Essentials of services marketing pdf

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Services Marketing: People, Technology, Strategy

Brief Contents

About the Authors About the Contributors of the Case Studies Preface Acknowledgements

PART I: UNDERSTANDING SERVICE PRODUCTS, CONSUMERS, AND MARKETS 1. Creating Value in the Service Economy 2. Understanding Service Consumers 3. Positioning Services in Competitive Markets

PART II: APPLYING THE 4 PS OF MARKETING TO SERVICES 4. Developing Service Products and Brands 5. Distributing Services Through Physical and Electronic Channels 6. Service Pricing and Revenue Management 7. Service Marketing Communications

PART III: MANAGING THE CUSTOMER INTERFACE 8. Designing Service Processes 9. Balancing Demand and Capacity 10. Crafting the Service Environment

11. Managing People for Service Advantage

PART IV: DEVELOPING CUSTOMER RELATIONSHIPS 12. Managing Relationships and Building Loyalty 13. Complaint Handling and Service Recovery

PART V: STRIVING FOR SERVICE EXCELLENCE 14. Improving Service Quality and Productivity 15. Building a World-Class Service Organization

PART VI: CASE STUDIES

Glossary Name Index Subject Index

Contents

About the Authors About the Contributors of the Case Studies Preface Acknowledgements

PART I: UNDERSTANDING SERVICE PRODUCTS, CONSUMERS, AND MARKETS

1. Creating Value in the Service Economy Why Study Services • Services Dominate the Global Economy • Most New Jobs are Generated by Services • Understanding Services Offers Personal Competitive Advantage What Are the Principal Industries of the Service Sector? • Contribution to Gross Domestic Product Powerful Forces are Transforming the Service Markets B2B Services as a Core Engine of Economic Development Outsourcing and Offshoring Often Work in Tandem What Are Services • The Historical View Benefits Without Ownership • Defining Services • Service Products versus Customer Service and After-Sales Service Four Broad Categories of Services – A Process Perspective • People Processing • Possession Processing • Mental Stimulus Processing • Information Processing Services Pose Distinct Marketing Challenges The 7Ps of Marketing

The Traditional Marketing Mix Applied to Services • Product Elements • Place and Time • Price and Other User Outlays • Promotion and Education The Extended Services Marketing Mix for Managing the Customer Interface • Process • Physical Environment • People Marketing Must be Integrated with Other Management Functions The Service–Profit Chain A Framework for Developing Effective Service Marketing Strategies • Understanding Service Products, Consumers and Markets • Applying the 4 Ps of Marketing to Services • Managing the Customer Interface • Developing Customer Relationships • Striving for Service Excellence

2. Understanding Service Consumers The Three-Stage Model of Service Consumption Pre-purchase Stage • Need Awareness • Information Search • Evaluation of Alternative Services • Purchase Decision Service Encounter Stage • Service Encounters are “Moments of Truth” • Service Encounters Range from High Contact to Low Contact • The Servuction System • Theater as Metaphor for Service Delivery: An Integrative Perspective • Role and Script Theories • Perceived Control Theory Post-Encounter Stage • Customer Satisfaction • Service Quality • Customer Loyalty

3. Positioning Services in Competitive Markets Customer-Driven Services Marketing Strategy • Customer, Competitor and Company Analysis (3 Cs) • Segmentation, Targeting and Positioning (STP) Segmenting Service Markets • Important versus Determinant Service Attributes • Segmentation Based on Service Levels Targeting Service Markets • Achieving Competitive Advantage through Focus Principles of Positioning Services Using Positioning Maps to Plot Competitive Strategy • An Example of Applying Positioning Maps to the Hotel Indsutry • Mapping Future Scenarios to Identify Potential Competitive Responses • Positioning Charts Help Executives Visualize Strategy Developing an Effective Positioning Strategy

PART II: APPLYING THE 4 PS OF MARKETING TO SERVICES

4. Developing Service Products and Brands Creating Service Products • What are the Components of a Service Product? The Flower of Service • Facilitating Supplementary Services • Enhancing Supplementary Services • Managerial Implications Branding Service Firms, Products and Experiences • Branding Strategies for Services Tiering Service Products with Branding Building Brand Equity Delivering Branded Service Experiences New Service Development • A Hierarchy of New Service Categories Achieving Success in New Service Development

