Services Marketing Integrating Customer Focus Across the Firm
Sixth Edition
Valarie A. Zeithaml University of North Carolina at Chapel Hill
Mary Jo Bitner Arizona State University
Dwayne D. Gremler Bowling Green State University
McGraw-Hill Irwin
Detailed Contents About the Authors Preface
iv
vii
PART1 FOUNDATIONS FOR SERVICES MARKETING 1 Chapter 1 Introduction to Services
2
What are Services? 3 Service Industries, Service as a Product, Customer Service, and Derived Service 4 Tangibility Spectrum 5 Trends in the Service Sector 5 Why Service Marketing? 6 Service-Based Economies 6 Service as a Business Imperative in Goods-Focused Businesses 8 Deregulated Industries and Professional Service Needs 9 Service Marketing Is Different 10 Service Equals Profits 10 Exhibit 1.1: Is the Marketing of Services Different? A Historical Perspective 11 But "Service Stinks " 12 Strategy Insight: Competing Strategically through Service 13 Service and Technology 14 New Service Offerings 14 New Ways to Deliver Service 15 Enabling Both Customers and Employees 15 Technology Spotlight: The Changing Face of Customer Service 16 Extending the Global Reach of Services 16 The Internet \s a Service 16 The Paradoxes and Dark Side of Technology and Service 17 Global Feature: The Migration of Service Jobs 18 Characteristics of Services 19 Intangibility 20 Heterogeneity 21
Simultaneous Production and Consumption 21 Perishability 22 Search, Experience, and Credence Qualities 23 Challenges and Questions for Service Marketers 24 Service Marketing Mix 24 Traditional Marketing Mix 25 Expanded Mix for Services 26 Staying Focused on the Customer 27 Exhibit 1.2: Southwest Airlines: Aligning People, Processes, and Physical Evidence 28
Summary 29 Discussion Questions 29 Exercises 29 Notes 30 Chapter 2 Conceptual Framework of the Book: The Gaps Model of Service Quality 33 The Customer Gap 35 The Provider Gaps 36 Provider Gap 1: the Listening Gap 36 Provider Gap 2: the Service Design and Standards Gap 37 Global Feature: An International Retailer Puts Customers in the Wish Mode to Begin Closing the Gaps 38 Provider Gap 3: the Service Performance Gap 40 Technology Spotlight: Technology's Critical Impact on the'Gaps Model of Service Quality 42 Provider Gap 4: the Communication Gap 44 Putting It All Together: Closing the Gaps 45 Strategy Insight: Using the Gaps Model to Assess an Organization's Service Strategy 46
Summary 48 Discussion Questions 48 Exercises 48 Notes 48
xvi Detailed Contents
PART 2
Customer Satisfaction
FOCUS ON THE CUSTOMER 49
What is Customer Satisfaction? 80 What Determines Customer Satisfaction? 81 National Customer Satisfaction Indexes 83 The American Customer Satisfaction Index 83 Outcomes of Customer Satisfaction 85 Service Quality 87 Outcome, Interaction, and Physical Environment Quality 87 Service Quality Dimensions 87 Global Feature: Importance of Service Quality Dimensions across Cultures 88 E-Service Quality 91 Service Encounters: The Building Blocks For Customer Perceptions 93 Service Encounters or Moments of Truth 93 Strategy Insight: Customer Satisfaction, Loyalty, and Service as Corporate Strategies 94 The Importance ofEncounters 95 Exhibit 4.1: One Critical Encounter Destroys 30-Year Relationship 97 Types of Service Encounters 98 Sources of Pleasure and Displeawsure in Service Encounters 99 Technology Spotlight: Customers Love Amazon 100 Exhibit 4.2: Service Encounter Themes 102 Technology-Based Service Encounters 103
Chapter 3
Customer Expectations of Service 50 Service Expectations 52 Types of Expectations 53 Global Feature: Global Outsourcing of Personal Services: What Are Customers' Expectations? 54 The Zone of Tolerance 54 Factors That Influence Customer Expectations of Service 57 Sources of Desired Service Expectations 57 Sources ofAdequate Service Expectations 59 Technology Spotlight: Customer Expectations of Airport Services Using Technology 60 Sources of Both Desired and Predicted Service Expectations 63 Strategy Insight: How Service Marketers Can Influence Customers' Expectations 65 Issues Involving Customers' Service Expectations 66 What Does a Service Marketer Do if Customer Expectations Are "Unrealistic"? 66 Exhibit 3.1: Service Customers Want the Basics 67 Should a Company Try to Delight the Customer? 68 How Does a Company Exceed Customer Service Expectations? 69 Do Customers' Service Expectations Continually Escalate? 71 How Does a Service Company Stay Ahead of Competition in Meeting Customer Expectations? 71
