CHARACTERISTICS OF A SERVICE

There are five characteristics to a service:

 Lack of ownership
 Intangibility
 Inseparability
 Perishability
 Heterogeneity

Each of these need to be taken into account when marketing a service.

Lack of Ownership

You can not own a service and you can not store a service like you can store a product. Services
are used or hired for a period of time. For example when you buy an aeroplane ticket to fly to
the USA, you are buying a service which will start at the beginning of the flight and finish at the
end of the flight. You can not take the aeroplane flight home with you.

Intangibility

You cannot hold or touch a service unlike a product. This is becuase a service is something
customers experience and experiences are not physical products.

Inseparability

Services cannot be separated from service providers. A product can be taken away from the
producer but a service can not be taken away as it involves the service provider or its
representatives doing something for the customer. For example a company selling ironing
services needs the company to iron the clothes for you.

Perishability

Services last a specific time and cannot be stored like a product for later use. For example an
interior designer will design a property once. If you would like to redesign the house you will
need to purchase the service again.
Heterogeneity

Firms have systems and procedures to ensure that they provide a consistent service but it is
very difficult to make each service experience identical. For example two identical plane
journeys may feel different to the passengers due to circumstances beyond the airline's control
such as weather conditions or other passengers on the plane.

7Ps OF SERVICE MARKETING

When it comes to marketing a service it can at times be more challenging than marketing a
product. You are not selling something that is tangible; you are in fact selling the invisible.

When selling a service the customer experience is extremely important to closing the deal and
marketing effectively. The experience has an impact on the perceived value of the service.

Services also tend to have the reputation built on one person. The people involved in selling
and performing the service have the ability to make or break a company's reputation. It's
harder to do damage control for service companies, which means you must always be on your
game and your reputation must remained untarnished and pristine.

Consumers often find it more difficult to compare service vendors. They can not touch or feel
the product, rather they have to trust that the service will be performed as promised. How can
you help your consumers compare you to other vendors?

A service can not be returned. If a service is purchased, but does not live up to the consumers
expectation they can not return it for a new product. This costs the consumer time and as
individuals our we often few our time as more valuable than money.

How do you market a service company?

Keep in mind that in traditional marketing we have the 4 Ps. When it comes to service
marketing we add three more.

Traditional marketing components include:

 Product
 Price
 Place
 Promotion

When it comes to marketing services you add three more components to consider. They
include:
People

All people involved either directly or indirectly of the consumption of a service is important.
People can add a significant value to a service offering. People sell the service and either make
or break the marketing of the services you offer. It's time to take a look at the "face" of your
service and evaluate.

PhysicalEvidence

The way that service is delivered needs to be communicated and followed through. You are
creating an intangible experience so communication and documentation is the only physical
evidence you have to share with your consumer. Make sure you are doing enough of it.

Proces

Procedure and flow of activities of how services are consumed is an essential element to your
strategy in marketing a services. Everything must run smoothly to keep the trust of your
consumer.

By developing your 4 Ps of marketing and enhancing them with the three mentioned above you
can successfully market your service even though you are selling the invisible.

Basic Differences Between Goods and Services

Every product—a term used in this book to describe the core output of any type of industry—
delivers benefits to the customers who purchase and use them. Goods can be described as
physical objects or devices and services are actions or performances. Early research into
services sought to differentiate them from goods, focusing particularly on four generic
differences, referred to as intangibility, heterogeneity (or variability), perishability of output,
and simultaneity of production and consumption. Although these characteristics are still cited,
they have been criticized for over-simplifying the real world environment.

It's important to note that in identifying these differences we're still dealing with
generalizations that do not apply equally to all services. Service processes are classified into
distinct categories, each of which presents somewhat different challenges for marketers and
other managers. We also need to draw a distinction between marketing of services and
marketing goods through service. In the former, it's the service itself that is being sold and in
the latter, service is added—usually free of charge—to enhance the appeal of a manufactured
product. Now, let's examine each of the nine differences in more detail.

Customers Do Not Obtain Ownership : Perhaps the key distinction between goods and services
lies in the fact that customers usually derive value from services without obtaining permanent
ownership of any substantial tangible elements. In many instances, service marketers offer
customers the opportunity to rent the use of a physical object like a car or hotel room, or to
hire the labor and skills of people whose expertise ranges from brain surgery to knowing how to
check customers into a hotel. As a purchaser of services yourself, you know that "while your
main interest is in the final output, the way in which you are treated during service delivery can
also have an important impact on your satisfaction.

Service Products as Intangible Performances : Although services often include tangible

elements—such as sitting in an airline seat, eating a meal, or getting damaged equipment
repaired—the service performance itself is basically an intangible. The benefits of owning and
using a manufactured product come from its physical characteristics (although brand image
may convey benefits, too). In services, the benefits come from the nature of the performance.
The notion of service as a performance that cannot be wrapped up and taken away leads to the
use of a theatrical metaphor for service management, visualizing service delivery as similar to
the staging of a play with service personnel as the actors and customers as the audience.
Some services, such as rentals, include a physical object like a car or a power tool. But
marketing a car rental performance is very different from attempting to market the physical
object alone. For instance, in car rentals, customers usually reserve a particular category of
vehicle, rather than a specific brand and model. Instead of worrying about styling, colors, and
upholstery, customers focus on price, location and appearance of pickup and delivery facilities,
extent of insurance coverage, cleanliness and maintenance of vehicles, provision of free shuttle
buses at airports, availability of 24-hour reservations service, hours when rental locations are
staffed, and quality of service provided by customer-contact personnel. By contrast, the core
benefit derived from owning a physical good normally comes specifically from its tangible
elements, even though it may provide intangible benefits, too. An interesting way to distinguish
between goods and services is to place them on a scale from tangible dominant to intangible
dominant .

