MARKETING DE SERVIÇOS

1. Understanding Service Products, Consumers and Markets

1) Definition and understanding of a Service

Why services mktg?

• From an industrial economy to a post-industrial one

• Serviced based economy vs industrial and agriculture economy
• Impacting company’s business models
o Companies have changed from manufacturer to a service provider
• Different way to manage a product/service
• Services dominate economy in most nations
• Importance of the service sector in economy is growing quickly:
o Services account for more than 60% of GDP worldwide
o Almost all economies have a substantial service sector
o Most new employments are provided by services
o Strongest growth area for marketing
o Most new jobs are generated by services
▪ Fastest growth expected in knowledge-based industries
▪ Significant training and educational qualifications required, but employees will be
highly compensated
▪ Will service jobs lost to lower-cost countries? Yes, some service jobs can be exported

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Factors Stimulating Transformation of the Service Economy

• Government Policies
o Changes in regulations o New agreement on trade in services
o Privatizations o Ex: EDP
o New rules to protect customers,
employees and the environment
• Social changes
o Rising consumer expectations o Rising consumer ownership of high-
o More affluence tech equipment
o More people less time o Easier access to information
o Increased desire for buying o Immigration
experiences vs things o Growing but aging population
• Business trends
o Emphasis on productivity and cost o Focus on quality and customer
saving satisfaction
o Manufacturers add value through o Growth of franchising
service and sell services o Marketing emphasis by non-profits
o More strategic alliances and o Ex: Century 21
outsourcing
• Advances in IT
o Growth of the internet o Faster, more powerful software
o Greater bandwidth o Digitization of text, graphics, audio,
o Compact mobile equipment video
o Wireless networking o Ex: Amazon
• Globalization
o More companies operating on o “Offshoring” of customer service
transnational basis o Foreign competitors invade
o Increased international travel domestic markets
o International mergers and alliances o Ex: Apple; EasyJet

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 • New markets and • Increase in demand of • More intense
product categories services competition

• Innovation in services/products and delivery systems by better technology

• Customers have more choices and exercise more power

• Success based on:

o Understanding customers and competitors
o Viable business models
o Creation of value for customers and firm

What are Services?

• Economic activities offered by one part to another

• Usually time-based performances are used to bring about desired results in recipients themselves or
in objects or other aspects for which purchasers have responsibility
• In exchange for their money, time and effort, customers expect to obtain value from access to goods,
labour, professional skills, facilities, networks and systems
• Services offer benefits without ownership

Characteristics of Services

• Customers don’t obtain ownership of services

o Customers obtain temporary rentals, hiring of personal, or access to facilities and systems
o Pricing is often based on time
o Customer choice criteria may differ for renting vs purchase may include convenience, quality
of staff
o Don’t have to own people but can hire expertise and labour
o Ex: Hertz
• Service products are ephemeral and can’t be inventoried
o Services performances are ephemeral – transitory, perishable (except some information-based
output that can be recorded in electronic/printed form and re-used many times)
o Balancing demand and supply may be a vital marketing strategy
o Key to profits: target right segments at right times and price
o Need to determine whether benefits are perishable or durable
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 o Ex: Lúcia Piloto
• Intangible elements dominate value creation
o Understand value added by labour and expertise of workers
o Effective HR management is critical to achieve service quality
o Make highly intangible services more “concrete” by creating and communicating physical
images or metaphors and tangible clues
o Ex: McKinsey&Company
• Greater involvement of customers in production process
o Customer involvement includes self-service and cooperation with service personal
o Think of customer behaviour and competence can help or delay productivity, so marketers
need to educate/train customers
o Changing the delivery process may affect the role played by customers
o Design service facilities, equipment and systems with customers in mind: user-friendly,
convenient localizations/schedules
o Ex: médicos
• Other people may form part of product experience
o Achieve competitive advantage buy perceived quality of employees
o Garantir que a visão e os standards do pessoal que tem o contacto direto com os clientes
refletem tanto o mktg como os critérios operacionais
o Recognize that appearance and behaviour of other customers can influence service experience
positively or negatively
o Avoid inappropriate mix of customer segments at the same time
o Manage customer behaviour (costumer is not always right!)
o Ex: Mc Donald’s
• Greater variability in operational inputs and outputs
o Work hard to control quality and achieve consistency
o Seek to improve productivity through standardization, and by training both employees and
customers
o Need to have effective service recovery policies in place because it’s more difficult to shield
customers from service failures
o Ex: TAP
• Many services are difficult for customers to evaluate
o Educate customers to help them make good choices, avoid risk

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 o Tell customers what to expect, what to look for
o Create a trust brand with reputation and ethical behaviour
o Encourage positive word-of-mouth from satisfied customer
o Ex: Selplus
• Time factor is more important – speed may be the key
o Offer convenience of extended service hours up to 24/7
o Understand customers’ time constraints and priorities
o Minimize waiting time
o Look for new ways to compete on speed
o Ex: 3 minutos ou pizza de graça
• Delivery systems include electronic and physical channels

4 extensive categories of service

1. People Processing
Costumers must:
• Physically enter the service factory
• Co-operate actively with the service operation
Managers should:
• Think about the process and output from customer’s perspective
• Identify benefits created and non-financial cost: time, mental and physical effort

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 2. Possession Processing
• Customers are less physically involved compared to people
• Involvement is limited
• Production and consumption are separable
3. Mental Stimulus Processing
• Ethical standards required when customers who depend on such services can potentially be
manipulated by suppliers
• Physical presence of recipients is not required
• Core content of services is information-based (can be “inventoried”)
4. Information Processing (directed at intangible assets)
• Information is the most intangible from of service output
• But may be transformed into enduring forms of service output
• Line between information processing and mental stimulus processing may be blurred

Implications of service processes

1. Seeking efficiency may lower satisfaction

Processes determine how services are created/delivered – process change may affect
customer satisfaction
• Imposing new processes on customers, especially replacing people by machines, may cause
dissatisfaction
• New processes that improve efficiency by cutting costs may hurt service quality
• Customers may need to be educated about new procedures and how to use them
• Best new processes deliver benefits desired by customers
o Faster o More conveniently
o Simpler
2. Designing the service factory
People – processing services require customers to visit the “service factory”, so:
• Think of facility as a “stage” for service performance
• Design process around the customer
• Choose convenient location
• Create pleasing appearance, avoid unwanted noises, smells
• Consider customer needs → info, parking, food, toilets

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3. Evaluating alternative delivery channels
For possession – processing, mental-stimulus processing, or information processing services,
alternatives include:
• Customers come to the service factory
• Customers come to a retail office
• Service employees visit customers’ home or workplace
• Business is conducted at arm’s length through:
o Physical channels (ex: mail)
o Electronic channels (phone, fax, email)
4. Balancing demand and capacity
When capacity to serve is limited and demand varies widely, problems arise because service
output can’t be stored:
• If demand is high and exceeds supply, business may be lost
• If demand is low, productive capacity is wasted
• Potential solutions
o Manage demand
o Manage capacity
5. Applying information technology
All services can benefit from IT, but mental-stimulus processing and information-processing
services have the most to gain:
• Remote delivery of information-based services “anywhere, anytime”
• New service features through websites, email and internet (ex: information, reservations)
• More opportunities for self-service
• New types of service
6. Including people as part of the product
Involvement in service delivery often entails contact with other people
• Managers should be concerned about employees’ appearance, social skills and technical skills
• Other customers may enhance or detract from service experience – need to manage customer
behaviour

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The Service Marketing-Mix

• Challenges for service companies

o For sales and margin. How can we decompose this equation?
o

o How can I develop my business? How can I increase my sales? What about my market share?
• Dual perspective
o Service provider
o Current and potential clients
• 7 P’s
1. Product elements
All aspects of service performance that create value
• Core product features – both tangible and intangible elements
• Additional supplementary service elements
• Performance levels relative to competition
• Benefits delivered to customers
o Customers buy experiences not products
• Guarantees
2. Place and time
Delivery decisions: Where, when, how
• Geographic locations served
• Service schedules
• Physical vs electronic channels
• Customer control and convenience
• Channel partners/intermediaries

