Seventh Edition

SERVICES MARKETING

PEOPLE, TECHNOLOGY, STRATEGY

Global Edition

Christopher Lovelock

Yale University Jochen Wirtz

National University of Singapore

Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto

Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo

CONTENTS

Preface 17

Part I Understanding Service Products, Consumers, and Markets 24

Chapter 1 New Perspectives on Marketing in the Service Economy 26

Why Study Services? 27

What Are the Principal Industries of the Service Sector? 30

Powerful Forces Are Transforming Service Markets 32

What Are Services? 32

Four Broad Categories of Services—A Process Perspective 40

Services Pose Distinct Marketing Challenges 43

The Traditional Marketing Mix Applied to Services 44

The Extended Services Marketing Mix for Managing the Customer Interface 47

Marketing Must Be Integrated with Other Management Functions 49

A Framework for Developing Effective Service Marketing Strategies 50

Chapter 2 Consumer Behavior in a Services Context 57 The Three-Stage Model of Service Consumption 58

Prepurchase Stage 59

Service Encounter Stage 67

Postencounter Stage 74

Chapter 3 Positioning Services in Competitive Markets 81

What Is Required for Positioning Services Effectively? 83

Achieve Competitive Advantage Through Focus 83

Market Segmentation Forms the Basis for Focused Strategies 86

Service Attributes and Levels 88

Positioning Distinguishes a Brand from Its Competitors 90

Developing an Effective Positioning Strategy 90

Using Positioning Maps to Plot Competitive Strategy 94

Changing Competitive Positioning 98

13

Part II Applying the 4 Ps of Market ing t o Services 102

Chapter 4 Developing Service Products: Core and Supplementary Elements 104

Planning and Creating Service Products 105

The Flower of Services 108

Branding Service Products and Experiences 117

New Service Development 122

Chapter 5 Distributing Services Through Physical and Electronic Channels 131

Distribution in a Services Context 132

Distribution Options for Servicing Customers: Determining the Type of Contact 133

Place and Time Decisions 137

Delivering Services in Cyberspace 139

The Role of Intermediaries 143

The Challenge of Distribution in Large Domestic Markets 145

Distributing Services Internationally 146

Chapter 6 Setting Prices and Implementing Revenue Management 157

Effective Pricing Is Central to Financial Success 158

Pricing Strategy Stands on Three Foundations 160

Revenue Management: What It Is and How It Works 167

Ethical Concerns in Service Pricing 171

Putting Service Pricing into Practice 177

Promoting Services and Educating Customers 185 The Role of Marketing Communications 186

Challenges of Services Communications 190

Marketing Communications Planning 191

The Marketing Communications Mix 195

The Role of Corporate Design 209

Integrating Marketing Communications 211

Part III Managing the Customer Interface 216

Chapter 8 Designing and Managing Service Processes 218 Flowcharting Customer Service Processes 219

Blueprinting Services to Create Valued Experiences and Productive Operations 222

Service Process Redesign 233

Chapter 7

Contents 15

The Customer as Co-Producer 236

Self-Service Technologies 240

Chapter 9 Balancing Demand and Productive Capacity 249 Fluctuations in Demand Threaten Profitability 250

Managing Capacity 253

Analyze Patterns of Demand 254

Managing Demand 256

Inventory Demand Through Waiting Lines and Queuing Systems 260

Customer Perceptions of Waiting Time 265

Inventory Demand Through Reservations Systems 267

Chapter 10 Crafting the Service Environment 275 What Is the Purpose of Service Environments? 276

The Theory Behind Consumer Responses to Service Environments 280

Dimensions of the Service Environment 284

Putting It All Together 291

Chapter 11 Managing People for Service Advantage 300 Service Employees Are Crucially Important 302

Frontline Work Is Difficult and Stressful 304

Cycles of Failure, Mediocrity, and Success 307

Human Resources Management—How to Get It Right 312

Service Leadership and Culture 325

Part IV Implement ing Profitable Service Strategies 334

Chapter 12 Managing Relationships and Building Loyalty 336

The Search for Customer Loyalty 338

Understanding the Customer-Firm Relationship 342

The Wheel of Loyalty 345

Building a Foundation for Loyalty 346

Strategies for Developing Loyalty Bonds with Customers 353

Strategies for Reducing Customer Defections 358

CRM: Customer Relationship Management 361

Chapter 13 Complaint Handling and Service Recovery 371 Customer Complaining Behavior 372

Customer Responses to Effective Service Recovery 376

Principles of Effective Service Recovery Systems 377

Service Guarantees 381

Discouraging Abuse and Opportunistic Customer Behavior 387

Chapter 14 Improving Service Quality and Productivity 401 Integrating Service Quality and Productivity Strategies 403

What Is Service Quality? 405

Identifying and Correcting Service Quality Problems 406

Measuring and Improving Service Quality 408

Learning from Customer Feedback 409

Hard Measures of Service Quality 416

Tools to Analyze and Address Service Quality Problems 418

Defining and Measuring Productivity 422

Improving Service Productivity 423

Chapter 15 Striving for Service Leadership 438 The Service-Profit Chain 439

Integrating Marketing, Operations, and Human Resources 441

Creating a Leading Service Organization 444

In Search of Human Leadership 449

Cases

Case 1 Sullivan Ford Auto World 462

Case 2 Four Customers in Search of Solutions 468

Case 3 Dr. Beckett's Dental Office 470

Case 4 Banyan Tree Hotels & Resorts 475

Case 5 Giordano: Positioning for International Expansion 485

Case 6 Distribution at American Airlines 497

Case 7 The Accra Beach Hotel: Block Booking of Capacity During a Peak Period 506

Case 8 Revenue Management of Gondolas: Maintaining the Balance Between Tradition and Revenue 512

Case 9 Aussie Pooch Mobile 516

Case 10 Shouldice Hospital Limited (Abridged) 529

Case 11 Red Lobster 541

Case 12 Menton Bank 543

Case 13 Dr. Mahalee Goes to London: Global Client Management 553

Case 14 Hilton HHonors Worldwide: Loyalty Wars 555

Case 15 Massachusetts Audubon Society 569

Case 16 TLContact: CarePages Service (A) 586

Case 17 The Accellion Service Guarantee 599

Case 18 Starbucks: Delivering Customer Service 602

Glossary 618 Credits 625 Name Index 626 Subject Index 638