Customer Involvement in the Production Process: Performing a service involves assembling

and delivering the output of a combination of physical facilities and mental or physical labor.
Often, customers are actively involved in helping create the service product, either by serving
themselves (as in using a laundromat or ATM)or by cooperating with service personnel in
settings such as hair salons, hotels, colleges, or hospitals. Services can be categorized
according to the extent of contact that the customer has with the service organization. People
as Part of the Product In high-contact services, customers not only come into contact with
service personnel, but they may also rub shoulders with other customers (literally so, if they
ride a bus or subway during the rush hour).The difference between service businesses often lies
in the quality of employees serving the customers. Similarly, the type of customers who
patronize a particular service business helps to define the nature of the service experience. As
such, people become part of the product in many services. Managing these service encounters
—especially those between customers and service employees—is a challenging task.

Greater Variability in Operational Inputs and Outputs: The presence of personnel and other
customers in the operational system makes it difficult to standardize and control variability in
both service inputs and outputs. Manufactured goods can be produced under controlled
conditions, designed to optimize both productivity and quality, and then checked for
conformance with quality standards long before they reach the customer. (Of course, their
subsequent use by customers will vary widely, reflecting customer needs and skills, as well as
the nature of the usage occasion.)However, when services are consumed as they are produced,
final "assembly" must take place under real-time conditions, which may vary from customer to
customer and even from one time of the day to another. As a result, mistakes and shortcomings
are both more likely and harder to conceal. These factors make it difficult for service
organizations to improve productivity, control quality, and offer a consistent product. As Harder
for Customers to Evaluate Most physical goods tend to be relatively high in "search
attributes ."These are characteristics that a customer can determine prior to purchasing a
product, such as color, style, shape, price, fit, feel, and smell. Other goods and some services,
by contrast, may emphasize "experience attributes" that can only be discerned after purchase
or during consumption (e.g., taste, wearability, ease of handling, quietness, and personal
treatment). Finally, there are "credence attributes"—characteristics that customers find hard to
evaluate even after consumption. Examples include surgery and auto repairs, where the results
of the service delivery may not be readily visible.

No Inventories for Services : Because a service is a deed or performance, rather than a tangible
item that the customer keeps, it is "perishable" and cannot be inventoried. Of course, the
necessary facilities, equipment, and labor can be held in readiness to create the service, but
these simply represent productive capacity, not the product itself. Having unused capacity in a
service business is rather like running water into a sink without a stopper. The flow is wasted
unless customers (or possessions requiring service) are present to receive it. When demand
exceeds capacity, customers may be sent away disappointed, since no inventory is available for
backup. An important task for service marketers, therefore, is to find ways of smoothing
demand levels to match capacity.

Importance of the Time Factor : Many services are delivered in real time. Customers have to be
physically present to receive service from organizations such as airlines, hospitals, haircutters,
and restaurants. There are limits as to how long customers are willing to be kept waiting and
service must be delivered fast enough so that customers do not waste time receiving service.
Even when service takes place in the back office, customers have expectations about how long
a particular task should take to complete—whether it is repairing a machine, completing a
research report, cleaning a suit, or preparing a legal document. Today's customers are
increasingly time sensitive and speed is often a key element in good service.

Different Distribution Channels: Unlike manufacturers that require physical distribution

channels to move goods from factory to customers, many service businesses either use
electronic channels (as in broadcasting or electronic funds transfer) or combine the service
factory, retail outlet, and point of consumption at a single location. In the latter instance,
service firms are responsible for managing customer-contact personnel. They may also have to
manage the behavior of customers in the service factory to ensure smoothly running operations
and to avoid situations in which one person's behavior irritates other customers who are
present at the same time.
Categorizing Service Processes
A process involves transforming input into output. But what is each service organization
actually processing and how does it perform this task? Two broad categories are processed in
services: people and objects. In many cases, ranging from passenger transportation to
education, customers themselves are the principal input to the service process. In other
instances, the key input is an object like a malfunctioning computer or a piece of financial data.
In some services, as in all manufacturing, the process is physical and something tangible takes
place. But in information-based services, the process can be almost entirely intangible. By
looking at services from a purely operational perspective, we see that they can be categorized
into four broad groups. Service Processes are of 4 types based on tangible actions either to
people's bodies or to customers' physical possessions and intangible actions to people's minds
or to their intangible assets. Each of these four categories involves fundamentally different
forms of processes, with vital implications for marketing, operations, and human resource
managers. We refer to the categories as people processing, possession processing, mental
stimulus processing, and information processing. Although the industries within each category
may appear at first sight to be very different, analysis will show that they do, in fact, share
important process-related characteristics. As a result, managers in one industry may be able to
obtain useful insights by studying another one and then creating valuable innovations for their
own organization.

1.People processing involves tangible actions to people's bodies. Examples of people

processing services include passenger transportation, haircutting, and dental work. Customers
need to be physically present throughout service delivery to receive its desired benefits.

2. Possession processing includes tangible actions to goods and other physical possessions
belonging to the customer. Examples of possession processing include airfreight, lawn mowing,
and cleaning services. In these instances, the object requiring processing must be present, but
the customer need not be.

3. Mental stimulus processing refers to intangible actions directed at people's minds. Services
in this category include entertainment, spectator sports, theater performances, and education.
In such instances, customers must be present men tally but can be located either in a specific
service facility or in a remote location connected by broadcast signals or telecommunication
linkages.
4. Information processing describes intangible actions directed at a customer's assets.
Examples of information-processing services include insurance, banking, and consulting. In this
category, little direct involvement with the customer may be needed once the request for
service has been initiated.