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3. Promotion and education
Informing, educating, persuading and reminding customers
• Marketing communication tools
o Media elements (like outdoors, broadcasts)
o Personal selling, customer service
o Sales promotion
o Advertising/PR
• Image and recognition
o Corporate design
o Design touch points
• Content
o Information, advise
o Persuasive messages
o Customer education/training
4. Price and other user outlays
Marketeers must recognize that customer outlays involve more than the price paid to seller
• Traditional pricing tasks
o Selling price, discounts, premiums
o Margins for intermediaries (if any)
o Credit terms
• Identify and minimize other costs incurred by users
o Additional monetary costs associated with service usage (like parking, phone)
o Time expenditures, especially waiting
o Unwanted mental and physical effort
o Negative sensory experiences
5. Physical environment
Designing the servicescape and providing tangible evidence of service performance
• Create and maintaining physical appearances
o Buildings/landscaping
o Interior design/furnishings
o Vehicles/equipment
o Staff grooming/clothing
o Sounds and smells

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 o Other tangibles
• Select tangible metaphors for use in marketing communications
6. Process
Method and sequence in service creation and delivery
• Design of activity flows
• Managing demand and capacity
• Number and sequence of actions for customers
• Providers of value chain components
• Nature of customers involvement
• Role of contact personnel
• Role of technology, degree of automation
• Ex: Self Mc Donald’s machines to order food
7. People
Managing the human side of the enterprise to delivery service quality and productivity
• The right customer-contact employees performing tasks well
o Job design o Motivation
o Recruiting/selection o Evaluation/rewards
o Training o Empowerment/teamwork
• The right customers for the right firms’ mission
o Fit well with products/processes/corporate goals
o Appreciate benefits and value offered
o Possess (or educate to have) needed skills (co-production)
o Firm is able to manage customer behaviour

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 2) Consumer needs and behaviour in Services

Three-Stage Model of service consumption

Pre-Purchase Stage → Service Encounter Stage → Post-Encounter Stage

Pre-Purchase Stage: Overview

• Customers seek solutions to needs or problems

o Decision to buy or use a service is triggered by need stimulation
o Triggers of need:
▪ Unconscious minds (ex: personal identify and aspirations – bad hair day → going to the
hairdresser)
▪ Physical conditions (ex: hunger)
▪ External sources (ex: service firm’s marketing activities)
o Consumers are then motivated to find a solution for their need → need information
o Customer decision making: information search
▪ Attempts to find a solution
− Evoked set – a set of products and brands that a consumer considers during the
decision-making process – that is derived from past experiences or external
sources
− Alternatives then need to be evaluated before a final decision is made →
evaluating alternatives
• Evaluating a service may be difficult
o Customer decision making: evaluating alternatives – services attributes
▪ Search which attributes are tangible characteristics that customers evaluate before
purchase
− Search which attributes are found in many service environments
− Ex: you can assess to some attributes before you visit a restaurant including the
type of food, location, type of restaurant and price
▪ Experience attributes can’t be evaluated before purchase
− Costumers must experience the service to know what they are getting. The
consumer won’t know how much he will enjoy the food, service and
atmosphere until the actual experience
− Ex: vacations, concerts
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 ▪ Credence attributes are those that customers find hard to evaluate confidently even
after buying and consuming
− Ex: hygienic conditions of the kitchen and the healthiness of the cooking
ingredients
• Uncertainty about outcomes increases perceived risk
o Functional – unsatisfactory performance outcomes
o Financial – monetary loss, unexpected extra costs
o Temporal – wasted times, delays leading to problems
o Physical – personal injury, damage to possessions
o Psychological – fears and negative emotions
o Social – how others may think and react
o Sensory – unwanted impact on any of five senses
• What risk reduction strategies can service suppliers develop?
o How consumers deal with risk
▪ Seek information from respected personal sources
− Compare service offerings and search for independent reviews and ratings via
Internet
− Relying on a firm with good reputation
− Looking for guarantees and warranties
− Visiting service facilities or going for trials before purchase and examining
tangible cues or other physical evidence
− Asking knowledgeable employees about competing services
o Strategic responses for managing customer perceptions of risk
▪ Free trial for services with high experience attributes
▪ Advertise helps to visualize
▪ Display credentials
▪ Use evidence management, like furnishing, equipment
▪ Offer guarantees
▪ Encourage a visit to the service facilities
▪ Give customers online access about order status
• Understanding customers’ expectations
o Customers evaluate service quality by comparing what they expect against what they perceive
o Situational and personal factors must be also considered

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 o Expectations change over time
• Components of customer expectations
I. Desired service level
• Wished-for level of service quality that customer believes can and should be delivered
II. Predicted service level
• Service level that customer believes firm will actually deliver
III. Adequate service level
• Minimum acceptable level of service
IV. Zone of tolerance
• Acceptable range of variations in service delivery

• Making a service purchase decision

o Purchase decision
▪ Possible alternatives are compared and evaluated, whereby the best option is selected
▪ Simple if perceived risks are low and alternatives are clear
▪ Complex when trade-offs increase
− Trade-off: várias alternativas, vou optar por uma que me dê mais vantagens
numa área, contudo, é impossível satisfazer em todos os aspetos por isso ganho
numas coisas perco noutras
o Trade-offs are often involved
o After deciding, the consumer moves into the service encounter stage

Service Encounter Stage: Overview

• Models and frameworks:

▪ Moments of truth – importance of managing touch points
▪ High/low contact model – extent and nature of contact points
▪ Servuction model – variations of interactions
▪ Theatre metaphor – staging service performances
• Service encounters range from high to low contact

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 o Service encounter – a period of time during which a customer interacts with the service
provider
o Might be brief or extend over a period of time
o Ex: phone call or visit to the hospital
o Moments of truth
▪ When the service provider and the service customer confront one another in the arena
▪ It’s the skill, the motivation, and the tools employed by the firms’ representative and
the expectations and behaviour of the client which together will create the service
delivery process
▪ Ex: SAS airline (most poorly rated airlines in Europe in 1981), where the new director
implemented new ways of managing the interactions between SAS employees and
customers
• Understanding the servuction system
o Servuction system: close involvement of customers in the service production and experience
o Service operations (front stage and backstage)
▪ Where inputs are processed, and service elements created
▪ Includes facilities, equipment and personnel
o Service delivery (front stage)
▪ Where final assembly of service elements takes place and service is delivered to
customers
▪ Includes customer interactions with operations and other customers
o Service marketing (front stage)
▪ Includes service delivery (as above) and all other contacts between service firm and
customers

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• Service mktg systems: high to low contact
o High contact services

▪ Customers visit service facility and remain throughout service delivery

▪ Active contact between customers and service personnel
▪ Includes most people processing services
o Low contact services

▪ Little or no physical contact with service personnel

▪ Contact usually at arm’s length through electronic or physical distribution channels
▪ New technologies help reduce contact

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 • Role and script theories
• Theatre as a metaphor for service delivery: an integrative perspective
• Implications for customer participation in service creation and delivery

Post-Encounter Stage: Overview

• Evaluation of service performance

• Future intentions
• Customer satisfaction is central to the marketing concept
o Satisfaction defined as attitude – like judgment following a service purchase or series of service
interactions
o Customers have expectations before consuming, observe service performance and compare it
to those expectations
o Satisfaction judgments are based on this comparison
▪ Positive disconfirmation if better than expected
▪ Confirmation if same as expected
▪ Negative disconfirmation if worse than expected
o Satisfaction reflects perceived service quality, price/quality trade-offs, personal and situational
factors
o Research shows links between customers satisfaction and a firms’ financial performance
• Costumer delight → going beyond satisfaction
o Researches show that delight is a function of 3 components
▪ Unexpectedly high levels of performance
▪ Arousal (ex: surprise, excitement)
▪ Positive affect (ex: pleasure, joy or happiness)
o Is it possible for customers to be delighted by very ordinary services?
o Strategic links exist between customer satisfaction and corporate performance
o Getting feedback during service delivery helps to boost customer loyalty
o Progressive insurance seeks to delight customers through exceptional customer service

