ffi

i:"-:{-

-'ii
-.

-'.,-f'

--;-

r+:

lll

+".*:1

ond in developing South-Eost Asion

Services now dominote economies in mony ports of the world,
ihe provision of services is
oddition.
ln
to
goin
momenlum.
conlinues
sector
countries the services
monufocturing componies'
oloyinq on increosingly importont role in the morketing,shotegies of goods
firms seek to differeniiote
commodities,
or
iu.n
ore
increosingly
products
[;;;;;iB;rrlirr"a
more oitention
consequence,
o
As
service
components.
volu+odding
including
tn.i, ofLrino, by
'by businesses, not-for-profit orgonisoiions ond even government enlerprises to
i.-[.i",
"ti"n of .urui." provision ond how-servrces moy best.be monoged.ond morketed'
ii"",rri'.1iJ,,,
business ,chool grodrotes who oim or expecl to work in service induskies now olso
A;#;;i";ly,
fr."J6"un pr"porud sufficiently to do so. These ore the needs to which this book responds.
"'-"".i1"
if.,ir-t* "'rr to help'proctitioners ond siudents olike to understond.procticol implicotions born,of the
.fr"r".reristics of services ond service provision, ond to enoble you lo coPe with the chollenges

i"".i"

.a

..

of monoging ond morketing o service.

:i

qs c crnfh is-b ook- b-e-u 5 e-d?-Lo_r wh o types-oL c o-u rs

for both
The book hos been composed ond wriiten in such o woy thot it con be used os o resource
,
ossume,
We
ond
formots.
durotions
portoroduote ond odvonced undergroduote courses o[ different
,
.
|,o*!r.r, thot students will hove undertoken some preporotory morkeling courses ond, os o
consequence, hove some foundoiionol underslonding of morketing principles ond concepts to

;
i
:.

t.
';,

?r.

i:
j
I

underpin whot is presented ond discussed here.

The moteriol contoined in the book, including the coses ond reodings, con olso be used to supporl
fhe provision of shorter, selective executiye koining sessions lhe focus of which moy be norrower
roiher thon comprehensive.
The following tobles link the reodings ond coses to the chopters in ihe book.
Readings matrix

Reading

Retated

DescriPtion

chapter(s)

!:

a:

jl'

,:

Services as theater
Why service stinks

i
i!

for managing the customer experience 7,3,7

J and

Excettent customer service is becoming a thing of

the past-untess you can afford to pay for it.

Customer service levets are increasingly being
based on a segmentation

approach

t
:1'

The theatre as a metaphor

'I quit but I forgot to

.
Identifoing and motivating'disengaged' front-tine

tet[ you'

employees

Getting more from

your ca[[ centres

Batancing costs and quality

results from cat[ centers

How to tead the

customer experience

Business strategies centred on the overatl design

and detivery of a total customer experience to create
superior vatue

.il

;
s

i:

to get profitable

,|
.:]

i
i:
Li

il

.::
a

t_t

7,8,

11

3,6,7

Readings matrix conti nued

Reading

Description

Are you being served?

Emotiona[ labour of front-[ine service employees

Strategic campaigns
change the way the
pubtic looks at you

8
9
10

lgl:I..,,rn

Growing the trust

re[ationship

Related
chapter(s)

a marketing strategy for a professional

The key rote of trust in developing customer

retationships

Strategic levers of
yietd management

Yield management as a pricing toot

Marketing metrics

A symlary of what managers shoutd measure by

way of internal
and external metrics to demonstrate Marketing,i
vatue to the firm

Coses mofrix
Country

Kiwi Experience

New Zealand

Industry
Tourism/ coach

tnveI
Integrating conservation

and

Pubtic Zoo

commerciatism and the

importanie oF internat
marketing: Perth Zoo
Customer frustration with

Telecomm

0ptusNet
4 An inaident in the babies
5

The Cape Hbuse. Bangkok

Aussie Pooch Mobite

room

Australia

Austra[ia

Chitd mindi

Irtobr'te pet
wash

Giordano: positioning for

internationaI expansion

Hoirg Kong

Starbucks: delivering

AppareI

Restaurant

customer service
9

10

11

Airtine

8lake Dawson Waldron: unteash- Australia

the power of the Internet

LegaI

Eanyan Tree hotels: developing Asia

service brand

Hospitality

Telekomset: to mend

the,tealqr

Indonesia

Tetecommuni-

China

Express

buckef
IJ

Customer asset

at

cations

management

DHL in Asia

Bumrungrad'sgtobalseMces
mal

Thailand

Private
HospitaI

4,

71.

5, 6, 70,

72

Att

1.7

orgonisotions differ from monufocturing

A cenkol theme of this book continues to be thot service
plonning ond implementing
businesses in mony

irporionf woys, ond require o,distinctive opprooch to

morketino stroteqy. SV fhir,

*" dln'f

meon io imply lhot services morketing is uniquely different from

of understonding service orgonisotions on their

stress the importonce

:;;::';il:;"?]n"ir."t-*;
;;i ri"n roit"ring morketing gools ond strotegies occordingly.
:;;;;.
"-';';;;;nJ-"qrolly
significo.nt ileme in this 4th edition is the importonce of volue creotion ro
indeed ony orgonisotion thol provides service- This is grounded in
firrr"o,.
,h";r;..;;i;;;"
d'cision mode in the lisht
Hri";;;;;t""airs but musl rhen be reflectei in every morketing+eloted
Eoch chopter of ihis new
provided'
ond
oflered
whot
is
see
volue
in
;i|tt,; ;;;;.; ,orl"tr torgeted
design ond creolion'
service
through
occomplished
be
this
con
by
.hi.h
woys
edition focuses on
communicolion'
oostioning, pricing, service delivery ond
yet is rooted
.perspective,
""1, ;,,'h';;uioJ, "ditions, this new edition moinloins o strong monogeriol
view thot tokes occount of both
o
bolonttd
present
lo
oim
we
woy
in
this
reseorch.
in solid ocodemic
the Asio-Pocific
rt,anrv ond reol world proctice. This 4th edition'olso mointoins o sirong focus on
now cross
services
with
which
speed
ond
eose
The
,."nl"l,l"Jraing Auskolio ond New Zeolond.
w-e ore now
meons.
centres)
coll
educotion,
consulting,
tourism,
finonce,
nojiorot boundJri", (e.g.,
from within
.".p.tf i, o globoi *".rt"lf.r ,ony r"*i."r. Thus Iompetitive threots:I"!S" not only porficulor'
in
firms
"g
Zeolond
New
ond
notionol boundories, brt incruoringly'from obrood. Austrolion
export
[;i;; ;";;;;pf,i*tty po* of South--Eost Asio, ore increosingly looking to the Asion region.for
culturol complexities of ihe vorious
ond
busineis
of
the
understonding
on
oppo"rtinitls.'Hencagoining
to reolise their export,potentiol' .
countries in this region ,e"#, ers"ntiol if serrL. firms ore

t tour
book hos been substontiolly oltered in this new edition which now comprises
orising
concepls
."i; ;"ri;;; r;ctions. The firsi of ihese, comprised of choplers I lo 4, deols with core oddresses the
of services ond service provision, ond olso
fr:om lhe unique nofure ond
"horo"t"ristics
solisfoction. The second section, compr:ising.choplers
ond
customer
,.f.ii."rfrip'U-"1ween seryice quolity
issues ond, in. the light of lhese decisions'
ond
loigeting
on
contenl
5 ond 6. contoins
.positioning
The lhird section,
trmulotion of the service product ltr"rcly wirh the oim of creoting customer volue'
the design of the
ond
delivery
to
service
reloted
issues
;;;;;;;; ; t o, dir.r.r"i o ronge of itt"gi.
bolonce
o
reosonoble
mointoin
to
how
shotegy.
pricing
oppropriote
o[
on
."rri."r.op", the formulotion
tc 14,
11
chopters
section,
;;;". copociV ond demond, ond *oy. of promotiig serviies. The fourth
ond,
relotionship
service
to
customer
Ji..rr*, "'rong. of ,onogeriol issues'in reiotion
-monogement,
chopter
;;;;;";""ry"ond .orploints monogement, ond inlernotionolexponsion. The slructure of eocho generol
i"tf.W, . ..rrirt nt fror"work, beginling *ith on opening highlight or vignetie followed by
ond,opplicofion
introduclion to the core contenf p[sentJ, ond concluding with o minicose,.review
questions, ond recommended supplemenlory reoding. ln oddition, throughout the book we hove sought
,onog"riol imphcotions of .or" tn""pls. ond theories presenled, to include exomples
"*i"enfigiilr".ti*l
thl th"uory in proctice, oid to o.lno*ledge recent reseorch lhot serves to underpin core lheory.
of
ln response'io feedbock from users ond reviewers of the book we hove:
--

r
e

Th.

itrr.t

ru

ofjh"

omplified our considerotion of relevonr HRM issues including ihe importonce o[ internol morkeling
in service
exponded ihe content on service bronding ond the use of informoti6n lechnology
provision

morkeling ond monogement

" Ir"oii,"j the content on cusiomer relotionship
E updoted ond exponded the content on service delivery'
ln oddition,

n
E

opening chopter highlighrs hove been refreshed

most of the end-o[chopter mini<oses hove been reploced with new ones

end_of-chopter revietv ond opplicotion questions hove been refreshed

recommended reodings hove been updoted

recent reseorch hos been ocknowledged

six new coses hove been included ond three of the retoined coses hqve been updoted

a three new reodings hove been odded.

A comprehensive lnstruclors

Resource CD provides

o chopter-by-chopter summory of core content occomponied by teoching suggestions including

the use o[ reodings ond coses

s
r
r
a

discussion nofes for eoch mini cose

onswers to eoch o[ the endof<hopter review questions
PowerPoint slides to occompony eoch chopter

o test bonk of questions for instructors who wish to test their sludenls in lhis monner.

Numerous professionol colleogues ond ossociotes have provided us wilh voluoble insights ond
confributions: not only in terms of concepls ond reseorch findings but olso odvice on how best fo leoch
services morketing. They include Len Berry (Texos A & M Universify), Colin Bowmon, Dovid Cox ond
Keith Stonley lFlight Centre), Ko de Ruyter ond Jos Lemink (Universiiy of Moostricht, The Netherlonds),
Robert Green {Thommosot University, Thoilond}, Eyerl Gummesson {Stockholm Universit'y}, Hondi
lrowon (Frontier Consulfing, Jokorto), Munib Korovodic ond Jone Poole (SGeorge Bonk), Simon Knox

(Cron[ield University, UK] Kritiko Kongprdmsong (Chulolongkorn University, Thoilond], Vinh lo

(NSW
[Tor"rn"1. Consulting], Poniso Lonionondo (Roiomongolo University. Thoilond), Ellen Lintiens
Deportment of Stote ond Regionol Development), Mortin Zhi Lu {Fudon- Universil'y. ), Anno Motillo
(Pennsylvonio Stote University), Jonet McColl-Kennedy {University of Queenslond). Kriengsin
Prosongsukorn (lnspire Reseorch, Thoilond), Amy Smilh (The George Woshington University), Richord
Spreng [Michigon Stote Uniyersify), Steve Tox {Yictorio University, Conodo), Khun Theeroyo ond Khun
Serm (Cope House, Bongkok), Ting Yu (University of New South Woles), Jochen Wirtz (Notionol
Universily of Singopore).
Severol orgonisotions in porticulor ossisted in providing moteriol for this revised Asio-Pocific ond
Austrotion edition, including the Austrolion Trode Commission (Bongkok ond Jokorto), Flight Centre,
Qontos, St. George Bonk, SOCAP, Storbucks, ond Tourism Victorio.
We olso wish to register our lhonks to the outhors of the reodings ond coses in this book*some
of whom ore mentioneJ obove-os well os to lheir publishers for permission to reprint their work lrere.
The outhors olso ocknowledge the conkibution mode by our studenis to the leorning experience ond
the progressive development of knowledge, ond hope thot this revised edition will serve usefully in
focilitoting thot growth.
Lqst bui by no meons leost, we would like lo ocknowledge the volued ossistonce ond support of
the people who helped to bring this 4th Asio-Pocific ond Ausfrolion edition to fruilion. They include
Sonio Wilson, Senior Acquisitions Editor, Poul Burgess, Acquisiiions Editor, Sondro Goodoll, Proiect
Editor, Jennifer Coombs, Copy Editor ond Joonno Dovis, Editorisl Co.ordinolor.
Christopher H. lovelock
Poul G. Potterson
Rhett H. Wolker

ffi+:t*-o

rkelin

His reseorch, teoching

consulting interests revolve oround morketing issues
.ond
in service
induskies. More speciFicolly modeling cusromer sorisfoction ond service
q:uority, 1""r",L".i,,

morkeling, consumer loyolty ond switching borriers in service coniexts,

.omptoining

6"fr"rarl,

the internotionolisotion of service firms. His more recent reseorch is

""5
cross-culrurol in noture-in

porticulor exomining vorious models of consumer behoviour ocross Eost-Wesf

cuhures. tn con;unction
with the UQ Business school ond lhe George Woshington Universiiy (UsA),
he is currently working
on on Ausfrolion government funded proiect exomining the couses ond

.on.ugr.nces o[ cusromer,s

extreme negotive emotionol resPonses to foiled service encounters.