Examples : People Processing:

Passenger transportation
Health care
Lodging
Beauty salons
Physical therapy
Fitness centers
Restaurants/bars
Haircutting
Funeral services

Examples : Possession Processing

Freight transportation
Repair and maintenance
Warehousing/storage
Janitorial services
Retail distribution
Laundry and dry cleaning
Refueling
Landscaping/lawn care
Disposal/recycling

Examples : Mental Stimulus Processing

Advertising/PR
Arts and entertainment
Broadcasting/cable
Management consulting
Education
Information services
Music concerts
Psychotherapy
Religion
Voice telephone
Examples: Information Processing
Services directed at intangible assets:
Accounting
Banking
Data processing
Data transmission
Insurance
Legal services
Programming
Research
Securities investment
Software consulting
Service Encounters: Differing Levels of Customer Contact

A service encounter is a period of time during which customers interact directly with a service.
In some instances, the entire service experience can be reduced to a single encounter, involving
ordering, payment, and execution of service delivery on the spot. In other cases, the customer's
experience includes a sequence of encounters. This can mean an extended process that may be
spread out over a period of time, involve a variety of employees, and even take place in
different locations (think about flying on a passenger airline). Although some researchers use
the term "encounter" simply to describe personal interactions between customers and
employees, realistically we also need to think about encounters involving interactions between
customers and self-service equipment. As the level of customer contact with the service
operation increases, there are likely to be more and longer service encounters. Service
Encounters can be grouped into three levels of customer contact, representing the extent of
interaction with service personnel, physical service elements, or both.

High-contact services tend to be those in which customers visit the service facility in person.
Customers are actively involved with the service organization and its personnel throughout
service delivery (e.g., hairdressing or medical services).

Medium-contact services entail less interaction with service providers. They involve situations
in which customers visit the service provider's facilities (or are visited at home or at a third-
party location by the firm's employees) but either do not remain throughout service delivery or
else have only modest contact with service personnel. The purpose of such contacts is often
limited to: (1) establishing a relationship and defining a service need (e.g., management
consulting, insurance, or personal financial advising, where clients make an initial visit to the
firm's office but then have relatively limited interactions with the provider during service
production), (2) dropping off and picking up a physical possession that is being serviced, or (3)
trying to resolve a problem.

Low-contact services involve very little, if any, physical contact between customers and service
providers. Instead, contact takes place at arm's length through the medium of electronic or
physical distribution channels—a fast-growing trend in today's convenience-oriented society.
Both mental stimulus-processing (e.g., radio, television) and information-processing services
(e.g., insurance) fall naturally into this category. Also included are possession-processing
services in which the item requiring service can be shipped to the service site or subjected to
"remote fixes" delivered electronically to the customers' premises from a distant location
(increasingly common for resolving software problems). Finally, many high-contact and
medium-contact services are being transformed into low-contact services as customers engage
in home shopping, conduct their insurance and banking transactions by telephone, or research
and purchase products through the World Wide Web.
MANAGING SERVICE ENCOUNTERS

Many services (especially those classified as high contact) involve numerous encounters
between customers and service employees, either in person or remotely by phone or e-mail.
Service encounters may also take place between customers and physical facilities or
equipment. In low-contact services, customers are having more and more encounters with
automated machines that are designed to replace human personnel. To highlight the risks and
opportunities associated with service encounters, Richard Normann, a Paris-based Swedish
consultant, borrowed the metaphor" moment of truth" from bullfighting. Normann writes:
We could say that the perceived quality is realized at the moment of truth, when the service
provider and the service customer confront one another in the arena. At that moment they are
very much on their own. . . . It is the skill, the motivation, and the tools employed by the firm's
representative and the expectations and behavior of the client which together will create the
service delivery process.

Critical Incidents in Service Encounters

Critical incidents are specific encounters between customers and service businesses that are
especially satisfying or dissatisfying for one or both parties. The critical incident technique (CIT)
is a methodology for collecting and categorizing such incidents in service encounters.
Conducting such an analysis offers an opportunity to determine what incidents during service
delivery are likely to be particularly significant in determining whether or not customers are
satisfied. The types of encounters classified as critical incidents differ depending on whether
the service is high or low contact in nature.

CIT in High-Contact Environments : Most CIT research has focused on interpersonal

interactions between customers and employees in high-contact service environments. In these
situations, critical incidents tend to center around customer perceptions of employee attitudes
and actions. For example, a lengthy wait for dinner in a restaurant would be classified as a
critical incident because it represents a service delivery failure. But if an employee attempts to
improve the situation by providing information about the cause of the wait and offering free
drinks as compensation, customers may feel that the outcome was satisfactory even though the
service delivery was problematic.

While customers' reactions are important, managers must also understand the employee's view
of the situation. Thoughtless or poorly behaved customers can often cause needless problems
for service personnel who are trying hard to serve them well. Dissatisfaction with a succession
of negative incidents can even drive good employees to quit their jobs. A CIT study that
examined hundreds of critical incidents from an employee perspective showed that more than
20 percent of all incidents that employees found unsatisfactory could be attributed to problem
customers, whose bad behavior included drunkenness, verbal and physical abuse, breaking
laws or company policies, and failing to cooperate with service personnel. As you know if
you've ever been a front-line employee in a service business, it's simply not true that "the
customer is always right."
CIT in Low-Contact Environments : In low-contact services, encounters between customers
and service businesses may not directly involve employees. Technology has provided new
opportunities for self-service, where delivery takes place electronically through interactions
with equipment rather than people. Examples of these self-service technologies (SSTs) include
bank ATMs, automated package tracking, pay-at-the-pump terminals at gas stations,
automated kiosks for airline tickets, and Internet investment transactions. In these types of
encounters, employees are not present to compensate for problems or customize the service
experience. A study of critical incidents in low-contact service environments highlights the
necessity of educating customers about effective use of SSTs and training them to "self-
recover" when a service failure has occurred.

