1. 1
Service Quality
MKTG 1268
Lecture One
Course overview
Introduction to Services
Marketing (Ch 1 )
JAN 2013 Semester
GEOFFREY DA SILVA

2. Course objectives
2
1. Recognize the customer’s and the service
provider’s (e.g. marketer’s) perspective
and roles in service exchanges.
2. Implement marketing plans.
3. Recognize and adapt to changing
environments.

3. Learning outcomes
3
1. Describe the unique characteristics of services and
their implications on marketing strategies.
2. Describe the major differences between marketing
products and services in relation to the expanded
marketing mix of product, price, promotion, place &
time (e.g. service logistics), people, processes and
physical evidence and the different nature of
consumer behaviour.
3. Describe the links between Marketing, Operations
and Human Resource Management in service
organizations.

4. Learning outcomes (cont’d)
4
4. Articulate key concepts in services marketing
including: service encounters, service blueprinting,
relationship marketing, service scripts, service
guarantees and service logistics.
5. Conceptualize and articulate service quality and
describe how it can be defined, measured and
improved.
6. Expound the concepts involved in implementing
service quality such as setting service standards,
customer focus, organisational change, leadership,
quality tools, quality awards and processes.

5. Coverage of topics (RMIT syllabus)
5
Class 1: Course overview; Introduction to Services Marketing (Ch 1 )
Class 2: Customer Behaviour in the Services Context (Ch 2), Introduction to
’Service Quality’ (Ch 14)
Class 3: Positioning Services in Competitive Markets; Developing Service
Products (Ch 3 and 4)
Class 4: Distributing Services Through Physical and Electronic Channels;
Setting Prices and Implementing Revenue Management (Ch 5 and 6)
Class 5: Promoting Services and Educating Customers; Designing and
Managing Service Processes(Ch 7 and 8)
Class 6: Crafting the Service Environment (Ch 10)
Class 7: Managing People for Service Advantage (Ch 11)
Class 8: Balancing Demand Against Productive Capacity (Ch 9)
Class 9: Managing Relationships and Building Loyalty, Complaint Handling and
Service Recovery (Ch 12 and 13)
Class 10: Improving Service Quality and Productivity (Ch 14)
Class 11: Organising for Change Management and Service Leadership (Ch 15)
Class 12: Revision and exam discussion / hints

6. Compulsory textbook
6
 Lovelock, C., Wirtz, J. and Chew, P. (2013), Essentials of
Services Marketing, 2ND Edition Pearson Education,
Singapore.

7. Before we start…
7
 This is not a foundation course but rather an applied
course
 You are assumed to have understood all the earlier
topics and concepts that you have learnt in
previous Marketing courses such as Principles of
Marketing, Consumer Behavior and Marketing
Research
 Many of the topics we will cover in Services
Quality/Marketing course will draw upon these
concepts

8. What concepts?
8
 What is the marketing concept?
 Understanding the marketing environment
 Understanding consumer buying behavior- this is
challenging in SM since the product is intangible
and the customer does not buy the product per se
but rather experiences a service.
 Segmentation, Targeting and Positioning- the
foundation for Marketing Strategy
 The Marketing Mix- now we don’t have 4 but rather
7 Ps

9. Overview of Chapter 1
9
 Why study services?
 Powerful forces that are transforming service
markets
 What are services?
 Four broad categories of services
 Challenges posed by services
 Expanded marketing mix for services
 Framework for effective services marketing
strategies

10. Services Marketing (education – your most
important service product purchase in your life?)
10

11. Why Study Services?
11
 Services Dominate Economy in Most Nations
 Most New Jobs are Generated by Services
 Fastest Growth Expected in Knowledge-Based
Industries
 Many New Jobs are Well-Paid Positions Requiring
Good Educational Qualifications
 Many manufacturing firms moved to marketing
stand- alone services

12. Contribution of Services Industries to
Global GDP
12

13. Estimated Size of Service Sector in
Selected Countries
13

14. Contribution of Services to Singapore economy
14
 See Department of Statistics for details
 Web Link
http://www.singstat.gov.sg/stats/themes/economy/services.ht
ml

15. There is also a national index for SQ in Singapore
15
 Customer Satisfaction Index of Singapore
 Undertaken by the Institute of Service Excellence at
the Singapore Management University
 Website: http://www.smu.edu.sg/centres/ises/
 2011 report:
 http://www.smu.edu.sg/centres%5Cises%5Cdownloads
%5Ccsisg2011q1_executivesummary.pdf