The study is being conducted in
Austrolio, USA, Chino ond Thoilond.
Professor Potierson's reseorch_ hos oppeored in the
Journol
Research in Markeling, Journol of lnternotional Business
studies,

of

Retoiling, lntqrnotional Journo! for

Journal oithe Ar.a*^y

i.'ririrg

science, Journal of service Research, Austrorosion Marketing

"i i;ri;;;;Z
Journal, tndrrtiol
Management, Advances in services Morkering ond Monogem.ri
tn,grrrtlnor Journar of service
lndustry Manogemenr, Europeon rournor of lvlorketing,
j;;;:;:,

Joirnar

Eusiness-lo-8us iness Morkeling, Psychology

of

services

ir;;;;;;;,

& Marketing, Asia-Pocific Journol of Manag"-*urt, loirnoit

Journal of lnt",notiono! Marketing, Journa!
urii,r,'rn

of Professionol services Mo.rkaing,

ond olhers' He is on the editoriol-boords of lhe Europeon
Journal of Morketing,"i'Ci"L*i
Journol of Business

Reseorch, Journal of Marketing Educolion, ond lnternational

Journal of Service irarury Uorrg"r'u"i,
os well os being o regulor reviewer br the Journo! of
Morketing, Journol of Retailing, Journol ol the
Academy of Morketing Science, ond Journol of Service
R"s"o-ih.

Rhett H. wolker

is o professor of Business

ol Lo Trobe Universiiy where he is orso

of tow.ond Monosemenr. nri.,
;"ili"s L"
f:r""^.,f.?.::l[_T'.i:l
lrobe he wos Heod of the school o[ Morketing ot RM|T
universiry MelbournJfor
ihree yeors. His reseorch ond reoching interesr"s ir.rrJ"
,rr"
nolure of service mindedness; the -morketing ond
.onogur"ri ,i-rJr"i."r,
porticulorly in business-f+business contexts; co"mpetitive
morker positionino; ond
ofthe

Fo.cutry

"

;;#;,.u*:.?rri

tourism. His resesrch popers hore beun prerunted

ot o ,"rJJ-"f
ond. inrernorionolly, ond his work hos been
".oti"ri.
published
in rhe
""fionolty
::.:l-"::1..":
Journot
or Jervtces Morketing, Journor of Financior services
Markering, Monoging

Service Quo.lify, Europeon Journol of Morketing,

Lou*rt o7 Uoii"',*"iti"""i";"rr,
lnlernolionol lot'rnal of service rndustry
Mz'rog"^"rt,
rnrernarionor Journar of
lnternet Marketins and Advertl!1srM."*1tyrg
j";:;;;i;iM;:r:;";;81,,,:;
irittig"*7'"ra

ond Advonces in lnternolionol MJrkeling.

H"i', tt
the Pacific Region.

n""rrir:i

".l-orthor

o[ slroregi c Morketing Monogement for

He hos ovei 25 yeors of senior level morketing

ond monogemenl expe.rience goined principolly
within the electronic communicotions ond
industry in Austrolio, the UK ond the USA,
ond ployed
"nt"rtoinrent

o cenfrol role in the

.o.n'ur.i"r i,u lr""acosting indusky in

Ausrrotio. He hos been rhe recipienr"rr"urrJr;.,'rj'rn"
,";;;;i
i";;;;;;
Jrrl vYYvrqr rrrLruqrrrg cI F
Ausrrorion
Hoover Morketing Aword.
"f

;;d,';.irj*r"."0*,,isious

=
:J:

rei

F.
g:
E-.

st
+:
F.'-l

F.

7:
g:;

*:

$:;
?.!.

n,.

il:

_r:i:

l.i

:,:

ali

:,

:i
n

;,
:f

i
a.':

ll
i

Auth g,-rs.!/t Csses

Mork Colgote, UniversitY o[ Victorio, British Columbio, Conodo
Hondi lrowon Diuwodi, F rontier Consulting Group, lndonesio

Universily
Jomes Duon, Soulhern Cross

Lorelle Frozer, Griffith University

ICFAI Center for Monogement Reseorch, lndio
Suson Hunt, Chief Executive Otficer, Perth Zoo
Koren Kueh, Swinburne University of Technology, Sorowok, Moloysio
,tA.ir" f.t,, Corporote Direcior, Brond Monogemenl, Bonyon Tree Hotels ond Resorts, ond

Vir"k Grpto,

Angrono Resorts ond SPos

Vinh Q. Lo. Toverner Reseorch
Christopher Lovelock, Yole Universiry
Youngme Moon, Horvord Business School
George Potrinos, IowYer
Poul G. Potterson, University o[ New South Wsles
Brendon Phillips, Noke Dome Universify
Konokonchi Proshonth, ICFAI Center for Monogement Reseorch, lndio
John Quelch, Horvord Business School
lndronil Sen, DHL Asio Pocific
Singh, NUS business School, Notionol Universiiy of Singopore, Singopore
Sonioy-Sweeney.
Un iversiiy of Western Auskol io
J i ll ion
University of Singopore
Notionol
Jochen Wirtz,

!l

ii

Tim Ambler. London Business School

Lionne Crefney-Bornes, Director Morketing ond Development, Edith Cowon Universily

Chris Beck, stoffi writer br Good Weekend mogozine
Leonard L. Berry, MB Zole Professor of Morketing, Texos A&M Universiiy
Dione Brody, Eusiness Week (US)
Lewis P. Corbonu, founder, presijent ond chief executive oFficer of Experience Engineering
Richord B. Chose, University o[ Southern Colifornio
Roymond P. Fisk, University of New Orleons
Keith A. Gilson, McKinsey & Co. Toronlo. Conodo
Stephen J. Grove, Clemson Universiiy
Sfephon H. Hoeckel, founder of Adoptive Business Systems ond post choirmon of
Morketing Science lnslitute
Christopher W Hort. Consultont, Spire Group
Joby John, Beniley College
Michoel D. Johnslon, Universiiy of Michigon
.,,i
Terri Kobochnick, founder of The Kobschnick Group, lnc'
Deepok K. Khondelwol, McKinsey & Co. Toronto, Conodo
Sheryl E. Kimes, Cornell University

Au th or
!:

a-

s of

Co

e---crrd*ffi:*iii:-

l!:*ff::ru,1rutJ:*X;uld

like ro thonk the tolrowing reviewers

who were invorved in rhe

Bill Chiffy, Murdoch Universiry

pro.lom Ferguson, Curtin University of lechnoloov

lon Lings, Universify of Technolosv

3;";"""-'"r,
Jonelle Rose, Jomes Cook Univeiitu' '
Judy Drennon, eueenslond Uniu"rriiy
o[ Iechnology
Korh leen Griffi rhs, Rovo I

lorry Neole, Universiiy

i.ui,r.
.ny
'="'
"ii"li".f
W*t"r, ,qrrrr;j;; "'

Melbourn"

"f
Morgee Hume, Griffith University

Sfuorf Crispin, Universiiy o[ Tosnlonio

ling Yu, University of New South
Woles

ll't:..

ii'

:
:.i.

:. :.: :-t'1:ia..::-: . ,.t:- :-:

;
r1 , i: -,:'il.ir :" r ;

; : ir":-;.':rii=5,";.::rji:
ll :Jr-: l:.

'

.:.r:

-,i

Telemedicine-eHeolth: on innovqtive heqlth cqre solufion

Cardiologist Dr Robert Justo looks

at the putsating

u[trasound image

on the monitor. probing for

abnormatities in the two-month-otd baby tying on a surgery tabl.e 1000 km away. Dr Justo has dropped into
the University of Queenstand's Centre for 0n[ine Heatth at Brisbane's Royal. ChiLdren's HospitaL for a few
consuttations-something he has been doing regutarty most weeks for three years. He's one of 150 heatth
professionats on the centre's register used for referra[s by doctors in ruraI and remote areas across this vast

state of Queenstand.
Telemedicine, as it is catted, may be expanding, but it is not without its probtems. Teteheatth was widety
predicted as the next big thing: no patient woutd ever have to travel againj says centre director Dr Richard
Wootton. But there have been expensive faitures atong the.way. But he says it has been successfut as a
supptement. to the conventionaI face-to-face medicaI system and. in some circumstances, even better.
Professor Wootton cites the case of a sick baby in Mackay, in far north Queenstand (some 750 km north of
Brisbane), where a retrieval team with an incubator was headed to fly the very sick baby back to Brisbane for
treatment. White they were in the air a cardiologist used the videoconferencing facitities to examine the baby
and conctude that it was too sick to fly, possibty saving its [ife.
The University of Queensland's ontine heatth centre is one of only a few research and teaching centres in
the wortd that evaluates e.heatth practices and measures their cost effectiveness. Because it is based at the
Royal Children's Hospital much of its work is in pediatrics (treatment of young chitdren). 5ince 2001 more
than 2,000 patient consultations have been coordinated through its teLepediatric service which refers
patients in country areas to Brisbane pediatric speciatists. The biggest proportion of consuttations are for
burns patients and diabetes, white oncology and cardiotogy are the next most sought after speciatist services
through the centre. For the past five years the centre has been running a gLobal. emaiL support network for
doctors in devetoping countries such as Indonesia, Vietnam and Cambodia. It is currently hooking up heaLth '
professionats from around the world with doctors in Aceh treating victims of the Indian 0cean tsunami. The
referraI service is atso used by doctors in Iraq.l

Telemedicine

- on innovotive
service for potients in remole
oreos

Dorothyllling(2006),'Telemedicinestillasafeconnecriorl,ThesydneyMorningHerald,Zslanuary,p.2l.

(tlprtn I New perspeclives

on morketing

in the service

economy

.j

-"::-.i: r::.t,::

::i:if

innovottve Servlce

:.,..

-:.
!:j

ntro-d u,cti-o-n
These opening vignettes iUustrate some of the changes taking place in the emerging service economy,

including the launching of innovative value-creating services, facilitated by information technology

arid continuous innovation. One of the economic megatrends of the last 15 years has been the

l,:

phenomena-l grov!'th of the service sector. Today, in developed (and most developing) countdes it is the
service sector that is the engine of economic growth. Note, for example, the growth in IT services,
health professiona-ls, financial seruices, otler professional services, telecommunicalions, as well as
recreational services and the arts, theatre, education services, and so on. For a fee, there are now
services available to balance your finances, babysit your dog, manage your daily exercise program, find
you a new home, job, car, pet or interior decorator. Or perhaps you want to rent a ga-rden tractor,
furniture or garden plants? If it is a business-to-business (B2B) service you need, companies will plan
your next conference or sa,les meeting, design your packaging, handle your data processing or supply

t:"
i-i,'

r
a::

i--:r

$:.,
4r',.

temporary secretaries

'

*t!.

F-i
a+l
i:i: '

5i,:

'i::..
!li,::

il.r:

lii 'l

ll1

,:: .'
'i.:

i:'':
1,.'

ir.,

i:,:,

'

er::;:'l
L:ta:'

marketing.3 In fact, a recent Haruard Bttsiness Reuiew afircle argues lhat seruices sclence should be a
legitimate field of sh-rdy in its or,vn right.a
But like every reader of this book, you're an erperienced service consumer. You use an array of
serrrices.every day-although some, like talking on the phone, Iistening to the radio, using a credit
card, catching a bus or seeing a doctor, may be so routine that you hardly notice them unless

orgarisation that offers not only educational services but also a range ofsupplementary services
such as a library, computer facilities, student accommodation, healthcare, recreational facilities,
security, counselling and career services. On campus you may flnd a bookstore, post office,
photocopying services, Internet access, bank, retail shops, entertainment ald more. Your use of
these services is an example of service consumption ai.jhe individual, or business-to-consumer
(B2C), level. The important thing to note about these (and all other services) is that they create value
for the recipient.
Companies and not-for-proflt organisations also use a wide array of B2B seryices, varying to
some degree according to the nature of their industry, but usually involving purchases on a much
larger scale than those macle.by individua-ls or households. Nowadays, d,,iirr... customers .ue
outsourcing more and more'tasks (e.g. accounting functions, customer seryice and sales via call
centres, printing, after-sales service) to erternal service suppliers in order to focus on their core
business.
Service

t::
F:ii:

now accounts for between 60-80% of GDP and betlveen 50-90% of all ner,v employment in maly
economies.2 The emergence of the service economyhas prompted some scholars to suggest that, for

something goes wrong. Other service purchases may involve more thought and be more
memorable-for instance, getting your ha-ir cut or sryled, booking a cruise vacation, getting financial
advice or having medical surgery. Enrolling in coliege or university may be one of the most
important service purchases you will ever make. The typical university is a complex senrice

,t:

,,

developed and

the.fust time, services (rather than manufactured goods) are becoming the mainstream focus of

sl:.

i:::

or even executives. Today manufacturing industries in

developing couatries continue to be replaced by service industries to the extent that the service sector

''

firms-be they large or small, for profit or not for profit-often face competition (from
global as well as local competitors) and have a m1'riad of operational concerns. Many owners and
managers complain about how difficult it is to keep costs dor,vn and make a p;ofit, to find skilted and
motivated employees or to satisly customers, who theysometimes see as havingunreasonablyhigh
expectations and as being overly demanding. Fortunately, there are service companies that know
2 'The great jobs stntch', The Econorn rsr, October 2005, pp. l 1-14.
3 Stephen L.Vango and Robert F. tusch (2004),'Evolving to a newdominant logic for matketttg',Journa! of Marketing,
68, January, pp. 1-17.
4 Henry Chesbrough (2005), 'Towards a new science for servic es', Haruard Business Reuiew, February pp. 43-44.