5. Distributing Services Through Physical and Electronic Channels

Distribution In a Services Context

What Is Being Distributed? How Should A Service Be Distributed? • Customers Visit the Service Site • Service Providers Go to their Customers • The Service Transaction is Conducted Remotely • Channel Preferences Vary among Customers • Channel Integration is Key Where Should a Service Facility be Located? • Strategic Location Considerations • Tactical Location Considerations • Locational Constraints • Innovative Location Strategies When Should Service be Delivered? The Role of Intermediaries • Benefits and Costs of Alternative Distribution Channels Franchising The Challenge of Distribution in Large Domestic Markets Distributing Services Internationally • Factors Favoring Adoption of Transnational Strategies • How does the Nature of a Service Affect International Distribution? • Barriers to International Trade in Services • How to Enter International Markets?

6. Service Pricing and Revenue Management Effective Pricing is Central to Financial Success • Objectives for Establishing Prices Pricing Strategy Stands on Three Foundations • Cost-based Pricing • Value-based Pricing • Reducing Related Monetary and Non-monetary Costs • Competition-based Pricing Revenue Management: What It Is and How It Works • Reserving Capacity for High-yield Customers • How can we Measure the Effectiveness of a Firm’s Revenue Management? • How does Competitor’s Pricing Affect Revenue Management? • Price Elasticity • Designing Rate Fences

Fairness and Ethical Concerns in Service Pricing • Service Pricing is Complex • Piling on the Fees • Designing Fairness into Revenue Management Putting Service Pricing Into Practice • How Much to Charge? • What Should be the Specified Basis for Pricing? • Who Should Collect Payment and Where Should Payment be Made? • When Should Payment be Made? • How Should Payment be Made? • How Should Prices be Communicated to the Target Markets?

7. Service Marketing Communications Integrated Service Marketing Communications Defining the Target Audience Specifying Service Communication Objectives • Strategic Service Communications Objectives Tactical Service Communications Objectives • Promote Tangible Cues to Communicate Quality Crafting Effective Service Communication Messages • Problems of Intangibility • Overcoming the Problems of Intangibility The Services Marketing Communication Mix • Communications Originate from Different Sources • Messages Transmitted through Traditional Marketing Sources • Messages Transmitted Online • Messages Transmitted through Service Delivery Channels • Messages Originating from Outside the Organization Timing Decisions of Services Marketing Communication Budget Decisions and Program Evaluation Ethical and Consumer Privacy Issues in Communications The Role of Corporate Design Integrated Marketing Communications

PART III: MANAGING THE CUSTOMER INTERFACE

8. Designing Service Processes What is a Service Process?

Designing and Documenting Service Processes Developing a Service Blueprint • Blueprinting the Restaurant Experience: a Three-Act Performance • Identifying Fail Points • Fail-Proofing to Design Fail Points out of Service Processes • Setting Service Standards and Targets • Consumer Perceptions and Emotions in Service Process Design Service Process Redesign • Service Process Redesign Should Improve Both Quality and Productivity Customer Participation in Service Processes • Levels of Customer Participation • Customer as Co-creators • Reducing Service Failures Caused by Customers Self-Service Technologies • Customer Benefits and Adoption of Self-Service Technology • Customer Disadvantages and Barriers of Adoption of Self-Service Technology • Assessing and Improving SSTs • Managing Customer’s Reluctance to Change

9. Balancing Demand and Capacity Fluctuations in Demand Threaten Profitability • From Excess Demand to Excess Capacity • Building Blocks of Managing Capacity and Demand Defining Productive Service Capacity Managing Capacity • Stretching Capacity Levels • Adjusting Capacity to Match Demand Understanding Patterns of Demand Managing Demand • Marketing Mix Elements Can be used to Shape Demand Patterns Inventory Demand Through Waiting Lines and Queuing Systems • Waiting is a Universal Phenomenon • Managing Waiting Lines • Different Queue Configurations • Virtual Waits • Queuing Systems can be Tailored to Market Segments Customer Perceptions of Waiting Time

• The Psychology of Waiting Time Inventory Demand Through Reservation Systems • Reservation Strategies Should Focus on Yield Create Alternative Use for Otherwise Wasted Capacity

