivery of a service provide cues to the cltstomer regarding the nature of the service itself. Their attitudes and behaviors, how these people are dressed, and their personal appearance all influence the custorrer's perceptions of the service. In fact' for some services, such as consulting, counseling, teaching, and other professional relationship-based services. the provider is the ser- vice. In other cases the contact person may play what appears to be a relatively small part in service delivery-for instance, a cable service installer, an airline baggage hatrdler, or an equipment delivery dispatcher. Yet research suggests that even these providers may be the focal point of service enconnters that can prove critical for the organization.
In many service sitnations, customers themselves can also influence service deliv- ery, thr-rs affecting service quality and their own satisfaction. For example, a client of a consulting company can influence the quality of service received by providing needed and timely information and by implementing recommendations provided by the consultant. Sirr-rilarly, health care patients greatly affect the quality of service they receive when they either comply or do not comply with health regin-rens prescribed
by the provider.
Customers t-tot only influence their own service outcomes, but they can influence other customers as well. In a theateq at a ballgame, in a classroom, or online, cus- tomers can ittfluence the quality of service received by others-either enhancing or detracting from other customers' experiellces.
Physical evidence The environment in rvhich the sen,ice is delivered and wherc the firm and customer interact, as well as any tangible components that facilitate perfor- mance or communication of the service.
The physical evidence of service includes all the tangible representations of the service such as brochnres, letterhead, business cards, reports. signage, equipment, and web pages. [n some cases it includes the physical facility' u'here the service is offered-the "service Scitpe"-for exarnple, a retail bank branch facility. In other cases, such as telecommunication services, the physical facility is irreler.ant. In this case other tangibles such as billing statenents and appearance of the service vehicle and installer may be important indicators of quality. Especially when corlsumers have little on which to judge the actual quality of sen'ice, they will rely on these cues, just as they rely on the cues provided by the people and the service process. Phvsical e'n,idence cues STAYING
Chapter 1 lntroduction to Services 27
provide excellent opportunities for the firm to send consistent and strong messages
iegarding the organiiation's pllrpose, the intended market segments, and the nature of
the service.
process The procedures, mechanisms, and fiow of activities by rvhich the
sen,ice is delivered-the service delivcry and operating systems.
The delivery steps that the customer experiences, or the operational flow of the
service, also give customers evidence on which to judge the service. Sorne 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 another. Rather, the point is that these process char-
acteristics are another form of evidence used by the cnstomer to judge service- For
example, two successful airline companies, Southwest and Singapore Airlines, fol-
low extremely different process models. Southwest is a no-frills (no food, no assigned
seats), low-priced airline that offers frequent, relatively short domestic flights. All the
evidence it provides is consistent with its vision and market position, as illustrated in
Exhibit 1.2. Singapore Airlines, on the other hand, focuses on the business traveler
and is ,on..rn.d *ith nt..ting individual traveler needs. Thus, its process is highly
customized to the individual, and employees are empowered to provide nonstandard
service when needed. Both airlines have been very successful'
The three new marketing mix elernents (people, physical evidence, and process)
are included in the rnarketing mix as separate elements because they are particularly
salielt for services, they are within the control of the firm and any or all of them may
influence the cnstomer's initial decision to purchase a service as well as the customer's
level of satisfaction and repurchase decisions. The traditional elements as well as the
1ew marketing mix elernents will be explored in depth in future chapters.
FOCUSED ON THE CUSTOMER
A critical thene running throughout the text is custonter Jbcus. In fact, the subtitle of
the book is "integrating customer focus across the firm." From the firm's point of view,
this means that all strategies are developed with an eye on the customer, and all imple-
mentations are carried out with an understanding of their impact on the custotner.
From a practical perspective, decisions regarding new services and communication
plans wiil integrate the customer's point of view; operations and human resource deci-
sions will be considered in terms of their impact on customers. All the tools, strategies,
and frameworks included in this text have cnstomers at their foundation. The service
marketilg mix just described is clearly an important tool that addresses the uniqueness
of services, keeping the customer at the ceuter.
In this text, we also view customers as assets to be valued, developed, and retained.
The strategies and tools we offer thus fbcus on customer relationship building and loy-
alty as opposed to a more transactional focus in which customers are viewed as one-
time revenue producers. This text looks at customer relationship management not as a
software program but as an entire architecture or business philosophy. Every chapter
in the texi ca1 be considered a cornponent needed to build a complete customer rela-
tionship lttallagement approach. Chapter 2 Conceptual Framework of the Book: The Gaps Model of Service Quality 35
Effective service marketing is a complex undertaking that involves many different
strategies, skills, and tasks. Executives of servic e organizations have long been confused
about how to approach this complicated topic in an organized manner. This textbook is
designed around one approach: viewing services in a structured, integrated way called
the gcqts model of .sen,ice clualih;, ' This rnodel positions the key concepts, strategies,
and decisions in services marketing and will be used to gr"ride the structnre of the rest
of this book; sections of the book are tied to each of the gaps described in this chapter.
