Servuction model in service marketing

Services Marketing: Concepts, Strategies, and Cases, 4e by Hoffman and Bateson highlights sustainability, global and technological service issues.

Sustainability and Services in Action 1. The Origins and the Growth of “Green” 2. The Triple Bottom Line 3. Airline Industry Practices 4. The Top 10 Motivators for Consumers to Recycle 5. LEED Ratings: Process Standards in Green Technology 6. The Cost of Going Green 7. Starbuck’s Subtle Promotion about Its Environmental Mission 8. Colleges and Universities on the Cutting-edge of Creating Green Servicescapes 9. Florida’s Green Lodging Program

10. How Complicated Can It Be to Throw Garbage Away? 11. TerraPass: Enhancing Satisfaction with Social Conscience 12. Certified ‘Green’: Enhancing Perceptions of Service Quality 13. TreeHugger Has Issues with Delta Sky: The Green Issue 14. Being “Green” Increases Loyalty in Banking 15. Developing a “Green” Culture: Sustainable Business Practices for Hotels

Global Services in Action 1. Sweden’s ICEHOTEL: One Very Cool Experience! 2. Charity.com 3. Ski Dubai 4. Consumer Tipping Behavior: To Tip or Not to Tip—That Is the Question 5. DHL GlobalMail: International Post Made Easy 6. Ethnic Pricing…Is This Ethical? 7. Personal Selling Approaches around the World 8. An Extraordinary Servicescape in the Caribbean: The Katitche Point Great House 9. Dell Offshore Tech Support: Lost in Translation

10. Customer Service Expectations Vary among Cultures 11. Benchmarking Customer Satisfaction throughout the World 12. American versus European Expectations and Perceptions of Airline Service Quality 13. Service Failures and Recovery Strategies: A Chinese Perspective 14. Singapore Airlines Experiences Rare Backlash from Customers 15. International Considerations for Service Cultures

E-Services in Action 1. Trip advisor: A Traveler’s Best Friend 2. Game, Set, Match.com 3. Social Networking: The New Face of Personal Sources of Information 4. Self-check-out: Why Consumers Might Stay Away? 5. Verizon Enterprise Solutions Group: Teaming Up with Health Care 6. Turbocharged Software Sets Airline Pricing 75,000 Times a Day! 7. The Growth of Personal Communications via Social Media 8. Google.com’s Servicescape: “61, Getting a Bit Heavy, Aren’t We?” 9. Where Employees Go Online to Sound Off!

10. Mastering the Self-check-out Lane at the Grocery Store 11. Enhancing Online Customer Satisfaction 12. The Seven Dimensions of E-Qual 13. Who Done It? Customer Attributions for Online Service Failures 14. I Heart Zappos 15. Zappos’ Core Values that Drive Its Service Culture

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

Services Marketing Concepts, Strategies, & Cases

FOURTH EDITION

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

K. DOUGLAS HOFFMAN Professor of Marketing,

University Distinguished Teaching Scholar

Colorado State University

JOHN E. G. BATESON Independent Consultant

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To Brittain, Emmy, Maddy, and my parents Doug Hoffman

For Dori, Lorna, Jonathan, and Thomas John Bateson

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Preface

The primary objective of Services Marketing: Concepts, Strategies, & Cases is to provide materials that not only introduce the student to the field of services marketing, but also acquaint the student with specific customer service issues. In addition to traditional busi- ness knowledge, the business world now demands increasing employee competence in developing effective service processes, constructing meaningful servicescapes, customer satisfaction and service quality measurement, as well as service recovery skills that are essential in growing and sustaining the existing customer base.