Role and Script Theories

Role and script theories offer some interesting insights for service providers. If we view service
delivery as a theatrical experience, then both employees and customers act out their parts in
the performance according to predetermined roles.

Roles Grove and Fisk define a role as "a set of behavior patterns learned through experience
and communication, to be performed by an individual in a certain social interaction in order to
attain maximum effectiveness in goal accomplishment." Roles have also been defined as
combinations of social cues, or expectations of society, that guide behavior in a specific setting
or context. In service encounters, employees and customers each have roles to play. The
satisfaction of both parties depends on role congruence, or the extent to which each person
acts out his or her prescribed role during a service encounter. Employees must perform their
roles to customer expectations or risk dissatisfying or losing customers all together. And
customers, too, must "play by the rules," or they risk causing problems for the firm, its
employees, and even other customers. Scripts are sequences of behavior that both employees
and customers are expected to learn and follow during service delivery. Scripts are learned
through experience, education, and communication with others. Much like a movie script, a
service script provides detailed actions that customers and employees are expected to perform.
The more experience a customer has with a service company, the more familiar the script
becomes.

Any deviations from this known script may frustrate both customers and employees and can
lead to high levels of dissatisfaction. If a company decides to change a service script (e.g., by
using technology to turn a high-contact service into a low-contact one), service personnel and
customers should be educated about the new script and the benefits it provides. Some scripts
are highly structured and allow service employees to move through their duties quickly and
efficiently (e.g., flight attendants' scripts for economy class).This approach helps to overcome
two of the inherent challenges facing service firms—how to reduce variability and ensure
uniform quality. The risk is that frequent repetition may lead to mindless service delivery that
ignores customers' needs. Not all services involve tightly scripted performances. For providers
of highly customized services—like doctors, educators, hair stylists, or consultants—the service
script is flexible and may vary by situation and by customer. When customers are new to a
service, they may not know what to expect and may be fearful of behaving incorrectly.
Organizations should be ready to educate new customers about their roles in service delivery,
since inappropriate behaviors can disrupt service delivery and make customers feel
embarrassed and uncomfortable. A well-planned script should provide a full description of the
service encounter and can help identify potential or existing problems in a specific service
process.

The Components of Customer Expectations

Customer expectations embrace several different elements, including desired service, adequate
service, predicted service, and a zone of tolerance that falls between the desired and adequate
service levels.

Desired and Adequate Service Levels : The type of service customers hope to receive is termed
desired service. It is a "wished for" level—a combination of what customers believe can and
should be delivered in the context of their personal needs. However, most customers are
realistic and understand that companies can't always deliver the level of service they would
prefer; hence, they also have a threshold level of expectations, termed adequate service, which
is defined as the minimum level of service customers will accept without being dissatisfied.
Among the factors that set this expectation are situational factors affecting service
performance and the level of service that might be anticipated from alternative suppliers. The
levels of both desired and adequate service expectations may reflect explicit and implicit
promises by the provider, word-of-mouth comments, and the customer's past experience (if
any) with this organization.

Predicted Service Level : The level of service that customers actually anticipate receiving is
known as predicted service, which directly affects how they define "adequate service" on that
occasion. If good service is predicted, the adequate level will be higher than if poorer service is
predicted. Customer predictions of service may be situation specific. For example, from past
experience, customers visiting a museum on a summer day may expect to see larger crowds if
the weather is poor than if the sun is shining. So a 10-minute "wait to buy tickets on a cool,
rainy day in summer might not fall below their adequate service level.

Zone of Tolerance : The inherent nature of services makes consistent service delivery difficult
across employees in the same company and even by the same service employee from one day
to another. The extent to which customers are willing to accept this variation is called the zone
of tolerance . A performance that falls below the adequate service level will cause frustration
and dissatisfaction, whereas one that exceeds the desired service level will both please and
surprise customers, creating the "customer delight" . Another way of looking at the zone of
tolerance is to think of it as the range of service within which customers don't pay explicit
attention to service performance. When service falls outside this range, customers will react
either positively or negatively. The zone of tolerance can increase or decrease for individual
customers depending on factors like competition, price, or importance of specific service
attributes. These factors most often affect adequate service levels (which may move up or
down in response to situational factors), while desired service levels tend to move up very
slowly in response to accumulated customer experiences. Consider a small-business owner who
needs some advice from her accountant. Her ideal level of professional service may be a
thoughtful response by the next business day. But if she makes the request at the time of year
when all accountants are busy preparing corporate and individual tax returns, she will probably
know from experience not to expect a fast response. Although her ideal service level probably
won't change, her zone of tolerance for response time may be much broader because she has a
lower adequate service threshold.

HOW CUSTOMERS EVALUATE SERVICE PERFORMANCES

Service performances—especially those that contain few tangible clues—can be difficult for
consumers to evaluate. As a result, there is a greater risk of making a purchase that proves to
be disappointing. If a customer buys a physical good that proves unsatisfactory, the product can
usually be returned or replaced—although this action may require extra effort on the
customer's part. These options are not as readily available with services, although some
services can be repeated. Consider the four process-based categories of service . In the case of
possession-processing services, repeating the performance may be an acceptable option. For
example, a cleaning service can reclean an office if a customer complains about the quality of
the job. By contrast, people-processing services that are performed on people's bodies may be
hard to reverse. Abad haircut must be grown out, and the consequences of a faulty surgical
operation or am poorly done tattoo may last a lifetime.