16. Powerful forces that are transforming service
markets
16
1. Social changes
2. Business trends like productivity and
cost savings, franchising etc.
3. Advances in information technology
4. Internationalization and globalization

17. Forces Transforming the Service Economy
17 Social Business Advances
Changes Trends in IT
Government
Globalization
Policies
● New markets and product categories
● Increase in demand for services
● More intense competition
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power
Success hinges on:
● Understanding customers and competitors
● Viable business models
● Creation of value for customers and firm

18. Forces Transforming the Service Economy (1)
18 Social Business Advances in
Changes Trends IT
Government
Globalization
Policies
● Changes in regulations
● Privatization
● New rules to protect customers,
employees, and the environment
● New agreement on trade in services

19. Forces Transforming the Service Economy (2)
19 Social Business Advances in
Changes Trends IT
Government
Globalization
Policies
● Rising consumer expectations
● More affluence
● Personal Outsourcing
● Increased desire for buying experiences vs.
things
● Rising consumer ownership of high tech
equipment
● Easier access to more information
● Immigration
● Growing but aging population

20. 20
Read the examples and the impact on the
service economy

21. Forces Transforming the Service Economy (3)
21 Social Business Advances in
Changes Trends IT
Government
Globalization
Policies
● Push to increase shareholder value
● Emphasis on productivity and cost savings
● Manufacturers add value through service and
sell services
● More strategic alliances
● Focus on quality and customer satisfaction
● Growth of franchising
● Marketing emphasis by nonprofits

22. Forces Transforming the Service Economy (4)
22 Social Advances in
Business
Changes Trends IT
Government
Globalization
Policies
● Growth of Internet
● Greater bandwidth
● Compact mobile equipment
● Wireless networking
● Faster, more powerful software
● Digitization of text, graphics, audio, video

23. 23
Read the examples and the impact on the
service economy

24. Forces Transforming the Service Economy (5)
24 Social Business Advances in
Changes Trends IT
Government
Globalization
Policies
● More companies operating on transnational
basis
● Increased international travel
● International mergers and alliances
● “Offshoring” of customer service
● Foreign competitors invade domestic markets

25. 25
Read the examples and the impact on the
service economy

26. The combined
model (figure 1.6)
26

27. What are Services? (1)
27
 Services involve a form of rental, offering
benefits without transfer of ownership
 Include rental of goods
 Marketing tasks for services differ from
those involved in selling goods and
transferring ownership

28. Five broad categories within non-ownership
framework of which two or more may be combined
Rented goods Defined space Labor and
services and place rentals expertise rentals
Access to shared Access to and
physical usage of systems
environments and networks
28 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

29. Explanation of the 5 broad categories:
29
 Rented goods services—provides customers with temporary right to
exclusive use of physical good
 Defined space and place rentals—obtain a defined portion of a
larger space and sharing its use with other customers, under varying
degrees of privacy
 Labor and expertise rentals—hire others to work that they either
choose not to do, or lack the necessary expertise and tools to do
 Access to shared physical environments—may be located indoors or
outdoors or a combination
 Systems and networks: access and usage—rent the right to
participate in specified networks like telecommunications, utilities etc.

30. Four Broad Categories of Services
30
 Based on differences in nature of service act
(tangible/intangible) and who or what is direct
recipient of service (people/possessions), there are
four categories of services:
 People processing
 Possession processing
 Mental stimulus processing
 Information processing

31. Four Categories Of Services
31
31

32. 1.4 Four broad categories of services
 People Processing
 Customers must:
 physically enter the service
factory
 co-operate actively with the
service operation
 Managers should think about
process and output from
customer’s perspective
 to identify benefits created
and non-financial costs:
Time, mental, physical effort
32

33. 1.4 Four broad categories of services
Possession Processing
 Possession Processing
 Customers are less
involved compared to
people processing
services
 Involvement may be
limited to just
dropping off the
possession
 Production and
consumption are
separable
33

34. People processing Possession processing
34

35. 1.4 Four broad categories of services
Mental Stimulus Processing
● Mental Stimulus Processing
● Ethical standards required
when customers who
depend on such services
can potentially be
manipulated by suppliers
● Physical presence of
recipients not required
● Core content of services is
information-based
Can be ‘inventoried’’
35

36. 1.4 Four broad categories of services
Information Processing
 Information Processing
 Information is the most
intangible form of
service output
 May be transformed into
enduring forms of
service output
 Line between
information processing
and mental stimulus
processing may be
blurred.
36

37. Mental Stimulus Information Processing
Processing
37

38. Think about your project – the nature of the service
product:
38
 Given the nature of your service product, which cell
would it be put under?
 How would this classification affect your positioning
of your service offer?
 You need to use the service classification matrix to
determine this.
 What marketing challenges would your service
product face?