10. Crafting the Service Environment Service Environments – An Important Element of The Service Marketing Mix What is the Purpose of Service Environments? • Shape Customer’s Service Experience and Behaviors • Signal Quality and Position, Differentiate and Strengthen the Brand • Core Component of The Value Proposition • Facilitate the Service Encounter and Enhance Productivity The Theory Behind Consumer Responses to Service Environments • Feelings are a Key Driver of Customer Responses to Service Environments • The Servicescape Model – An Integrative Framework Dimensions of the Service Environment • The Effect of Ambient Condition • Spatial Layout and Functionality • Signs, Symbols and Artifacts • People are Part of the Service Environment too Putting It All Together • Design with a Holistic View • Design from a Customer’s Perspective

11. Managing People for Service Advantage Service Employees are Extremely Important • Service Personnel as a Source of Customer Loyalty and Competitive Advantage • The Frontline in Low-Contact Services Frontline Work is Difficult and Stressful • Service Jobs are Boundary Spanning Positions • Sources of Role Conflict • Emotional Labor • Service Sweatshops? Cycles of Failure, Mediocrity and Success • The Cycle of Failure • The Cycle of Mediocrity • The Cycle of Success

Human Resource Management – How to Get it Right • Hire the Right People • Tools to Identify the Best Candidates • Train Service Employees Actively • Internal Communications to Shape the Service Culture and Behaviors • Empower the Frontline • When are High Levels of Empowerment Appropriate? • Build High-Performance Service-Delivery Teams • Integrate Teams Across Departments and Functional Areas • Motivate and Energize People • The Role of Labor Unions Service Culture, Climate and Leadership • Building a Service-Oriented Culture • A Climate for Service • Qualities of Effective Leaders in Service Organizations • Leadership Styles, Focus on the Basics, and Role Modelling • Focusing the Entire Organization on the Frontline

PART IV: DEVELOPING CUSTOMER RELATIONSHIPS

12. Managing Relationships and Building Loyalty The Search for Customer Loyalty • Why Is Customer Loyalty So Important to a Firm’s Profitability? • Assessing the Value of a Loyal Customer • Worksheet for Calculating Customer Lifetime Value • The Gap between Actual and Potential Customer Value • Why Are Customers Loyal? The Wheel of Loyalty Building A Foundation For Loyalty • Target the Right Customers • Search for Value, Not Just Volume • Manage the Customer Base through Effective Tiering of Service • Customer Satisfaction and Service Quality Are Prerequisites for Loyalty Strategies for Developing Loyalty Bonds with Customers • Deepen the Relationship • Encourage Loyalty through Financial and Non-financial Rewards • Build Higher-Level Bonds Strategies for Reducing Customer Defections

• Analyze Customer Defections and Monitor Declining Accounts • Address Key Churn Drivers • Implement Effective Complaint Handling and Service Recovery Procedures • Increase Switching Costs Enablers of Customer Loyalty Strategies • Customer Loyalty in a Transactional Marketing Context • Relationship Marketing • Creating “Membership-Type” Relationships as Enablers for Loyalty Strategies CRM: Customer Relationship Management • Common Objectives of CRM Systems • What Does a Comprehensive CRM Strategy Include? • Common Failures in CRM Implementation • How to Get CRM Implementation Right

13. Complaint Handling and Service Recovery Customer Complaining Behavior • Customer Response Options to Service Failure • Understanding Customer Complaining Behavior • What Do Customers Expect Once They Have Made A Complaint? Customer Responses to Effective Service Recovery • Impact of Effective Service Recovery on Customer Loyalty • The Service Recovery Paradox Principles of Effective Service Recovery Systems • Make It Easy for Customer to Give Feedback • Enable Effective Service Recovery • How Generous Should Compensation Be? • Dealing with Complaining Customers Service Guarantees • The Power of Service Guarantees • How to Design Service Guarantees • Is Full Satisfaction the Best You Can Guarantee? • Is It Always Beneficial to Introduce a Service Guarantee? Discouraging Abuse and Opportunistic Customer Behavior • Seven Types of Jaycustomers • Consequences of Dysfunctional Customer Behavior • Dealing with Consumer Fraud