Approach Following the same philosophical approach used in earlier editions, the fourth edition of Services Marketing: Concepts, Strategies, & Cases purposely examines the use of services marketing as a competitive weapon from a broadened perspective. Consequently, we view services marketing not only as a marketing tool for service firms, but also as a means of competitive advantage for those companies that market products on the tangible side of the product continuum. As a result, business examples used throughout the text reflect a wide array of firms representing the nine service economy supersectors, including education and health services, financial activities, government, information, leisure and hospitality, professional and business services, transportation and utilities, wholesale and retail trade, and other services—as well as firms that produce tangible products.

Ultimately, the service sector is one of the three main categories of a developed economy—the other two being industrial and agricultural. Traditionally, economies throughout the world tend to transition from an agricultural economy to an industrial economy (e.g., manufacturing, mining, etc.) to a service economy. The United Kingdom was the first economy in the modern world to make this transition. Several other coun- tries including the United States, Japan, Germany, and France have made this transition, and many more will join this group at an accelerated rate.

We continue to live in interesting times! The increased rate of transformation from an agricultural to a manufacturing to a service-based economy has generally been caused by a highly competitive international marketplace. Simply stated, goods are more amenable to international trade than services, thereby making them more vulnerable to competitive actions. In other words, countries that industrialized their economies first eventually come under attack by other countries that are newly making the transition from an agri- cultural to an industrial economy. These “newcomer” countries offer lower production costs (especially labor), which is attractive to industry. Consequently, as industrial sectors flow from one country to the next, the countries they abandon begin to rely more heavily on the growth of their service sectors as the mainstay of their economies. This whole pro- cess repeats itself over and over as other less-developed countries enter the fray, conse- quently facilitating the transformation from agriculture to industrial to service-based economies.

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Structure of the Book Services Marketing: Concepts, Strategies, & Cases is divided into three main sections.

Part I: An Overview of Services Marketing Part I concentrates on defining services marketing and discusses in detail the fundamen- tal concepts and strategies that differentiate the marketing of services from the marketing of tangible goods. The primary objective of Part I is to establish a core knowledge base that will be built upon throughout the remainder of the text.

Chapter 1, An Introduction to Services Marketing, provides just what it says—an intro- duction to the field of services marketing. It establishes the importance of the service sec- tor in the world economy and the need for services marketing education. Chapter 2, The Service Sector: Supersectors and Ethical Considerations, provides an overview of the ser- vice sector and focuses on the nine service industry supersectors and the most substantial changes taking place within the service sector. In addition, Chapter 2 takes an in-depth look at ethics in the service sector. Because of the differences between goods and services, unique opportunities arise that may encourage ethical misconduct. Chapter 3, Fundamen- tal Differences between Goods and Services, focuses more deeply on the differences be- tween goods and services—namely intangibility, inseparability, heterogeneity, and perishability—and their corresponding managerial implications. Possible solutions to mini- mize the negative consequences of these unique service characteristics are also discussed.

Thus far, Chapters 1, 2, and 3 introduce the fundamentals of the service experience, provide an overview of service industries and ethical considerations, and detail the un- ique challenges associated with the marketing of services. The remainder of this text is organized around the framework provided in Figure 3.5. The consumer must be at the heart of services marketing, and Chapter 4, Services Consumer Behavior, focuses on building your understanding of the behavior of service consumers as they select service providers and evaluate their satisfaction with the service they have received. Chapter 4 provides concepts and frameworks that permeate the rest of this book as service firms adapt their marketing mixes to reflect the changing needs of their customers.

Part II: The Tactical Services Marketing Mix One of the most basic ideas in marketing is the marketing mix. The marketing mix re- presents the levers that the organization controls. These levers can be used to influence consumers’ choice processes as well as their evaluation of service satisfaction. The tradi- tional marketing mix is often expressed as the four Ps—product, place, price, and pro- motion. As Figure 3.5 illustrates, due to the fundamental differences between goods and services, the services marketing mix can be redefined and expanded, offering the three additional marketing mix variables of process, the physical environment, and people.

