service marketing...service marketing consolidated notes page 2 of 12 perishability: unlike...

SERVICE MARKETING

Services may be defined as an act or performance that one party can offer to another that is essentially

intangible and does not result in the ownership of anything.

A service can be provided by

a Machine – an ATM Kiosk, a Vending Machine;

a Person – a Doctor, an Advocate; or

a Combination of both Man & Machine – Services of a Mechanic or Technician.

There are some services that

Accompany the Purchase of a Product – Services in the form of warranties.

Services can be

Directed at a Person – an Educational Package, a Facial Massage, an Eye Check Up; or

Directed at an Object – Installation, Repair, Maintenance.

Examples Of Service Industries

• Health Care– hospital, medical practice, dentistry, eye care

• Professional Services– accounting, legal, architectural

• Financial Services– banking, investment advising, insurance

• Hospitality– restaurant, hotel/motel, bed & breakfast; ski resort, rafting

• Travel– airline, travel agency, theme park

• Others– hair styling, pest control, plumbing, counseling services, health club, interior design

Growing importance of Services in Marketing

Economic Well Being: Double Income Families, More Disposable Income, More Consumers

Changing Life Style: Increased Life Span, More Working Women

Complexity of the Product: Advance in Technology, Innovative Products

Characteristics of Services

Intangibility:

Unlike Products, that can be seen, heard, touched, smelt and/or tasted, Services are to be experienced. Quality

of service is not always strictly measurable. Different people may have different expectations with regard the

same service. Implications of Intangibility

• Services cannot be inventoried

• Services cannot be easily patented

• Services cannot be readily displayed or communicated

• Pricing is difficult

Heterogeneity:

A machine can produce units identical in size, shape and quality. A human being cannot work uniformly and

consistently throughout the day. Since human beings offer a service, there is high probability that the same

level of service is not delivered all the time. Further, the service offered by one employee of an organisation

may vary from the service offered by another employee of the same organisation.

Implications of Heterogeneity

• Service delivery and customer satisfaction depend on employee and customer actions

• Service quality depends on many uncontrollable factors

• There is no surety that the service delivered matches what was planned and promoted

Inseparability:

A service is consumed by the customer as soon as it is delivered to him. Production and consumption

occur simultaneously. Since the delivery and consumption of a service are inseparable, there has to be

interaction between customers and service providers.

Implications of Simultaneous Production and Consumption

• Customers participate in and affect the transaction

• Customers affect each other

• Employees affect the service outcome

• Decentralization may be essential

• Mass production is difficult

Service Marketing Consolidated Notes of 12

Perishability:

Unlike products, services cannot be inventoried or stored for future consumption. The service provider looses

on revenue if his service capacity is not fully utilised.

Implications of Perishability

• It is difficult to synchronize supply and demand with services

• Services cannot be returned or resold

Lack of Ownership:

Due to the intangible nature of services, service delivery, unlike product delivery, does not ensure transfer of

ownership. The challenge here is to make the customers believe that they are being offered a unique piece of

service. Unlike a motor car or a vacuum cleaner, services once delivered cannot be returned or resold to a

third party. They are enjoyed only once by the customer and once consumed cannot be meaningfully

transferred to third parties.

Extended Marketing Mix and Strategies for Services Marketing

As we already know, the traditional marketing mix comprises of 4Ps of marketing.

• Product - What you are selling

• Price–The price you are charging for the product

• Promotion–The way you promote your product and price

• Physical Distribution–The place or physical distribution through which people can buy your product

But when we talk about Services, there are some points that make it different from selling products. Therefore

the 7 P's of marketing added3 more P’s to the traditional marketing mix of Product, Price, Promotion and

Physical Distribution. They are:

• People - Recruiting the right staff and training them appropriately in the delivery of their service is

essential to convince consumers make judgments in their favor

• Process - Refers to the systems used to assist the organization in delivering the service

• Physical evidence - Where is the service being delivered? Since the services are intangible, the

customer looks for physical clues about the quality

PRODUCT: Same standardised service – car service stations, couriers

Customised service – doctors, consultants

The service offering needs to be looked at carefully to ensure it meets customer needs as closely as possible.

The range of services offered may require extending/updating in response to new developments in the market.

PRICING: Fees: Doctors, Lawyers, Accountants

Rent: House, Building, Home Appliances

Admission Fee: Education, Recreation Parks, Resorts

Premium: Insurance Policy

Interests: Loans

The perishability nature of services makes pricing difficult since fluctuation in demand cannot be met through

inventory. Hence, variation of price depending on time/season/consumption becomes the natural strategy.