-IE CUSTOMER GAP
The customer gap is the difference betweerr customer expectations and perceptions
(see Figure 2.1). Customer expectations are standards or reference points that cus-
tomers bring into the service experience, whereas customer perceptions are subjec-
tive assessments of actual service experiences. Customer expectations often consist
of what a customer belier,-es should or will happen. For example, when you visit an
expensive restaurant, you expect a high level of service, one that is considerably supe-
rior to the level you would expect in a fast-food restanrgnt. Closing the gap between
what cnstonters expect and what they perceive is critical to delivering quality service;
it forms the basis for the gaps model.
Because customer satisfaction and customer focus are so critical to the competitive-
ness of firms, any con'lpany interested in delivering quality service must begin with
a clear understanding of its customers. This understanding is relatively easy for an
organization as small as The Oaks at Oiai but very difficult for a large organization
in which managers are not in direct contact with customers. For this reason, r.l'e u'ill
devote the first part of the textbook to describing the relevant customer concepts, so
that the focus of everything can relate back to these concepts. Considerable evidence
exists that consumer evaluation processes differ for goods and services and that these
differences affect the way service providers market their organizations. Unfortunately,
much of what is known and written about consumer evaluation processes pertains
specifically to goods.
The sources of customer expectations are marketer-corrtrolled factors (such as pricing.
advertising, and sales promises) as well as factors that the marketer has limited ability to
affect (innate personal needs, word-of-rnouth conrmunications, and competitive offerings).
In a perfect world, expectations and perceptions would be identical: customers would per-
ceive that they have received what they thought they would and should. In practice these
concepts are often, separated by some distance. Broadly, it is the goal of services marketing
2,1
-,mer Cap Expected
service
Gustomer
9ap
Perceived
service I
36 Part One Foundations for Services Marketing
to bridge this distance, and we will devote virtually the entire textbook to describing sffate-
gies and practices designed to close this customer gap. We will describe customer expecta-
tions in detail in Chapter 3 and cnstomer perceptions in Chapter 4.
THE PROVIDER GAPS
Tcr close the all-important customer gap, the gaps model suggests that four other
gaps-the trtrot,icler gops-need to be closed. These gaps occl-lr within the organization
providing the service (hence the terrn prot,ider gaps) and include
Gap l: The listening gap
Gap 2: The service design and standards gap
Gap 3: The serl'ice performaltce gap
Gap 4: The communicatiorr gaP
The rest of this chapter is devoted to a description of the full gaps model.
Provider Gap 1: the Listening GaP
Provider gap I , the listening gctp, is the difl-erence between customer expectatious of
service and cornpany understanding of those expectations. The primary reason that
many firms do not meet customers' expectations is that the firms lack an accurate
understanding of exactly w,hat those expectations are. Many reasons exist for managers
not being aware of what customers expect: they may not interact directly with custorn-
ers, they may be unwilling to ask about expectations, or they rnay be unprepared to
address them. When people with the authority to set priorities and the responsibility
to do so do not fully ntrderstand customers' service expectations, they may trigger a
chain of bad decisions and suboptimal resource allocations that result in perceptions
of poor selvice quality. In this text, ue broaden the responsibility for the first provider
gap from managers alone to any employee in the organization with the authority to
clrange or influence service policies and procedures. In today's changing orgawzations,
the authority to make adjustments in service delivery is often delegated to empowered
teams and fi'ontline people. In bnsiness-to-business situations, in particular, account
teams make their own decisions about how to address their clients'unique expectations.
Figure 2.2 shows the key factors responsible for provider gap l, the listening gap. An
irradequat e c'u.stotner reseurc'h orientatiorz is one of the critical factors. When manage-
ment or empowered employees do not acquire accurate information about customers'
expectations, this gap is large. Formal and informal methods to capture inforrnation
about customer expectations rnust be developed through customer research. Tech-
niques involving a variety of traditional research approaches-among them customer
interviews, survey research, complaint systems, and custotner panels-must be used
to stay close to the cllstomer. N{ore innovative techniques, such as structured brain-
storming and service quality gap analysis, are often needed. This chapter's Global Fea-
ture discusses one of these innovative techniques, which IKEA and other companies
have tised to identify customer expectatiolls.
Arrother key factor that is related to the listening gap is lack of upttarcl crtmmunication.
Frontline employees often knorv a great deal about customers; if management is not in
contact with frontline ernployees and does not understand what they know, the gap widens.
Also related to the listening gap is a lack of company strategies to retain customers
and strengthen relationships with them, an approach called relqtionship morketing.
When organizations have strong rc-lationships with existing customers, provider gap I
is less likely to occur. Relationship marketing is distinct fron transactional marketing,