(llrrtn I New perspectives on morketing in the ser-;fr*-co.rrorry=:-

how to please their customers while also running a productive,

profitable operation, staffed t
pleasant and competel1t employees, and accessible'through
,.".G".rd.ly.elf-service t".h.roffi
You probably have some favourite senrices that you like to patronise.
Have you ever stopped t
think about how these organisations succeed in delivering service that
meets your needs and eve,
exceeds your expectations? This book wi.ll teach you how
ieryice Urri.r"r..s ,frould be
-r.";;;;
achieve customer satisfaction and profitable p".for-u.r"". In.ad.dition
to ,trayirrg tt tey concepts
organising frameworks and tools of services marketing, you'll
"
also be introaucea to a wide array

lf,i

$l
fi.

fli

o
examples from Asia-pacific region, Austraria and
around the world. After reading this
book
hopefully you can draw important ressons on how to
succeed n
DuLUtseu
in serwce
service markets
markl that are becominE

l;

increasingiy innovative and

ii;l

competitive.

ii
j
.:

Listening to FM radio, visiting

mailing a letter, visiting a doctor, engaging th.

sirrrlc". or. tawyer or
movies or opera are all examples of services
consumption. In fact, we ,consume,seryices
every day
of our lives' services have traditionally been
aitn.uit to define, in puri u..urr" of their diversiry
(Table t'l)' so what exactlyis a serviceiMost
people have lirue

i
I

aimcrtry aeR.,i,g **rructuring or

agriculture' but defining a service can elude
them. The. distinction between seryices
and
manufacturing lies in the fact that the tangiurJphysi;J
"u

I
1

l
I
J

enjoyinga horiday in Bangkok, shanghai,

cairns or tl.1s
at university,

;'ffi;:T"f"1,H',H"-"i:::,Tl:I:'.i::':li:::'i::i:,':i:.1,ffi;iil'L.y*,
archid'#T:fffiffitfJ

i
I

a hairdresser,

photograph, horel bed,'mea_I,

Ji,ffi"ot

$ptcalyaciaerrta t"

I ::'-l:
.

%rkerins

l'
i1.',:
-.'.:',,

1.

ii

,u*i."

(the report,

rh;";;;.x .,,J,,e a"uu..ed. Various

definitionl of services.exist. Two that cap[r.
,f,. ur.*rr." of services are:
service is any act' performance or experience
' Aessentially
that one party can offer to another and
that is
intangible and does not r.rrrt i, the owaership
oiury,rrirg. ris production may or
may not be tied to a physical product.
etc..J are

:.:".f' - il i::r,.::;:..:1. . .
:,"1'-:' ;',: 1-:1
,,;.-..:-,., ;,, ....

I ,,r,i.:,;.

=,r.,;,;,:i. ;;i,.. :,'

An experientiol service-sofelY
.hockied tourisls enioy the Skywolk
otop SYdneY

Source: SYdneY SkYwaIk

time, place' form' problem solving or

Services are processes (economic activities) that provide
'experiential value to the recipient'
'something that maybe bought and sold
More humorously, serrrices have also been desciibed as
but cannot be droPPed on Your foot''

TimevaTuemightcomefromcatchingataxi,employingagard.eleroremployingareseiuch
a mobile
rrir".y r"*"r, . Place @k;ibutipnllogistics) value might come from using
a hairdresser, doctor or
"
going
to
by
created
is
"#;;;,;;;
while
formvahe
phone, email or rrrt.ri*t uurrtirrg,

the movies, taking a vacation in Bali' on

masseur. Customers are bulng a-n experience 1e.g. going to
a sporting event or listening to a band)
the Gold Coast or Koh samui in Thailand, going tJ ttr op"ru,
report, using an architect) that
consulting
*unug"*"r,t
;;""";;;;;;;;; i1i]1g. surgery education,
problern' Attending the opera' a
provides specialist knowlef,ge or intellectual ptoputty to solue a
movie or

football match provides experience

value'

It's oll obout volue

two parties' implying that value is

Note that we define services as econamic actiuities between
buy services because they are
customers
that
created for both seller and buyer. we emphasise
expliqitly-rnarket
manV
fact,
In
emotional).
(botir
and
functional
!r11
looking for d.esired.resulrs
our definition
flnally,
And
needs'
customers'
prospective
'solutions'
to
as
their services
in exchange
purchases
service
their
from
emphasises that while customels i*peit to obtain ualue

(glprrnlNewper5peclivesonmorketinginthus.ffi

ligure

I.l

Fromework for developing ond delivering cuslomer volue

for their money, time and'' efforf, this value comes from a uariety of ualud-creating
elements rather
than transfer of ownership, These value-creating
elements ui"iup,rr"a in the value delivery
system shown in Fig,re I I' customer value
creation means that .r.,o-,n"r,

are more Iikely to be

satisfled' stay loyal and act as advocates for
the firm-thus creating flrm and stakeholder
value.
This theme emphasisingthe importance of value
creation to the"success of service flrms
is a

theme that will continue throughout this

book.
The framework in Figure 1'1 begins with
understanding

target customers,needs and how they

behave in service environments. Nu*t,
*"mu... or,rr" .rrirugl*.r,i i"J'a"termine their target
market(s); develop a positioning strategy
and then create a service ualue proposition-thespecified
package of benefits and solutions thatiiie
tu- i"t.;;;i;;";;;;;ff#r"Jonoru,
to deriver them
to target customers' This requires a disilnctive
seruice concepr,t u, ,"rpofi, to specific
customer
needs and market opportunitier,
,msl;;offering.
oppor.alffiposirrg u generic,
Transforming
this concept inro a service prodr.l*.*,
"r
d;r;r;;,lg ,i".in. p".i.uf"
*a ,upprementary
product elemenrs, and then distriburing
"
"ilor"
ot.r,i.
,"o
II.,o,,".,
i".trg""
in a way that
meets rhe rdget customers,e4pectations] "r.rr.rl*J,.,t
Uut trt*, irrto u.."""irh"
o"p"r,aing on the
nature of the seririce, you may be. selecting
a variety of both physical and electronic
channels to
deliver all the different producr erements
,'o1u*o*m"r, M"r"

;;;;;iior,.

;;;L,]o',u.", is no longer just

::H,f::ffirlj:.,"."::,l;i,lTl."r, d,.i;ril;;; r,""*, r,, **"*il.""i., "yr.,.pace that rhe
Butcustomerswon'tbuyunless.theyperceivethatthetotalbenefitsobtained

exchange exceed the financial ara

ensure that your strategy will be

ottr.,

financially

.;;;

fromthisualue
,h-y incur, incruding their time and effort.
To

ni-u - ust create ind irurr, ,*r_res that are

perceived (by customers).to pro'ide
"iuur",
rar".-rmary,
promoted through effective communicationr-uia rhe varue pro;;;:'r, must be activeiy
,n.., *rrt'u.-"*.rr"r.r, for educating
customers-especially first-time ,....-abort
rrr* ,o make good qhoices and holv to use the
service to their best advantage.
eg:r-=M-orketing

lii1a i!;,:a:!:.-..ai:

;:::.,.

The hospitolily

industry-o moior
service provider in developed ond
developing economies. A hofel
pool is on exomple of o tongible
service elemenl.

Services: infsngible elemenfs dominqfe votue

Although customers are interested p-rimarily in the final
output, the manner in which they are
treated during the process of service detiveryaJso has
a sigrrificanrimpact on their satisfaction and
value perceptions, services typically have ootn tangute
Guch as a mea-l in a restaurant, bed in,a
hotel or medical supplies used during a hospital stay)
and intangible elements. In fact, few services
are without tangible elements and few good.
*" without a service.. component. Lynn shostack
placed goods and services along a contiiuum,
from tangible dominant to intangible dominant.s

Figure 1.2 shows

tigure

l'2

version of her framer,vork.

Relotive volue odded by physicor versus intongibre

eremenls

'i"li::fi

It
6

Batanced
g

j
Tangibte

dominant

G. Lynn Shostack (1977),,Breaking free

fr"- p-a@

(llprtnlNewpersPecliVesonmorketinginthes@

,,,

1..

ri

ll

Itr

rj

va-lue is created by the service elements of

For service marketers, a key question is: How much
the totai package in a competitive marketplace?

Service products versus customer service ond offer'soles service

With the growth of the service economy, and emphasis on adding value-creating services to

manufactured goods, the distinction between services and manufacturing sometimes becomes
blurred. Manymanufacturing flrms-car makers Ford and Fiat, aerospace engine producers GE and
Rolls Royce and high-tech equipment manufacturers IBM and Xerox-are moving aggressively into
service businesses.ETheodore Levitt, respected as one of the worlds leading marketing experts, long
ago observed that'There are no such things as service industries. There are only industries whose
seryice components are greater or less than those of other industries. Everybody is in service'.7
Nevertheless, it's important to clarify the distinction between seruice producrs and what is often
termed custorner seruice (or customer support).
In this book, we describe a flrm's market offerings as being divided into core seruiceelements and
supplementary serviceelemertts-those activities or amenities that facilitate and enhance use of the
core offering.We draw a clear distinction betrveenmarketingof seruices-where a service itself is the
core product-and marketing through seruice. Certainly, good service often helps to sell a physical

good and even make

it

more useful, and thereby valuable to the buyer. Many firms in

manufacturing, agicultural, natural resource or construction industries now base their marketing
strategies on a philosophy of serving customers well and adding supplementary seruice elements to
the core product. But the core product still remains a physical good if marketing's goal is to sell the
item andtransfer ownership. Supplementarysewices mayinclude after-sales service, consultation,
finance, shipping, installation, maintenance, upgrades and the like. These services may be offered
'free' (meaning effectively that their cost is bundled with the price of the initial product purchase) or
charged for separatelY.

Tourism in soulhern

Thoilond-o moior
service industry

Rogelio Oliva and Robert L. Kallenberg (2003), 'Managing the transition fror,n products to seryices', International
Journal af Service Industry Management, 14, pp.I60-72; Mohanbir Sawhney, Sridhar BaJasubramanian and VishV
Krishaan {2004), 'Creating growth with services', MIT Sloan Management Review,45, Winter, pp. 34-43; Wayne A.
Neu and Stephen A. Brown (2005), 'Forming successftrl business-to-business serrrices in goods-dominant firms',
lournal of Seraice Research, 8, August.
Theodore Levitt(\974), Marketingfor Bwiness Grorzth, McGraw-Hill, NewYork, p. 5.

:- _-=_tO===i-r1rffir--mo r k e r i n g

"ar:.! '.

',:,

'

r:,i']:;

ively into

.
;.ti;:,.:
'itt .,, I
;;;;;,':: :
.,:t:a. i
ji,,:. ,
";.i,.;r:,'
. ,!i'.
,,
.L-;,' .

erts, Iong

,.'.,ii::q:.:.1. ..I

lements of

yice
ervices to
becomes
rs GE and

rs

whose

service'.7

is often
rnts and
,e of the

lf is the
hysical

'ms in
'keting
)nts to
ell the
ation,
Tered
se)

or

-:1r;1,,.

Many manufacturing firms have made the transition from simply bundling supplementary

services with their physical products to reformulating and enhancing certain elements so that they
can be marketed as stand-alone services. At that point, the firm may target new customers who
haven't previously purchased its manufactured products-and may even have no interest in doing
so. As the organisation's expertise builds, it may add new service products that it never offered
b"for". IBM, once known only as a manufacturer of computers and business maihines, offers four
main groups of services: strategic outsourcing, business consulting, integrated technology services
and maintenance. Collectively, they generated US$46.2 billion in service revenues in 2004-almost
half of IBM's total revenues-and contributed a gross profit of US$ I 1.6 bi]lion.s

::=:,,::;::_:

ffi

esso-nslo-rJhelcrpidrr-o-\edh-pfs-eryjce-s-t,'::af,'-'
M*y factors underu" tr,e .rpia clgq; of the service economy, not only t" t,t*
as those of Australia, Iapan, New Zealand and Singapore, but also
economies such as Thailald, Mataysia, Vietnam, China and Indonesia.

t"::,,,:;i:,, economies such

...:i

a"***
in emerging

:fh"-''hollowing our/ effect

,.?::l.l

,,tJ,,;.,rr, : Over the past two decades much low-techlology manufacturing, which is labour intensive, has
,,.,-:::;-. , been transferred to low-wage economies such as Mexico, Vietnam and China to reduce production

.iil;;,: : , costs. In most industria-lised economies, these changes have led to shifts in the worldorce pattern...-Ea::,. l' ,from manufacturing to services. This shift in employment patterns in industrialised economies has
::+;..::., ,: been referred to as the 'hollowing out' effect. Some service companies in high-wage bountries are
$r;::::',: : outsourcing certain seruice tasks to countries where skilled labour is available at lower rates:i::::;:':.'.1;

:..;,;i

.., . Insurance companies, for instance, have outsourced claims processingto Ireland, white the flnance
,,. lndustry and other services are outsourcing their call centres to India.s

'.t,l

Deregulotion ond privotisotion

'..:::::':,,:::.;'.

Many countries have. been moving toward the complete or partial deregulation of key selrice
induskies. Other previously controlled government services (e.g. heaith, teleiommunications,

-rnational airlines, tollways) have been sold or leased to private sector.operators. In many countries,
;i ;r.,,r1 1*r'eauCeid government reguJation has eliminated or minimised constraints on competiiive actildty
r=,rr'.: :,in"such jndustries as freight, airlhes, rail services, trucking, banking, securities, insurance,
::'r:-: .:
r' r;l^^;*#,,ii^^+i^n,,+ili}:^^
D^--:^-L,--!--^-,{
energy
^-^--,
utilities.
Barriers 3^
to entry
by new
firms were dropped in many
ii:ii..',, , r.. tqleg-ql.nTunications and
!1:,':':: .: :: instances, and geographic restrictions on service delivery were reduced. The result is increased
:;;,.,,:1,:..'-:,competition, and service enterprises must embrace marketing in order to build competitive
';!.;...':..y;;'

,l,,.';;-,,.

;',,;,';, advantagq.

S*eiol chonges
.r

: As societies become more affluent and there are niore dual-income families, we see the
emergence
1 of q global middle class with convergent needs, inrerests and even lifestyles. The result is a demand
for'inore ald better services, notably hospitaliry entertainment, travel,'health and fitness, sport ancl
fast-food restaurants and experlenti"l se*i.es. Sonre rwiters are even talking;;;;;;;;*i....
lRM Ann4al Repor, (2005), International Business Machines corporation, Armonk, New york

lt:l:::.:

R.p"r-.rril"bl"

orrline.at <ftp:/ /ftp.software. ib m.com/ annualrep ofitZO04 IZAO4-|bm*annu aJ.pd ir'Baitle of &e gia nts', i,lews Reuietu, Th,e Sydney Moming Herald,&-7 March, p. 30.