39. Challenges posed by services
Services Pose Distinctive Marketing Challenges
• Marketing management tasks in the service sector differ from
those in the manufacturing sector.
• The eight common differences are:
– Most service products cannot be inventoried
– Intangible elements usually dominate value creation
– Services are often difficult to visualize and understand
– Customers may be involved in co-production
– People may be part of the service experience
– Operational inputs and outputs tend to vary more widely
– The time factor often assumes great importance
– Distribution may take place through nonphysical channels
39

40. Challenges posed by services
Differences, Implications, and Marketing-Related
Tasks (1) (Table 1.2)
Difference Implications Marketing-Related Tasks
 Most service products  Customers may be  Use pricing, promotion,
cannot be inventoried turned away reservations to smooth
demand; work with ops to
 Intangible elements  Harder to evaluate manage capacity
usually dominate service & distinguish  Emphasize physical clues,
value creation from competitors employ metaphors and
vivid
images in advertising
 Services are often  Greater risk &
difficult to visualize & uncertainty perceived  Educate customers on
understand making good choices; offer
guarantees
 Customers may be  Interaction between
involved in co- customer & provider;  Develop user-friendly
Production but poor task equipment, facilities &
execution
could affect systems; train customers,
satisfaction provide good support
40

41. Challenges posed by services
Differences, Implications, and Marketing-Related
Tasks (2) (Table 1.2)
Difference Implications Marketing-Related Tasks
 People may be part of  Behavior of service  Recruit, train employees to
service experience personnel & customers reinforce service concept
can affect satisfaction  Shape customer behavior
 Operational inputs  Hard to maintain quality,
and  Redesign for simplicity and
outputs tend to vary consistency, reliability failure proofing
more widely  Difficult to shield  Institute good service
recovery procedures
customers from failures
 Time is money;  Find ways to compete on
 Time factor often
customers want service speed of delivery; offer
assumes great
at convenient times extended hours
importance
 Electronic channels or  Create user-friendly,
 Distribution may take
voice secure websites and free
place through telecommunications access by telephone
nonphysical channels
41

42. Challenges posed by services
Added by Physical, Intangible Elements Helps
Distinguish Goods and Services (Fig 1.14)
42

43. 43
EXPANDED MARKETING MIX FOR
SERVICES
The 7 Ps

44. Services Require An Expanded Marketing Mix
44
● Marketing can be viewed as:
A strategic and competitive thrust pursued by top
management
A set of functional activities performed by line managers
A customer-driven orientation for the entire organization
● Marketing is only function to bring operating revenues
into a business; all other functions are cost centers.
● The “7 Ps” of services marketing are needed to create
viable strategies for meeting customer needs
profitably in a competitive marketplace

45. The 7 Ps of Services Marketing
45
● Product elements (Chapter 4)
● Place and time (Chapter 5)
● Price and other user outlays (Chapter 6)
● Promotion and education (Chapter 7)
● Process (Chapter 8)
● Physical environment (Chapter 10)
● People (Chapter 11)

46. The 7 Ps of services marketing
Applying the 4 Ps of Marketing to Services (1)
46
 Product elements
 Service products are at the heart of services marketing
strategy
 Marketing mix begins with creating service concept that
offers value
 Service product consists of core and supplementary
elements:
 Core products meet primary needs
 Supplementary elements are value-added enhancements

47. Services are not just products- they are experiences
47

48. The 7 Ps of services marketing
Applying the 4 Ps of Marketing to Services (2a)
48
 Place and time
 Service distribution can take place through physical and
non-physical channels
 Some firms can use electronic channels to deliver all (or
at least some) of their service elements
 Information-based services can be delivered almost
instantaneously electronically

49. The 7 Ps of services marketing
Applying the 4 Ps of Marketing to Services (2b)
49
 Place and time
 Delivery Decisions: Where, When, How
 Time is of great importance as customers are physically
present
 Convenience of place and time become important
determinants of effective service delivery

50. The 7 Ps of services marketing
Applying the 4 Ps of Marketing to Services (3a)
• Price and other user outlays
 From the firm’s perspective, pricing generates
income and creates profits
 From the customer’s perspective, pricing is key part
of costs to obtained wanted benefits
 Marketers must recognize that customer costs involve
more than price paid to seller
50 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