Given the importance of the services marketing mix, Part II of this text focuses on The Tactical Services Marketing Mix, spotlighting the marketing mix variables that must be the most modified when competing in service marketing environments. More specifically, Chapter 5 focuses on The Service Delivery Process; Chapter 6 examines The Pricing of Ser- vices; Chapter 7 investigates Developing the Service Promotion Strategy; Chapter 8 addresses Managing the Firm’s Physical Evidence; and Chapters 9 and 10 explore the “people issues” surrounding services marketing, including People as Strategy: Managing Service Employees and People as Strategy: Managing the Service Consumer, respectively.

Part III: Assessing and Implementing Successful Service Strategies Marketing’s role with the rest of the organization is the theme for Part III of the book, which focuses on Assessing and Implementing Successful Service Strategies. Marketing is at the heart of each of these strategies, but their execution is dependent on harnessing all of the functions: Operations, Human Resources and Marketing. As such, Chapter 11, Defining and Measuring Customer Satisfaction, expands the consumer behavior chapter to explore

Preface v

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how it is possible to satisfy a customer in a particular service experience and how to mea- sure and manage satisfaction. Chapter 12, Defining and Measuring Service Quality, builds upon Chapter 11 and increases our understanding of how consumers evaluate services and the longer-term concept of service quality. Due to the complexity of the various rela- tionships that comprise a typical service encounter, service failures are inevitable; but because of inseparability, it is often possible to recover from a failure situation during the service encounter. Chapter 13 discusses how to successfully master the art of Complaint and Service Recovery Management.

Given the current competitive situation among many service firms, Chapter 14 deals with Customer Loyalty and Retention as an important strategy for service firms to consider seriously. Finally Chapter 15, Pulling the Pieces Together: Creating a World-Class Service Culture, examines the role of marketing within the service organization. It juxtaposes the industrial management model and the market-focused model, and shows how important the latter is for a service business. This final chapter also discusses the key components of creating a world-class service culture.

What’s New in the Fourth Edition? New 15 Chapter Version: The fourth edition of Hoffman and Bateson has been stream- lined to fit perfectly with semester or quarter university schedules. As a result of this revi- sion, Hoffman and Bateson (4e) provides an effectively integrated service marketing textbook that incorporates online, global, sustainability, and ethical considerations within one text while providing the latest in service marketing concepts and practices.

New Opening Chapter Quotes: Every chapter begins with a managerially oriented, thought-provoking quote directly pertinent to the chapter’s content. Quotes such as “Washrooms will always tell if your company cares about its customers”; and “The bitter- ness of poor quality is remembered long after the sweetness of low price has faded from memory” set the practical application tone for each chapter.

Revised Learning Objectives: Learning objectives establish the framework for every chapter, enabling instructors to more effectively organize their class lectures. In addition, past students have found the learning objectives useful for organizing class notes as they study for essay-oriented exams.

Significantly Revised Chapters: Every chapter has been updated and/or significantly revised to deliver the latest in service marketing concepts and practices. Most signifi- cantly, chapters pertaining to the introduction of service marketing, managing employees, managing service customers, implementing service recovery programs, understanding ser- vice supersectors and ethical considerations, and creating a world-class service culture have undergone the greatest transformations.

New Opening Vignettes: Every chapter opens with a brand new vignette which spot- lights service issues in real companies. These real-life situations draw readers in and set the stage for the chapter topics. The vignettes represent a variety of firms, as well as rele- vant customer service issues, including: Netflix, Ticketmaster, Frontier Airlines, Vail Re- sorts, Harrah’s, Google, Geico, “Dinner in the Sky”, and RateMyProfessor.com.