Mental stimulus-processing services like education, live entertainment, or sporting events can
also be difficult to "replace" if quality does not meet customers' expectations. Theater goers
cannot realistically ask for their money back if actors perform their roles poorly or the script is
bad. Sports fans can't expect refunds if their favorite team plays badly. (But they do find ways
of letting the players know of their dissatisfaction! One university recently prohibited people
from booing in the football stadium when the home team was playing poorly.) Similarly,
universities don't usually compensate students for poor quality classroom experiences. Even if a
college let dissatisfied students repeat classes free of charge with a different instructor, those
students would still incur significant extra time and psychological costs. Finally, information-
based services present risks for customers when service quality is unsatisfactory. Banking or
accounting errors may not be noticed until later, by which time damage may have been done to
a customer's reputation (e.g., a check was returned rather than paid, or a faulty tax return was
filed). Customers who receive a questionable consulting recommendation or medical opinion
have the option of seeking a second opinion, but that will involve extra money, time, and even
psychological costs.

A Continuum of Product Attributes

As we've pointed out, one of the basic differences between goods and services is that services
are harder for customers to evaluate. We also briefly mentioned that product attributes could
be divided into search, experience, and credence properties. We'll expand on the concept of
these three categories here, since they provide a useful framework for understanding how
consumers evaluate different types of market offerings. All products can be placed on a
continuum ranging from "easy to evaluate" to "difficult to evaluate" depending on whether
they are high in search attributes, experience attributes, or credence attributes. Search
Attributes Physical goods tend to emphasize those attributes that allow customers to evaluate a
product before purchasing it. Features like style, color, texture, taste, and sound allow
prospective consumers to try out, taste test, or "test drive" the product prior to purchase.
These tangible attributes help customers understand and evaluate what they will get in
exchange for their money and reduce the sense of uncertainty or risk associated with the
purchase occasion. Goods such as clothing, furniture, cars, electronic equipment, and foods are
high in search attributes.

Experience Attributes When attributes can't be evaluated prior to purchase, customers must
"experience" the service to know what they are getting. Holidays, live entertainment
performances, sporting events, and restaurants fall into the experience attributes category.
Although people can examine brochures, scroll through Web sites describing the holiday
destination, view travel films, or read reviews by travel experts, they can't really evaluate or
feel the dramatic beauty associated with hiking in the Canadian Rockies or the magic of scuba
diving in the Caribbean until they actually experience these activities. Nor can customers always
rely on information from friends, family, or other personal sources when evaluating these and
similar services, because different people may interpret or respond to the same stimuli in
different ways. Think about your own experiences in following up on recommendations from
friends to see a particular film.

Although you probably walked into the theater with high expectations, you may have felt
disappointed after viewing the film if you didn't like it as much as your friends did. Credence
Attributes Product characteristics that customers find impossible to evaluate confidently even
after purchase and consumption are known as credence attributes, because the customer is
forced to trust that certain benefits have been delivered, even though it may be hard to
document them. For example, relatively few people possess enough knowledge about financial
markets to assess whether their stockbroker got the best possible returns on their invested
funds. Patients can't usually evaluate how well their dentists have performed complex dental
procedures. And most college students must simply have faith that their professors are
providing them with a worthwhile educational experience!

THE PURCHASE PROCESS FOR SERVICES

When customers decide to buy a service to meet an unfilled need, they go through what is
often a complex purchase process. This process has three separate stages: the pre-purchase
stage, the service encounter stage, and the post-purchase stage, each containing two or more
steps .
Pre-purchase Stage
The decision to buy and use a service is made in the pre-purchase stage. Individual needs and
expectations are very important here because they influence what alternatives customers will
consider. If the purchase is routine and relatively low risk, customers may move quickly to
selecting and using a specific service provider. But when more is at stake or a service is about to
be used for the first time, they may conduct an intensive information search (contrast how you
approached the process of applying to college versus buying a pizza or a hamburger!). The next
step is to identify potential suppliers and then weigh the benefits and risks of each option
before making a final decision.

This element of perceived risk is especially relevant for services that are high in experience or
credence attributes and thus difficult to evaluate prior to purchase and consumption. First-time
users are especially likely to face greater uncertainty. Risk perceptions reflect customers'
judgments of the probability of a negative outcome. The worse the possible outcome and the
more likely it is to occur, the higher the perception of risk.

When customers feel uncomfortable with risks, they can use a variety of methods to reduce
them during the pre-purchase stage. In fact, you've probably tried some of the following risk-
reduction strategies yourself before deciding to purchase a service:

1. Seeking information from respected personal sources (family, friends, peers)

2.Relying on a firm with a good reputation
3.Looking for guarantees and warranties
4.Visiting service facilities or trying aspects of the service before purchasing
5.Asking knowledgeable employees about competing services
6.Examining tangible cues or other physical evidence
7.Using the Web to compare service offerings

One strategy to help reduce the risk perceived by customers is to educate them about the
features of the service, describe the types of users who can most benefit from it, and offer
advice on how to obtain the best results.

Service Encounter Stage

After deciding to purchase a specific service, customers experience one or more contacts with
their chosen service provider. The service encounter stage often begins with submitting an
application, requesting a reservation, or placing an order. As we know , contacts may take the
form of personal exchanges between customers and service employees, or impersonal
interactions with machines or computers. In high contact services, such as restaurants, health
care, hotels, and public transportation, customers may become actively involved in one or more
service processes. Often, they experience a variety of elements during service delivery, each of
which may provide clues to service quality.
Service environments include all of the tangible characteristics to which customers are exposed.
The appearance of building exteriors and interiors; the nature of furnishings and equipment;
the presence or absence of dirt, odor, or noise; and the appearance and behavior of other
customers can all serve to shape expectations and perceptions of service quality. Service
personnel are the most important factor in most high-contact service encounters, where they
have direct, face-to-face interactions with customers. But they can also affect service delivery in
low-contact situations like telephone-based service delivery. Knowledgeable customers often
expect employees to follow specific scripts during the service encounter; excessive deviations
from these scripts can lead to dissatisfaction. Handling service encounters effectively on the
part of the employee usually combines learned skills with the right type of personality. Support
services are made up of the materials and equipment plus all of the backstage processes that
allow front stage employees to do their work properly. This element is critical, because many
customer-contact employees can't perform their jobs well without receiving internal services
from support personnel. As an old service-firm axiom goes: "If you aren't servicing the
customer, you are servicing someone who is.