51. The 7 Ps of services marketing
Applying the 4 Ps of Marketing to Services (3b)
• Price and other user outlays
 Identify and minimize non-monetary costs incurred by users:
 Additional monetary costs associated with service
usage (e.g., travel to service location, parking, phone,
babysitting, etc.)
 Time expenditures, especially waiting
 Unwanted mental and physical effort
 Negative sensory experiences
 Revenue management is an important part of pricing
51 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

52. The 7 Ps of services marketing
Applying the 4 Ps of Marketing to Services (4)
• Promotion and Education
 Plays three vital roles:
 Provide information and advice
 Persuades the target customers of merit of service product or brand
 Encourages customer to take action at specific time
 Customers may be involved in co-production so:
 Teach customer how to move effectively through the service process
 Shape customers’ roles and manage their behavior
52 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

53. Promotion of Services (advertising)
53

54. The 7 Ps of services marketing
Extended Mix for Managing the Customer Interface (1)
• Process
 How firm does things may be as important as what it
does
 Customers often actively involved in processes,
especially when acting as co-producers of service
 Operational inputs and outputs vary more widely
 Customers are often involved in co-production
 Demand and capacity need to be balanced
54 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

55. The 7 Ps of services marketing
Extended Mix for Managing the Customer Interface (2a)
• Physical environment
 Design servicescape and provide tangible evidence
of service performances
 Manage physical cues carefully— can have
profound impact on customer impressions
55 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

56. The 7 Ps of services marketing
Extended Mix for Managing the Customer Interface (2a)
• Physical environment
 Create and maintain physical appearances
 Buildings/landscaping
 Interior design/furnishings
 Vehicles/equipment
 Staff grooming/clothing
 Sounds and smells
 Other tangibles
56 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

57. The 7 Ps of services marketing
Extended Mix for Managing the Customer Interface (3)
• People
 Interactions between customers and contact
personnel strongly influence customer perceptions of
service quality
 Well-managed firms devote special care to
selecting, training and motivating service employees
 Other customers can also affect one’s satisfaction
with a service
57 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

58. People factor in services marketing
58

59. Recognize why service businesses need to integrate the
marketing, operations, and human resource functions
59
 The 7Ps model demonstrates that marketing can’t
operate separately from other functional areas in a
successful service organization.
 Marketing, operations, and human resources all play
central and interrelated roles in meeting customer needs
 Marketing links the firm to its external environment and
acts as a customer champion; operations is concerned
with service design and delivery, often involving
customers in operational processes; and human
resources helps to recruit, train, and motivate
employees whose jobs bring them into direct contact
with customers.

60. LETS RECAP: So now you should be clear that
services have FOUR important characteristics
Intangibility Heterogeneity
Simultaneous
Production Perishability
and
Consumption
Important points to note:
- These characteristics are actually CHALLENGES or problems faced by the service
marketer
- The service marketer needs to use the right tools – marketing mix elements to
overcome these challenges

61. Additional Slides on the Four Characteristics of
Services
• Source: Philip Kotler and Kevin Lane Keller
• Marketing Management (an Asian Perspective)
61

62. Intangibility
• Unlike physical products, services cannot be seen, tasted, felt,
heard, or smelled before they are bought.
• To reduce uncertainty, buyers will look for evidence of quality.
• They will draw inferences about quality from the place,
people, equipment, communication material, symbols, and
price that they see.
• Therefore, the service provider’s task is to “manage the
evidence,” to “tangibilize the intangible.”Whereas product
marketers are challenged to add abstract ideas, service
marketers are challenged to add physical evidence and
imagery to abstract offers
• Service companies can try to demonstrate their service
quality through physical evidence and presentation.
62

63. Suppose a bank wants to position itself as a “fast” bank. It could make
this positioning strategy tangible through a number of marketing tools:
• Place — The exterior and interior should have clean lines. The
layout of the desks and the traffic flow should be planned
carefully. Waiting lines should not get overly long.
• People — Personnel should be busy. There should be a
sufficient number of employees to manage the workload.
• Equipment — Computers, copying machines, and desks
should be and look “state of the art.”
• Communication material — Printed materials — text and
photos — should suggest efficiency and speed.
• Symbols — The name and symbol should suggest fast service.
• Price — The bank could advertise that it will deposit $5 in the
account of any customer who waits in line for more than five
minutes
63

64. Managing the Physical Evidence : DBS Bank
• This DBS branch in Singapore looks very modern and is equipped
with gadgets to appeal to the more tech-savvy market.
64