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 3) Positioning the value proposition in Service

6 questions for effective positioning strategy

1. What customer do we serve now, and in which do we like to target in the future?
2. What does our firm currently stand for in the minds of current and potential customers?
3. What is the value proposition for each of our current service products, and what market segments is
each one targeted at?
4. How well do customers in chosen target segments perceive our services products as meeting their
needs comparing to competitors?
5. What changes must we make to our offerings to strengthen our competitive advantages?
6. Avoid trap of investing too heavily in points of differences that are easily copied

Market, internal and competitive analyses

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STP positioning service in competitive markets

• Steps to develop an effective positioning strategy

1. Segmentation: “divide the population of possible customers into groups”
Division of the market
o Customers within same segment share common needs
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o Demographic, psychographic and behaviour variables
Important vs determinant attributes
o Important: important to consumer but not for buying decisions
o Determinant: often down on the list of service characteristics important to consumers but on
which customers see relevant differences between competing alternatives
Ex: Air companies → safety (important) convenience, loyalty programmes, price (determinant)

Service attributes and levels

o Use research to identify and prioritize which attributes of given service are important to a
specific market segment
o Individuals may set different priorities according to
▪ Purpose of using service
▪ Who makes decisions
▪ Whether a service is used alone or in groups
▪ Composition of the group
Service levels can be defined → used by companies to differentiate customers segments
according willingness to trade off price and service level
o Consumers usually choose between alternative service offerings based on perceived
differences between them
o Attributes that distinguish competing services from one to another are not necessarily the most
important ones
o Determinant attributes determine buyers’ choices between competing competitive
alternatives
▪ Service characteristics that are important to purchasers
▪ Customers see significant differences between competitive alternatives on those
attributes
o Ex: EasyJet vs TAP

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 Market segmentations forms the basis for focused strategies
o Firms contrast widely in ability to serve different types of customers
o Adopt strategies of market segmentation, by identifying which parts of the market can serve
the best
o A market segment is composed of a group of buyers sharing common:
▪ Characteristics
▪ Needs
▪ Purchasing behaviour
▪ Consumption patterns
▪ Inside segments, they are as similar as possible. Between segments, they are as dissimilar
as possible
2. Targeting segment: “once firms’ customers are segmented, evaluate and decide which segments
would most likely to be interested in its services and focus how to serve them well”
Target segments
o A target segment is one that a firm has selected from among those in the broader market and
may be defined because of multiple variables
o Must analyse market to determine which segments offer better opportunities
o Target segments should be selected with reference to
▪ Firms ability to match or exceed competitive offers directed at the same segment
▪ Not just sales potential
o Some “underserved” segments can be huge, especially poor consumers in emerging
economies, ex, low-income group in emergent countries
Targeting – Four focus strategies
o The focus means that firms should not try to appeal to all potential buyers in a market
o Customers have varied needs, purchasing behaviours and consumption patterns
o Different service firms also have different abilities to serve different types of customers. Later
rather than trying to compete in an entire market, each company needs to focus its efforts on
those customers that can serve them the best

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• Fully focused
o Limited range of services to narrow and specific market
o Opportunities
▪ Developing recognized expertise in a well-defined niche may provide protection against
would-be competitors
▪ Allows firms to charge premium prices
o Risks
▪ Market may be too small to generate needed volume of business
▪ Demand for a service may be displaced by generic competition from alternative products
▪ Purchasers in chosen segments may be susceptible to economic downturn
− Ex: Private jets charters services; Heart-specialized hospitals
• Market focused
o Narrow market segment with wide range of services
o Need to make sure firms have operational capability to deliver each of the different services
selected
o Need to understand customer purchasing practices and preferences
• Service focused
o Narrow range of services to fairly broad market
o As new segments are added, firm needs to develop knowledge and skills in serving each segme
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 • Unfocused
o Broad markets with wide range of services
o Many service providers fall into this category
o Danger – become a “jack of all trades and master of none”
3. Positioning: “the unique place that the firm and/or its services offerings occupy in mind of its
consumers. Before it, the firm must differentiate its services from their competitors”
Developing an effective positioning strategy (STP)
• Must establish position for firm or product in the mind of target customers
• Position should provide one simple and consistent message
• Position must set firm/product apart from competitors
• A company can’t be all things to all people – must focus its efforts
• Positioning links market analysis and competitive analysis to internal corporate analysis
• Market analysis
o Focus on overall level and trend of demand and geographic locations of demand
o Look into size and potential of different market segments
o Understand customer needs and preferences and how they perceive the competition
• Internal corporate analysis
o Identify organizations resources, limitations, goals and values
o Select limited number of target segments to serve
• Competitor analysis
o Understand competitors’ strengths and weaknesses
o Anticipate responses to potential positioning strategies
Using positioning maps to analyse competitive strategy
• Great tool to visualize competitive positioning and map developments of time
• Useful way to represent consumer perceptions of alternative products graphically
• Typically confined to two attributes, but 3D models can be used to portray positions on three
attributes simultaneously
• Also known as perceptual maps (built on preference maps)
• Information about a product can be obtained from market data, derived from ratings by
representative consumers or both

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Positioning maps help managers to visualize strategy
• Positioning maps display relative performance of competing firms on key attributes
• Research provides inputs to development of positioning maps – challenge is to ensure that
o Attributes employed in maps are important to target segments
o Performance of individual firms on each attribute accurately reflects perceptions of customers
in target segments
• Predictions can be made of how positions may change considering future developments
• Simple graphic representations are often easier for managers to grasp than tables of data or
paragraphs of prose
• Charts and maps can facilitate “visual awakening” to threats and opportunities, suggest alternative
strategic directions

Summary
• Positioning distinguishes a brand from its competitors
• Positioning links market analysis and competitive analysis to internal corporate analysis
• To develop a marketing positioning strategy, we need
o Market analysis
o Internal analysis
o Competitive analysis
• Positioning maps are useful for plotting competitive strategy
o Mapping future scenarios help identify potential competitive responses
o Positioning charts help visualization of strategy

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2. Adaptation of the 4 P’s to the marketing mix considering the characteristics of the services which is different
from goods
1) Product elements such as core and supplementary elements

Designing a service product

• A service product comprises all elements of service performance, both tangible and intangible, that
create value for customers
• The service concept is represented by
o A core product
▪ Central component that supplies the principal problem-solving benefits customers seek
▪ Based on the core set of benefits and solutions delivered to consumers
▪ Usually defined with reference to a particular industry like in healthcare the core
product may be restoration of the body back to an optimum condition
o Accompanied by supplementary services
▪ Expand the core product, facilitating its use and enhancing its value and appeal
o Delivery processes
▪ Used to deliver both the core product and each of the supplementary services
• Service concept design must address the following issues
o How the different service components are delivered to the customer
o The nature of the customer role in the processes
o How long delivery lasts
o The recommended level and style of service to be offered

The flower of service – supplementary services

• There are 8 categories of supplementary services forming the so-called Flower of Service

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• There are two kinds of supplementary services
o Facilitating supplementary services – either needed for service delivery, or help in the use of
the core product
▪ Information
− customers often require information about how to obtain and use a product or
service
− traditional ways of providing information to customers include using front-line
employees, printed notices, brochures and instruction books
▪ Order-taking
− customers need to know what is available and may want to secure commitment
to delivery. The process should be fast and smooth
− includes applications, order entry and reservations or check-ins
− banks, insurance companies, utilities and universities usually require potential
customers to go through and application process
▪ Billing
− bill should be clear accurate and intelligible
− periodic statements of account activity
− invoices for individual transactions
− verbal statements of amount due
− self-billing
− machine display of amount due
▪ Payment
− customers may pay faster and more cheerfully if you make transactions simple
and convenient for them
− self-service, direct to pays or intermediary or automatic deduction from
financial deposits
o Enhancing supplementary services – add extra value for the customer
▪ Consultation
− value can be added to goods and services by offering advice and consultation
tailored to each customer needs and situation
− customized advice, personal counselling, training in products use or
management or technical consulting