When customers use people-processing or mental stimulus processing services, they often find
themselves in close proximity to other customers. Waiting rooms at a medical clinic may be
filled with other patients; trains, buses, or aircraft are usually carrying many passengers at once,
requiring travelers to sit next to strangers.

Post-purchase Stage
During the post-purchase stage, customers continue a process they began in the service
encounter stage—evaluating service quality and their satisfaction/dissatisfaction with the
service experience. The outcome of this process will affect their future intentions, such as
whether or not to remain loyal to the provider that delivered service and whether to pass on
positive or negative recommendations to family members and other associates.

Customers evaluate service quality by comparing what they expected with what they perceive
they received. If their expectations are met or exceeded, they believe they have received high-
quality service. If the price/quality relationship is acceptable and other situational and personal
factors are positive, then these customers are likely to be satisfied. As a result, they are more
likely to make repeat purchases and become loyal customers. However, if the service
experience does not meet customers' expectations, they may complain about poor service
quality, suffer in silence, or switch providers in the future.

Relationship Marketing

There's a fundamental distinction in marketing between strategies intended to bring about a

single transaction and those designed to create extended relationships with customers.
Relationship marketing involves activities aimed at developing long-term, cost-effective links
between an organization and its customers for their mutual benefit. Among the approaches
used by service firms to maintain and enhance relationships are such basics as treating
customers fairly, offering service augmentations, and treating each customer as though he or
she were a segment of one—the essence of mass customization. Service "extras" often play a
key role in building and sustaining relationships between vendors and purchasers of industrial
goods.

There are three distinct categories of relationship marketing: database marketing, interaction
marketing, and network marketing.

Database Marketing: In this type of marketing, the focus is on the market transaction but
includes information exchange. Marketers rely on information technology—in the form of a
database or the Internet—to form a relationship with targeted customers and retain their
patronage over time. However, the nature of these relationships is often not a close one, with
communication being driven and managed by the seller. Technology is used to (1) identify and
build a database of current and potential customers, (2) deliver differentiated messages based
on consumers' characteristics and preferences, and (3) track each relationship to monitor the
cost of acquiring the consumer and the lifetime value of the resulting purchases. Although
technology can be used to personalize the relationship (as in word-processed letters that insert
the customer's name), relations remain somewhat distant, as illustrated by utility services such
as electricity, gas, and cable TV.

Interaction Marketing: A closer relationship exists in situations where there is direct interaction
between customers and company representatives (in person or by telephone and e-mail).
Although the service itself remains important, people and social processes also add value
through interactions that may include negotiations and mutual sharing of information. This type
of relationship has long existed in many local environments where buyer and seller know and
trust each other, ranging from community banks to dentistry. It is also commonly found in
many business-to-business services. Both the firm and the customer are prepared to invest
resources to develop a mutually beneficial relationship. This investment may include time spent
sharing and recording information. As service companies grow, they face the challenge of
maintaining satisfying relationships with customers as new technologies encourage a shift from
high to low-contact service.

Network Marketing: We often say that someone is a "good networker" because he or she is
able to put individuals in touch with others who have a mutual interest. This type of marketing
occurs primarily in a business-to-business context, where firms commit resources to develop
positions in a network of relationships with customers, distributors, suppliers, the media,
consultants, trade associations, government agencies, competitors, and even the customers of
their customers. Often a team of individuals within a supplier's firm must collaborate to provide
effective service to a parallel team within the customer organization. However, the concept of
networking is also relevant in consumer marketing environments where customers are
encouraged to refer friends and acquaintances to the service provider.

The Loyalty Effect

Loyalty is an old-fashioned word, traditionally used to describe fidelity and enthusiastic
devotion to a country, cause, or individual. More recently, in a business context, it has been
used to describe a customer's willingness to continue patronizing a firm over the long term,
purchasing and using its goods and services on a repeated and preferably exclusive basis, and
voluntarily recommending it to friends and associates."Few companies think of customers as
annuities," says Frederick Reichheld, author of The Loyalty Effect, and a major researcher in this
field. And yet that is precisely what a loyal customer can mean to a firm: a consistent source of
revenues over a period of many years. However, this loyalty cannot be taken for granted. It will
only continue as long as the customer feels that he or she is receiving better value (including
superior quality relative to price) than could be obtained by switching to another supplier.

Addressing the Challenge of Jaycustomers

Visitors to North America from other English-speaking countries are often puzzled by the term
"jaywalker," that distinctively American word used to describe people who cross streets at
unauthorized places or in a dangerous manner. The prefix "jay" comes from a nineteenth-
century slang term for a stupid person. We can create a whole vocabulary of derogatory terms
by adding the prefix "jay" to existing nouns and verbs.