Summary 72 Discussion Questions Exercises 73 Notes 73
72
'
Chapter 4
Customer Perceptions of Service 76 Customer Perceptions 78 Satisfaction versus Service Quality 79 Transaction versus Cumulative Perceptions 79
Summary 105 Discussion Questions Exercises 106 Notes 106
80
105
PART 3
UNDERSTANDING CUSTOMER REQUIREMENTS 111 Chapter 5
Listening to Customers through Research 113 Using Customer Research to Understand Customer Expectations 115 Research Objectives for Services 115 Criteria for an Effective Service Research Program 116 Exhibit 5.1: Elements in an Effective Customer Research Program for Services 118
Detailed Contents xvii
Elements in an Effective Service Marketing Research Program 121 Complaint Solicitation 121 Technology Spotlight: Conducting Customer Research on the Web 122 Critical Incident Studies 123 Requirements Research 124 Relationship and SERVQUAL Surveys 125 Exhibit 5.2: SERVQUAL: A Multidimensional Scale to Capture Customer Perceptions and Expectations of Service Quality 126 Trailer Calls or Posttransaction Surveys 128 Service Expectation Meetings and Reviews 129 Process Checkpoint Evaluations 130 Market-Oriented Ethnography 130 Mystery Shopping 131 Customer Panels 132 Lost Customer Research 132 Future Expectations Research 132 Analyzing and Interpreting Customer Research Findings 133 Zones of Tolerance Charts 133 Strategy Insight: From Greeting Cards to Gambling, Companies Bet on Database Customer Research 134 Global Feature: Conducting Customer Research in Emerging Markets 136 Importance/Performance Matrices 136 Using Marketing Research Information 138 Upward Communication 138 Objectives for Upward Communication 138 Exhibit 5.3: Elements in an Effective Program of Upward Communication 139 Research for Upward Communication 139 Exhibit 5.4: Employees Provide Upward Communication at Cabela's, "World's Foremost Outfitter" 141 Benefits of Upward Communication 142 Summary 142 Discussion Questions 142 Exercises 143 ' Notes 143
Chapter 6 Building Customer Relationships
145
Relationship Marketing 147 The Evolution of Customer Relationships 147 Exhibit 6.1: A Typology of Exchange Relationships 149
Technology S,potlight: Customer Information Systems Help Enhance the Customer Relationship 150 The Goal of Relationship Marketing 152 Benefits for Customers and Firms 153 Relationship Value of Customers 156 Exhibit 6.2: Calculating the Relationship Value of a Quicken Customer 157 Customer Profitability Segments 157 Profitability Tiers—the Customer Pyramid 158 The Customer's View ofProfitability Tiers 159 Making Business Decisions Using Profitability Tiers 160 Relationship Development Strategies 160 Core Service Provision 160 Switch ing Barriers 161 Relationship Bonds 162 Global Feature: Developing Loyal Customers at Alliance Boots 166 Relationship Challenges 166 The Customer Is Not Always Right 166 Ending Business Relationships 169 Strategy Insight: "The Customer Is Always Right": Rethinking an Old Tenet 170 Summary 172 Discussion Questions 173 Exercises 173 Notes 174
Chapter 7 Service Recovery
179
The Impact of Service Failure and Recovery 180 Service Recovery Effects 181 Exhibit 7.1: The Internet Spreads the Story of Poor Service Recovery: "Yours is a Very Bad Hotel" 1 8 2 / The Service Recovery Paradox 184 How Customers Respond to Service Failures 185 Why People Do (and Do Not) Complain 185 Types of Customer Complaint Actions 187— Types of Complainers 187 Service Recovery Strategies: Fixing the Customer 188 Respond Quickly 189 Exhibit 7.2: Story of a Service Hero 190 Provide Appropriate Communication 191 Technology Spotlight: Cisco Systems— Customers Recover for Themselves 192
xviii Detailed Contents
Treat Customers Fairly 194 Exhibit 7.3: Fairness Themes in Service Recovery 195 Global Feature: Service Recovery across Cultures 196 Cultivate Relationships with Customers 197 Strategy Insight: Eliciting Complaints 198 Service Recovery Strategies: Fixing the Problem 198 Encourage and Track Complaints 198 Learn from Recovery Experiences 199 Learn from Lost Customers 200 Make the Service Fail-Safe—Do It Right the First Time! 201