3 l{arnish McDbna-ld (2004.),

(llrrtn I New perspectives on

r,

orketing in lhe serVie_i:eCA-ir_qini-..:JI-.

i
.:

lncreosed living stondords hove seen

lhe emergence of innovofive new
services such os onJine supermorkel

shopping

economy'.Io Dual-income families and busl,'prafessionals, in particular, are often too 'time poor' to

perform routine chores, such as shopping, house cleaning and garden maintenance, and are willing
to pay for seryices that will save them tir',re. Witness the trend towards ordering and delivery of
groceries via the Internet.

Professionol services ond frone hises

Government and legal pressure has forced rrrofessional service associations to remove or relax bans

on advertising and promotiona-l activities. ,{mong the professionals affected by such rulings are
accountants, architects, doctors, lawyers and optometrists. Freedom to engage in advertising,
promotion and overt marketing activities i-., after all, essentia-l in bringing innovative serr,.ices, price
cuts and new delivery systems to the attenti'rn of prospective clients. Many of these industries now
compete globally. Hence such industries now seek better ways to understand their customers,

segment markets and ensure delivery of qrilily sen'ices that create value. Further, more and more
services are delivered tfuough national oI j.'en global llanchise nerworks such as 7-l1, Mandarin
Oriental Hotel, H&R Block, Coffee Wor1d, :.3C, The Body Shop, Midas Muffler and Snap Printing.
Service features a-re codified for consisr,.rcy arrd pricing is scientifically determined. Service
operations become uniformly standardiseC, service quality standards are emphasised and training
progTams are formalised while brand namc , syrribols and uniforms are standardised to ensure wide

recognition.
Virgin intensifies competition in the home taan market
earty 2006 5ir Richard Branson taunched ihe nel Virgin Money Home Loan in Austratia-a major
chattenge to Austratia's top four retaiI ba;t];. The Inlernet-managed product has redraw and extra
H repayment options, and ATM. Eftpos and Inl'rnei banking facitities, and of course a tower standard
'.fa
interest rate. As Sir Richard noted on a three .:y trip to Austratia to attend the project launch,'I'm not
i't sure why anyone in their right mind takes oui a nrorlgage with one
of the major banks. We expect to get
q
about 4 to 5 per cent of the market and my luess js that the big banks woutd rather teave us in that
i,,1
position than spend the biLtions of dottars to n-:tch us'. Virgin Money wiLt pay for the vatuation fee on the
ET

H
gj

i:

ii

In

a;.1

il

'::1,

first property and offers a repayment holiday oi up to three months.

10

I. Pine and J' Gilmore, (1998),'Welcome to tlie

ptr. 97-l 08.

ii

5etviie!

MorkeIing

experience economy', Haruarcl B.,siness,Reujer4 july-August,

Virgin MoneY said that

-;-#
ffi#
Ei;ffiffi
t:uco

;!FF
,"HtU,.n-ti

it

would

triaI a satesforce of mobile lenders

but 5ir Richard said: 'My guess is that
95% witt be haPPY deatr'ng on the
phone'. Virgin's loan is considered a
discount product but has a relative[y
high number of features. The
Australian Consumer Association's
Nick Coates said: 'It is alwaYs good
from a consumer's Point of view
new entrants in the
'rrhen there are

S,=*

f,r,:!lE!:!r!l

ir_.HB,.i=8=.-

ma rket'.1I
i,..i

lar, are often

too'time poor'to

maintenance, and are willing

ards ordering and delivery of

Are the marketing concepts, practices and skills developed in the manufacturing sector directly
uansferable to serrricb organisations? The answer is often 'no' because marketing management tasks
in the seryice sector tend to differ from those in the manufacturing sector in several important
aspects. In the balance of this chapter, we take a close look at these differences and their
implications for managers.
Early researchers in services marketing often encountered criticism of their work on the grounds
that services were not really different from goods. Much of the initial research into seryices sought
to distinguish services from goods, focusing particularly on four generic differences-intangibiliry
heterogeneity (variability), perishability of output and simultaneity of production and
consumption.12 More detailed insights are provided in the following list of eight generic differences
(see Table 1.2), which are more specific and therefore more helpftrl in distinguishing the tasks of
services marketing from those of goods marketing.
It is important to note that in citing these differences we are still dealing with generalis4tions that
do not apply with equal force to qll seruices. Later in this chapter we discuss ways of classifying
services into various categories, each of which presents somewhat different marketing challenges.
We nowexamine each characteristic from Table 1.2 in detail.

.ations to remove or relaxbans

r affected by such rulings are

)m to

engage in advertising,
ging innovative services, price
Many of these industries. now
understand their customers,
'alue. Further, more and more
/vorks such as 7-11, Mandarin
as Mufller and Snap Printing.
rtifi cally determined. Service
s are emphasised and training
re standardised to ensure wide

..i..

:;r.

iil
.i!
:.'a

Alosi service products connot be invenforied

Because services involve actions or performances, they ar e ephemeral-rransitory and perishableancl so cannot usually be stocked as inventory follor,ring production. (Exceptions are found among
those service activities that can be recorded for iater use in electronic or printed form.) Although

.d

me Loan

in Austratia-a

major
product has redraw and extra
rnd of course a lower standard
end the project launch,'I'm not
r major banks. We expect to get
s woutd rather [eave us in that
pay for the vatuation fee on the

facilities, equipment and labour can be held in readiness to create the service, each represents
productive capacity, not the product itself. If there's no demand, unused capacity is wasted and the
firm loses the chance to create value from these assets. During periods,*vhen demand exceeds
capacity, customers may be sent away disappointed or asked to wait until later. A key task for service
ntarketers, therefore, is to find ways of smoottring demand levels to match available capacity
tfucugh promotions, reservations and dl.namic pricing strategies.

1:

:.a,

i:!

A]ldrewKnight (2006), 'Virgin stuntman tackles home loans', The Syclney Morning Herald,S March, p. 21.
t2 Earl Sasser, R. Paul Olsen and D. Daryl14[ckoff (1 978), Managentent ofseruice Operartons. Text, Casei and Reactings,
Boston, Allyn & Bacon.
11

ard

Business Reuielu, luly-A:ugost,

;:r,

::

':|

::l

(rrpitn I New perspeciives on morketing in the ser"ice'aal;ntry-,j-.1.3

x
;{i
rit
.:.'-+:

'!:t:::

Difference

Implications

Most service products

cannot be inventoried

Customers may be turneu

away or have to wait

a.1

Marketing-retated tasks

?ll:

Intangibte elements

Customers can't taste,

usuatly dominate.
vatue creation

touch these elements ar- i,

be able to see or hear th=Hardei to evaluate 5ervic: :rd
distinguish from compet,. :

fnr
ii:.>,

l_!:,jl

5tr

Services are often

Customers perceive great:.

:i,r:'j

difficult to visuatise

i+

risk and uncertainty

and understand

..3L

Smooth demand through promotions,

dynamic pricing and reservations
Work with operations to adjust
ca pa ci ty

,,

,, ui

:t

;i:;i

,..

Customers interact with

involved in producfion

equipment,
Poor task execution by cu::_n,.r,
may hurt productivity, spl ;: . :e
experience and curtaiI be; . .i;

::i,::il

::;::l

:,lCi:.;l

i!,]

p: ,iC:.';
facitities and : ;ilr.,.

Customers may be

i;:,::;

Other people are

sometimes part of
the product

0perational inputs
and outputs tend to

vary m.ore widely

ard . :i..

Appearaoce, alfitude
of service personnel and

c:;-:r

customers can shape the

t .-,.

.:,

:.
r

ur

.:e

and affect satisfaction

Harder to mar'ntain consigi :.:;,r.

reliability, and service qua:. rto lower costs through hic

::

;r

The time factor

frequently assumes
great importance

Distribution may
take ptace through
non-physicaI channels

L:";:11

-u:'i'1:
E,,+i

!:!,::l'
illlr'::i]
;::::i
tr.;1
lil,:r:

i:':r:;--

i.:

11

a.:.L

:*9
i,1*.i:

redesign product etements For

simpticity and faiture-proofi ng
Institute good service
recovery procedures

Automate customer-provider
interactions; perform work white

,:ati!
-,.1"I.,iJ

a:.4

.i:t:i
,

r:i;i

'i;*

r::.;:i
i::.r:ii

.:.:t!;

.::{iJ

.a-:-a

:::::-1

:i

i-:l

,.:.i*
.:.:

:1::

:'a,:?

j:j

customers are absent

T
f,

Devetop user-friendty equipment,

facitities and systems
Train customers to perform
effectively; provide customer
support

Set quatity standards based

on customer expectations;

--

Difficult to shietd customer,

from resutts of service fai[1.,.:

Educate customers to make good

choices, exp[ain what to [ook for,
document performance, offer
guarantees

Recruit, train and reward

employees to reinforce the planned
service concept
Target the right customers at the
right times; shape their behaviour

productivity

ia:;
:.':il

Make services tangible through

emphasis on physicaI clues
Emp[oy concrete metaphors and vivid
images in advertising and branding

r4.i

::j,Ji
li':i:i

:'i:3

.1t

:.i;:l

;*,.:

Customers see time as a sci,: -e

resource to be spent wise[1,: :isi.if-:
wasting time waiting and,,,.: :,t
seryice at times thal are co "

":r:i:l

'.
i

Information-based services :l i.
delivered th rough etectron j, 'ii:1.:lS
such as the Internet or voi,;,
telecommunications, but co..,
products invotving physicai .: :ti',; ries
or products cannot
._

r
r

Find ways to compete on

speed of delivery; minimise
burden of waiting; offer
extended service hours
Seek to create user-friend[y, secure
websites and free access by
te [eph

Ensure

ne

that

atL information-based
service eLements can be downloaded
from site

.,=

-ry*
-- ,:n exPerienliol

:e 'vhere volue

is

::i

by ihe
,i:'itmeni exPerience

-retated tasks
iiemand through promotions,
pr-icing and reservations
th operations to adjust

rvices tangr'b[e through

is on physical ctues
concrete metaphors and vivid

in acivertising and branding

customers to make good
e;rptain what to [ook for,
rt performance, offer

i;ricngible elements usuolly domin

).ler;i ;ervices include important physical elt
.:r'i,ilhd during repairs, and credit cards a
,,' i.ir r 3n ts-such as processes, Internet-based
-.;r5lflnel-that create the most value in se
. -,'.LCh these elements, and they may not be e.

:ES

user-friendty equipment,

i and systems
stomers to perform
rly; provide customer

train and reward

to reinforce the p[anned

:0ncept
re right customers at the
res; shape their behaviour

:ty standards based

,.i:,.

,li:
;!1,

rner expectatr'ons;

product elements for

a;5,'

y and failure-proofing
-Aj,'

good service
l.-r

!El

ocedures

:::li:

cilstomer-provider

:ni;

perform work whiLe

's are absent

io compete

on

delivery; minimise
1 '//attrng; olfer
service hours

I(

.fI

,:.1'

r{l
:it
/i
;4

:ii;il
.rca

ie user-friendty, secure

;rrd free access by

ai aLL information-based
.ellents can be downtoaded

::!:;
"iii.

':\

hotel beds, theafe interiors, spare parts

: books. However, often it is the intangible

,ris, and the expertise and attitudes of service
-.,irr,arices. customers cannot taste, smell or
rr hear them. This makes it more difficttlt for

' 6f use and to evaluate the quality of thi

. points can make it hard for customers tL-l

assess

:es, first suggested by Lynn Shostackr3, is ttr

(see Figure 1.2 on p. 9)

A useful way to distinguish between good

:,.,ir: ihem on a spectrum from tangible-doi
are some potentially ambiguor,l
'-.:aili: there
,-rr1 ia-<t-food restaurants delivering Soods c
.r.oii1-if t should be regarded as a good or a si
, r:a;rg.ible seruice elements. At full-service r.
: -:cr:itrt foras little as 20 to 30 per cent of the
i ,r;i-i preparation and cooking, table servic
; , ,j.1. ing, toilets and cloakroom.
\ 1h:n there are few physical elements, n:
I '.3 :light service benefits and demonstra'
.,iailg brand associations help to make serv-i

-ten employphysica-l images and metaphors

competencies. Creating physical clues and
'iarrgible'.Ia

,:,rrvices ore often difficult to visuc:

.l evoluote

;ervices can be described as 'mentalll

i:,,-rrili:e the experience in advance of purci:
, r;,.r.,ii,rn can make service purchases seem r
l'Ie;rtal intangibility is most likely to presi
ir ii:rtrr jrsrs who lack prior etposure to a particr-l
, ,r;r e;.reriences that call serve as benchmark:
.'.1;:i:iy

i:i.

.:h as

important service features

rrf,lrmanie itself. Similarly, the lack of ea,
!Li l guish between compeilng suppliers.

.'i:rir tc
es

I3 creotion

,.

'

'ntangible-dominant

',r

',

nieaning that it's difficult for customers to

urderstand what they will be gening. This

.:n-r (and thus a perceived risk) for first-time

'service. Frequent users have the advantage ol
.r'.-.'rvhatclues to lookfor. Based on a study of

tat.

,1!
'a1.:;:

:l:
=.
.ii;:.

':*..

i+.

.i?:

:a

:).9:

,-..

l-r,ln Shostack (1997), 'Breaking ftee from produe

.':.liiri:r R. George and Leonard L. Berry t198f ), 'f
, -.y--:iugust, pp. 52-6; Banwari Mitta.l (1999),'The r
i ).:;r:a! of Seruice Research,2, Alugust, pp. 9B-l 16; Bi
'.

:,

::; r r::i iry servic es', Co

rnell

Ho tel

and

Res taurant

(g.tpitn I New perspectives

At

in the middle. Are custom tailors, plumbers

I One suggested economic test of whether a
''Lether more than half the value comes from
fu,r example, the cost of the food itself mav
r mea]. Most of the value added comes ftom
,ruiant environment, and facilities such as
,

Jor"tntal of Marketing,

Aptl'

:r the adverlising of serrices', Business Horizon.s,

:l services: Meeting the challenge of intangibiliryl
i ai-rd iulie Baker (2002), Advertising strategies for

Quarterly,43, April, pp. 51-63.

t;ng in the serr-raa.r'ec;ln;*i--,..ii.