65. Intangibility
• Service marketers must be able to transform
intangible services into concrete benefits.
• Because there is no physical product, the
service provider’s facilities—its primary and
secondary signage, environmental design and
reception area, employee apparel, collateral
material, and so on—are especially important.
• All aspects of the service delivery process can
be branded.
65

66. Intangibility
• Service providers
such as medical
doctors will use
brand elements
such as where
they received
their medical
education from to
make their service
and benefits more
tangible.
66

67. Inseparability
• Services are typically produced and consumed
simultaneously.
• Because the client is also present as the service is
produced, provider-client interaction is a special
feature of service marketing.
• Several strategies exist for getting around this
limitation:
i. Work with larger groups
ii. Work faster
iii. Train more service providers
67

68. Variability
• Because they depend on who provides them
and when and where they are provided,
services are highly variable.
• This is a challenge of ensuring high and
consistent standards of service quality.
• To reassure customers, some firms offer
service guarantees that may reduce consumer
perception of risk.
68

69. There are three steps service firms can take to
increase quality control:
1. Invest in good hiring and training procedures.
2. Standardize the service-performance process
throughout the organization.
– Prepare a service blueprint that depicts
events and processes in a flowchart, with
the objective of recognizing potential fail
points.
– Monitor customer satisfaction; take action
to overcome service gaps
69

70. Blueprint for Overnight Hotel Stay
Process (P) in the Services Marketing Mix
70

71. Perishability
• Services cannot be stored.
• Perishability is not a problem when demand is
steady.
• When demand fluctuates service firms have
problems.
• Several strategies can produce a better match
between supply and demand
– Pricing and promotions are often used to
influence demand and supply
71

72. How would you LINK the 4 characteristics of
services to the 7 Ps? © Geoffrey da Silva
72
Intangibility Perishability Heterogeneity Inseparability
PRODUCT X X
PRICE X
PROMOTION X X
PLACE X
PEOPLE X X
PHYSICAL EV X
PROCESS X X
This is just an illustration to show how the different elements of the marketing mix can
address the challenges of the services characteristics; the links are not necessarily
definitive but rather indicative. What do you think?

73. Framework for effective services marketing strategies
Overview
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74. Chapter 1 Summary: Introduction to Services
Marketing (1)
74
 Reasons for studying services
 Service sector dominates economy in most nations
 Most new jobs are generated by services
 Powerful forces—government policies, social changes, business trends, IT
advances, and globalization—are transforming service markets
 The service concept and its definition:
 Services offer benefits without transfer of ownership
 Four broad categories of services – people processing, possession
processing, mental stimulus processing and information processing
 Customers expect value from access to goods, facilities, labor,
professional skills, environments, networks & systems in return for money,
time, effort
74

75. Chapter 1 Summary: Introduction to Services
Marketing (2)
75
 Services present distinctive marketing challenges relative to
goods, requiring:
 Expanded marketing mix comprising 7Ps instead of
traditional 4Ps
 Framework for developing effective services marketing
strategies:
 Understanding service products, consumers & markets
 Applying the 4 Ps to services
 Managing the customer interface
 Implementing profitable service strategies
75

76. Sample Practice Exam Essay Questions
76
1. The marketing of services is different to the
marketing of tangible goods‖. Provide support for
this statement by:
(a.) Identifying and explaining the unique
characteristics of services.
(b.) Describing the expanded marketing mix for
services, highlighting how it may be different to the
―traditional marketing mix of 4Ps‖.

77. Sample Practice Exam Essay Questions
77
2. List and describe each of the expanded marketing
mix elements and contrast the expanded marketing
mix for services to the traditional marketing mix for
tangible goods
3. List and discuss each of the four broad categories of
services.
 Demonstrate your understanding of these four
categories of services by giving at least three
examples of each and highlighting the implications
of such services

78. Sample Practice Exam Essay Questions
78
 List and explain why the unique characteristics of
services (that makes them different to tangible
goods).
 Classify the following two services into
people/possession/mental-stimulus/information-
processing services and explain your selection:
 Funeral service
 Online dating service

79. Sample Practice Exam Essay Questions
79
 The marketing mix for services is different to that of
tangible goods. Explain the marketing mix elements
applicable to service contexts, and highlight its
differences to the marketing mix elements of
tangible goods. Select a service that you are
familiar with, and describe its marketing mix
elements.

80. Sample Practice Exam Essay Questions
80
 Demonstrate your understanding of the unique
characteristics of services by listing the eight (8)
common differences between services and tangible
goods, and relating each to the example of
education (and other services e.g. library,
administrative and IT support) provided by a
university.