Price also represents other factors in addition to simply costs and is often used by prospective clients as a

guide to quality. Therefore, pricing should be regarded as a strategic element of the overall marketing

programme rather than a basic costing exercise.

Bases of Pricing

Demand, Season, Time of year/day, Age

of Consumer, Ability to pay


PROMOTION: Ambience;Employees (Personal Selling); Awards and Certificates displayed; Publicity

Promotional objectives need to be clearly defined before a strategic promotional program can be designed.

Service providers may have more than one promotional objective and will use a variety of messages and

media to communicate with target audiences. Advertising can increase awareness. Newsletters or house

magazines can be a useful tool for communicating with existing customer and other publics. Sponsorship, PR

and publicity can be used to attract attention and inform target audiences. A higher profile and enhanced

corporate identity will make the organisation more attractive to customers.

PHYSICAL DISTRIBUTION: No Intermediaries Required: Legal or Medical consultation

Intermediaries Required: Public Utilities – Electricity, Gas, Ration, Mass Transport etc.; Travel and

Entertainment; Financial Services

Location decisions are important in professional services marketing as many clients use convenience as a key

factor in provider selection. Location may be less important for highly complex or specialist services. Some

services, such as building surveying or accounting audits, have to be carried out at the clients’ premises.

PHYSICAL EVIDENCE: The Remote Encounter- ATM transactions, e-ticketing etc.

The Indirect Personal Encounter- Helplines of banks & credit card companies

The Direct Personal Encounter- Direct face-to-face encounter with customers

Customers will base their judgement on the physical evidence available to them. Appearance and cleanliness

of hospitals influence a customer perception of the service.

PROCESS: Standardisation of Processes

The arrangements through which the customer actually receives delivery of the service constitute the process.

In a hospital, the service comprises of getting an appointment at the reception, consulting the doctor etc.

Administration quality, customer care, appointment systems, methods of communication, office opening

hours and operating efficiency in terms of delegation or team working, are all examples of aspects of the

service delivery process which may be improved or revised.

PEOPLE: Competitive advantage through service personnel

Behavioural Training

Since most services are provided by people and service delivery quality depends on the person delivering the

service, hence the selection, training and motivation of employees can make huge difference in customer

satisfaction. Ideally, employees should exhibit competence, a caring attitude, responsiveness, initiative,

problem solving ability and goodwill.

Goods and Services Continuum

Examples of services include Hospitals, Banks, Transport Services, Consultancy Firms, Tourism and Travel

Agencies etc. Although we talk about products in terms of goods or services, yet many products have a

combination of the attributes of both. The major factor that differentiates a service from a product is its

intangibility. However, it should be noted that the line separating products and services is fast thinning down.

In order to attract customers and increase their loyalty, marketers today try to associate their products with an

element of service attached to it.

Companies marketing goods or products can fall into any of the following five categories depending upon the

goods/services mix they offer.

1. Companies offering tangible goods

Some companies offer only tangible goods such as soaps, toothpastes or packaged salt. They do not offer any

services, tied or otherwise, with the goods.

2. Services along with tangible goods

In the case of technology-dependent goods or other products - for which customers need training and

knowledge about installation and product use; accompanying services such as trials, delivery and installation;

operation training - warranty and after-sales service are crucial. Customer loyalty and word-of-mouth

publicity are more likely to be dependent on the performance of these services than on the product

performance. Such goods include cars, computers and all consumer durables like washing machines,

televisions, refrigerators, water purifiers etc.


3. Goods and services in near-equal measures

People have different reasons for choosing a restaurant. For some it is the quality of food while others like a

place for its atmosphere or the service. Thus, the goods (menu card, food, drinks etc.) are accompanied in

equal measures by services (ambience, music, atmosphere, hospitality, efficient service etc) to make it a

memorable experience for the customer.

4. Services accompanied by minor goods

For an airline customer, while the journey would be essentially an intangible service it will be accompanied

by some minor goods such as foods & drinks served on the aircraft or a complimentary in-flight magazine etc.

5.Pure service not accompanied by goods

Some companies and firms provide services that may not have any accompanying goods. A consultation visit

to the Psychiatrist or a visit to the gymnasium are good examples of pure service not accompanied by goods.