British police departm"lt'

ffiir::T:,"JxHt:?'i::l

Flanagar, Robert
lu*
u"p".iury

lohnston and Derek Talbot argue that infrequer

pubric sector, need to buitd confidence in

t-o,;;;;;

importanrpoi,,,o,.,nu,n{,1:,il"i,+X#:;"of

tl

.ffi

H:i1::]?illgi'"1t"':-lFvices
",##J,i'j,:,H::;L:
e greare r the p rce ive J ;il ;;;,f

th

#$*nf}**f ii""#i'T

along a continuum ranging rrom'easy

:Ti I #SJ T.:1fl ;",f.T :"jffil:T:" ;i :ffi :ffi..l#

,"*li:,H:,'ffiTl['"'"HffJT,J::"':'$r.*chasebyherpingp,l,p..ti," cusromers ro ma
e

:
i:j,,;*i_,#:ffi,i::ti;:,#:1.,'J-'ffi.:TtT,TH:,TJ,:il.:H,T;"*:"Jff
was-done and whv, and offiering

additionarwaystoreassuifl"lfli::l:l-lat
emphasisingth.n'*t.*p",i.nliliiff H".H::Jffy;:*i;::T:ff

suarantees

LtX;llT::;:Jfr ::l

Customers moy be involved in co_production

some services require customers to participate
u*ir"ry in co-producing the seririce product. Ft
to
#,h-.;;.u
personnel i., ,"tt'r,,g. such as hair saron
;T,,j1|,.[',rl"Trffi:yr'":::t 'oop",.i"
doing
some of the wo"rk yourself rather tha
beingwaited on. rn fact, J."H:t"i:illo^t11-'1,"".t"
' ^"" ou,ulsrS
ilrzue

tharcustomers often function as partial employees.'

lncreasingly, your involvq
t".r,norogy';r,-;
machines, terecommunicl,'*:'*T:|;
---" qru ule lnternet' Simple
examples include withdrawing mone
froriianATM,usinganau
vourself in for a flight at an
seats for the 'B,,
,"'l}ll1i,5::T:leck
'1""""t' rrccess to self-seririce technologies (SSTs)ai.rport, and reservin
is important, too, fo
B2B u.rd ,protessional
customers using ""rnu'
services. A key issue for marketers.is
how satis6ed customer

t::::j.'Ic';;;;;ft;;;;*s il

ligure

I.3

How product quolities ofieet

eose o[ evoluotion

lasy to evatuate

EU
ri

'i!' g

\e
[,,s;:i,,',::,,n

EEE

Hrsh

-o

Source: Adapted with permission from

Marketing
Zeithaml (i981), pp. 181-90.

ilil;

Difficutt to evaluate

:9d
;-=

;tsh

quarrhes

Seruices,

:a

r,;.d"*

qualities

publsihed by the American Marketing Associaion, V

i
15

P Flanagan, R. Johnston, and D. Talh

16

;i:1:Y:?:?lJ":;;y:,!n!::,1T;:,:*...";;;::,ffi;i:ff:?#i,t:';?:o-"n'[

H:"J!;:#,'l"lTJi{ffi;H#.yii1,.!:

:if;ts:i!,i1;i?rlB,i;ili;i';".,ives on ,he ,echno,ogyor

Karthik Namasivayam (2004), 'Th" *"ir..ll"Yr:y:-7,.no. 3, pp. 467-7&. For recent research on this topicllee.
performance mo dels', Iiltemailon tlr,ri""i^1".tl1islent employee: Consumer satisfaction through the leni ofjobchang-I{ua Yen, and Ko-chien cru"-ij,i#i'r,"Y?ic.e IndustryManagement, t4, no.4, pp. 420-34;An-Tien H;ieh,
workroad" rnternationatlot"""t
and service provider

o7si,'iiiJi'ia,#'#:r:;:::;;?r:ff":$:*;$3r:"*

.j-,

or a pre experience

:_f6 :-_:.:_i:StE:l:v,i,E_e.s -.M <l r

ting

A personol filness lroiner: An exomple

of o high conlroct service ond service

rekfilbot argue that in_trequently

reed

to build confi.dence in their

:.

ii

prospective customers to
make
ill be useful for certain types of

,
1..

1,

rg and after seryice Oetivery.

?
a

t
i

and offering g"uarantees are

e can be

.i:

co-produclion

rns that create lasting trust.rs

An
build trust-or destroy it.
rntinuum ranging from .easy
to
n advance ofpurchase and use,
espeople or customer service

:.

created in advance by

it

individual service providers.

:,

cing the seryice product. For

settings such as hair salons,
re work yourself rather than

Soarce.- Tony

+
E

r,

tctton as partial employees.t6

ring the technology of smart
nclude withdrawing money
:at an airport, and reserving
t(SSTs) is importanr, too, for
s is howsatisfied customers

n
:
':.

licutt to evaluate

.:.]

,1

:'

.::
1

:t
1.

are

Muratori,

Be

yout Best

with the quality of service delivered by ssrs.

Do customers

see electronic channers that require

them to do more work as better or worse than
face-to-face J*r"",i""r1r,vrrat needs
do ssrs meet
that traditional alternatives cannot? what are
their ,rro.rg ur,J *;rt ui,ritr,u.e Good
research can
help us to learn the answers, and we will be examining
trrl i*f
i"i.,orogy-oriven
,rrulu6y-urrve, serylces
seryices or
on
customers_and how to manage them well_throughout
".i "?
this book;
In many industriies you now have a choice.
You can do your banking through
multiple chaanels,
$hop at a rerail store or order goods online, attend
classes i" ;;;;;
haII or watch a cable or
satellite-based transmission of that same .turr. yo,
"
wil even fl;J;h;;;
within the same physical
site. For instance, at your locar glnn or hearth
ciub, yo,,
u"#".,
g"nrng the benefits you
want by working out independently on tle
"*.hoor"
equipment
or obtaining knowledgeable advice and
feedback from a personal niiner as he or
she sJpe.vis"s your efforts.
service firms havd much to gain from
herping au.to-"., to b""o*" more
competent and
productive-and so do
A-fter all, if you do a poor job of performing
.customers'
the tasks for which
youte responsible, that may spoil yo'.rr
r"*i., experience a',d curtail the benefits you hope
receive' By cbntrast' if things ut"
to
easy for you,.not only will you
-ud"
have a better experience and
outcome, your greater efficiency may
boost the hrmt proarlti.,rrty, i;;;'tu,
cosrs, and even enabre
it to reduce the price you pay This meaas
that serviceharketers ,trorra *ort *lth
specialists from
different departments t1
*"t.it"r,
faci.lities arrd syst"*, that are user-friendly.
They should ensure that lt"aon
"qrio.*""1,
customers get the traiiing they need
a
should ensure that operations persoinel
"r"'n"r. options welr, and they
off..."ul_time support.
"un

People moy be pori of the service experience

You have probably noted that the

difference between one service supplier
and another often lies in
the attitude and skils of their

Marketing Associaion, V A.

:
:.

|ment of a pre-experience

;;ii--unrg"a n.m, aurot" sp"cia care ro serecting,

training' and motivating the peopie
"r"prrt";;.
*r,"
,ill:u"
responsibre for serving customers directrv.
addition to possessing th'e technical
In
skilt, *q;;; by the job, tr,es" inalJJiars
igood interpersonal
also need to possess
skills aad to

\{'tren y'ou encourter

displayporit* ui,i*a"r.

oth"r
at a service raci.tiry you know that
they, too, can a_ffect your
sarisfaction. How they are dressed,
"rrto*"..
how
*" fr"r"rt, who triey are, and how they behave
serve to reinforce or negate the image
caa all
,Lu, u n.- ir rying to proje.t u.ra it
create' were you annoyed by the
it,s trying to
customer at th; next table talking
"-""perience
loudly
on her phone about
problems at work or algerediy
trre reuow seat"ai.ria" you in
trre
trruit."
*io spilIed his sticky soda
on your clothes? AJternativery, were you
grut.rlrt to the friendry travelrer who
showed you how to

m*/

:tives on &e technology of

research on this topic, see
on through the lens ofjobrp. 420-35; An_Tien Hsieh,
yees and service provider

aa

t.
,':

.i

(llprln I New perspeclives

on morketing in lhe service-e.cnq.m.y:r.::n_ll

i
i

!
i

j
j1

it

it

il
ifl
tfi

tl
ifl

is

ifi
tfl

ifl

ffi
ifr

operate the complicated ticketing machine? At a ol;

,n" enrhusiasm orr

itmaydetractfromyourenjoyment. cusromer *iriri*,lil).:::::lt-o"."*e too rowdyand abusi.
rhe marketing impiications
.i;;;;;;;;'iiriJ!?''""'oresents a marketingproblem.

";;i;;.;i,",.,;;;;;;,T:*,,"ry";',i;,l"J.lji,{;[::H[fj,;S.:,;:f

"."
to ensure good service delivery n.-,
-i'aging their ovvr employees effective
shape customer
service setting, other customers should
u"r,'.ri""..1r'" .i".1
instances, service market
u:
;;'
;i"".i fl
s esm enrs to geth er in th e .H
J:."*'."" H;,1j
idea to mlx sever
th" gr"rt, wire atrending a,., academic conference
flT". =
whohad come for the rvlerend ro supporr
th.i. tu.'1d,r,"
The two groups may
expectations of what constitr,., u goJi"-*;;;.;,"*
differ sh;;,,

*rri",r";:::-t:
;;;;;:i9"1and
.:,X'Ldt

ffi

:':';;
'l*".'r*;;t;: r;il":t

;;';;

"";

."r,*"?io#:ii;:::ir*"":xl;itT
; ;;

Operotionol inpufs ond outpufs tend

t,

more widely
unrikb many-and
services, manufactured goods
can ot^ lt?
conditions,
checked r", .""i"ri un]."f;jt|toau.ed at a distant fi
customer' However, when a service
is derivereor
'assembry'must take prace in rea.l time.
.o.,ru*.i
sl;;;;"1:ii:.tlv -ando,ii.r"..,l;"Xt.H,Xt:*,T:J":1
the same empr"y"".ia different crstomers,

:l"liy u';;;;;l;;r"i""#"'H"T:::j|"rf:

il::.::i"":jo""
p.,i"l,*L:I'I:tT,r,?ir:l;lt'1i".::"*::,*Htin
?r;ffi ittfi i: i:[T tr#*i:*:: " *, * m ake t *n i
',T:;T;.l"',::;:ffi
nT;ffi ::,,,.r,T.T".,.ou,;*i;u;ililf"T*U*U#;#.
producLion [ine can ...
Gamble
,"ffi:,'JiJ;H3,fl1,.0,n,*:r
fo r
rvi e
",,*,, "i, ",,'
se

cui

controtensineer on a
v., orvi.i,.*;;:T:j,',-1:::r,
io sutlou;;ffi::
.llrt :ilr,_.ir#lJ,ne |o.ani ultootths
,r,ri rr'*iiffi;to jl3]l;^*1-' vo,, lul a Hotiday in, *.
sive you ,-;J;;;il,
r.,,,,'Jfffi:TffiJ:::,jilll.T'l ,i,in,
,*
rrrul Ldrr rrdppen tn j,i""!.llrn,,,
rr ,i.i;:ffiXJf
a hotel'17
wr,un

percent sure that this sturrwi{r*o*

vou're sure at some lesser percenras.
-hassre,
or o.,o[

a__

Neverrheress the
Nevertheless,
rhp best
hact service
corrj_^ firms

.
have made
adoptingstana.ji."Jp.,..o,:::r4;,'"*;;dfr,.Jf::f:H;:ffi::;.T:^:..liq.13f,r1v

ur ;

employees carefully and auroma ting

,urt. prrr.o"rri
sure that employees are rr.e, trained
in seivice

r..orlll"t,or*"J;;;;;; ;"ffi HIJTJTiXS

Thetimefqcforoftel.eryproceduresincase.r,i"g!g,*,|;;
tt u
g reot m porto
n ce
T :t
Many services rr. o"tir"rl, l
i

are rhe mosr

rime-sensitivl1itl"i,".1'j*t Yhile

gT,:T":,

custor

*,,,,ri"'#':flll[,;#:.1i1"T-:,|,llJ:'#J,!iiilll
]'.':L::::::T:f
as
a cost to avoid
Jt

niav be
sarne route, or to ger a nerocrr
rask perforrngd
fur,u.
be availabre *rr"l'r,.,,r* ilLem,
ratrer than when
offering extended hours, i.Ls.cornperitors

rP

ttti"el ,;;;:;'"
S
tncreasingly,'uir;;r,;';:;'yJlit""t#:J:,

srrpptier.
;i;;;;;irt-suits.the
-^'"' ''-: obriged to rolrow su;,.tr on" fir.i;;;;;;;;
wo*aaay;,
"'T:::;:::::::jl..i'"i,"bte24.t7..
Another concern of cu!lrtmpr s ic h^,^, *.- ,
"'*r"*r;
how much time
elapses be[ween
and receivilg rt nnirtrea 1l::it l:
ma-\inil
If
a
request for service
vou've ustd , pa.ti.-IL"."{ii}}H,T}ng
"
to have erpectations
uho,-::'p'.''

sui,, or

a".,-.",,"e

v",r;lik;;;
t'*pttt""stt"t;:::;':i1'":;::
u"Ji'io''i,f:::
*Till5t:

,;lll]1X.':ii:i:nj;l"__I1;Trl{iffif;Jlt::l;lr

understand customers, tir

to find new ways ro .on,r]:

t:n"*i'"

,*r,"*,"t.*l;#r;l:i,:::.';,','."":1#I"'.lT,".','iJi^T'-::llTi:ff
l7
IB
ll
il

-,t,-,':.1

.,5 6

6y:i.l6.s

-IVl o

rk et

ing

;:.:,ff

ngt:il',f,J

.,

:B'-:r ',
a

sportingevent, the enthusiasm.r* ,.*-.

nbers become too rowdy a,d ,uu.n]lu
o .
nts a marketing problem.
g their own employees effectivcr,. t$'i.