Introducing Sustainability and Services in Action Box Features: Every chapter con- tains a new box feature dedicated to Sustainability and Services in Action. As perhaps the first services marketing textbook to incorporate sustainability throughout the text, Hoffman and Bateson specifically address sustainable services marketing practices across a variety of industries throughout the globe. Despite the intangible nature of service pro- ducts, the companies that produce these services are among the world’s largest consumers of the earth’s natural resources. Industries and topics include: hotels, banking, airlines, restaurants, universities, LEED rating systems, the cost of going green, TerraPass, Tree- Hugger, consumer motivations to recycle, the triple bottom line, and more.

vi Preface

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Revised Global Services in Action Box Features: In response to the growth of service economies throughout the world, Hoffman and Bateson (4e) provides box features of in- ternational services marketing practices in every chapter. These features demonstrate the often subtle adjustments to international services marketing strategy that are necessary to become a world-class service organization. Companies and concepts featured include: Ski Dubai, Katitche Point Great House, Singapore Airlines, ethnic pricing, Chinese perspec- tives on service failures, personal selling approaches around the world, international con- siderations for creating world-class service cultures, and many more.

Revised E-Services in Action Box Features: Featured in every chapter, E-Services in Action boxes highlight the dynamic nature of online service marketing practices. Exam- ples of companies and topics include: Zappos.com; Match.com; Google.com; social media sites such as Facebook, Twitter, and LinkedIn; online airline pricing; and the ins and outs of self-check-out options.

Revised End-of-Chapter Review Questions: Every chapter concludes with 10 review questions that are intentionally written to further reinforce students’ understanding and application of chapter content. Answers for review questions are provided in the Instruc- tor’s Manual for adopters.

Revised Marginal and End-of-Chapter Glossaries: Key terms, provided in every chapter, are highlighted within the text and defined in the adjacent margin. For student study purposes, key terms are again presented collectively at the end of each chapter in order of appearance and defined in the end-of-chapter glossary.

New End-of-Chapter Cases: The fourth edition of Hoffman and Bateson contains a new set of end-of-chapter cases that further illustrate, deepen, and extend the concepts developed in each chapter. These cases, purposely brief in nature but long on application and representing a variety of service industries, provide students with an opportunity to further internalize services marketing concepts. Answers for end-of-chapter cases are pro- vided in the Instructor’s Manual for adopters.

New YouTube Video Library: Especially prepared for adopters, Hoffman and Bateson (4e) provides over 50 video links that illustrate key service concepts that are cross refer- enced by chapter. The videos, a mix of humorous and serious, bring services marketing practices alive in the classroom, creating a much more interactive atmosphere for learning.

Updated Instructors Manual: The updated Instructors Manual provides updated chapter outlines, PowerPoint slides, the answers to all end-of-chapter review questions and cases, as well as an updated test bank.

Instructors’ Resources The instructor resources for Services Marketing: Concepts, Strategies, & Cases, 4e provide a variety of valuable resources for leading effective classroom discussions and assessing student learning. The following instructor resources are available for this text:

Instructor’s Resource CD-ROM The Instructor’s Resource CD-ROM includes the Instructor’s Manual, the Test Bank, PowerPoint Lecture Slides, and Examview.

• The Instructor’s Manual for Services Marketing: Concepts, Strategies, & Cases, 4e includes a summary of the goals of each chapter, detailed lecture outlines, key terms and definitions, answers to discussion questions, case teaching notes, and other re- sources to reduce lecture preparation time.

• The Test Bank has been expanded to include an abundant number of multiple-choice questions and new short answer essay questions.

• PowerPoint lecture slides highlight the key concepts of each chapter.

Preface vii

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• ExamView® (Windows/Macintosh) Computerized Testing allows the instructor to create, deliver, and customize tests in minutes with this easy-to-use assessment and tutorial system.

Instructor Support Website The Instructor Support website provides access to downloadable supplements such as Instructor’s Manual, Test Bank, and PowerPoint Slides. The URL for the Instructor Support website is www.cengage.com/marketing/hoffman.

Student Resources Student Support Website The Student Support Website (www.cengage.com/marketing/hoffman) enriches the learning experience with a variety of interactive tools and web resources such as Flash Cards, Interactive Quizzes, PowerPoint slides, and more.