The Service Triangle

Services marketing is about promises made and promises kept. A strategic framework known as the services

triangle visually reinforces the importance of people in the ability of firms to keep their promises and succeed

in building customer relationships. The triangle shows the three interlinked groups that work together to

develop, promote, and deliver services. These key players are labelled on the points of the triangle: the

company; the customer; and provider. Between these three points on the triangle, three types of marketing

must be successfully carried out for a service to succeed: external marketing, interactive marketing, and

interactive marketing.

On the right side of the triangle are the external marketing efforts that the firm engages in to set up its

customers’ expectations and makes promises to customers regarding what is to be delivered. Anything or

anyone from the company, that communicates to the customer before service delivery can be viewed as part

of this external marketing function. At the bottom of the triangle is interactive marketing or real-time

marketing. Here is where promises are kept (or broken) by providers – the firm’s employees, subcontractors

or agents. People are critical at this juncture. If promises are not kept, customers become dissatisfied and

eventually leave. The left side of the triangle suggests the critical role played by internal marketing. These are

the activities that management engages in – recruiting, training, motivating, rewarding, and providing equipment

and technology – to aid the providers in their ability to deliver on the service promise.

All three sides of the triangle are essential to complete the whole, and the sides of the triangle should be

aligned. What is promised through external marketing should be the same as what is delivered; and the

enabling activities inside the organisation should be aligned with what is expected of service providers.

0

25

50

75

100

Goods / Services

Percentage

1 2 3 4 5

Categories of Companies

Goods Service Continuum

Tangible Goods

Services

Company

Customer

s

Providers

Internal Marketing

(Enabling Promises) External Marketing

(Making Promises)

Interactive Marketing (Keeping Promises)


Service Encounters or ‘Moments of Truth’

From the customer’s point of view, the most vivid impression of service occurs in the service encounter or

moment of truth, when the customer interacts with the service firm. Sometimes called ‘real-time marketing’,

it is where promises are kept or broken. Some services have very few service encounters, and others have

many. It is in these encounters that customers receive a snapshot of the organisation’s service quality, and

each encounter contributes to the customer’s overall satisfaction and willingness to do business with the

organisation again. The Disney Corporation estimates that each of its amusement park customers experience

about 74 service encounters and that a negative experience in any one of them can lead to an overall negative

evaluation of the service as a whole.

Types of Service Encounters

A service encounter occurs every time a customer interacts with the service organisation. There are three

general types of service encounters: remote encounters, phone encounters, and face-to-face encounters. A

customer may experience any of these types of encounters or a combination of all three, in his or her relations

with a service firm.

Remote encounters: Encounters can occur without any direct human contact such as when a customer

interacts with a bank through the ATM system, with a transport company through automated ticketing

machine, or with a retailer through its Internet web-site. Remote encounters can also occur when the firm

sends its billing statements or communicates other types of information to customers by mail. Although there

is no direct human contact in these remote encounters, each represent an opportunity for the firm to reinforce

or establish quality perceptions in the customer.

Phone encounters: In many organisations such as insurance companies, utilities, and telecommunications,

the most frequent type of encounter between an end customer and the firm occurs over the telephone. Almost

all firms rely on phone encounters in the form of customer service, general enquiry, or order taking functions.

Face–to-face encounters: Occurs between an employee and a customer in direct contact. Determining and

understanding service quality issues in face-to-face contexts is the most complex of all. Both verbal and

nonverbal behaviours are important determinants of quality, as are tangible cues such as employee dress and

other symbols of service such as equipment, informational brochures, and physical settings.

Service Blueprinting

A service blueprint is a picture or map that accurately portrays the service system so that the different people

involved in providing it can understand and deal with it objectively regardless of their roles or their individual

points of view. Blueprints are particularly useful at the design and redesign stages of service development. A

service blueprint is a tool that visually displays the service by simultaneously depicting the process of service

delivery, the points of customer contact, the roles of customers and employees, and the visual elements of the

service. It provides a way to break a service down into its logical components and to depict the steps or tasks

in the process, the means by which the tasks are executed, and the evidence of service as the customer

experiences it.

The key components of service blueprints are:

Customer actions: The steps, choices, activities, and interactions that the customer performs in the process of

purchasing, consuming, and evaluating the service.

Onstage contact employee actions: The steps and activities that the contact employee performs that are visible

to the customer.

Backstage contact employee actions: The contact employee actions that occur behind the scene to support the

on-stage activities.