PART V: STRIVING FOR SERVICE EXCELLENCE

14. Improving Service Quality and Productivity Integrating Service Quality and Productivity Strategies • Service Quality, Productivity, and Profitability What is Service Quality? Identifying and Correcting Service Quality Problems • The Gaps Model in Service Design and Delivery • Key Ways to Close the Gaps in Service Quality Measuring Service Quality • Soft and Hard Service Quality Measures Learning from Customer Feedback • Key Objectives of Effective Customer Feedback Systems • Use a Mix of Customer Feedback Collection Tools • Analysis, Reporting, and Dissemination of Customer Feedback Hard Measures of Service Quality Tools to Analyze and Address Service Quality Problems • Root Cause Analysis: The Fishbone Diagram • Pareto Analysis • Blueprinting — A Powerful Tool for Identifying Fail Points Return on Quality • Assess Costs and Benefits of Quality Initiatives • Determine the Optimal Level of Reliability Defining and Measuring Productivity • Defining Productivity in a Service Context • Measuring Productivity • Service Productivity, Efficiency, and Effectiveness Improving Service Productivity • Generic Productivity Improvement Strategies • Customer-Driven Approaches to Improve Productivity • How Productivity Improvements Impact Quality and Value Integration and Systemic Approaches to Improving Service Quality and Productivity • Total Quality Management • ISO 9000 Certification • Six Sigma • Malcolm-Baldrige and EFQM Approaches • Which Approach Should a Firm Adopt?

15. Building a World Class Service Organization Creating a World-Class Service Organization • From Losers to Leaders: Four Levels of Service Performance • Moving to a Higher Level of Performance Customer Satisfaction and Corporate Performance

PART VI: CASE STUDIES Case 1 Sullivan Ford Auto World Case 2 Dr. Beckett’s Dental Office Case 3 Bouleau & Huntley: Crossselling Professional Services Case 4 Uber: Competing as Market Leader in the US versus Being a Distant Second in China Case 5 Banyan Tree: Designing and Delivering a Branded Service Experience Case 6 Kiwi Experience Case 7 The Accra Beach Hotel: Block Booking of Capacity during a Peak Period Case 8 Aussie Pooch Mobile Case 9 Shouldice Hospital Limited (Abridged) Case 10 Delwarca Software Remote Support Unit Case 11 Red Lobster Case 12 Raleigh & Rosse: Measure to Motivate Exceptional Service Case 13 Singapore Airlines: Managing Human Resources for Cost-effective Service Excellence Case 14 Dr. Mahalee Goes to London: Global Client Management Case 15 Royal Dining Membership Program Dilemma Case 16 Starbucks: Delivering Customer Service Case 17 LUX*: Staging a Service Revolution in a Resort Chain Case 18 KidZania: Shaping a Strategic Service Vision for the Future Case 19-32 Additional Cases Available for Educators

Glossary Name Index Subject Index

About the Authors

As a team, Christopher Lovelock and Jochen Wirtz provide a blend of skills and experience ideally suited to writing an authoritative and engaging services marketing text. Since first meeting in 1992, they’ve worked together on a variety of projects, including cases, articles, conference papers, and two books — Services Marketing: People, Technology, Strategy and Essentials of Services Marketing.

Jochen Wirtz is Professor of Marketing at the National University of Singapore (NUS), an international fellow of the Service Research Center at Karlstad University, Sweden, and academic scholar at the Cornell Institute for Healthy Futures (CIHF) at Cornell University, USA.

Professor Wirtz was the founding director of the dual degree UCLA–NUS Executive MBA Program (ranked fourth globally in the Financial Times 2015 EMBA rankings, and third in the EIU 2015 rankings) from 2002 to 2014, an Associate Fellow at the Saïd Business School, University of Oxford from 2008 to 2013, and a founding member of the NUS Teaching Academy (the NUS think-tank on education matters) from 2009 to 2015.

Professor Wirtz’s research focuses on service marketing and has been published in over 200 academic articles, book chapters, and industry reports. He is author or co-author of more than 10 books, including Services Marketing — People, Technology, Strategy (World Scientific, 8th edition, 2016), co-authored with Professor Lovelock, which has become one of the world’s leading services marketing textbook, translated and adapted for more than 26 countries and regions, and with sales of some 800,000 copies. His other books include Flying High in a Competitive Industry: Secrets of the World’s Leading Airline (McGraw Hill, 2009), Essentials of Services Marketing (Prentice Hall, 3rd edition, 2016), and Winning in Service Markets: Success Through People, Technology and Strategy (World Scientific, 2016).