Acknowledgements We would like to extend our heartfelt thanks to the good folks at Cengage, many of whom we have had the pleasure of knowing for a number of years through our other text pro- jects. Special thanks to Jack Calhoun, Vice President of Editorial Business; Melissa S. Acuña, Editor-in-Chief; Mike Roche, Executive Acquisitions Editor; and Daniel Noguera, Developmental Editor for generating and maintaining the level of support and enthu- siasm associated with this project throughout the entire process.

Additional thanks are extended to Mary Stone, Project Manager; Stacy Shirley, Senior Art Director; Deanna Ettinger, Photo Manager; Jaime Jankowski, Photo Researcher; John Rich, Media Editor; Miranda Klapper, Frontlist Buyer; Mardell Glinski-Schultz, Text Per- missions Manager, and everyone at PreMediaGlobal for putting the project together–no small task!

We would also like to thank Holly Hapke of University of Kentucky for revising the Instructor’s Manual, Test Bank, and PowerPoint Slides. Thank you, Holly!

Special thanks to Colorado State University Honor Students Shawna Strickland and Ashley Tevault for their contributions to the chapter opening vignettes and Services in Action Box features. It was a great experience to involve students in the development of this fourth edition. Good luck to both of you as you begin your respective masters pro- grams abroad!

Finally, we would also like to thank the Cengage sales force for supporting this project. We truly appreciate your efforts in bringing this package to the marketplace and we offer our assistance in support of your efforts.

These first three editions have benefited greatly from the quality of reviewers’ com- ments. We are very appreciative of the insightful comments of the following colleagues:

Nancy Sirianni, Arizona State University Nadia Pomirleanu, University of Central Florida Doug Cords, California State University Melissa St. James, California State University Olivia Lee, Saint Cloud State University Kim Nelson, University of Arizona Ronald Goldsmith, Florida State University Mohan Menon, University of South Alabama

viii Preface

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Cheryl Brown, University of West Georgia Bacy Dong, University of Missouri Roxanne Stell, Northern Arizona University

In closing, we hope that you enjoy the book and your services marketing class. It will likely be one of the most practical courses you will take during your college career. Edu- cation is itself a service experience. As a participant in this service experience, you are ex- pected to engage in class discussions. Take advantage of the opportunities provided to you during this course, and become an integral component of the education production pro- cess. Regardless of your major area of study, the services marketing course has much to offer.

We would sincerely appreciate any comments or suggestions you care to share with us. We believe that this text will heighten your sensitivity to services; and because of that be- lief, we leave you with this promise: We guarantee that after completing this book and your services marketing course, you will never look at a service experience in the same way again. This new view will become increasingly frustrating for most of you, as you will encounter many experiences that are less than satisfactory. Learn from these negative experiences, relish the positive encounters, and use this information to make a difference when it is your turn to set the standards for others to follow. As apostles of services mar- keting, we could ask for no greater reward.

K. Douglas Hoffman Professor of Marketing

University Distinguished Teaching Scholar

Marketing Department Colorado State University

Fort Collins, Colorado 80523 Doug.Hoffman@colostate.edu

John E. G. Bateson The Hale, Wendover, Bucks,

HP22 6QR United Kingdom

john@johnbateson.net

Preface ix

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About the Authors

K. Douglas Hoffman is Professor of Marketing, Everitt Companies Teaching Scholar, and University Distinguished Teaching Scholar at Colorado State University. He received his BS from The Ohio State University, and his MBA and DBA from the University of Kentucky. Doug’s teaching experience at the undergraduate and graduate levels spans nearly 25 years, during which he held tenure track positions at Colorado State University, the University of North Carolina at Wilmington, and Mississippi State University. In addition, Doug has taught as a visiting professor at the Helsinki School of Business and Economics (Helsinki, Finland), the Institute of Industrial Policy Studies (Seoul, South Korea), Thammasat University (Bangkok, Thailand), and Cornell-Nanyang Technological University (Singapore).