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 ▪ Hospitality
− customers who invest time and effort in visiting a business and using its services
deserve to be treated as welcome guests
− should reflect pleasure at meeting new customers and greeting old ones when
they return
− well managed business try to ensure that their employees treat consumers as
guests
▪ Safekeeping
− customers prefer not to worry about looking after the personal possessions that
they bring with them to a service site
− caring for possessions customer brings with them
− caring for good purchased or rented by customers
▪ Exceptions
− customers appreciate some flexibility when they make special requests and
expect responsiveness when things don’t go according to plan
− special requests in advance of service delivery
− handing special communications
− problem-solving
− restitution
• In a well-designed and well-managed service organization the petals and core are fresh and well-
formed
• Market positioning strategy helps to determine which supplementary services should be included
• Branding services, products and experiences
o Most service organizations offer a line of products rather than just a single product
o They may choose among 4 broad alternatives to branding a service
1. Branded house – single brand to cover all products and services
2. Sub-brands – corporate reference, but with different service names
3. Endorsed brands – products names dominate
4. House of brands – separate, stand-alone brand for each offering
o Tiering services products with branding
▪ Branding used not only to differentiate core services but also to clearly differentiate
services levels

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 o Building brand equity and developing branded experience
▪ Branding can be used at both company and product levels
▪ Corporate brand´
− Easily recognized
− Holds meaning to customers
− Stands for a particular way of doing business
▪ Product brand
− Helps firms establish mental pictures of service in consumers’ minds
− Helps clarify value proposition

• New service development to maintain competitive edge

o Style changes
o Service improvements
o Supplementary service innovations
o Process line extensions
o Product line extensions
o Major process innovations
o Major service innovations

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2) Place and time elements refer to the delivery of the product elements to the consumers

Distributing service through physical and electronic channels

• In a service context, we often move nothing

• Experiences, performances and solutions are not being physically shipped and stored
• More and more information transactions are conducted through electronic and not physical channels
• What? How? Where? When?

Determining type of contact: options for service delivery

• What – flower model

o Information and promotions
▪ Petals: information/consultation
o Negotiation flow
▪ Petals: order taken/billing/payment
o Product flow
▪ Other petals and core
▪ Less propensions to electronic service
• How
distribution options for serving customers
o Customers visit service site
▪ Convenience of service factory locations and operational schedules important when
customer must be physically present
o Service providers go to customers
▪ Unavoidable when object of service is immovable
▪ Needed for remote areas
▪ Greater probability of visiting corporate customers than individuals
o Service transaction is conducted remotely
▪ Achieved with help of logistics and telecommunications
o Can a service provider add or change the service outlet structure to increase sales/add
convenience?
Customer preferences
o For complex and high-perceived risk services, people tend on personal channels
o Individuals with greater confidence and knowledge about a service/channel tend to use
impersonal and self-service channels

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 ▪ Customers who are more technology oriented
o Customers with social motives tend to use personal channels
o Convenience is a key driver of channel choice
• Where – distribution options for serving customers
o Cost, productivity and access to labour are key determinants to locating a service facility
o Locational constraints
▪ Operational requirements (airports)
▪ Geographic factors (beaches)
▪ Need for economies of scale (hospitals)
o Mini-stores
▪ Creating many small service factories to maximize geographic coverage (multibanco)
▪ Separating front and back stages of operation
▪ Purchasing space from another provider in complementary field (harrods)
o Locating in multipurpose facilities
▪ Proximity to where customers live or work (service stations/galp tangerina)
• When – time service delivery customers
o Traditionally schedules were restricted
▪ Service availability limited to daytime, 40-50 hours a week
o Today
▪ Flexible, responsive service operations, 24/7 service

Delivering services in cyberspace

• Distribution of supplementary services in cyberspace

o Five of the supplementary services are information-based
o Information, consultation, order-taking, billing, payment can all be distributed electronically
o Distribution of information, consulting and order-taking had reach very sophisticated levels in
global service industries such as hotels, airlines, car rental companies
• Service delivery innovations facilitated by technology
o Technological innovations
▪ Development of smart mobile telephones and PDAs and Wi-Fi high-speed internet
technology that links users to internet from almost anywhere
▪ Voice recognition technology
▪ Web sites
▪ Smart cards
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 − Store detailed information about customer
− Act as electronic purse containing digital money
o Electronic channels can be offered together with physical channels or take the place of physical
channels
• e-Commerce: move to cyberspace
o among the factors attracting customers to virtual stores are
▪ Convenience
▪ Ease of search
▪ Broader selection
▪ Potential for better prices
▪ 24-hour service with quick delivery
o Recent developments link websites customer management (CRM) systems and mobile
telephony
o Integrating mobile devices into the service delivery infrastructure can be used as means to
▪ Access services
▪ Alert customers to opportunities/problems
▪ Update information in real time

Intermediaries

• Some services firms use intermediaries to distribute some of the supplementary services
o Firms may find it cost effective to outsource certain tasks
o Need to assure a good customer experience
o Franchising (growth) – advantages/disadvantages

Strategy for entering international markets

• Depends
o Control of intellectual property (IP)
o Degree of customer interaction

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3) Price of services

Setting prices and implementing revenue management

Objectives for pricing of services

• Pricing is typically more complex in services than it is in manufacturing

• For physical goods the costs of creating and distributing can be calculated. However, it’s usually harder
for managers to calculate the financial costs of services as costs contrast usually depending on capacity
utilization
• The importance of the time factor in service delivery means that speed of delivery and avoidance of
waiting time often increase value
• By increasing value customers are prepared to pay a higher price for the service
• Revenue and profit objectives
o Gain profit
▪ Make the largest possible contribution or profit
▪ Achieve a specific target level, but don’t seek to maximize profits
▪ Maximize revenue from a fixed capacity by varying prices and target segments over
time. This is done typically using revenue management systems
o Cover costs
▪ Cover fully allocated costs, including corporate overhead
▪ Cover costs of providing one service, excluding overheard
▪ Cover incremental costs of selling one extra unit or to one extra customer
• Building demand and user-based objectives
o Build demand
▪ Demand maximization
▪ Full capacity utilization (full house adds excitement to a theatre play)
o Build a user base
▪ Stimulate trial and adoption of new service
▪ Build market share/large user base (High Fix Cost)

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Pricing tripod

Costs + Competition + Value to customer → Pricing strategy

• 3 main approaches to pricing

1. Cost-based pricing
o Set prices relative to financial costs (problem: defining costs)
o Pricing implications of cost analysis
▪ To make profit a firm must set its price high enough to cover the full costs of producing
and marketing the service
▪ For a service business with high fixed costs (like hospitals) the variable costs of serving
an extra customer may be minimal
▪ Later, firms that compete based on low prices need to have a very good understanding
of their structure and of the sales volume need to break even at prices
2. Value to customer-based pricing
o Value-based pricing understanding net value
▪ Net value = Perceived benefits to customer (gross value) – All perceived outlays
(money, time, mental/physical effort)
▪ Value exchange will not take place unless customer sees positive net value in
transaction
▪ There is a high level of subjectivity
▪ When looking at competing services, customers are mainly comparing relative net
value
▪ Need effective communication and personal explanations to explain value
▪ Reduce related-monetary costs
− Cut time spent searching for purchasing and using service
▪ Reduce non-monetary costs
− Time costs
− Physical costs
− Phycological costs
− Sensory costs
o Approaches to reducing non-monetary and related-monetary costs
▪ Reduce time costs of service at each stage
▪ Minimize unwanted psychological costs of service
▪ Eliminate unwanted physical costs of service
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 ▪ Decrease unpleasant sensory costs of service
3. Competition-based pricing
o Non-price-related costs of using competing alternatives are high
o Personal relationships matter
o Switching costs are high
o Time and location specificity reduce choice
o Managers should not only look at competitor’s prices dollar for dollar, but should examine all
related financial and non-monetary costs