In recognition of his excellence in teaching and research, Professor Wirtz has received

more than 40 awards, including the prestigious Academy of Marketing Science (AMS) 2012 Outstanding Marketing Teacher Award (the highest recognition of teaching excellence of AMS globally), and the top university-level Outstanding Educator Award at NUS. He was also the winner of the inaugural Outstanding Service Researcher Award 2010, and the Best Practical Implications Award 2009, both by Emerald Group Publications. He serves on the editorial review boards of more than 10 academic journals, including the Journal of Service Management, Journal of Service Research, Journal of Service Science, and Cornell Hospitality Quarterly and is also an ad hoc reviewer for the Journal of Consumer Research and Journal of Marketing. Professor Wirtz chaired the American Marketing Association’s biennial Service Research Conference in 2005 when it was held for the first time in Asia.

Professor Wirtz was a banker and took the banking exam at Chamber of Commerce and Industry in Munich. He has since been an active management consultant, working with international consulting firms, including Accenture, Arthur D. Little and KPMG, and major service firms in the areas of strategy, business development, and customer feedback systems.

Originally from Germany, Professor Wirtz spent seven years in London before moving to Asia. Today, he shuttles between Asia, the United States, and Europe. For further information, see www.JochenWirtz.com.

The late Christopher Lovelock was one of the pioneers of services marketing. He consulted and conducted seminars and workshops for managers all around the world, with a particular focus on strategic planning in services and managing the customer experience. From 2001 to 2008, he had been an adjunct professor at the Yale School of Management, where he taught services marketing in the MBA program.

After obtaining a B Com and an MA in economics from the University of Edinburgh, he worked in advertising with the London office of J. Walter Thompson Co., and then in corporate planning with Canadian Industries Ltd. in Montreal. Later, he earned an MBA from Harvard and a PhD from Stanford, where he was also a postdoctoral fellow.

Professor Lovelock’s distinguished academic career included 11 years on the faculty of the Harvard Business School and two years as a visiting professor at IMD in Switzerland. He has also held faculty appointments at Berkeley, Stanford, and the Sloan School at MIT, as well as visiting professorships at INSEAD in France and the University of Queensland in Australia.

http://www.JochenWirtz.com
Author or co-author of more than 60 articles, 100 teaching cases, and 27 books, Professor Lovelock saw his work translated into 16 languages. He served on the editorial review boards of the Journal of Service Management, Journal of Service Research, Service Industries Journal, Cornell Hospitality Quarterly, and Marketing Management, and was also an ad hoc reviewer for the Journal of Marketing.

Widely acknowledged as a thought leader in services, Professor Lovelock has been honored by the American Marketing Association’s prestigious Award for Career Contributions in the Services Discipline. This award has been renamed the SERVSIG Christopher Lovelock Career Contribution Award in his honor. His article with Evert Gummesson “Whither Services Marketing? In Search of a New Paradigm and Fresh Perspectives” won the AMA’s Best Services Article Award in 2005. Earlier, he received a best article award from the Journal of Marketing. Recognized many times for excellence in case writing, he has twice won top honors in the Business Week’s “European Case of the Year” Award.

About the Contributors of the Case Studies

Karla Cabrera is a senior researcher at the Service Management Research & Education Group at EGADE Business School, Tecnologico de Monterrey, Mexico.

Mark Colgate is a professor at University of Victoria, Canada.

Lorelle Frazer is a professor at Griffith University, Australia.

Roger Hallowell is affiliated professor of strategy at HEC Paris and former professor at Harvard Business School, US.

Christopher W. Hart is a former professor at Harvard Business School, US.

Loizos Heracleous is a professor at Warwick Business School, UK.

James L. Heskett is an Emeritus Professor at Harvard Business School, US.

Ron Kaufman is founder and chairman of UP! Your Service Pte. Ltd.

Sheryl E. Kimes is a professor at the School of Hotel Management, Cornell University, US.

Suzanne Lowe is President, Expertise Marketing LLC, US.

Michael Mahoney is a former writer at Harvard Business School, US.

Youngme Moon is Donald K. David Professor of Business Administration at Harvard Business School, US.

Paul E. Morrison is a professor at Boston University, US.

John A. Quelch is Senior Associate Dean and Lincoln Filene Professor of Business Administration at Harvard Business School, US.

Javier Renoso is the Chair of the Service Management Research & Education Group at EGADE Business School, Tecnologico de Monterrey, Mexico.

Roy D. Shapiro is a professor at Harvard Business School, US.

Robert Simons is a professor at Harvard Business School, US.