Disiribution moy loke ploce through non-physicol chonnels

Mu.,rfucturers require physical distriblrtion channels to move their products from the factory to

customers, either directly or through lvhr:lesa-le and retail intermediaries. Some service businesses
to deliver all (or at least some) of their service elements. Todayt
are able to use electronic channels

ecustomerbehauiour.fnuJ"..,l .-..,... ;rrk.offercustomersachoiceoidistributionchalnels,includingvisitingabranch,usinganetwork

rotdetractfromitsvalue.. Inr"*;
,f a1.frlr, doing business by telephone (including text messaging), or conducling banking trans..
rer it's a good idea to mlx severar::r,,er,::
on the Internet. Much information-based service can be delivered almost instantaneously
dctlons
ragine staying at a hotel *l1"."
f,ri , , ' to any location in the world that has Internet access.
erefootballfansfromoutof to;
The Internet and its key component, the World Wide Web (www), is reshaping distribution
groups may differ sharply in
for a broad array of industries' However, we need to distinguish between the potential
sfiategy
- their,..,;.,j
-"
. for delivering information-basecl core products (those that respond to customers' primary
-, ._.

widery

'#;,:runn:lxx*'f,Il:,::HiT,? ;',:::,::,'r:7^:[?:?,*:::x'.'"":'"T#::]ffi#$ffi#

1 distant factory, under controlf.a,i:.i:r....,'..:,.. ,ttre Master of Business and Technology Ivlanagement at the University of New South Wales.
'ards long before they r"u.h tf,"= t ,. . By contrast, onliae retailers such as Iv{yShopping.com.au can provide information, take orders,
consumed as it's produced, nnrl ' . , ard receive payment through their websites, but they must use physical channels such as pcistal or
Iffers among employees, between= , ,l ' courier services to distribute the purchased goods to their customers. Similarly, airlines can provide
) time of day to another. attitudes,.ir:it#11,.,:rinformation, take booking_s,
accept payrnent by Internet or telephone, but travellers must go to
1nd
ly, and it's.hard, sometimer u;.ni..::jii,.theairporttoboard*reirflights.
;.ThesefactorscanmakeitdlfRcutti...,:iilir.ri.;,,r.Much e-comrnerce activity concerns supplementary services that are based on transfer of
y, and ensure reliable delivery,
inJormation and funds through elecironic channels, as opposed to dowrrloading the core product itself.
A, u . I
anewpositionwithHolidaylnn: ,..,,,.,.",-. Thisisonlypossibleiftheproductiiselfisinformationbased. Howeveqtheuseofsuchchannels,even
for supplementaryproducts, has had a radica-l impact on competitive marketing strategy:
j
rnd Gamble controI g,r5,,rqst

engineer uu
on d
:I,:..ij,:::?a:..r:.:;:
,...
t.reasonabty be 99 and 44/lo}ths
:.1..r;.i.:i,1,
/hen you buy a Ho{.iday Inn room,
tr s
good night's
a yuuu
lrgrfL) steep
)reep without
wttn0ut any ..;:.:,r:.:+.:.:::a.t::i:,:,
,;::r.ff
: can happen in a
W. have already

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any

',,

:ri

o, ,

,rosress rrr
in reducing
rtruuurrrB variability
vanaD[lty.by

rvices dl$:#er from one onother?

lade

th.e

point that it is unwise to dvergeneralise about servjces. It is equally

. H"Tl,?rr""1'j*..f#:l.jfiT;;::i:::?:::*?:? H::1:::T":T.:',,:::::-""T:,^:"^::.:1

tgementofservicequaliry'trai'i1's .1..'i.,?;;$tn'a t*in traps of either treating a]1 scrvices as though they w-ere part of a homogeneous group or
,t1.$],fi;iilht r'.J."r-r..",aGio standard indusrry classifications; Experience suEgesrs rhat the
byhumanbeings'Theyatt"*ttt']t-1t111ii,,fii.;irseftrJ
approach is to segrn,:nt serr,ices into clusters rhat share certain marketing-releuant
res in case things go wrong'
Jteristics-, and then exaniinr tle strategic implications of these characteristics, keeping in
t.,.:,r-, ii
',:i=t .]+adthattheprovisionofallsenii:esinvolvesthecustomerintheproductionprocess-toagreater
e! r!oorcu urlrtr

ds a uosr ro avoro..,,
: -How con
- Services be cletssi$ie!?
taxi when a ciry bus serves thr ,..l ...,..1,1_-_
i.l. ..,'
gi
Services
carr be grouped or classified in the following useful ways.le
, busy customers expect ser"lce t, . ti'i:ll1,-':...t
i
;upplier. If one flrm responrls b
.:::'c,,.:The degree of tangibilitylintanitbility of seruice processes. Does the service do somettring physica]
bllow suit. Nowadays, a growin5 -,,,t|.',t ',{like mldical orlental surgcr}', or oflice cleaning) or are its processes more intangible,
Iike
education, management consiiitarcy investment advice or watching a rnovie? In the rest of this
iieen making a request 1or r.rri.r . . .;,-i
chapter we will see how differlnt setvice processes not only shape ttre nature of the serr,ice
of service previously, you're likeiy ': .1.
delivery system but also arfect t?ir: role of employees ald the experience of custorners.
rvolves repairing a car, cleaning a
Ilho -' what is the dir"ect mt;:";ent af seruice processes? Some services, like liairc|:essing or
l:-': : : or
:te. Successful service marketers
',.ibntertainment, are directed ai rcustoirers themselves. ln other situations, ctistcrrners seek
borate with operations rranagers
'-Sewices (like household clearirrg. laundry and electrical appliance repairs) for otriects that
ustomer waiting times, and thtly ...+
ga

r:--:-<

tld', Aduertising,Age

l5 ]anuary

'Christopher H, Lovelock (1983), 'Classil;,''ing scnices to gain strategic ma-rketing in sights', Journct af Mtarketing, 42,
'rsurhmer, pp. 9-20.

(gtrtrn I New per:p.lcr,r'es

on morkeling

in ihe serri-Ee.:ero1i omy

:_lg_

.!l

{i
II

Iil

process of service delivery and do not

belong to them, yet remain relatively uninvolved in the
later'
until
the
benefits
consume
delivery systems, service marketers must ask
The ptace of seruice deliuery.When designing service
themselves whether they should require customers to visit the service organisation at its owrl sites
or whether the service should come to the customer. Hotels, medical and denta.l clinics are
examples of the former; office and household care and maintenance services are examples of the
latter. Some service organisations, however, may pursue both options, as with restaurants that
majntain in-house dining and home delivery seriiices, and professional consulting firms that may
provide advice in their own offices as well as in the offices of their clients. Alternatively, sometimes
Loth service provider arrd customer can deal at arm's length, through such channels as majl ald
telecommunications. Home shopping via the Internet and the ability to bciok airline and theatre
tickets over the phone are examples of this. Some seruices, such as tertiary education programs,
provide the opportuniry to avail oneself of the core service at the place of service delivery or at a
distance. As we sha.ll see in Chapter 6, lDeveloping a service product strategy', such decisions

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involve considering the nature of the service itself, customer preferences and reldtive costs.
Customisation uersus standardisation.Who decides and how? Services can be classified according
to wtiether they are customised or Etandardised. The provision ofprofessional business services
and most personal healthcare services demands a high degree of individual customisation, but
even standardised services, such as those provided by fast-food restaurants, oflen a.llow for
some degree of flexibility or customisation in accommodating particular needs ald wants.
An important marketing decision is whether all customers should receive the same service or
rvhether service features (and the underlying process) should be adapted to meet individual
requirements. A related topic is whether the provider needs expert kirowledge ald professional
skills to prescribe and make the necessary adaptations. This issue will recur throughout this book,
not least in discussing professional service fums, and receives special focus in Chapter 6.

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Relationships with customers. Some services involve a forrnal relationship, in which each
customer is known to the organisation, and a-ll transactions are individually acknowledged. But
in another group of services, unidentified customers make fleeting transactions and then are lost
to the organisation's sight. As we shall see in Chapter 12, some services lend themselves naturally
to a'membership' rela'rionship, in which customers must apply to join the 'club' and their
subsequent performance is monitored over time, as in banking or university enrolment. Others,
Iike airline and hotel services, require the flrm's proactive effort to move beyond a transactional
perspective and create an ongoing relationship, employing such strategies as the creation of
special memberships to reward loyai users.

Discrete uersus continuous seruices. For some services the customer has a continuous
relationship tvith the service provider. In retail banking, postal or telecommunications services,
TAIE or polltechnic college courses, or in a B2B context or an advertising agency-client
relationship, customers have regular contact with the provider. Customers tlierefore develop
realislic expectations ofvalue and levels ofseruice performance. For discrete seruices (such as
engaging a management consultancy for the first Lime in tfuee years, or a stay in hospita-l),
however, the customer will be Iesi erperienced and thus will have fewer concrete erpectarions.
Thus they rnay ha.vc difficulry in confidently evaluating service performance and may even use
different choice cri terla.20
High contact uersus loru corincf. Customers' service experiences are shaped, in part, by the extent
to which they are exposed to rangible elements in the service delivery system, and by how the
combination of these elements is divided behveen people (employees and other customers) and

3]ltr
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Paul G. Patterson (1995), 'Choice criteria in selecting a management consultaacy',

(2) L77-87 .
Marketing

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_..:?0_ --=_$,s.1:rf94:5:_I!{.o r k e r i n g

Iournal of Professionel Seruices

)ss of service

objects (like buildings, vehicles and equipment). Below we will look at some of the implications

of managing high-contact versus low-contact seFrices. In later chapters we will look at the
human resource implications of how to manage people so as to improve service qualiry and
enhance the prospects of recovery from service failures. We will also look at the role of

delivery and do not

stems, seryice marketers must ask

ervice organisation at its own sites
s, medical and dental clinics are
rance services are examples of the
options, as with restaurants that

lssional consulting firms that may

lr clients. Alternatively, sometimes'
rrough such channels as mail ald
ability to book airline and theatre
h as tertiary education programs,
1e place ofservice delivery or at a
product strategy; such decisions
eferences and reldtive costs.
rrvices can be classified according
of professional business services

of individual customisation, but

bod restaurants, often allow for

ng particular needs and wants.

technology in replacing employees by self-service equipment.

Since customer involvement in production is often cited as a distinctive characteristic of services, it
stands to reason that we should determine if different types of processes result in different levels of
customer involvement. It also suggests that serv-ice marketers may find it helpftrl to understand the
process bywhich seri.ices are created.

Earlier we described services as 'performances'. TWo fundamental questions are:At whom (or what)

is the activiry directed? Is this activity tangible or intangible? As shown in Table 1.3, these lwo
questions result in a four-way classification scheme, involving:

t
.

: ,Trir.r,gible,actions to people's bodies (people processing), such as transportation, body massages,

, hair care afld sur8ery. Customers need to be physically present t]rroughout service delivery in

i; 6rdEi. td reaeive the desired benefits of such services.

,. i;::i - . 't-.'
:

ould receive the same service or

I be adapted to meet individual

oert khowledge and professional
: will recur throughout this book,
ecial focus in Chapter 6,

I relationship, in which

each

rdividually acknowledged. But

'transaciions and then are lost
ces lend themselves naturally

,to ioin the 'club' and their

piversity enrolment. Otiers,

rove beyond a transaclional
hrategies as the creation of

'irf:i'

omer has a continuous

rommunications services,
dvertising agency-client
rmers therefore develoP
iscrete services (such as
or a stay in hosPital),
concrete expectarions.
nce and may even use
in part, bythe ertent
lem, and by how the
ther customers) and
tf Profes sio nal

S e ru

ic es

(sarttn I New perspectives on morketing in the serfirc=can.:Ern1--= E:-

Tl 5:":
'::

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2
3

Tangible actions to goods and

other physical possessions (possession processing),

such as air
freight, furniture removal, lawn-mowing, repair, cleaning and pet-iare ,e..,.i"ce..
t., th"se
instances, the object requiring processing must be present, but the customer
need .,o, b".
Int(tngible actions directed at people's minds {mentd-stimulus processing),
such as public
broadcasting, a sporting event, theatre and education. In such instances,
&.to-".,
must be
present mentally but can be located either in a specific service
faciliry or in a remote location

connected by broadcast signals or telecommunication links.

Intangible actions directed at intangible assels (information processing),

such as insurance,
investment banking, computer systems analysis and consulting. For"ihese
,".u1."., air".,
involvement with the customer may not be necessary (at least inlheory).onc"il" ^."qu"r,

fo.

service has been initiated.

Let! look at each of these cateSories in more depth and examine why
different types of processes
often have distinct implications for marketing strategy.

People processing
To receive most personal services, customers are usually required
to enter the service systemtypically, they cannot deal at arm's length with the servi." irp jll"..
There are,
.;", ;;'"p,ro.,.,
such as personal trainers a]ld masseurs, who may come to you,
"f
but these are exceptions
rather tran
the rule' Think about your own behaviour as a consumer
of services: How many times each week do
you go inside a service 'factory'? It is not called a factory
of course-at least nol by th. pro,ria"r. vo,
know it as a restaurant, a hotel, a training seminar room,
a hairdressing salon, a bus or a hospita-l.
If' as a customer, you want the benefits that a people-pro..r.i.rf
seryice has

to offer, then you

operation. The level of
involvement required of customers may entail anythinifrom
bou-rJrng a bus for a five-minute ride
to iying in a hospital bed for a lengthy course of possitly
,r.,pt.^.r.,t ueatments. In between these
xtremes come activities such as ordering and eating
u *"u], having one,s hair washed, cut and
sryled and spending a few hours with a personal rrainer.
The outcomes (after a period that can vary
from minutes to months), of course, vary' In any event,
however, tie customer expects that theywill
receive

must be prepared to spend time actively cooperating

with the

,i*i."

one or more sought benefits as a consequence of the ,processing,.