Every service has its share of jaycustomers. But opinions on this topic seem to polarize around
two opposing views of the situation. One is denial: "The customer is king and can do no
wrong."The other view sees the marketplace of customers as positively overpopulated with
nasty people who cannot be trusted to behave in ways that self-respecting service providers
should expect and require. The first viewpoint has received wide publicity in gung-ho
management books and in motivational presentations to captive groups of employees. But the
second view often appears to be dominant among cynical managers and employees who have
been burned at some point by customer misbehaviors. As with so many opposing viewpoints in
life, there are important grains of truth in both perspectives. What is clear, however, is that no
self-respecting firm would want to have an ongoing relationship with an abusive customer.

Six Types of Jaycustomers

Jaycustomers are undesirable. At worst, a firm needs to control or prevent their abusive
behavior. At best, it would like to avoid attracting them in the first place. Since defining the
problem is the first step in resolving it, let's start by considering the different segments of
jaycustomers who prey upon providers of both goods and services. We've identified six broad
categories and given them generic names.

The Thief : This jaycustomer has no intention of paying and sets out to steal goods and services
(or to pay less than full price by switching price tickets or contesting bills on baseless grounds).
Shoplifting is a major problem in retail stores. What retailers euphemistically call "shrinkage" is
estimated to cost them huge sums of money in annual revenues. Many services lend
themselves to clever schemes for avoiding payment. For those with technical skills, it's
sometimes possible to bypass electricity meters, access telephone lines free of charge, or
circumvent normal cable TV feeds. Riding free on public transportation, sneaking into movie
theaters, or not paying for restaurant meals are also popular. And we mustn't forget the use of
fraudulent forms of payment such as stolen credit cards or checks drawn on accounts without
any funds. Finding out how people steal a service is the first step in preventing theft or catching
thieves and, where appropriate, prosecuting them. But managers should try not to alienate
honest customers by degrading their service experiences. And provision must be made for
honest but absent-minded customers who forget to pay.

The Rule-breaker: Just as highways need safety regulations , many service businesses need to
establish rules of behavior for employees and customers to guide them safely through the
various steps of the service encounter. Some of these rules are imposed by government
agencies for health and safety reasons. The sign found in many restaurants that states "No
shirt, no shoes—no service" demonstrates a health-related regulation. And air travel provides
one of the best of examples of rules designed to ensure safety—there are few other
environments outside prison where healthy, mentally competent, adult customers are quite so
constrained (albeit with good reason).

In addition to enforcing government regulations, suppliers often impose their own rules to
facilitate smooth operations, avoid unreasonable demands on employees, prevent misuse of
products and facilities, protect themselves legally, and discourage individual customers from
misbehaving. Ski resorts, for instance, are getting tough on careless skiers who pose risks to
both themselves and others.18 Collisions can cause serious injury and even death. So ski patrol
members must be safety oriented and sometimes take on a policing role. Just as dangerous
drivers can lose their licenses, so dangerous skiers can lose their lift tickets.

At Vail and Beaver Creek in Colorado, ski patrollers once revoked nearly 400 lift tickets in just a
single weekend. At Winter Park near Denver, skiers who lose their passes for dangerous
behavior may have to attend a 45-minute safety class before they can get their passes back. Ski
patrollers at Vermont's Okemo Mountain may issue warnings to reckless skiers by attaching a
bright orange sticker to their lift tickets. If pulled over again for inappropriate behavior, such
skiers may be escorted off the mountain and banned for a day or more. "We're not trying to be
Gestapos on the slopes," says the resort's marketing director, "just trying to educate people."

How should a firm deal with rule-breakers? Much depends on which rules have been broken. In
the case of legally enforceable ones—theft, bad debts, trying to take guns on aircraft—the
courses of action need to be laid down explicitly to protect employees and to punish or
discourage wrongdoing by customers. Company rules are a little more ambiguous. Are they
really necessary in the first place? If not, the firm should get rid of them. Do they deal with
health and safety? If so, educating customers about the rules should reduce the need for taking
corrective action. The same is true for rules designed to protect the comfort and enjoyment of
all customers. There are also unwritten social norms such as "thou shalt not jump the queue"
(although this is a much stronger cultural expectation in the United States or Canada than in
many countries, as any visitor to Paris Disneyland can attest!). Other customers can often be
relied upon to help service personnel enforce rules that affect everybody else; they may even
take the initiative in doing so. There are risks attached to making lots of rules. They can make an
organization appear bureaucratic and overbearing. And they can transform employees, whose
orientation should be service to customers, into police officers who see (or are told to see)their
most important task as enforcing all the rules. The fewer the rules, the more explicit the
important ones can be.

The Belligerent: You've probably seen him (or her) in a store, at the airport, in a hotel or
restaurant—red in the face and shouting angrily, or perhaps icily calm and mouthing off insults,
threats, and obscenities. Things don't always work as they should: Machines break down,
service is clumsy, customers are ignored, a flight is delayed, an order is delivered incorrectly,
staff are unhelpful, a promise is broken. Or perhaps the customer in question is expressing
resentment at being told to abide by the rules.

Service personnel are often abused, even when they are not to blame. If an employee lacks
authority to resolve the problem, the belligerent may become madder still, even to the point of
physical attack. Drunkenness and drug abuse add extra layers of complication (see the box "Air
Rage"). Organizations that care about their employees go to great efforts to develop skills in
dealing with these difficult situations. Training exercises that involve role-playing help
employees develop the self-confidence and assertiveness that they need to deal with upset,
belligerent customers (sometimes referred to as "irates"). Employees also need to learn how to
defuse anger, calm anxiety, and comfort distress (particularly when there is good reason for the
customer to be upset with the organization's performance). What should an employee do when
an aggressive customer brushes off attempts to defuse the situation? In a public environment,
one priority should be to move the person away from other customers. Sometimes supervisors
may have to arbitrate disputes between customers and staff members; at other times, they
need to stand behind the employee's actions. If a customer has physically assaulted an
employee, then it may be necessary to summon security officers or the police. Some firms try to
conceal such events, fearing bad publicity. But others feel obliged to make a public stand on
behalf of their employees, like the Body Shop manager who ordered an ill-tempered customer
out of the store, telling her: "I won't stand for your rudeness to my staff."