Christopher Tang is a UCLA Distinguished Professor and the Edward W. Carter Chair in Business Administration at the Anderson School of Management, UCLA, US.

Rohit Verma is a professor at School of Hotel Management, Cornell University, US.

Lauren K. Wright is a professor of marketing, California State College, Chico, US.

Preface

Services dominate the expanding world economy like never before, and technology continues to evolve in dramatic ways. Established industries and their often famous and old companies decline, and may even disappear, as new business models and industries emerge. Competitive activity is fierce, with firms often using new strategies and technologies to respond to changing customer needs, expectations, and behaviors. This book has been written in response to the global transformation of our economies to services. Clearly, the skills in marketing and managing services have never been more important!

Creating and marketing value in today’s increasingly service and knowledge-intensive economy requires an understanding of the powerful design and packaging of “intangible” benefits and products, high-quality service operations, and customer information management processes, a pool of motivated and competent frontline employees, building and maintaining a loyal and profitable customer base, and the development and implementation of a coherent service strategy to transform these assets into improved business performance. This textbook provides this knowledge. Specifically, its main objectives are to:

1. Provide an appreciation and understanding of the unique challenges inherent in the marketing, management, and delivery of service excellence at a profit. Readers are introduced to and have the opportunity to work with tools and strategies that address these challenges.

2. Develop an understanding of the “state of the art” of services marketing and management thinking.

3. Promote a customer service-oriented mind-set.

As the field of services marketing has evolved, so too has this book, with each successive edition representing a significant revision over its predecessor. The new eighth edition is no exception. You can be confident that it captures the reality of today’s world, incorporates recent academic and managerial thinking, and illustrates cutting-edge service concepts.

Preparing this new edition has been an exciting challenge. Services marketing, once a tiny academic niche championed by just a handful of pioneering professors, has become a thriving area of activity for both research and teaching. There’s growing student interest in taking courses in this field, which makes good sense from a career standpoint, as most business school graduates will be going to work in service industries.

WHAT’S NEW IN THIS EDITION? The eighth edition represents a significant revision. Its contents reflect ongoing developments in the service economy, dramatic developments in technology, new research findings, and enhancements to the structure and presentation of the book in response to feedback from reviewers and adopters.

New Structure, New Topics • Almost all chapters are now structured around an organizing framework that provides a pictorial overview of the chapter’s contents and line of argument.

• New applications of technology are integrated throughout the text, ranging from apps, M-commerce, and social networks, to robots, artificial intelligence, and biometrics.

• Each of the 15 chapters has been revised. All chapters incorporate new examples and references to recent research. Significant changes in chapter content are highlighted below.

• Chapter 1 “Creating Value in the Service Economy” now explores the nature of the modern service economy more deeply and covers B2B services, outsourcing and offshoring. The Service–Profit Chain, featured in Chapter 15 in the previous editions, was moved here to serve as a guiding framework for the book.

• Chapter 2 “Understanding Service Consumers” covers the post-consumption behaviors, including service quality, its dimensions and measurement (SERVQUAL), and how quality relates to customer loyalty. This was in Chapter 14 in the previous edition.

• Chapter 7 “Service Marketing Communications” is now tightly organized around the 5 Ws model, a new section on the services marketing communications funnel was added, and the coverage of new media (including social media, mobile, apps, and QR codes) is significantly expanded.

• Chapter 8 “Designing Service Processes” has a new section on emotionprints, and covers service blueprinting in more detail.

• Chapter 11 “Managing People for Service Advantage” has new sections on a service- oriented culture and how to build a climate for service, a section on effective leadership in service organization and leadership styles. Part of this content was previously covered in Chapter 15 in the previous editions.

• Chapter 14 “Improving Service Quality and Productivity” now integrates key concepts in the main body of the chapter instead of including them in the Appendix as seen in the previous editions. They are TQM, ISO 9000, Six Sigma and the Malcolm- Baldrige and EFQM.

• Chapter 15 “Building a World-Class Service Organization” was completely restructured to provide a recap and integration of key themes of this book. It now features an auditing tool to assess the service level of an organization. It emphasizes on the impact of customer satisfaction on long-term profitability and closes with a call to action.

FOR WHAT TYPES OF COURSES CAN THIS BOOK BE USED? This text is designed for advanced undergraduates, MBA and EMBA students. Services Marketing places marketing issues within a broader general management context. The book will appeal to both full-time students headed for a career in management and to EMBAs and executive program participants who are combining their studies with ongoing work in managerial positions.