It is important for managers to think about process

ald output in terms of what happens to the
customer (or object being processed), because
it helps them to identify what beneflis are being
created' Reflecting on the service process itself
helps t" id".,tify ,;;; of the non-financial costs_
such as time' menta'l and physical effort, even
fear and pa:n-tlai customers incur in obtaining
these benefits' There are a-lso implications
relating to how the customer is treated and how the
customer feels about this-two important considerations
to which we will return later in this
chapter and again elsewhere in the book.

Possession processing
often customers ask a serrrice organisation
to provide treatment not to themselves but to some
physica-l possession-which could
be anything from a car to a truck, a suit,
a computer or a pet.
N{any such activities are quasi-manufacfuring
operations and don't always-involve sim,ltaneity
of
production and consumption Fxamples
incluie cleaning, *J"i"i"i"g, storing, improving or
repairing the customer's physical objects-both
live and ilanimate-to extend their usefulness.
Additional possession-proiessing t.rui.es
include transport, storage, wholesale and retail
distribution' insta-llation, removal Jnd disposal-in

1.:-

short, the entire value-adding chain of activities

that may take place during the lifetime
of'Ue oUlect in quesrion.
customers are less physicaJly involved
with this tlpe of service than with people-processing
services' since there is usually no real
need for them io u.rt", the seryice

factory and accompany

iz: ----s6tivllres Mo rkerin

!'.

ssession processing), such as air

and pet-care Seryices. In these
.t the customer need not be.

,:
t

rlus processing), such as public

:h instances, customers must be
;e facility or in a remote location

:n

rt

Entertainment, teaching and training sessions, and religious services, are often delivered face to
,
,. . face, with customers physically present with many others in the same facility. In such instances
, managers find themselves sharing many of the same challenges as their colleagues in people.. processing services. These services can a.lso be transmitted to customers in distant locations through
,, telecornmunication channels. Finally, since the core content is information based (whether it is music,
' . voice or visual images), this type of service can easily be converted to digital biis or aralogue signals,
:" recorded for posterity and transformed into a manufactwed product, such as a compact disk, MP3,
' videotape or DVD, which may then be packaged and marketed much like ariy other physical good.
.
An impbrtant implication here is that the customer will be concerned with, and affected by, not

why different types of processes

rd to enter the service system. There are, ofcourse, exceptions,

: these are exceptions rather than
s: Howmanytimes eachweek do
-at least not by the provider. You
ssing salon, a bus or a hospital.
ng service has to offer, then you

only whatis being provided but also the malner in which it is provided. A service provider in this
cbntext must be mindful of both considerations and pay equal attention to both.

,
r..

lnformotion Processing
Informationprocessing, oneof thebuzrwords of ourage,hasbeenrevolutionisedbycomputers.But

r-r.:,'.,rro1"1irr1'ormationisprocessedbymachines:professionalsinawidevarietyoffleldsusetheirbrains
i ,, :too. Information is the most intangible form of seryice output, but may be transformed into a more
.:;' :. arrduing, tangible form as letters, rePorts, books, tapes, floppy disks,'CD-ROMs or DVDs. Among
-,r.:,., , the services that are highly dependent on the effective collection and processing of inf. ormation are
..,. : financial Services and professional services like accounting, law, marketing research, architecture,

service operation. The level of

'ding a bus for a five-minute ride
mt treatonents. ln between these
ving one's hair washed, cut and
mes (after a period that can vary
e customer enpects that theywill

', i
..:
:..
,-:
,,r

-'ssing'.

in terms of what happens to the

idenrify what benefits are'being
lme of the non-financial costsat customers incur in obiaining
Jstomer is treated and how the

we will return later in

Services that interact with people's minds include education, news and information, professional
advice, psychotherapy, entertainment and certain religious activities. Receiving such services requires
the customer to make an investrnent of time. However, recipients dont necessarilyhave to be physically

dtect

in theory).once the request for

Lich

Mentol-stimulus Processin g

'..

processing), such as insurance,

Llting. For these services,

::i:'

their possession while it is being processed. Irr fact, the customer's involvement can often be limited
to requesting the service, explaining the problem and paying the bil.t.

engineering consulting and medical diagnosis.

The extent of customer involvement in such services is often determined more by nadition and
a p.rroral desire to meet the supplier face to face tharr by the needs of the operational processStrictly speaking, personal contact is often quite unnecessaiy in industries like banking or
insurance. Yet many customers prefer the personal contact. Professionals and, their clients may say
:

tiis

not to themselves but to some

rck, a suit, a computer or a pet.
It always involve simultaxeity of

rtaining, storing, improving or

rte-to

extend their usefulness.

storage, wholesale and retail

value-addingchain of activrties

re than with people-Processing

service factory and aciomPanY

:.:

a,

Teqchers provide o menlol stimulus

service

(rrrrtnl

New perspectives on morketing in rh" r"r+d-.c-o-rc-m-1c--=1Jr...'

ice, because they feel they learn more about each other's needs,
tat way. But successful persona.l relationships, built on trust, ma)t to
intained purely through telephone contact or other means.

n
ught of as a system compiising service operations; where inputs are
the service product are created; and service delivery, where final
s place and the product is delivered to the customer (see Figure 1.4).
r othenvise apparent) to customers; otherparts are hidden in what
r 'technical core', and the customrir may not even know of their
e terms front office and back office in referring to the visible and
Others talk about frontstage and backstage, using the analogy of
hat service is a performance.z2
rlTl

:omponents of the service operations system can be divided into

ruice personnel) and those involving the stage set (or physical
ngibles). What goes on backstage is likely to be of little interest to
lhey evaluate the production according to what elements are
sry and, of course, according to the perceived service outcome.
tge (or systems-e.g. billing, ordering or account keeping) fail to
)erly, the impact will be apparent to customers. For instance,
nenu items are not available because someone forgot to go to the
rt particular wines are unavailable because the cellar was not

*---:--:
-- *

Direct interactions
Secondary interactions

tt

H. Lovelock & Pierre Eiglier (1981), Seruices

Manigers, lvlarketing Science Institute, Cambridge, Massachusetts.

I F. G, B3teson, Chrisiopher
Vd.

lql{lg

beh4viour in service industries: an explordtory study', lournal of1

MaryJo Bitner (1992), 'Dramatizing the sewice experience: a managerial

W Brown (eds), Aduances in Seruices Markeing and Management,
rp.91-122.
id S.

. more about each other's needs,

elationships, buiit on trust, may to
.e contact or other means.

rvice operations, where inputs are

and service delivery where final
)d to the customer (see Fi8ure I.4).
:rs; other parts are hidden in what
mer may not even know of their
fice in referring to the visible and
d backstage, using the analogy of

ations system can be divided into

rolving.the stage set (or physical
1e is likely to be of little interest to

according to vrhat elements are

the perceived service outcome.

dering or account keeping) fail to
rent to customers. For instance,
cause someone forgot to go to the
,able because the cellar was not

re-stocked. Other examples of backstage failures include having an order incorrectlyfilled, receiving
an incorect bill or statement or having a suitcase lost or misplaced. If repeated, such incidents can
so irritate valuable customers that they look for alternative suppliers.
The proportion of the overall service operation that is visible to customers varies according to the

nature of the service. High-contact services directly involve the physical person of the customer.
They require customers to enter the service factory (although there may still be backstage activities
that they don't see). Medium-contact senrices, by contrast, require a less substantial involvement of
the customer in service delivery. Consequently, the visible component of the serrice operations
system becomes proportionately smaller. Low-contact services minimise customer contact with the
seF/ice provider, with the result that the vast bulk of the service operations system operates
backstage; frontstage elements are normally limited to contact by mail and telecommunications.

Service delivery system

Service delivery is concemed with where, when and how the service product is delivered to the
customer. As seen in Figure 1.5, this system embraces not ordy the visible elements of the service
operating system-physical support and personnel-but mayalso entail exposure to other customers.
Traditionally, serrrice pioviders had direct interactions with their customers. But for reasons of
operational efficiency and customer convenience, many services that don't require the customer's
physical presence now seek to reduce direct contact. In short, the visible component of the senrice
operations system is shrinking as the delivery system relies more heavily on information technology
and self-service to drive the service from higher to lower levels of contact.

Electronic delivery often offers customers potenlia.lly greater convenience than face-to-face
contact does but, correspondingly may create a distance between the customer and the seryice
organisation. Self-service equipment, such as automated fuel pumps, AIMs, centralised calling
systems arrd the individual package scanners to facilitate faster checkout at retail sites, is available
in numerous locations and may be accessible 24 hours a day, seven days a week. But there are
potential disadvantages, too. The shift from personal service (sometimes referred to as 'high touch')
to self-service ('high tech') cafl create a sense ofimpersonalisation and is not necessarily acceptable
to all customers. Therefore making this type of change may require ari information campaign to
educate customers and promote the benefits of the newapproach. It may also be necessary to foster
thri capability and confidence of customers to use these services.

Iigure 1.5 The service morketing system lor o high-contocl service

Service delivery system
Service operations system

Other contact points

Advertising
5aLes ca[[s
Bi

,velock& Pierre Eiglier (I98t), Services

nstitute, cambridge, Massachusetts.

lti ng/statemenls

MisceLtaneous mail,
phone ca[s. faxes etc.

'n5
Tech nicaI

Websites and emails

Random exposures to

core

ta cr

;tries: an exploratory study', Journal

rg

the senrice experience:

of

managerial

Seruices Marketing and Management,

Ll

tr

es/ve nrcl.es

Chance encounters
with service personnel

Word of mouth
Backstage

Frontstage

(i nvisibte)

(visibte)

(rarrrn I New perspectives on morketing in rh" s-.-"F.ce--=e_conollf_--?3.j__-

Il

Iikened to ttre differences berween live theatre on a stage and a drama created for radio. Customers
of low-contact services normally never see the 'factory' where the work is performed; at most. the.,
udll talk with a service provider by telephone. without buildings and furnishingr o,
ahl
appearance of employees to provide tangible clues, customers must eva.luate iervice"uun
q"rfit
according to ease of telephone access and the voice and responsiveness of a telephone-tasei
customer-service agent. When service is delivered through impersonal electronic chalnels,
such as
the Internet, self-senice machines, automated telephone calls to a central computer
or c.x
or via the customer's own compute! then there may be very little 'theate' left to the performance.
";;t ",

j
j!

!
a:

Service n'lorkefing system

Other elements that may contribute to the cusiomer's overall view of the service organisation
include advertising and other communication efforts such as the website, telephone cutts inO
tetters
from service personnel, billings from the accounting department, random exposures to
seryice
personnel and facilities, news stories and editorials in the mass media, word-of-rnouth
comments
from current or former customers and even participation in market research studies.
Collectively, all
of these-plus those in the service delivery system-add up to what we term the
seruice markiting
system.In essence, this represents all the different ways in which the customer
may encounter or
"learn about the seryice organisation in question.
Since services are experiential, each of these elements offers clues about
the nature and quality
of the service product. Inconsistency between different elements may weaken
tne organisationi
credibility in customers' eyes. The scope and structure of the seryice marketing
,yr;;;;;;;
sharply with different tl?es of organisations. Figure 1.5 depicts the service
**k.ti.rg ryrt"* fo, u
high-contact service. Figure r.6 shows how ttre picture changes when we
*" d";;?-jj,lr; i;;:
contact service. The significance of this approach to conceptualising service
creation and delivery
is that it represents a c 6tomer's view, iooking at the service orgJnisation
from the outside, as
opposed to an internallyfocused operations perspective.
Managers need to think carefirlly about the nature of the service
marketing system for a
particular t ?e of customer using a given service. Table 1.4 provides
a checklist, categorislng a,,J
summarising each of the main tangible and communication ;lements
to which custom;rs migit be
exposed (fewer elements will be involved, of course, in the case
of a low-contact sen/ice).
Try using the list in Table 1.4 to develop a profile-of the service
**t"ti.rg system for a variety of
services-hospital, airline, acco"nting orlegal service, hotel, dry
clea11er, c.editirnion, car service centre
or post office.You should realise, though, that customers'encounters
are sometimes more random than
planned' For instance, what impressi,on does it make on you
to see an express delivery service truck
broken down by the side of the road? or to observe a uniformed
employee from a nearby hotel
Iigure

I.6

The service morkeling syslem for o low.66nf66f

5sryi6g

Frontstage

(visibte)

-.::it--:,,.-,S.

i,.ui,i_,e!,,,frt o

rk

eting
;:

ald low contact can be

ama created for radio. Customers
work is performed; at most, they
rgs and furnishings or even ttre
rontact

s must eva,luate service quality

Insiveness of a telephone-based
onal electronic channels, such as
central computer or call centre,
theatre'left to the performance.

riew of the service organisation

ebsite, telephone calls and letters
rt, random exposures to service
.edia, word-of-mouth comments
: research studies. Collectively, all
at we

term

l}:re seruice

marketing

the customer may encounter or

ues about the nature and

quality

may weaken the organisationt

yice markeling system may vary
e service marketing system for a
vhen we are dealing with a lowing serrrice creation and delivery
ganisation from the outside, as
;

service marketing system for a

les a checklist, categorising and
nts to which customers might be
a low-contact service).
marketing system for a variety of
.er, credit union, car service centre
ile sometimes more random thart
an express delivery service truck
I emPlol,se from a nearbY hotel

0'Lher contart
poi nts

Advertisi

PubLiciiy. press articles

Bitli nglstate ments
Random exposures to

faci[ities and personnel

Word

of nouth

li

staggering dorvn the street, drunk? Or to visit a friend in

a hospita-l where the grounds and buildings are

beautifirlly maintained, the interior d6cor cheerfirl rather than institutional, the stafffriendly and well
groomed, and the ftiend firll of praise for the personal care and even the food? Because service
performances are intangible, tangible evidence gives clues about the quality of service, and in some
cases will shongly influence how customers (especially inexperienced ones) eva1uate the service.
It should be clear to you by now that managers ofservice organisations (not forproflt as well as for
profit) have several more irnportant variables to consider, besides the traditional four Ps of product
(seririce), promotion, price and place (dlstribution), when devising marketing strategyand tactics.This
is why we emphasise process, people and physical evidence, too. Each of these holds vital marketing
as well as managerial implications, and therefore comprises part of the service. marketing system.
Much operations work is done backstage and is relevant to marketing only to the exteirt that it
results in delivery of a good'product'; But frontstage operations, where seryice delivery takes place,
must be seen in the context of the troader services marketing system. In short, there's an overlap
between the marketing and operations spheres of influence. Managers on both sides must try to
understand the other's perspectives, seeking to balance custorner satisfaction against productivity
and cost control. The fact that customers often deal directly with service personnel again highlights
the importance of a well-managed human resource function, especia-lly in high-contact services.