Support processes: The internal services, steps and interactions that take place to support the contact

employees in delivering the service.

Points of contact

Evidence

Process

Service

Blueprint


The Service Package

The service package consists of 5 features:

• Supporting Facility: The physical resources that must be in place before a service can be sold. Examples

are golf course, ski lift, hospital, airplane.

• Facilitating Goods: The material consumed by the buyer or items provided by the consumer. Examples are

food items, legal documents, golf clubs, medical history.

• Information: Operations data or information that is provided by the customer to enable efficient and

customized service. Examples are patient medical records, seats available on a flight, customer preferences,

location of customer to dispatch a taxi.

• Explicit Services: Benefits readily observable by the senses. The essential or intrinsic features. Examples

are quality of meal, attitude of the waiter, on-time departure.

• Implicit Services: Psychological benefits or extrinsic features which the consumer may sense only vaguely.

Examples are privacy of loan office, security of a well lighted parking lot.

Service Process Design

Designing a service delivery system varies with the type of service to be delivered. The customers’

expectations from an airline, retail stores, car repair garage and a doctor/lawyer are all very different.

Based on these two parameters, four distinct types of services emerge:

Service Factory: Involves Low degree of Labour Intensity and Low degree of Interaction and Customisation.

Examples: Airlines, Trucking, Hotels and Resorts etc.

Mass Service: Involves High degree of Labour Intensity but Low degree of Interaction and Customisation.

Examples: Retailing, Schooling, Commercial Banking etc.

Service Shop: Involves Low degree of Labour Intensity but High degree of Interaction and Customisation.

Examples: Hospitals, Auto Repair, Electronic goods servicing etc.

Professional Service: Involves High degree of Labour Intensity and High degree of Interaction and

Customisation. Examples: Doctors, Lawyers, Architects, Accountants etc.

The service process matrix, distinguishes four

types of service scenarios based on the degree

of interaction and customization required and

the degree of labour intensity involved in

providing the service.

On one hand there are services that require

either high or low customization levels and

high or low interaction with customers and on

the other hand there are services that require

high or low labour intensity.

Service Blueprint Components

Physical evidence

Customer actions

Line of interaction

Onstage contact employee actions

Line of visibility

Backstage contact employee actions

Line of internal interaction

Support processes


Customer Relationship Management

Customer Lifetime Value

Relationship value of a customer, also referred to as the Customer lifetime value, is a concept or calculation

that looks at customers from the point of view of their lifetime revenue and/or profitability contributions to a

company. This type of calculation is needed when companies start thinking of building long term

relationships with their customers. Companies want to find out what is the potential financial value of those

long-term relationships. They also want to know what the financial implications of losing a customer are.

The customer lifetime value is influenced by the length of an average lifetime, the average revenues generated

per relevant time period over the lifetime, sales of additional products and services over time, referrals

generated by the customer over time, and costs associated with serving the customer. Lifetime value truly

means lifetime profitability. With sophisticated accounting systems to document actual costs and revenue

streams over time, a firm can be quite precise in documenting the rupee value and costs of retaining

customers.

Steps of New Service Development

New service development process is rarely a completely linear process. An underlying assumption of new

product or service development process models is that new product ideas can be dropped at any stage of the

process if they do not satisfy the criteria for success at that particular stage. The figure showing the new

service development steps shows the checkpoints, represented by stop signs, which precede critical stages of

the development process. The checkpoints specify requirements that a new service must meet before it can

proceed to the next stage of development.

• Business strategy development or review

• New service strategy development

• Idea generation

• Concept development and evaluation

• Business analysis

• Service development and testing

• Market testing

• Commercialisation

• Post-introduction evaluation

STOP

STOP

STOP

STOP

STOP

Screen ideas against new service strategy

Test concept with customers and employees

Test for profitability and feasibility

Conduct service prototype test

Test service and other marketing mix elements

Front-end planning

Implementation

Enhancing

Satisfying

Retaining

Getting

Loyalty Ladder

Relationship marketing essentially represents a paradigm shift within marketing – away

from an acquisition/transaction focus toward a retention/relationship focus. Customer

relationship management is a philosophy of doing business, a strategic orientation, which

focuses on keeping and improving current customers rather than on acquiring new

customers. This philosophy assumes that many customers prefer to have an ongoing

relationship with one organisation than to switch continually among providers in their

search for value. Building on this assumption and the fact that it is usually much cheaper

to keep a current customer than to attract a new one, successful marketers are working on

effective strategies for retaining customers.