Whatever a manager’s specific job may be, we argue that he or she has to understand and acknowledge the close ties that link the functions of marketing, human resource, and operations. With that in mind, we’ve designed this book so that instructors can make selective use of chapters and cases to teach courses of different lengths and formats in either services marketing or service management.

WHAT ARE THE BOOK’S DISTINGUISHING FEATURES?

Key features of this highly readable book include:

• A strongly managerial perspective, yet is rooted in solid academic research, complemented by memorable frameworks. Our goal is to bridge the all-too-frequent gap between theory and the real world.

• Text that is organized around an integrated framework that the reader immediately can relate to. The framework cascades across the entire book. Each chapter also provides a succinct chapter overview in pictorial form.

• Text that is clear, readable, and focused. • A global perspective, with examples carefully selected from America, Europe, and Asia.

• A systematic learning approach, with each chapter having clear learning objectives, an organizing framework providing a quick overview of the chapter’s contents and lines of argument, and chapter summaries in bullet form that condense the core concepts and messages of each chapter.

• Opening vignettes and boxed inserts within the chapters are designed to capture student interest and provide opportunities for in-class discussions. They describe significant research findings, illustrate practical applications of important service marketing concepts, and describe best practices by innovative service organizations.

We’ve designed this textbook to complement the materials found in traditional marketing management texts. Recognizing that the service sector of the economy can best be characterized by its diversity, we believe that no single conceptual model suffices to cover marketing-relevant issues among organizations ranging from huge international corporations (in fields such as airlines, banking, insurance, telecommunications, freight transportation, and professional services) to locally owned and operated small businesses such as restaurants, laundries, taxis, optometrists, and many business-to-business services. In response, the book offers a carefully designed “toolbox” for service managers, teaching students how different concepts, frameworks, and analytical procedures can best be used to examine and resolve the varied challenges faced by managers in different situations.

Acknowledgments

Over the years, many colleagues in both the academic and business worlds have provided us with valuable insights into the marketing and management of services through their publications, conference or seminar discussions, and stimulating individual conversations. In addition, both of us have benefited enormously from in- class and after-class discussions with our students and executive program participants.

We’re much indebted to those researchers and teachers who helped to pioneer the study of services marketing and management, and from whose work we continue to draw inspiration. Among them are John Bateson of Cass Business School; Leonard Berry of Texas A&M University; Mary Jo Bitner and Stephen Brown of Arizona State University; David Bowen of Thunderbird Graduate School of Management; Richard Chase of the University of Southern California; Bo Edvardsson of University of Karlstad; Pierre Eiglier of Université d’Aix-Marseille III; Raymond Fisk of the Texas State University; Christian Grönroos of the Swedish School of Economics in Finland; Stephen Grove of Clemson University, Evert Gummesson of Stockholm University; James Heskett and Earl Sasser of Harvard University; A. “Parsu” Parasuraman of University of Miami; Roland Rust of the University of Maryland; and Benjamin Schneider formerly of the University of Maryland. We salute, too, the contributions of the late Eric Langeard, Robert Johnston, and Daryl Wyckoff.

Although it’s impossible to mention everyone who has influenced our thinking, we particularly want to express our appreciation to the following: Tor Andreassen, Norwegian School of Management; Steve Baron of University of Liverpool; Ruth Bolton of Arizona State University; John Deighton, Theodore Levitt, and Leonard Schlesinger, all currently or formerly of Harvard Business School; Michael Ehret of Nottingham Trent University; Dominik Georgi of Lucerne School of Business; Loizos Heracleous of University of Warwick; Douglas Hoffmann of Colorado State University; Irene Ng of University of Warwick; Jay Kandampully of Ohio State University; Ron Kaufman of UP! Your Service College; Sheryl Kimes of Cornell University; Tim Keiningham of Rockbridge Associate; Jean-Claude Larréché of INSEAD; Jos Lemmink of Maastricht University; Kay Lemon of Boston College; David Maister of Maister Associates; Anna Mattila of Pennsylvania State University; Ulrich Orth of Kiel

University; Chiara Orsingher of University of Bologna; Anat Rafaeli of Technion- Israeli Institute of Technology; Ram Ramaseshan of Curtin University; Frederick Reichheld of Bain & Co; Jim Spohrer of IBM; Bernd Stauss formerly of Katholische Universität Eichstätt; Christopher Tang of UCLA; Rodoula Tsiotsou of University of Macedonia; Charles Weinberg of the University of British Columbia; Lauren Wright of California State University, Chico; George Yip of London Business School; Ping Xiao of the National University of Singapore; and Valarie Zeithaml of the University of North Carolina.