Revenue management: what it is and how it works

Maximize revenue from available capacity at a given time

• Most effective when
o Relatively high fixed capacity
o High fixed cost structure
o Perishable inventory
o Variable and uncertain demand
o Varying customer price sensitivity
• Revenue management is price customization
o Charge different value segments different prices for same product based on price sensitivity
• Revenue management uses mathematical models to examine historical data and real time information
to determine
o What prices to charge within each price bucket
o How many service units to allocate to each bucket
• Rate boundaries discourage customers willing to pay more from trading down to lower prices
(minimize consumer spare)

Price elasticity

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Key categories to rate boundaries: Physical

Key categories to rate boundaries: Non Physical

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 Key categories to rate boundaries: Physical

Ethical concerns in service pricing

• Customers are vulnerable when service is hard to evaluate as they assume that higher price indicates
better quality
• Many services have complex pricing schedules
o Hard to understand
o Difficult to calculate full costs in advance of service
• Quoted prices not the only prices
o Hidden charges o Many kinds of fees

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 • Too many rules and regulations
o Customers feel constrained, exploited
o Customers face unfair fines and penalties

Designing fairness into revenue management

• Design clear, logical and fair price schedules and fences

• Use high published prices and present fences opportunities for discounts rather than quoting lower
prices and using fences as basis to impose surcharges – discount for weekday and not surcharges
weekends
• Communicate consumer benefits of revenue management
• Take care of loyal customers
• Use service recovery to compensate for overbooking

Questions to ask when putting service pricing into practice

• How much to charge?

• What should the specified basis for pricing be?
• Who should collect payment?
• Where should payment be made?
• When should payment be made?
• How should payment be made?
• How should prices be communicated to the right target market?

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4) Promotion and education deals with how firms should tell customers about their services

Specific roles of marketing communications

• Position and differentiate service

• Help customer evaluate offerings and highlight differences that matter
• Promote contribution of personnel and backstage operations
• Add value through communication content
• Facilitate customer involvement in production
• Stimulate or manage demand to match capacity
• Ex: TAP, Fidelidade

Challenges of service communications – Overcoming problems of intangibility

• May be difficult to communicate service benefits to customers, especially when intangible

• Intangibility creates 4 problems:
1. Generality
o Item that comprise a class of objects, persons or events
o A key task of the marketeer is to communicate what makes a specific offering distinctively
different from and better than competing offering
2. Non-searchability
o Cannot be searched or inspected before purchase
3. Abstractness
o No one-to-one correspondence with physical objects
4. Mental impalpability
o Customers find it hard to grasp benefits of complex, multidimensional new offerings
• To overcome intangibility
o Use tangible cues in advertising
o Use metaphors to communicate benefits of service offerings

Marketing communications planning

1. Who is our target audience?

2. What do we need to communicate and achieve?
3. How should we communicate this?
4. Where should we communicate this?
5. When do communications need to take place?

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Target audience: 3 broad categories

1. Prospects candidatos
• Employ traditional communication mix because prospects are known in advance
2. Users
• More cost-effective channels
3. Employees
• Secondary audience for communication campaigns through public media
• Shape employee behaviour
• Part of internal marketing campaign using company-specific channels

Educational and Promotional Objectives in service settings

• Create memorable images of specific companies and their brands

• Built awareness/interest for unfamiliar service/brand
• Compare service favourably with competitors’ offerings
• Built preference by communicating brand strengths and benefits
• Reposition service relative to competition
• Reduce uncertainty/perceived risk by providing useful information and advice
• Provide reassurance, for example promote service guarantees
• Encourage trial by offering promotional incentives
• Familiarize customers with service processes before use
• Teach customers how to use a service to best advantage
• Stimulate demand in off-peak, discourage during peak combater a sazonalidade
• Recognize and reward valued customers and employees

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The marketing communications mix

Sources of messages received by target audience

Messages through marketing channels

1. Advertising
• Traditional channel
• Build awareness, inform, persuade and remind
• Challenge: how to stand out from the crowd?

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 • Effectiveness remains controversial
• Research suggests that less than half of all ads generate a positive return on their investment
2. Public relations
• Public relations/publicity involves efforts to stimulate positive interest in an organization and its
products through third parties, for example, press conferences, new releases
• Corporate PR specialists teach senior manager how to present themselves well at public events,
especially when faced with hostile questioning
• Unusual activities can present and opportunity to promote company’s expertise
3. Direct marketing
• Mailings, recorded telephone messages, faxes, email
• Potential to send personalized messages to highly targeted microsegments
o Need detailed database of information about customers and prospects
• Advanced in on-demand technologies empower consumers to decide how and when they prefer to be
reached, and by whom. For example, email spam filters, pop-up blockers, podcasting
• Permission marketing goal is to persuade customers to volunteer their attention
o Enables firms to build strong relationships with customers
o For example, people invited to register at a firm’s website and specify what type of information
they like to receive via email
4. Sales promotion
• Defined as communication that comes with an incentive
• Should be specific to a time period, price or customer group
• Motivates customers to use a specific service sooner, in greater volume with each purchase, or more
frequently
• Interesting sales promotion can generate attention and put firm in favourable light, especially if
interesting results are published
5. Personal selling
• Interpersonal encounters educate customers and promote preferences for a particular brand or
product
• Common in B2B and infrequently purchased services
• Many B2B firms have dedicated salesforce to do personal selling
o Customer assigned to a designated account manager
• For services that are bought less often, firm’s representative acts as consultant to help buyers to select
• Face-to-face selling of new product is expensive – telemarketing is a lower cost alternative

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6. Trade shows
• Popular in B2B marketplace
• Stimulate extensive media coverage
• Many prospective buyers come to shows
• Opportunity to learn about latest offerings from wide variety of suppliers
• Sales representative who usually reaches four to five potential customer per day may be able to get
five qualified leads per hour at a show
7. Company’s web site
• Web is used for a variety of communication tasks
o Creating consumer awareness and interest
o Providing information and consultation
o Allowing two-way communication with customers through email and chat rooms
o Encouraging product trial
o Allowing customers to place orders
o Measuring effectiveness of advertising or promotional campaigns
• Innovative companies look for ways to improve the appeal and usefulness of their sites
8. Online advertising
• Banner advertising
o Placing advertising banners and buttons on portals such as Google, LinkedIn and other firm’s
websites
o Draw online traffic to the advertiser’s own site
o Web sites often include advertisements of other related, but non-competitive services, por
example, advertisement for financial service providers oh Yahoo’s stock quotes page
• Search engine advertising
o Revers broadcast network: search engines let advertisers know exactly what consumer wants
through their keyword search
o Can target relevant messages directly to desired consumers
o Several advertising options:
▪ Pay for targeted placement of ads to relevant keyword searches
▪ Sponsor a short text message with a click-through link
▪ Buy top rankings in the display of search results

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Moving from impersonal to personal communications

• There used to be a difference between personal and impersonal communication, but technology has
created a grey area between the two
• Direct mail and email can be personalized, electronic recommendation agents can also personalize
communications
• Advances of on-demand technologies, consumers are increasing empowered to decide how and when
they like to be reached

Messages through service delivery

• Customer service employees

o Communication from frontline staff can be the core service or supplementary elements
o New customers in particular need help from service personnel
• Service outlets
o Can be through banners, posters, signage, brochures, video screens, audio
• Self-service delivery points
o Ex: ATMs, vending machines and websites