Service Guarantees 201 Characteristics ofEffective Guarantees 202 Types of Service Guarantees 202 Benefits ofService Guarantees 204 Exhibit 7.4: Questions to Consider in Implementing a Service Guarantee 205 When to Use (or Not Use) a Guarantee 205
Switching Versus Staying Following Service Recovery 206 Summary 208 Discussion Questions 208 Exercises 209 Notes 209
PART 4 ALIGNING SERVICE DESIGN AND STANDARDS 215 Chapter 8 Service Innovation and Design
216
Challenges of Service Innovation and Design 218 Important Considerations for Service Innovation 219 Involve Customers and Employees 219 Global Feature: The Global Service Innovation Imperative 220 Employ Service Design Thinking and Techniques 220 Technology Spotlight: Facebook: A Radical Service Innovation 222 Types of Service Innovation 224 Service Offering Innovation 224 Innovating around Customer Roles 225 Innovation through Service Solutions 225
Stages in Service Innovation and Development 226 Front-End Planning 227 Strategy Insight: Strategic Growth through Services 230 Implementation 231 Exhibit 8.1: Service Innovation at the Mayo Clinic 232 Service Blueprinting: A Technique for Service Innovation and Design 234 What Is a Service Blueprint? 235 Blueprint Components 235 Service Blueprint Examples 23 7 Blueprints for Technology-Delivered SelfService 239 ' Reading and Using Service Blueprints 240 Building a Blueprint 241 Exhibit 8.2: Blueprinting in Action at ARAMARK Parks and Destinations 242 Exhibit 8.3: Frequently Asked Questions about Service Blueprinting 244
Summary 244 Discussion Questions 245 Exercises 245 Notes 246 Chapter 9 Customer-Defined Service Standards 250 Factors Necessary for Appropriate Service Standards 252 Standardization of Service Behaviors and Actions 252 Formal Service Targets and Goals 253 Customer-, Not Company-, Defined Standards 253 Strategy Insight: When Is the Strategy of Customization Better Than Standardization? 254 Types of Customer-Defined Service Standards 256 Hard Customer-Defined Standards 256 Exhibit 9.1: Examples of Hard CustomerDefined Standards 257 Technology Spotlight: The Power of Good Responsiveness Standards 258 Soft Customer-Defined Standards 259 Global Feature: Adjusting Service Standards around the Globe 260 Exhibit 9.2: Examples of Soft CustomerDefined Standards 262
Detailed Contents xix
Exhibit 9.3: Hard and Soft Standards for Service at Ford Motor Company 263 One-Time Fixes 264 Development of Customer-Defined Service Standards 264 Turning Customer Requirements into Specific Behaviors and Actions 264 Exhibit 9.4: Expected Behaviors for Service Encounters at John Robert's Spa 268 Developing Service Performance Indexes 2 73 Summary 273 Discussion Questions 274 Exercises 274 Notes 275
Chapter 10 Physical Evidence and the Servicescape 276 Physical Evidence 278 • What Is Physical Evidence? 278 How Does Physical Evidence Affect the Customer Experience? 279 Technology Spotlight: Virtual Servicescapes: Experiencing Services through the Internet 280 Types of Servicescapes 282 Servicescape Usage 282 Servicescape Complexity 283 Strategic Roles of the Servicescape 283 Strategy Insight: Strategic Positioning through Architectural Design 284 Package 284 Exhibit 10.1: Using Physical Evidence to Position a New Service 286 Facilitator 287 Socializer 287 Differentiator 288 Framework for Understanding Servicescape Effects on Behavior 288 The Underlying Framework 288 Exhibit 10.2: Servicescapes and Well-being in Health Care 289 Behaviors in the Servicescape 291 Internal Responses to the Servicescape 292 Exhibit 10.3: Social Support in "Third Places" 294 Environmental Dimensions of the Servicescape 296 Exhibit 10.4: Designing the Mayo Clinic Hospital 298
Guidelines for Physical Evidence Strategy 298 Recognize the Strategic Impact of Physical Evidence 298 Blueprint the Physical Evidence ofService 299 Global Feature: McDonald's Adapts Servicescapes to Fit the Culture 300 Clarify Strategic Roles of the Servicescape 302 Assess and Identify Physical Evidence Opportunities 302 Update and Modernize the Evidence 302 Work Cross-Functionally 303 Summary 303 Discussion Questions 304 Exercises 304 Notes 305