We’ve also gained important insights from our co-authors on international adaptations of Services Marketing, and are grateful for the friendship and collaboration of Guillermo D’Andrea of Universidad Austral, Argentina; Harvir S. Bansal of University of Waterloo, Canada; Jayanta Chatterjee of Indian Institute of Technology at Kanpur, India; Xiucheng Fan of Fudan University, China; Miguel Angelo Hemzo, Universidade de São Paulo, Brazil; Hean Tat Keh of the University of Queensland, Australia; Luis Huete of IESE, Spain; Laura Iacovone of University of Milan and Bocconi University, Italy; Denis Lapert of Telecom École de Management, France; Barbara Lewis of Manchester School of Management, UK; Xiongwen Lu of Fudan University, China; Paul Maglio of University of California, Merced, USA; Annie Munos, Euromed Marseille École de Management, France; Jacky Mussry of MarkPlus, Inc., Indonesia; Javier Reynoso of Tec de Monterrey, Mexico; Paul Patterson of the University of New South Wales, Australia; Sandra Vandermerwe of Imperial College, London, UK; and Yoshio Shirai of Takasaki City University of Economics, Japan.

It’s a pleasure to acknowledge the insightful and helpful comments of reviewers of this and previous editions: David M. Andrus of Kansas State University; Charlene Bebko of Indiana University of Pennsylvania; Michael L. Capella of Villanova University; Susan Carder of Northern Arizona University; Frederick Crane of the University of New Hampshire; Harry Domicone of California Lutheran University; Lukas P. Forbes of Western Kentucky University; Bill Hess of Golden Gate University; Ben Judd of the University of New Haven; P. Sergius Koku of Florida Atlantic University; Robert P. Lambert of Belmont University; Martin J. Lattman of Johns Hopkins University; Daryl McKee of Louisiana State University; Terri Rittenburg of the University of Wyoming; Cynthia Rodriguez Cano of Augusta State University; and Lisa Simon of California Polytechnic State University. They challenged our thinking and encouraged us to include many substantial changes. In addition, we benefited from the valued advice of Sharon Beatty of the University of Alabama and Karen Fox of Santa Clara University, who provided thoughtful suggestions for improvement.

It takes more than authors to create a book and its supplements. Warm thanks are due to

the editing and production team who worked hard to transform our manuscript into a handsome published text. They include Chua Hong Koon, Publishing Director; Karimah Samsudin, Desk Editor, Munira Alhad and Shirley Ng, Graphic Designers. Thanks also to Shanti Venkatesh, Associate Professor of Marketing at Loyola Institute of Business Administration, author of the eighth edition test bank.

Finally, we’d like to thank you, our reader, for your interest in this exciting and fast- evolving field of services marketing. If you have any feedback, interesting research, examples, stories, cases, videos, or any other materials that would look good in the next edition of this book, please contact us via www.JochenWirtz.com. We’d love to hear from you!

Jochen Wirtz Christopher Lovelock

http://www.JochenWirtz.com
The Services Marketing Framework

Figure I Organizing framework for services marketing

UNDERSTANDING SERVICE PRODUCTS, CONSUMERS, AND MARKETS

Part I lays the building blocks for studying services and learning how one can become an effective service marketer. It consists of the following three chapters:

CHAPTER 1

Creating Value in the Service Economy Chapter 1 highlights the importance of services in our economies. We also define the nature of services and how they create value for customers without transfer of ownership. The chapter highlights some distinctive challenges involved in marketing services and introduces the 7 Ps of services marketing.

The framework shown in Figure I on the facing page will accompany us throughout as it forms the basis for each of the four parts in this book. It describes systematically what is involved in developing marketing strategies for different types of services. The framework is introduced and explained in Chapter 1.

CHAPTER 2

Understanding Service Consumers Chapter 2 provides a foundation for understanding consumer needs and behaviors related to services. The chapter is organized around the three-stage model of service consumption that explores how customers search for and evaluate alternative services, make purchase decisions, experience and respond to service encounters, evaluate service performance, and finally, develop loyalty.