Messages originating from outside the organization

• Word of Mouth (WOM)

o Recommendations from other customers viewed as more credible
o Strategies to stimulate positive WOM:
▪ Having satisfied customers providing comments
▪ Using other purchasers and knowledgeable individuals as reference
▪ Creating exciting promotions that get people talking
▪ Offering promotions that encourage customers to persuade their friend to purchase
▪ Developing referral incentive schemes
• Social networks – blogs, Facebook, a new type of online WOM
o Becoming increasingly popular
o Communications about customer experiences influence opinions of brands and products
o Some firms have started to monitor blogs as form of market research and feedback
• Media coverage
o Compares, contrasts service offerings from competing organizations
o Advise on “best buys”

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Ethical issues in communications

• Advertising, selling and sales promotions all lend themselves easily to misuse
• Communication messages often include promises about benefits and quality of service delivery.
Customers are sometimes disappointed
• Why were their expectations not met?
o Poor internal communication between operations and marketing personnel concerning level of
service performance
o Over promise to get sales
o Deceptive promotions
• Unwanted intrusion by aggressive marketers into people’s personal lives

The role of corporate design

Strategies for corporate design

• Many service firms employ a unified and distinctive visual appearance for all tangible elements.
Example: logos, uniforms, physical facilities
• Provide recognition and strengthen brand image. Example: BP’s bright green and yellow service
stations
• Especially useful in competitive markets to stand out from the crowd and be instantly recognized in
different locations. Example: McDonald’s logo
• How to stand out and be different?
o Use colours in corporate design
o Use names as central elements in their corporate designs
o Use trademarked symbol rather than name as primary logo
o Create tangible recognizable symbols to connect with corporate brand names

Service Process

Process, delivery service to customers. Sequence of different steps

Flowcharting service delivery

Definition: technique for displaying the nature and sequence oh the different steps in delivery service to
customers

• Flowcharting service delivery helps to clarify product elements

• Offers ways to understand total customer service experience

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• Shows how nature of customer involvement with service organizations varies by type of service
o People processing

o Possession processing

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 o Mental stimulus processing

o Information processing

Blueprinting service to create valued experiences and productive operations

Blueprinting is a key tool that should be used to design new services or redesign existing ones.

• Blueprinting is a more complex form of flowcharting

• A flowchart describes an existing process, usually in a fairly simple from. A blueprint, however,
specifies in more detail how a service process should be constructed.

Developing a blueprint

• Identify key activities in creating and delivering service

• Map customer, employee and service system interactions

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 • Define a “big picture” before “drilling down” to obtain a higher level of detail

Advantages of blueprint

• Distinguish between “frontstage” and “backstage”

• Clarify interactions between customers and staff and support by backstage activities and systems
• Identify potential fail points, take preventive measures, prepare contingency
• Pinpoints stages in the process where customer commonly have to wait

Key components of a service blueprint

1. Define standards for frontstage activities

2. Specify physical evidence
3. Identify main customer actions
4. Line of interaction, customers and frontstage personal
5. Frontstage actions by customer-contact personnel
6. Line of visibility between front and backstage
7. Backstage actions by customer contact personnel
8. Support processes involving other service personnel
9. Support processes involving IT
10. Identify fail points and risks of excessive waits
11. Set service standards and do failure-proofing

Improving reliability of processes by failure proofing

• Identify fail points

• Analysis of reasons for failure often reveals opportunities for failure proofing to reduce/eliminate
future risk of errors
• Need fail-safe methods for both employees and customers
• Focus on preparing the customer for.
o The encounter
o Understanding and anticipating their roles
o Selecting the correct service or transaction

Service process redesign

• Revitalizes process that has become outdated

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 • Changes in external environment make existing practices obsolete and require redesign of underlying
processes
o Creation of a brand-new processes to stay relevant
• Rusting occurs internally
o Natural deterioration of internal processes, creeping bureaucracy, evolution of spurious, unofficial
standards
o Symptoms
▪ Extensive information exchange
▪ Data that is not useful
▪ High ratio of checking or control activities to value – adding activities
▪ Increased exception processing
▪ Customer complaints about inconvenient and unnecessary procedures

Approaches and potential benefits

• Eliminating non-value-adding steps

o Simplify front-end and back-end processes with goal to focusing on benefit-producing part of
service encounter
o Get rid of non-value adding steps
o Improving productivity and customer satisfaction
• Shifting to self-service
o Increase in productivity and service quality
o Lower costs
o Enhance technology reputation
o Differentiates company
• Delivering direct service
o Bring service to customers instead of bringing customers to service firm
o Improve convenience for customers
o Productivity can be improved if companies can eliminate expensive retail locations
o Increase customer base
• Bundling services
o Involves grouping multiple services into one offer, focusing on a well-defined customer group
o Often has a better fit to the needs of target segment
o Increase productivity
o Add value for customer through lower transaction costs
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 o Customize service
o Increase per capita service use
• Redesigning physical aspects of service processes
o Focus on tangible elements of service process, including changes to facilities and equipment to
improve service experience
o Increase convenience
o Enhance the satisfaction and productivity of frontline staff
o Cultivate interest in customers
o Differentiate company

The customer as co-producer – levels of customer participation

Customer participation

• Actions and resources suppled by customers during service production and/or delivery
• Includes mental, physical and even emotional inputs

Levels of customer participation

• Low – employees and system do all the work

o Often involves standardized service
o Ex: MEO
• Medium – customer helps firm create and deliver service
o Provide needed information and instructions
o Make some personal effort; share physical possessions
o Ex: McDonalds
• High – customer works actively with provider to co-produce the service
o Service cannot be created without customer’s active participation
o Customer can jeopardize quality of service outcome
o Ex: English classes; weight loss

Customers as partial employees

• Customers can influence productivity and quality of service processes and outputs
• Customers nor only bring expectations and needs, they also need to have relevant service production
competencies
• Customers also need to be recruited as they are “partial employees”. Firms need to get those with the
skills to do the tasks
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 • For the relationship to last, both parties need to cooperate with each other

Self -service technologies (SST)

Ultimate form of customer involvement

o Customers undertake specific activities using facilities or systems provided by service supplier
o Customer’s time and effort replace those of employees
o Ex: internet-based services, ATM
• Information-based services can easily be offered using self-serving technologies
o Used in both supplementary services and delivery of core product
o Ex: eBay, no human auctioneer needed between sellers and buyers
• Many companies seek to encourage customers to serve themselves using Internet-based self-service
o Challenge: getting customers to try this technology

Psychological factors related to the used of SST’s

• Advantages
o Time and cost saving
o Flexibility
o Convenience of location
o Greater control over service delivery
o High perceived level of customization
• Disadvantages
o Anxiety and stress experienced by customers who are uncomfortable with using them
o Some see service encounters as social experiences and prefer to deal with people
• People love SST when
o Machines are conveniently located and accessible 24/7 – often as close as nearest computer
o Obtain detailed information and complete transactions can be done faster than through face-to-
face or telephone contact
o People in awe of what technology can do for them when it works well
• People hate SST when
o They fail – the system is down, for example
o Poorly designed technologies that make service processes difficult to understand and use
o They mess up – forgetting passwords, for example
• Key weakness of SST: too few incorporate service recovery systems
o Customers still forced to make telephone calls or personal visits
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Balancing Demand

Demand vs. Capacity

Fluctuation in demand threaten service productivity

The effective use of expensive productive capacity is one of the secrets of success in business. The goal
should be to utilize staff, labour, equipment, and facilities as productively as possible

Capacity

• Capacity refers to the resources or assets that a firm can use to create good and service
• Financial success in businesses that are limited in capacity depends largely on how capacity is used

Four conditions potentially faced by fixed-capacity services:

• Excess demand
o Too much demand relative to capacity at a given time – business is lost
• Demand exceeds optimum capacity
o Upper limit to a firm’s ability to meet demand at a given time – conditions are crowded, service
quality seems lower and customers are dissatisfied
• Optimum capacity
o Point beyond which service quality declines as more customers are serviced
• Excess capacity
o Too much capacity relative to demand at a given time – resources are not used fully, resulting in
low productivity. In some case there´s the risk that customers may find the experience
disappointing or have doubts about whether the firm can survive