(rarttnl New perspectives on morketing in the

srrv-l-c:-e__e

-rrtrnffi,17-:...

i.-

An exponded,mqrketing mix for:-services

The notion of service as an experience or performance leads to Grove, Fisk and John's use of a
theatrical metaphor for service management; they compare service delivery to the staging of a play,
with service personnel as actors, customers as the audience and the office environment or
'servicescape' as the stage.23
In discussing marketing strategies for manufactured goods, the nature of the decisions made by
marketiag managers has long been enshrined in the four elements of the marketing mix, often
referred to as the 'four Ps' of the marketing mix. The marketer's tasks concern (l) product elementsdeciding on product features, packaging and performarce characteristics; (2) price and other user
cosrs-establishing the selling price to customers, setting trade margins and credit terms; (3) place,
cyberspace and tim*-selecting the rFpes and locations of outlet through which the product is to be
sold and determining the nature of intermediary channels between the factory and the place of sale;
and (4) promotion-deciding how best to communicate the product to the target audience and how
to persuade them to buy it. This is how customer va,lue is created.
However, the traditional four Ps of goods marketing are inadequate to describe the key tasks of
a service marketer's job. Bitnel Booms and Tetreault suggest that other distinctive characteristics
of services (as we described them earlier in this chapter) necessitate three additional elements in
marketing strategy: people, physical euidence and process.za These seven Ps of services, shown
-in Figure 1.7, arc discussed below. Each of these elements creates value for customers.

l
I

t
r

I
s
d

People

c
S

Many services require direct, personal interaction between customers and the firmb personnel or
employees for the service to be'marufactured' and delivered (e.g. haircut, medical advice, fitness
class, travel, university lecture, a visit to the bank or accountant). These interaclions strongly

r(
Cr

st
it

tigure 1.7 An exponded morkeiing mix for services

Phv
TI
pr

ot

ir

cc
se
aF

Pr
th,

inr
be

cu
Source. Adapted from R. T. Rust, A. I. Zahorik & T. L. Keiningham, Seruices

Marketing, Pearson Education,

1996, p. 11

Froc
Th

Stephen J.
(2000), 'services as theatre: guidelines and implications', in T. A.
.Glove, Raymond P Fisk and loby lohn

ma

Swartz and Dawn Iacobucci (eds), Handbook of Seruices Marketing and lianagemen4 Sage'Publications Inc.
Thousand Oa.ks, Cdifornia.
MaryJo Bitner, Bernard H. Booms and MaryStanfield Tetreault (1990), 'The service encounter: diagnosing favorable
and-unfavorable incidents', Joumal of i[arketing, s4, Januiry, p'p. 7bsa. see a.lso B.G. cfiung-H"errera, N.
Goldschrnidt and K.D. Hoffrnan (2004), 'C,rr516mgi and employ'eetews of crirical service incidenis,, Joumal of
Se"r-uices Markerin& 18(a), pp.24l*54; and I. Roos (200+), Utithoas of investigating critica-l incidenit;,
lorrrit
of Seruice Research, 4, February, pp. 193-204.

PIC

25

Sun

indr

Eer,vittEs Morkeiing

,t-_

rvtqeS
Grove, Fisk and John's use of a
delivery to the staging of a play,

and the office environment or

influence customers' perception of service quaJity. For high-contact services, it is in a sense ti ..

'the person delivering the service is the service'-that is, customer assessments of qualiry a;,
based largely on how they assess the person(s) with whom they are dealing. An actuary in :,
superannuation firm said of his regular clients: 'My clients only know me. To them I &rii i: r
organisation, and they Lrust me.'This observation emphasises the fact that in high- and mc
contact services at least, a trusting relationship between client and service provider som(
develops to tie extent that the person delivering the service becomes inseparable from the s,ji
Ponder this for a moment: what would happen if this actuary left his firm and went into pr
practice or joined a competing superannuation firm?
Similarly, a customer's stay at a hotel can be greatly affected by the friendliness, knowledge : , ,,
helpfulness of &e hotel staff-in many cases the lowest-paid employees in the organisation. r.: .,:,
hotel patrons have little contact with hotel managerS and supervisors; instead, their impressic,: . ,
the hotel and inclination to relurn are influenced by their many brief encounters ('momeiii .l
truth') with front-desk staff, porters, housekeeping staff, restaurant staff and so on. Most or" ii
service encounters take place outside the direct control of hotel management which therefore {r' ',.
,

nature of the decisions made by

nts of the rnarketing mix, oflen
concern (l) product elementrteristics; (2) price and other user
rgins and gredit terms; (3) place,
s

rough which the product is to be

ttre factory and the place of sa.le;
:t to the target audience and how
uate to describe the key tasks of

other distinctive characteristics

additional elements in

ate three

se seven Ps of services, shor,r,rt

'alue

for customers.

thechallengeoftrainingtheseemployeestodotheirjobswell andofmotivatingthemto661sp.l-:.,'

making an extra effort when senring customers.

Humal resouice management issues are therefore of strategic importance to deliveriag h:,:irquatity services. Establishing a customer-oriented cultu-re throughout the fum is one way in whici.
seryice enterprises can achieve a sustainable competitive advantage.zsAvis (rental car comjr :i'.
determined that it must fust create 'raving fans' of its employees in order to create 'raving I r "
of its customers. This customer-oriented culture is one of the keys to Avis' success. The 'penp1.,'
component of the seririce matketing mix also includes management of the fum's crlstomer eleii, ;:
Satisfaction with a service can be influenced by other customers' behaviour. Noisy or ill-maru,,iri.,
restaurant patrons at the next table, crying children in a nearby seat on an aircraft and l-.rritlr
customers whose lengthy transactions force others to wait for service are all examples of gnpierr.,,::, i
service conditions caused by a firm's other pakons. Key management tasks include delerminiiig ,.;,.,
l'ight customermix and managingcustomerbehaviourto enhance theerperience and avoid cori:':ir:i..
.

ners and the firm's personnel or

haircut, medical advice, fitness

rt). These interactions strongly

Physicol evidence (fongible cues)

This component of the expanded marketing mix addresses the 'tangible' components of the service
product. In the absence of any tangible good, cues indicating the quality of a service come l',.,,rr;
other contelrls. Physical surroundings and other visible cues can have a profounil effect on lhe
impressions customers form about the quality of the service they receive. The term servicescapc--covering such elements as physical layout of the service faciliry ambience, background music an,!
seating comfort-can also affect a customer's impressions of ald satisfaction with service- Thc
appearance of sta-ff, including clothes and grooming, may also function as important r.,.i:.,,.
Promotiona-l materials, invoices and written correspondence all provide some tangible evideit,.;..i. i:)f
the firm's professiona-lism. To the extent that theie elements provide reassurance, they carr i-,i:
incorporated into the fum's marketing communications to help reduce customer risk perceptiots
before purchase. Service firms should design these items with ertreme care, since they influence a
customer's impression of the flrm, especially the impression of first-time customers.
"-aring,

Pearson Education, 1996, p, f1.

guidelines and implications', in T. A'

Vanagement, Sage Publications Inc.
;

Process of service producfion

The flna,l element of the expanded marketing mix for services concerns the process required lo
manufactrtre and deliver the service. Employees often depend on efficient ard effecrive'backsraiie'
processing systems to enable them to deliverhigh-qualitysenrice. Howdo you feel if you are hil;ri.i::,i

ryice encounter: diagrrosing favorable

1. See a.lso B.G. Chung-Herrera, N.

critical sen'ice incidents', Journal ol

estigatirg critical incidents', Journal

25 Sundar Bharadwaj, P
industries:

Rajan Varadarajan and john Fahy (1993), 'sustainable competitive advantage in sri,,..
model and research propositionsl /o urnal of Marketing, 57, October, pp. 83-99.

a conceptual

fi,
,li

managers who want their enterprises to succeed cannot

management functions. As a resuit,
sector' In the
rely solely on models and concepts developed in the manufacturing
;;;;;";,
and opportunities faced
challenges
unique
the
in
more
detail
discuss
will
we
."-J"a.,,rrhis book,
a range of models and conceptua-l tools designed to address the
fV,"J""^U"rinesses, and introduce
that you will use the material from this text to enhance your
hope
our
is
It
;iriq"" aspects of seryices.
employee or manager, but also as a customer of many
a
serrice
as
only
not
erperiences,
futuie

different lypes of service businessesl

:,
,:.-;

.:._:.-;;i;1: :;:_i.,;-.

APS

id cannot
or. In the
ities faced

ldress the

Choose o service enterprise with which you ore fomilior. Show how eoch of lhe seven
elements of ihe services morketing mix might be used by monogemenl lo ofiroct customers ond
creole volue'

lnce your

of many

Whoi is their 5ignificonce io the customer

v.l!t.qn

j;::r1;ai:ii.:.]:=

Recommended reodings
Berry, Leonard L., Seiders, Kathleen and Grewal, Dhruv (2002), 'Understanding senrice convenjence', Journal

of Marketing,66, pp. 1-17.

L. L. and ]ohnson, L. (2006), 'Customer loyalty to one service worker: Should
InternationalJournal of Research in Marketing,23(l) March, pp. 79-91.

Bove,

:.:.
::

.'-:.

it

be discouraged?l

Brown, StephenW. (2002),'Opportunities for business-to-business services scholarship: a commentary;

Australasian Marketing lournal, Special Issue on Seryices Marketing, 10, pp. I 0-1 Z_
Harris, Ricliard, Harris, Kim and Baron, Steve (2003), 'Theatrical serrrice experiences; dramatic script
development with employees', Internationallournal af Seruice Industry Management,l4, pp. f B4-g9.
Johnson, Michael D. and Gustafsson, Anders (20O3), Competing in a Seruice Economy, San Franciso, JosseyBass.

Lovelock, Christopher & Gummesson, Evert (2004), '\4/hithbr services marketing? In search of
ard ftesh perspectives', Journal ofSeruice Research, T(L) Augost, pp. 20-4l.

nerv paradigm

Oliva, Rogelio a;rd Kallenberg, Robert L. (2003), 'Managing the transition from products to services,,
International Journal of Seruice Indtctry Management,14, pp. 160-72.
Sweeney, Iillian C. SrWacle Lapp (2004), 'Critical seryice encounters on theWcb: an erploratory sfitdy', Journal

of Seruices Markeri ng, lB(4) pp. 276-89.

Vargo, Stephen L. & Lusch, Robert (2004), 'The four service marketlng myths: remnarts of a goods-based,
manufac turing mo del', I o urn al of S e ru i ce Re s e ar ch, 6, pp. 324-35.
Verhoef, Peter, Aatoides, Gerrit and do Hoog, Armoud (2004), Service encounters as sequence of events: the
importance of peak experiences', Journal of Serulce Research, Z, pp. 53-64.

(terrrn I New perspeclives

-:33

Customer behaviour and

a'

: _'!:

seI "v,lce

e.

cou nte r5

LeqrninEobf&.iis..'.....:..
After reoding this chopier yo1

thould

be oble to:

#-

Exploin the rei.q,{,".lc9.OFpeiceived risk ond informotion seorch ot the pre-purchose

,
stoge of the buying.frocis:

-*-

Outline th*'i"loliv" impacr of vorious inforrnotion"sources on the choice oI business{obusrness sqrvlces.

-#.

,_,

,.

Exploin why it is nu."rrory'to understond ond occommodote cusiomers' intrinsic

' t' ., r'': .. '
needs ond volues. t
Describe why mood slotes, role ond script theory ond control theory ore centrol to
nderstondi ng'cristonier behoviour' i n service setii n gs.
-'.''r"

-u.

,af

':.':;: l:l

"'-r: '.

"

Exomine thq, impoct'of 'culfure upon consumer behoviour in service settings.

'u

i:,

ii
:rl

'i'

:i

:*:.

Customer behaviour and

a-'.

,:

al

ser WCC e.n,F; nterS

i'ii''l

Leqrnin9

offiffit , ..

,,t.

After reoding this,chApldryou,,should be oble

to: ,

#-

r!1k ond jnformolion georch ot the pre-purchose

Exploin lbS'r"i
'19f-peice'1veJ
stoge of the buyi"i pro."1t,
,

-*-

Outline th*'i"lo1iv" iriipa.r of vorious inforrnbtion"sources on the choice o[ business{obusiness se-rvices.

'

'..

tl

. ,l

...'

-#.

Exploin why it is nu."rrory'to understond ond occommodoie cuslomers' intrinsic

-*.

Describe why mood sloles, role ond script theory ond control theory ore cenlrol to
u nderstondi ng'cristonier
,:;,_;, ty..
-j. .r. behoviour' i n servicb seiti n gs.
Exomine thq, impoct'of 'culfure upon consumer behoviour in service settings.

,.

,af
'g

,,'

,...i