The Loyalty Ladder illustrates the goals of relationship marketing graphically. The

overriding goal is to move as many profitable customers up the ladder, from the base

where the marketer gets them as newly attracted customers through to being highly

valued, enhanced customers by the process of satisfying and retaining them.


The new service development process is divided into two sections: front-end planning and implementation.

The front end determines what service concepts will be developed, whereas the back end executes or

implements the service concept.

Servicescape

Because services are intangible, customers often rely on tangible cues, or physical evidence, to evaluate the

service before its purchase and to assess their satisfaction with the service during and after consumption.

Elements of Physical Evidence

Servicescape

Exterior facility: Exterior design, Signage, Parking, Landscape, Surrounding environment

Interior facility: Interior design, Equipment, Signage, Layout, Air quality/temperature

Other Tangibles

Business cards, Stationery, Billing statements, Reports, Employee dress, Uniforms, Brochures, Web pages

General elements of physical evidence include all aspects of the organisation’s physical facility as well as

other forms of tangible communication. Elements of the servicescape that affect customers include both

exterior attributes – such as signage, parking and the landscape – and the interior attributes – such as design,

layout, equipment, and décor. Web pages and virtual servicescapes conveyed over the internet are more recent

forms of physical evidence. Physical evidence examples from different service contexts are given below:

Service Physical Evidence Insurance Servicescape NA

Other Tangibles Policy itself, Billing statements, Periodic updates, Company brochure, Letters/Cards,

Website

Hospital Servicescape Building exterior, Parking, Signs, Waiting areas, Admissions office, Patient care room,

Medical equipment, Recovery room

Other Tangibles Uniforms, Reports/Stationery, Billing statements, Website

Airline Servicescape Airline gate area, Airplane exterior, Airplane interior (decor, seats, air quality)

Other Tangibles Tickets, Food, Uniforms, Website,

Courier service Servicescape NA

Other Tangibles Packaging, Trucks, Uniforms, Computers, Website

Sporting event Servicescape Parking, Stadium exterior, Ticketing area, Entrance, Seating, Restrooms, Playing field

Other Tangibles Signs, Tickets, Program, Uniforms, Website

It is apparent that some services like hospitals, resorts, and child care communicate heavily through physical

evidence while others like insurance and courier services provide limited physical evidence. All of the

elements of evidence listed above for each service communicate something about the service to consumers

and facilitate performance of the service. Consumer researchers have shown that servicescapes can influence

customer choices, expectations, satisfaction, and other behaviours.

Organisations differ in terms of whom the servicescape will actually affect. That is who actually comes into

the service facility and thus is potentially influenced by its design – customers, employees, or both groups?

There are three types of service organisations that differ on this dimension. At one extreme is the self-service

(customer only) environment, where the customer performs most of the activities and few, if any, employees

are involved. Examples of self-service environments include ATMs, movie theatres, express mail drop off

facilities, self-service entertainment such as golf clubs, and online internet services.

At the other extreme of the use dimension is the remote-service (employee only) environment, where there is

little or no customer involvement with the servicescape. Telecommunications, utilities, financial consultants,

editorial, and mail-order services are examples of services that can be provided without the customer ever

seeing the service facility.

Interpersonal services (both customer and employee) environment are placed between the two extremes

and represent situations where both the customer and the employee must be present in the servicescape.

Hotels, restaurants, hospitals, educational settings and banks fall under this category.


Environmental dimensions of the physical surroundings can include all of the objective physical factors that

can be controlled by the firm to enhance or constrain employee and customer actions. There is an endless list

of possibilities – lighting, colour, signage, textures, quality of materials, style of furnishings, layout, wall

décor, temperature, and so on. The hundreds of potential elements may be categorised into three composite

dimensions: ambient conditions, spatial layout and functionality, and signs, symbols and artefacts.

Ambient conditions: temperature, lighting, noise, music, scent, and colour

Spatial layout and functionality: Spatial layout refers to the ways in which machinery, equipment and

furnishings are arranged. Functionality refers to the ability of the same items to facilitate the accomplishment

of customer and employee goals.

Signs, symbols and artefacts: Signs can be used as labels, for directional purposes, & to communicate rules

of behaviour. Symbols and artefacts may include quality materials used in construction, artwork, presence of

certificates and photographs on walls, floor coverings, and personal objects displayed in the environment.