Professor Hoffman is an accomplished scholar in the services marketing area. In addi- tion, he has written numerous journal and conference proceedings articles on teaching scholarship that have appeared in a variety of publication outlets. His teaching scholarship has also expanded into the co-authorship of three textbooks, including Services Marketing: Concepts, Strategies, & Cases (4e) published by Cengage. He has received numerous teach- ing awards at the college, university, and national discipline levels, including the presti- gious Board of Governors Excellence in Undergraduate Teaching Award. He was also named University Distinguished Teaching Scholar in 2007—a lifetime appointment. Pro- fessor Hoffman was named editor of Marketing Education Review in 2010.

Doug’s current research and consulting activities are primarily in the areas of sales/ service interface, customer service/satisfaction, service failure and recovery, and services marketing education.

John E. G. Bateson is an independent consultant and company chairman. Previously, he was Group Chief Executive of the SHL Group, the global leader in psychometric testing for jobs. SHL was listed on the London Stock Exchange. In 2006, Dr Bateson lead a man- agement buyout of the company. He was a senior vice president with Gemini Consulting and a Member of the Group Executive Committee of the Cap Gemini Group. He was as- sociate professor of marketing at the London Business School, England, and a visiting as- sociate professor at the Stanford Business School. Prior to teaching, he was a brand manager at Lever Brothers and marketing manager at Philips.

Dr. Bateson holds an undergraduate degree from Imperial College, London, a master’s degree from London Business School, and a doctorate in marketing from the Harvard Business School. He has published extensively in services marketing literature, including the Journal of Marketing Research, Journal of Retailing, Marketing Science, and Journal of Consumer Research. He is also the author of Managing Services Marketing: Text and Read- ings (South-Western) and Marketing Public Transit: A Strategic Approach (Praeger).

Dr. Bateson was actively involved with the formation of the services division of the American Marketing Association. He served on the Services Council for four years, and has chaired sessions of the AMA Services Marketing Conference. He also serves on the steering committee of the Marketing Science Institute.

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Contents in Brief

Preface iv About the Authors x

PART I An Overview of Services Marketing 1 CHAPTER 1 An Introduction to Services 2

CHAPTER 2 The Service Sector: Supersectors and Ethical Considerations 30

CHAPTER 3 Fundamental Differences Between Goods and Services 55

CHAPTER 4 Services Consumer Behavior 84

PART II The Tactical Services Marketing Mix 109 CHAPTER 5 The Service Delivery Process 110

CHAPTER 6 The Pricing of Services 142

CHAPTER 7 Developing the Service Communication Strategy 168

CHAPTER 8 Managing the Firm’s Physical Evidence 198

CHAPTER 9 People as Strategy: Managing Service Employees 227

CHAPTER 10 People as Strategy: Managing Service Consumers 258

PART III Assessing and Implementing Successful Service Strategies 285

CHAPTER 11 Defining and Measuring Customer Satisfaction 286

CHAPTER 12 Defining and Measuring Service Quality 316

CHAPTER 13 Complaint and Service Recovery Management 345

CHAPTER 14 Customer Loyalty and Retention 375

CHAPTER 15 Pulling the Pieces Together: Creating a World-Class Service Culture 406

Glossary 434 Index 448

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Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

PART I An Overview of Services Marketing

C H A P T E R 1

An Introduction to Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Introduction 3 What Is a Service? 4 Framing the Service Experience: The Servuction Model 8 Why Study Services? 13 Summary 20 CASE 1: The Twins’ First Service Encounter 23