Defining productive capacity

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Two basic ways to overcome varying of demand

1. Adjust level of capacity to meet changes in demand

2. Manage the level of demand using marketing strategies
Many companies use both

Blocks of managing capacity and demand

1. Defining productive capacity

In a service context, productive capacity can take several forms
• Physical facilities designed to contain customers: hotels, restaurants
• Physical facilities designed for storing or processing goods: parking lots, storage warehouse
• Physical equipment used to process people, possessions, or information: ATM’s, airport security
• Labour: staff, available doctors
• Infrastructures: crowed airports, power failures
2. Managing capacity
• Capacity can be stretched or shrunk – more hours
• Capacity can be adjusted to match demand – self-service
o Schedule downtime during periods of low demand
o Cross-train employees
o Use part-time employees
o Invite customers to perform self-service
• Capacity can be flexible for different segments mixes
3. Analyse patterns of (understand) demand
Demand varies by market segment
• Demand differs by market segments and these segments may have different segment patterns
• Demand may seem random, but analysis may reveal a predictable demand cycle for different
segments
• Keep good records of transactions to analyse demand patterns. Sophisticated software can help
to track customer consumption patterns
• Record weather conditions and other special factors that might influence demand
• Questions about demand patterns and their underlying
o Do demand levels follow a predictable cycle?
o What are the underlying causes of these cyclical variations?
o Do demand levels seem to change randomly?

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 o Can demand for a particular service over time be disaggregated by market segment to reflect
different components?
4. Managing demand – 5 basic approaches
Alternative demand management strategies
• Take no action
o Let customers sort it out
• Reduce demand
o Higher prices
o Communication encouraging use of other time slots
• Increase demand
o Lower prices
o Communication, including promotional incentives
o Vary product features to increase desirability
o More convenient delivery times and places
• Inventory demand by reservation system
• Inventory demand by formalized queuing

Marketing strategies can reshape some demand patterns

• Use price and other costs to manage demand

• Change product elements
• Modify place and time of delivery
• Promotion and education

Inventory demand trough waiting lines and reservations

• When demand exceeds supply

• Steps to take to inventory demand (keep for use later)
• Asking customers to wait in line (queue), usually on a first-come first-served basis
• Offering customers the opportunity to reserve or book capacity in advance

Perceptions of waiting time

10 propositions to make waiting more bearable

1. Unoccupied time feels longer than occupied time, put TV, Magazines, Wi-Fi
2. Solo waits feel longer than group waits, bring your friends
3. Physical uncomfortable waits feel longer than comfortable ones
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 4. Pre-and post-process waits feel longer than in-process waits. Waiting in a line for tickets or waiting for
the concert to start
5. Unexplained waits are longer than explained waits
6. Unfamiliar waits seem longer than familiar ones
7. Uncertain waits are longer than known, finite waits
8. Unfair waits are longer than fair waits
9. Anxiety makes waits seem longer
10. People will wait longer for more valuable services, spending the night to get a new iPhone

Inventory demand through a reservation system

• Benefits of reservations
o Controls and soothes demand
o Data captures helps organizations
▪ Prepare financial projections
▪ Plan operations and staffing levels
o Benefits businesses
▪ Allows management to make sure some time is kept free for emergency jobs
o Pre-sells service
o Informs and educates customers in advance of arrival
o Save customers from having to wait in line for service, if reservation times are honoured
• Characteristics of well-designed reservation system
o Fast and user-friendly for customers and staff
o Answers customer questions
o Offers options for self service
o Accommodates preferences
o Deflects demand from unavailable first choices to alternatives times and locations

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Service Environment (physical)

Purpose of service environments

• Shape customers’ experiences and their behaviour

o Message creating medium
▪ Symbolic cues to communicate the distinctive nature and quality of the service experience
o Attention creating medium
▪ Make service scape stand out from competition and attract customers from target segments
o Effect creating medium
▪ Use colours, textures, sounds, scents and spatial design to enhance desired service
experience
o For image, positioning and differentiation
o Part of the value proposition
o Facilitate service encounter and enhance productivity
• Impacts
o Each service scape clearly communicates and reinforces its respective positioning and sets service
expectations as guests arrive

Consumer responses to service environments

• The main dimensions in a service environment are

o Ambient conditions
▪ Ambient environment is composed of hundreds of design elements and details that must
work together to create desired service environment
▪ Ambient conditions are perceived both separately and holistically and include:
− Sounds such as noise and music
− Scents
− Lighting and colour schemes
− Size and shapes
− Air quality and temperature
o Spatial layout and functionality
▪ Spatial layout
− Floorplan
− Size and shape of furnishing, counters, machinery, equipment, and how they are
arranged
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 ▪ Functionality
− Ability of those item to make the performance of the service easier
o Signs, symbols and artefacts
▪ Communicates the firm’s image
▪ Help customers fine their way
▪ Let customers know the service script
▪ First time customer will automatically try to draw meaning from the signs, symbols and
artefacts
▪ Challenge is to design such that these guide customer through the service delivery process
− Unclear signals from a service can result in anxiety and uncertainly about how to proceed
and obtain the desire service
• People perceive them as a whole
• Key to effective design is how well each individual dimension fits together with everything else
• Internal customer and employee responses can be categorized into cognitive, emotional and
physiological responses, which lead to observable behavioural responses towards the environment

People are part of the service environment

• Appearance and behaviour of both service personnel and customers can strengthen impression
created by service environment or weaken it
• For customers, marketing communication may seek to attract those who appreciate the service
environment and are also able to enhance it by their appearance and behaviour
• In hospitality and retail settings, newcomers often look at existing customers before deciding wither
to patronise the service firm

Putting it all together

Selection of environmental design elements

• Design with a holist view
o Service scape must be seen holistically
▪ No dimension of design can be optimized in isolation, because everything depends on
everything else
o Holistic characteristic of environments makes designing service environment an art
• Must design from a customer’s perspective

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 Tools to guide service scape design
• Keen observation of customers’ behaviour and responses to the service environment by management,
supervisors, branch managers and frontline staff
• Feedback and ideas from frontline staff and customers, using a range of research tools from suggestion
boxes to focus groups and surveys
• Photo audit – ask customers to take photographs of their experience and these are used as basis for
further interviews or included as part of survey of experience
• Field experiments can be used to manipulate specific dimensions in an environment and the effects
observed
• Blueprinting – extended to include physical evidence in the environment

Managing People

Importance of service personnel

Service employees are extremely important

• Help maintain firm’s positioning because they are
o A core part of the product
o The firm service
o The brand
o Affect sales
o Determine productivity
• Frontline is an important driver of customer loyalty
o Anticipate customer needs
o Customize service delivery
o Build personalized relationships

Frontline in low-contact services

• Many routine transactions are now conducted without involving front-line staff, ATM for example
• Though technology and self-service interface is becoming a key engine for service delivery, frontline
employees remain crucially important
• “Moments of truth” affect customer’s views of the service firm

Frontline work is difficult and stressful

• Boundary spanning and role stress

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 o Boundary spanners link inside of organization to outside world and often experience role stress
from multiple roles they must perform
• 3 main causes of role stress
o Organization vs. client
▪ Dilemma whether to follow company rules or to satisfy customer demands
▪ This conflict is especially acute in organizations that are not customer oriented
o Person vs. role
▪ Conflicts between what job require and employee’s own personality and beliefs
o Client vs. client
▪ Conflicts between customers that demand service staff intervention

Emotional labour

• The act of expressing socially desired emotions during service transactions

• Occurs when there is a gap between what employees feel inside, and emotions that management
requires them to display to customers
• Performing emotional labour in response to society’s or management’s display rules can be stressful
• Good HR practice emphasizes selective recruitment, training, counselling, strategies to alleviate stress