Flower of Services

The Core Service is surrounded by different supplementary services. When these supplementary services are

properly carried out, the core service is automatically fulfilled. The supplementary services can be either

essential or facilitating or optional or enhancing in nature.

Facilitating supplementary services: Information, Order taking, Billing, and Payment.

Enhancing supplementary services: Consultation, Hospitality, Safekeeping, and Exceptions

The concept of flower of services can be applied to different service sectors.

CORE

Informatio

n

Consultation

Order taking

Safekeepin

g

Exceptions

Payment

Hospitality

Billing

The Flower of

Services

CORE Food and Beverages

Information

Reservation

Menu prices

Rreminders

Consultation

Customised

advice

Menu

suggestions

Order taking

Table

reservation

Ordering

menu

Safekeeping

Coat room

Valet

parking

Exceptions

Complaints

Suggestions

Payment

Cash

Credit card

cheque

Hospitality

Waiting

area

Free

Beverages

Toilets

Billing

Self billing

Mail billing

The Flower of Services Applied to

Eating in a Restaurant


Service Quality Dimensions and its Measurement

Customers do not perceive quality in a one-dimensional way, but rather judge quality based on multiple

factors relevant to the context. Specific dimensions of service quality have been identified in the pioneering

research of Parasuraman, Zeithmal, and Berry. Their research identifies five specific dimensions of service

quality that apply across a variety of service contexts. These dimensions represent how consumers organize

information about service quality in their minds.

Reliability: Ability to perform the promised service dependably and accurately.

Responsiveness: Willingness to help customers and provide prompt service.

Assurance: Employee’s knowledge and courtesy and their ability to inspire trust and confidence.

Empathy: Caring, individualized attention given to customers.

Tangibles: Appearance of physical facilities, equipment, personnel, and written materials.

Unlike goods quality, which can be measured objectively by such indicators as durability and number of

defects, service quality is abstract and is best captured by surveys that measure customer evaluations of

service. A sound measure of service quality is necessary for identifying the aspects of service needing

performance improvement, assessing how much improvement is needed on each aspect, and evaluating the

impact of improvement efforts. One of the first measures to be developed specifically to measure service

quality was the SERVQUAL survey.

The SERVQUAL scale is a multidimensional scale developed by Parasuraman, Zeithmal, and Berry to

capture customers’ perception and expectations of service quality. The scale involves a survey containing 21

perception items or service attributes, grouped into the five service quality dimensions of reliability,

responsiveness, assurance, empathy, and tangibles. The survey often asks customers to provide two different

ratings on each attribute – one reflecting the level of service they would expect from excellent companies in a

sector and the other reflecting their perception of the service delivered by a specific company within that

sector. The difference between the expectation and perception ratings constitutes a quantified measure of

service quality.

Gaps Model of Service Quality

The gaps model of service quality helps us to view services in a structured and integrated way. It positions the

key concepts, strategies and decisions in services’ marketing in a manner that begins with the customer and

builds the organisation’s tasks around what is needed to close the gap between customer expectations and

perceptions. The following diagram depicts the four provider gaps along with the customer gap. The model is

therefore known as the integrated gap model of service quality. The model serves as a frame work for service

organizations attempting to improve the quality of service.

Customer Gap:

identical – customers perceive that they get what they think they will get. The sources of customer

expectations consists of marketer controlled factors, such as advertisements as well as other factors such as

personal needs of customers. Customer gap is the gap between the customers perceived level of service and

expected level of service.

Customer expectations

Customer perceptions

Customer Gap

The central focus of the gaps model is the difference between customer

expectations and perceptions – the customer gap. Firms need to close this

gap – between what customers expect and receive – in order to satisfy their

customers and build long-term relationships with them.

Customer perceptions are subjective assessments of actual service

experiences, where as customer expectations are reference points of

comparing service performances. Ideally expectations & perceptions are

identical


Provider Gaps:

The gap model mentions four other gaps – the provider gaps – as the reasons for the customer gap and

suggests that in order to minimise/close this all important customer gap, the provider gaps need to be closed.