C H A P T E R 2

The Service Sector: Supersectors and Ethical Considerations . . . . . . . . . . . . . . . . . . . . 30 Introduction 31 What Is the Service Economy? 32 Ethical Considerations for Services Marketers 42 What Are Ethics? 42 The Opportunity for Ethical Misconduct in Services Marketing 43 Issues That Create Ethical Conflict 46 The Effects of Ethical Misconduct 48 Controlling Ethical Decision Making 49 Summary 50 CASE 2: The Conundrum: Sears Auto Centers 53

C H A P T E R 3

Fundamental Differences Between Goods and Services . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Introduction 56 Intangibility: The Mother of All Unique Differences 57 Inseparability: The Interconnection of Service Participants 63 Heterogeneity: The Variability of Service Delivery 68 Perishability: Balancing Supply and Demand 71 The Structure of This Text 77 Summary 79 CASE 3: Online Air Travel: Expedia, Orbitz, and Travelocity Lead the Pack 82

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C H A P T E R 4

Services Consumer Behavior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Introduction 85 The Consumer Decision Process: An Overview 87 Special Considerations Pertaining to Services 93 Summary 102 CASE 4: United Attempts to Crack the Non-business Market 106

PART II The Tactical Services Marketing Mix

C H A P T E R 5

The Service Delivery Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 Introduction 112 Stages of Operational Competitiveness 112 Marketing and Operations: Balance Is Critical 116 In a Perfect World, Service Firms Would Be Efficient 118 Applying Efficiency Models to Service Firms 120 The Art of Blueprinting 126 Blueprinting and New-Product Development: The Roles of Complexity and Divergence 134 Summary 136 CASE 5: Build-A-Bear Workshops: Calculating the Service Cost per Bear 139

C H A P T E R 6

The Pricing of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Introduction 143 What Does It Mean to Provide Value? 144 Special Considerations of Service Pricing 146 Emerging Service Pricing Strategies 160 Some Final Thoughts on Pricing Services 163 Summary 163 CASE 6: MDVIP: Become a Priority, Not Just a Patient 166

C H A P T E R 7

Developing the Service Communication Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Introduction 169 Managing the Service Communication Process 171 Special Challenges Associated with the Service Communications Strategy 180 Specific Guidelines for Developing Service Communications 182 Developing Communication Strategies for Professional Service Providers 189 Summary 193 CASE 7: Developing a Communication Strategy: Ultimate Escapes 196

Contents xiii

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C H A P T E R 8

Managing the Firm’s Physical Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Introduction 199 The Strategic Role of Physical Evidence 200 The SOR Model 204 The Development of Servicescapes 206 Managing the Senses When Creating Servicescapes 213 Summary 221 CASE 8: Developing an Orthodontic Servicescape: Dr. Crane’s Dilemma 224

C H A P T E R 9

People as Strategy: Managing Service Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Introduction 229 The Importance of Service Personnel 231 The Natural Stresses & Strains on Contact Service Personnel 233 Unleashing Service with the Right Climate 235 The Role of Management 249 Information Technology and the Service Provider 249 Summary 252 CASE 9: Recruitment Cost Savings in the Gaming Industry 255

C H A P T E R 1 0

People as Strategy: Managing Service Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258 Introduction 258 Expert and Novice Consumers as Part of the Production Process 260 Consumer Performance and Operational Efficiency 260 Consumer Performance and Information Technology 261 Consumer Satisfaction and Consumer Performance 264 The Theatrical Analogy 265 Managing Consumer Performance Scripts 266 Managing Consumer Service Perceptions 271 Consumer Inseparability and the Role of Marketing and Operations 275 Summary 278 CASE 10: You Decide How Much Meals Are Worth, Restaurants Tell Customers 282

PART III Assessing and Implementing Successful Service Strategies

C H A P T E R 1 1

Defining and Measuring Customer Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 Introduction 288 The Importance of Customer Satisfaction 288 Measuring Customer Satisfaction 293 Understanding Customer Satisfaction Ratings 295 Customer Satisfaction: How Good Is Good Enough? 301 Does Customer Satisfaction Translate into Customer Retention? 303

xiv Contents

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Customer Satisfaction: A Closer Look 305 Summary 312 CASE 11: The Crestwood Inn 314