PART 5 DELIVERING AND PERFORMING SERVICE 309 Chapter 11 Employees' Roles in Service Delivery 311 Service Culture 312 Exhibiting Service Leadership 313 Developing a Service Culture 313 Global Feature: How Well Does a Company's Service Culture Travel? 314 Transporting a Service Culture 314 The Critical Role of Service Employees 315 The Service Triangle 317 Employee Satisfaction, Customer Satisfaction, and Profits 318 The Effect of Employee Behaviors on Service Quality Dimensions 319 Boundary-Spanning Roles 319 Emotional Labor 320 Sources of Conflict 321 Strategy Insight: Strategies for Managing Emotional Labor 322 Quality/Productivity Trade-Offs 324 Strategies for Delivering Service Quality through People 324 Hire the Right People 325 Technology Spotlight: How Technology Is Helping Employees Serve Customers More Effectively and Efficiently 326 Exhibit 11.1: Google Quickly Becomes a Preferred Employer in Its Industry 328
xx
Detailed Contents
Develop People to Deliver Service Quality 330 Exhibit 11.2: Potential Benefits and Costs of Empowerment 332 Provide Needed Support Systems 333 Retain the Best People 334 Customer-Oriented Service Delivery 336 Summary 338 Discussion Questions 338 Exercises 339 Notes 339 Chapter 12
Customers' Roles in Service Delivery 345 The Importance of Customers in Service Cocreation and Delivery 347 Customer Receiving the Service 347 Strategy Insight: Customer Cocreation of Value: The New Strategy Frontier 348 Fellow Customers 349 Customers 'Roles 351 Customers as Productive Resources 351 Exhibit 12.1: Client Coproduction in Business-to-Business Services 352 Customers as Contributors to Service Quality and Satisfaction 354 Exhibit 12.2: Which Customer (A or B) Will Be Most Satisfied? 355 Customers as Competitors 356 Global Feature: At Sweden's IKEA, Global Customers Cocreate Customized Value 357 Self-Service Technologies—The Ultimate in Customer Participation 358 A Proliferation ofNew SSTs 358 Customer Usage of SSTs 359 Success with SSTs 360 Strategies for Enhancing Customer Participation 360 Define Customers' Roles 360 , Technology Spotlight: Technology Facilitates Customer Participation in Health Care 362 Exhibit 12.3: Working Together, U.S. Utility Companies and Customers Conserve Energy 365 Recruit, Educate, and Reward Customers 365 Exhibit 12.4: Weight Watchers Educates and Orients New Members 367 Manage the Customer Mix 368
Summary 370 Discussion Questions Exercises 371 Notes 371
370
Chapter 13
Managing Demand and Capacity 375 The Underlying Issue: Lack of Inventory Capability 377 ' Capacity Constraints 379 Time, Labor, Equipment, and Facilities 380 Optimal versus Maximum Use of Capacity 380 Demand Patterns 381 The Charting ofDemand Patterns 381 Predictable Cycles 382 Random Demand Fluctuations 382 Demand Patterns by Market Segment 383 Strategies For Matching Capacity and Demand 383 Shifting Demand to Match Capacity 383 Global Feature: Cemex Creatively Manages Chaotic Demand for Its Services 384 Adjusting Capacity to Meet Demand 387 Strategy Insight: Combining Demand (Marketing) and Capacity (Operations) Strategies to Increase Profits 390 Combining Demand and Capacity Strategies 392 Yield Management: Balancing Capacity Utilization, Pricing, Market Segmentation, and Financial Return 392 Exhibit 13.1: Simple Yield Calculations: Examples from Hotel and Legal Services 393 Technology Spotlight: Information and Technology Drive Yield Management Systems 394 / Implementing a Yield Management System 394 Challenges and Risks in Using Yield Management 396 Waiting Line Strategies: When Demand and — Capacity Cannot Be Matched 397 Employ Operational Logic 397 Exhibit 13.2: Overflow in the ED: Managing Capacity Constraints and Excess Demand in Hospital Emergency Departments 398 Establish a Reservation Process 400 Differentiate Waiting Customers 401 Make Waiting More Pleasurable 402
Detailed Contents xxi
Summary 404 Discussion Questions Exercises 405 Notes 405
404
PART 6
MANAGING SERVICE PROMISES
409
Chapter 14