• Not knowing what customers expect – GAP I

• Not selecting the right service design & standards – GAP II

• Not delivering to service standards – GAP III

• Not matching performance to promises – GAP IV

Customer expectations

Company perceptions of

customer expectations

Gap 1

Customer-driven service

designs and standards

Management perceptions

of customer expectations

Gap 2

Service delivery

Customer-driven service


Gap 3

Service delivery

External communications

to customers

Gap 4

Factors leading to Gap-I:

Inadequate marketing research orientation

Lack of upward communication

Insufficient relationship focus

Inadequate service recovery

Factors leading to Gap-II:

Poor service design

Absence of customer-defined standards

Inappropriate physical evidence and servicescape

Factors leading to Gap-III:

Deficiencies in HR policies

Failure to match supply and demand

Customers not fulfilling their roles

Problems with service intermediaries

Factors leading to Gap-IV:

Lack of integrated services marketing communications

Ineffective management of customer expectations

Over promising

Inadequate horizontal communications

CUSTOMER

Customer

Gap

Gap 1 Gap 4

Gap 3

Gap 2

External

communications to

customers Customer-driven service


Expected service

Company perceptions of

consumer expectations

COMPANY

Perceived service

Service delivery

Gaps Model of Service Quality


Service Expectations and Zone of Tolerance Expectations are reference points against which service delivery is compared. Let’s imagine that you are planning to go to a

restaurant. The following figure shows a continuum along which different possible types of service expectations can be arrayed

from low to high.

On the left of the continuum are different types or levels of expectations ranging from high to low. At each

point a name has been given to the type of expectation and it has been shown what it might mean in terms of a

restaurant you are considering. Note how important the expectation you held will be to your eventual

assessment of the restaurant’s performance.

Zone of Tolerance

Customers hold different types of expectations about service. The highest can be termed ‘desired service’: the

level of service the customer hopes to receive – the wished for level of performance. Desired service is a

blend of what the customer believes ‘can be’ and ‘should be’. You will, very soon, engage the services of

your college’s placement office. You would expect that the office would find you a job – the right job in the

right place for the right salary – because that is what you hope and wish for. However you also see that the

economy may constrain the availability of ideal job openings in companies. And not all companies you may

be interested in have a relationship with your placement office. In this situation and in general, customers

hope to achieve their service desires but recognize that this is not always possible. This threshold level of

acceptable service is called ‘adequate service’: the level of service the customer will accept. The following

figure shows these two expectation standards – desired service and adequate service – as the upper and lower

boundaries for customer expectations. The figure portrays the idea that customer assess service performance

on

higher than the zone of tolerance at the top end – where performance exceeds desired service – customers will

be delighted. The zone of tolerance is the range in which customers do not particularly notice service

performance. When it falls outside the range – either very low or very high – the service gets the customer’s

attention in either a positive or negative way. Consider the service at a checkout line in a grocery store. Most

customers hold a range of acceptable times for this service encounter – say, 5-10 minutes. If service consumes

that period of time, customers probably do not pay much attention to the wait. If a customer enters the line

and finds sufficient checkout personnel to serve him in the first two minutes, he may notice the service and

judge it as excellent. On the other hand, if a customer has to wait in line for 15 minutes, he may begin to

grumble and look at his watch. The longer the wait is below the zone of tolerance, the frustrated he becomes.

This tolerance zone can be different for different customers. As a matter of fact, this zone can expand and

contract within the same customer as well. An airline customer’s zone of tolerance will narrow when she is

running late and is concerned about making to the plane. A minute seems longer and her adequate service

levels increases. But, the same customer, if she arrives at the airport early may have a larger tolerance zone.

The marketer must understand not just the size and boundary levels for the zone of tolerance but also when

and how the tolerance zone fluctuates with a given customer.

Ideal expectations or

desire

Normative “should”

expectations

Minimum tolerable

expectations

Experience-based

norms

Acceptable

expectations

High

Low

Everyone says this restaurant is as good as one in Europe and I want

to go somewhere very special for my anniversary.

As expensive as this restaurant is, it ought to have excellent food and

service.

Most times this restaurant is very good, but when it gets busy the

service is slow.

I expect this restaurant to serve me in an adequate manner.

I expect terrible service from this restaurant but come because the

price is low.

on the basis of two standard boundaries: what they desire and what they deem

acceptable. Since services are heterogeneous, their performance may vary across

providers, across employees from the same provider, and even with the same

service employee. The extent to which customers are willing to accept this

variation is called the ‘zone of tolerance’. If service drops below adequate service

– the minimum level considered acceptable – customers will be frustrated and

their satisfaction with the company will be undermined. If service performance is

higher

Zone of

Tolerance

Adequate Service

Desired Service

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