The service talent cycle for service firms

Human resources management – how to get it right

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1. Hiring the right people
• Be the preferred employer
o Create a large pool: compete for talent market share
o What determines a firm’s applicant pool?
▪ Positive image in the community as place to work
▪ Quality of its services
▪ The firm’s perceived status
• Select the right people
o There is no perfect employee
▪ Different jobs are best filled by people with different skills, styles or personalities
▪ Hire candidates that fit firm’s core values and culture
▪ Focus on recruiting naturally warm personalities for customer-contact jobs
2. Enable your people
Train service employees actively
• Service employees need to learn
o Organizational culture, purpose and strategy
▪ Get emotional commitment to core strategy and core values
▪ Get managers to teach “why”, “what” and “how” of job
o Interpersonal and technical skills
▪ Both are necessary but neither alone is enough for performing a job well
o Product/service knowledge
▪ Staff’s product knowledge is a key aspect of service quality
▪ Staff must explain product features and help consumers make the right choice
Is empowerment always appropriate?
• Empowerment is most appropriate when
o Firm’s business strategy is based on personalized, customized service and competitive
differentiation
o Emphasis on extended relationships rather than short-term transactions
o Use of complex and non-routine technologies
o Service failures are non-routine and cannot be designed out of the system
o Business environment is unpredictable, consisting of surprises
o Managers are comfortable letting employees work independently for benefit of firm and customers

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 Levels of employee involvement
• Suggestion involvement
o Employee make recommendation through formalized programs
• Job involvement
o Jobs redesigned
o Employees retrained, supervisors
o Reoriented to facilitate performance
• High involvement
o Information is shared
o Employees skilled in teamwork, problem-solving
o Participate in management decisions
o Profit sharing and stock ownership
Build high-performance service delivery teams
• Many services require cross-functional coordination for excellent service delivery
• Teams, training and empowerment go hand-in-hand
• Creating successful service delivery teams
o Emphasis on cooperation, listening, coaching and encouraging one another
o Understand how to air differences, tell hard truths, ask tough questions
o Management needs to set up a structure to steer teams towards success
3. Motivate and energize your people
• Useful range of available rewards effectively including
o Job content
▪ People are motivated and satisfied knowing they are doing a good job
o Feedback and recognition
▪ People derive a sense of identity and belonging to an organization from feedback and
recognition
o Goal achievement
▪ Specific, difficult but attainable and accepted goals are strong motivators

Service leadership and culture

• Charismatic/transformational leadership
o Change frontline’s values, goals to be consistent with firm
o Motivate staff to perform their best
• Service culture can be defined as
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 o Shared perceptions of what is important
o Shared values and beliefs of why they are important
• A strong service culture focuses the entire organization on the frontline and top management is
informed and actively involved

Managing relationships and building loyalty

Why is customer loyalty important to a firm’s profitability?

Customers become more profitable the longer they remain with a firm
• Increase purchases
o Customers/families purchase in greater quantities as they grow
• Reduced operation costs
o Fewer demands from suppliers and operating mistakes as customer becomes experienced
• Referrals to other customers
o Positive word-of-mouth saves firm from investing money in sales and advertising
• Price premiums
o Long-terms customers are willing to pay regular prices
o Willing to pay higher prices during peak per

Reasons to loyalty

• Confidence benefits
o Confidence in correct performance
o Ability to trust the provider
o Lower anxiety when purchasing
o Knowing what to expect and receive
• Social benefits
o Mutual recognition and friendship between service provider and customer
• Special treatment
o Better price
o Discounts not available to most customer
o Extra service
o Higher priority when there is a wait

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Wheel of loyalty

1. Build a foundation for loyalty

Segments the market and target the right customers
• Target the right customer and match them to what firm can deliver
• Focus on number of customers served as well as value of each customer
o Some customers are more profitable than others in the short term
o Other may have room for long-term growth
• Right customers are not always high spenders
o Can come from a large group of people that no other supplier is serving well
2. Create loyalty bonds to strengthen relationship
• Deeping the relationship
o Bundling/cross-selling service makes switching a major effort that customer is unwilling to go
through unless they are extremely dissatisfied with service provider
o Customers benefit from buying all their various services from the same provider
• Reward based bonds
o Financial bonds

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 o Non-financial rewards
• Reward based loyalty programs are relatively easy to copy and rarely provide a sustained
competitive advantage
• Social bonds
o Based on personal relationships between providers and customers
o Harder to and takes a longer time to build, but also harder to imitate and so, better chance
to retention in the long term
• Customization bonds
o Customized service for loyal customers
o Customers may find it hard to adjust to another service provider who cannot customized
service
• Structural bonds
o Mostly seen in B2B settings
o Align customers way of doing things with supplier’s own processes
o Joint investments in projects and sharing of information, processes and equipment
• Difficult for competition to draw customers away when they have integrated their way of doing
things with existing supplier
3. Reduce churn drivers
• Deliver quality service
• Reduce inconvenience and non-monetary costs
• Have fair and transparent pricing
• Industry specific drivers
• Take active steps to retain customers
• Implement effective complaint handling and service recovery procedures
• Increase switching costs

Complaint handling and service recovery

Importance of service recovery

• Plays a crucial role in achieving customer satisfaction

• Test a firm’s commitment to satisfaction and service quality
o Employees training and motivation is highly important
• Impacts customer loyalty and future profitability
o Complaint handling should be seen as a profit cent not a cost center

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Improving service quality and productivity

Integrating service quality and productivity

• Quality and productivity are paths to creating value for both customers and companies
• Quality focus on the benefits created for customers; productivity addresses financial costs incurred by
firm
o If service processes are more efficient and increase productivity, this may not result in better quality
experience for customers
o Getting service employees to work faster to increase productivity may sometimes be welcomed by
customers, but at other times feel rushed and unwanted
• Marketing, operations and human resource managers, need to work together for quality and
productivity improvement

Dimensions of service quality

• Tangibles
o Appearance of physical elements
• Reliability
o Dependable and accurate performance
• Responsiveness
o Promptness, helpfulness
• Assurance
o Competence, courtesy, credibility and security
• Empathy
o Easy access, good communication, understanding of customer

Service leadership

Integrated functions to serve customer

• Marketing function
o Target right customers and built relationships
o Offer solutions that meet their needs
o Define quality package with competitive advantage
• Operations function
o Create, deliver specified service to target customers
o Adhere to consistent quality standards
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 o Achieve high productivity to ensure acceptable costs
• Human resource function
o Recruit and retain the best employees for each job
o Train and motivate them to work well together
o Achieve both productivity and customer satisfaction

Facilitating cooperation

• Transfer individuals to other functions and allow development of holistic perspectives

• Establish cross-functional service delivery teams
• Appointing individuals to integrate specific objectives, activities and processes between departments
• Carry out internal marketing and training
• Have top management commitment to ensure overarching objectives of all departments are
integrated

PARA A FREQUÊNCIA:

Marketing mix (forma como vou interagir com o meu target)

Em serviços os processos, ambiente físico e pessoas são os pontos mais diferenciadores.

Produto- elementos facilitadores e de reforço.

Distribuição- pontos físicos e ou virtuais. Como é que o serviço chega ao comprador. A fábrica pode ir ter com
o cliente (caso de reboque).

Promoção- boa comunicação para certos serviços mais complexos. Educar o cliente. Não esquecer de
comunicar para os trabalhadores. A audiência é muito crítica, evitar reclamações que possam ser públicas nas
redes sociais.

Preço-ver tripé.

Processo- definir os diferentes passos do processo para educar e evitar o erro da equipa dos trabalhadores.
Nem sempre o processo se mantém ao longo do tempo, devido a mudanças do comportamento do
consumidor, avanços tecnológicos, se acrescenta valor ou não, se são atuais ou não (perceber se estão a usar
recursos, dinheiro ou tempo, que podem ser eliminados). Colaboração dos clientes no processo (3 níveis).
Capacidade da procura e da oferta.

Ambiente físico- 3 variáveis

Pessoas- gerir pessoas tanto do BO como FO. Gerir relações de fidelidade e lealdade com os trabalhadores e
com os clientes.

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