Integrated Service Marketing Communications 411 The Need for Coordination in Marketing Communication 413 Key Service Communication Challenges 415 Service Intangibility 415 Management of Service Promises 416 Management of Customer Expectations 416 Customer Education 417 Internal Marketing Communication 417 Five Categories of Strategies to Match Service Promises with Delivery 418 Address Service Intangibility 418 Strategy Insight: Google's Strategy Dominates Web Advertising and Communication 421 Exhibit 14.1: Service Advertising Strategies Matched with Properties of Intangibility 422 Manage Service Promises 425 Global Feature: Virgin Atlantic Airways 428 Manage Customer Expectations 429 Technology Spotlight: Grouping Customers Based on Online Activities 43.0 Manage Customer Education 432 Manage Internal Marketing Communication 434 Summary 437 Discussion Questions 437 Exercises 438 Notes 438 ,, " i
Chapter 15
Pricing of Services
440
Three Key Ways That Service Prices Are Different for Customers 442 Customer Knowledge of Service Prices 442 Exhibit 15.1: What Do You Know about the Prices of Services? 443
The Role ofNonmonetary Costs 445 Price as an Indicator of Service Quality 447 Approaches to Pricing Services 447 Cost-Based Pricing 448 Competition-Based Pricing 449 Strategy Insight: "Congestion Pricing" as a Strategy to Change Driving Behavior in Big Cities 450 Demand-Based Pricing 451 Global Feature: Unique Pricing around the World 452 Pricing Strategies That Link to the Four Value Definitions 455 Technology Spotlight: Dynamic Pricing on the Internet Allows Price Adjustments Based on Supply and Demand 456 Exhibit 15.2: Pricing for CustomerPerceived Value with Modular Service Pricing and Service Tiering 458 Pricing Strategies When the Customer Means " Value Is Low Price ". 460 Pricing Strategies When the Customer Means "Value Is Everything I Want in a Service " 462 Pricing Strategies When the Customer Means "Value Is the Quality I Get for the Price I Pay" 462 Pricing Strategies When the Customer Means "Value Is All That I Getfor All That I Give" 464 Summary 466 Discussion Questions 466 Exercises 467 Notes 467
PART 7
SERVICE AND THE BOTTOM LINE 469 Chapter 16
The Financial and Economic Impact of Service 470 — Service and Profitability: The Direct Relationship 472 Offensive Marketing Effects of Service: Attracting More and Better Customers 473 Exhibit 16.1: Customer Satisfaction, Service Quality, and Firm Performance 474
xxii Detailed Contents
Defensive Marketing Effects of Service: Customer Retention 476 Lower Costs 476 Volume ofPurchases 477 Price Premium 477 Word-of-Mouth Communication 477 Exhibit 16.2: Word-of-Mouth Communication and Customer Measurement: The Net Promoter Score 478 Customer Perceptions of Service Quality and Purchase Intentions 478 Exhibit 16.3: Questions That Managers Want Answered about Defensive Marketing 480 Exhibit 16.4: Service Quality and the Economic Worth of Customers: Businesses Still Need to Know More 482 The Key Drivers of Service Quality, Customer Retention, And Profits 483 Strategy Insight: Customer Equity and Return on Marketing: Metrics to Match a Strategic Customer-Centered View of the Firm 484 Company Performance Measurement: The Balanced Performance Scorecard 484 Technology Spotlight: CostEffective Service Excellence through Technology 487 Global Feature: Measurement of Customer Satisfaction Worldwide 488 Changes to Financial Measurement 488 Customer Perceptual Measures 489 Operational Measures 489 Innovation and Learning 489 Effective Nonfinancial Performance Measurements 489 Summary 491 Discussion Questions 492 Exercises 492 Note's 492
Cases
495
Casel Zappos.com 2009: Clothing, Customer Service, and Company Culture 495 By Frances X. Frei, Robin J. Ely, Laura Winig Case 2 Merrill Lynch: Supernova 516 By Rogelio Oliva, Roger Hallowell, Gabriel R. Bitran Case 3 United Breaks Guitars 537 By John Deighton, Leora Kornfeld Case 4 Michelin Fleet Solutions: From Selling Tires to Selling Kilometers 549 Case 5 ISS Iceland 563 Case 6 People, Service, and Profit at Jyske Bank 572 Case 7 JetBlue: High-Flying Airline Melts Down in Ice Storm 591 By Joe Brennan, Felicia Morgan Case 8 Using Services Marketing to Develop and Deliver Integrated Solutions at Caterpillar in Latin America 607 By Holger Pietzsch, Valarie A. Zeithaml
Photo Credits 620 Index 622