C H A P T E R 1 2

Defining and Measuring Service Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 Introduction 318 What Is Service Quality? 319 Diagnosing Failure Gaps in Service Quality 321 Measuring Service Quality: The SERVQUAL Measurement Scale 327 Service Quality Information Systems 334 Summary 339 CASE 12: Service Quality at the Remington Hotel 342

C H A P T E R 1 3

Complaint and Service Recovery Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345 Introduction 346 The Psychology of Customer Complaining Behavior 348 Developing a Service Recovery Management Program 355 The Art of Service Recovery: Basic Rules of Thumb 364 Summary 366 CASE 13: Part I: Is This Any Way to Run an Airline? 370 CASE 13: Part II: World Airline’s Response 373

C H A P T E R 1 4

Customer Loyalty and Retention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Introduction 376 What Is Customer Loyalty? 377 What Is Customer Retention? 382 The Benefits of Customer Retention 385 Customer Retention Programs 389 Defection Management: Developing a Zero Defection Culture 394 Summary 400 CASE 14: The Mandalay Bay Conundrum 403

C H A P T E R 1 5

Pulling the Pieces Together: Creating a World-Class Service Culture . . . . . . . . . . . 406 Introduction 407 Obstacles to World-Class Service: Departmentalization and Functionalism 408 Developing a Service Culture 418 Strategies that Facilitate Cultural Change 425 Summary 430 CASE 15: Assessing Your College’s Culture: Go for a Culture Walk 432

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448

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Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

PART I AnOverview of Services Marketing

Chapter 1 An Introduction to Services Chapter 2 The Service Sector: Supersectors and Ethical Considerations Chapter 3 Fundamental Differences Between Goods and Services Chapter 4 Services Consumer Behavior

Services Marketing: Concepts, Strategies and Cases is divided into three main sections: • Part I: An Overview of Services Marketing (Chapters 1–4); • Part II: The Tactical Services Marketing Mix (Chapters 5–10); and • Part III: Implementing Successful Service Strategies (Chapters 11–15)

Part I, An Overview of Services Marketing, concentrates on defining services market- ing and discusses in detail the fundamental concepts and strategies that differentiate the marketing of services from the marketing of tangible goods. Part I also introduces the service supersectors and discusses ethical issues as they relate to the field of ser- vices marketing. Finally, Part I concludes with a discussion pertaining to how consu- mers of services make purchase decisions, focusing once again on the primary differences between goods and services. The primary objective for Part I is to establish a core knowledge base that will be built upon throughout the remainder of this text.

The marketing of services differs from the marketing of goods. The bundle of benefits delivered to customers is derived from the service experience that is carefully created by the service organization.

Ro be rt Be ck /S po rts

Ill us tra te d/ Ge tty

Im ag es

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C H A P T E R 1 An Introduction to Services

This chapter provides an introduction to the field of services marketing. As such, this chapter introduces the basic differences between goods and ser- vices and highlights the importance of managing the customer’s overall service experience. In addition, this chapter establishes the importance of the service sector in the global econ- omy, introduces the concept of technologically-based e-services, and discusses the need to develop sustain- able service business practices.

“ S T O P T R Y I N G T O B E

P E R F E C T A N D S T A R T

B E I N G R E M A R K A B L E ! ”

Seth Godin has written several terrific books about how busi- nesses can set themselves apart from the competition. Two per- sonal favorites are The Purple Cow and The Big Moo. The Purple Cow was inspired by a drive through the French countryside. Seth noted the beauty of the scenery that was populated with equally beautiful dairy cows. However, after seeing the same sights hour after hour as they were being repeated over and over again, the drive began to get a bit monotonous. Seth thought “what would truly be remarkable would be to see a ‘purple cow.’” Clearly, a purple cow would truly stand out from the crowd!