Telephone rudeness poses a different challenge. Service personnel have been known to hang
up on angry customers, but that action doesn't resolve the problem. Bank customers, for
instance, tend to get upset when learning that checks have been returned because they are
overdrawn (which means they've broken the rules) or that a request for a loan has been
denied. One approach for handling customers who continue to berate a telephone-based
employee is for the latter to say firmly: "This conversation isn't getting us any where. Why don't
I call you back in a few minutes when you've had time to digest the information?" In many
cases, a break for reflection is exactly what's needed.

The Family Feuders : People who get into arguments (or worse) with other customers—often
members of their own family—make up a subcategory of belligerents we call family feuders.
Employee intervention may calm the situation or actually make it worse. Some situations
require detailed analysis and a carefully measured response. Others, like customers starting a
food fight in a nice restaurant (yes, such things do
happen!), require almost instantaneous response. Service managers in these situations need to
be prepared to think on their feet and act fast.

The Vandal : The level of physical abuse to which service facilities and equipment can be
subjected is truly astonishing. Soft drinks are poured into bank cash machines; graffiti are
scrawled on both interior and exterior surfaces; burn holes from cigarettes scar carpets,
tablecloths, and bedcovers; bus seats are slashed and hotel furniture broken; telephone
handsets are torn off; customers' cars are vandalized; glass is smashed and fabrics are torn. The
list is endless. Customers don't cause all of the damage, of course. Bored or drunk young people
are the source of much exterior vandalism. And disgruntled employees have been known to
commit sabotage. But much of the problem does originate with paying customers who choose
to misbehave. Alcohol and drugs are sometimes the cause, psychological problems may
contribute, and carelessness can play a role. There are also occasions when unhappy
customers, feeling mistreated by the service provider, try to take revenge in some way. The
best cure for vandalism is prevention. Improved security discourages some vandals. Good
lighting helps, as does open design of public areas. Companies can choose pleasing yet vandal-
resistant surfaces, protective coverings for equipment, and rugged furnishings. Educating
customers on how to use equipment properly (rather than fighting with it) and providing
warnings about fragile objects can reduce the likelihood of abuse or careless handling. And
there are economic sanctions: security deposits or signed agreements in which customers agree
to pay for any damage that they cause.

What should managers do if prevention fails and damage is done? If the perpetrator is caught,
they should first clarify whether there are any extenuating circumstances (because accidents do
happen). Sanctions for deliberate damage can range from a warning to prosecution. As far as
the physical damage itself is concerned, it's best to fix it fast (within any constraints imposed by
legal or insurance considerations).The general manager of a bus company had the right idea
when he said: "If one of our buses is vandalized, whether it's a broken window, a slashed seat,
or graffiti on the ceiling, we take it out of service immediately, so nobody sees it. Otherwise you
just give the same idea to five other characters who were too dumb to think of it in the first
place!"

The Deadbeat : Leaving aside those individuals who never intended to pay in the first place (our
term for them is "the thief"), there are many reasons why customers fail to pay for services
they have received. Once again, preventive action is better than a cure. A growing number of
firms insist on prepayment. Any form of ticket sale is a good example of this. Direct marketing
organizations ask for your credit card number as they take your order, as do most hotels when
you make a reservation. The next best thing is to present the customer with a bill immediately
on completion of service. If the bill is to be sent by mail, the firm should send it fast, while the
service is still fresh in the customers mind. Not every apparent delinquent is a hopeless
deadbeat. Perhaps there's good reason for the delay and acceptable payment arrangements
can be worked out. A key question is whether such a personalized approach can be cost-
justified, relative to the results obtained by purchasing the services of a collection agency.
There may be other considerations, too. If the client's problems are only temporary ones, what
is the long-term value of maintaining the relationship?

A Hierarchy of Service Innovation

The word "new" is popular in marketing because it's a good way to attract people's attention.
However, there are different degrees of "newness" in new service development. In fact, we can
identify seven categories of new services, ranging from major innovations to simple style
changes.

1. Major service innovations are new core products for markets that have not been previously
defined. They usually include both new service characteristics and radical new processes.
Examples include FedEx's introduction of overnight, nationwide, express package delivery in
1971, the advent of global news service from CNN, and eBay's launch of online auction services.

2. Major process innovations consist of using new processes to deliver existing core products in
new ways with additional benefits. For example, the University of Phoenix competes with other
universities by delivering undergraduate and graduate degree programs in a nontraditional
way. It has no permanent campus; instead its courses are offered online or at night in rented
facilities. Its students get most of the core benefits of a college degree in half the time and at a
much lower price than other universities. The existence of the Internet has led to the creation
of many start-up businesses employing new retailing models that exclude the use of traditional
stores, saving customers time and travel costs. Often, these models add new, information-
based benefits such as greater customization, the opportunity to visit chat rooms with fellow
customers, and suggestions for additional products that complement what has already been
purchased.

3. Product line extensions are additions to current product lines by existing firms. The first
company in a market to offer such a product may be seen as an innovator, but the others are
merely followers who are often acting defensively. These new services may be targeted at
existing customers to serve a broader array of needs, designed to attract new customers with
different needs, or both. Starbucks, known for its coffee shops, has extended its offerings to
include light lunches.

Major computer manufacturers like Compaq, Hewlett-Packard, and IBM are going beyond their
traditional business definitions to offer integrated "e-solutions" based on consulting and
customized service. Telephone companies have introduced numerous value-added services
such as caller ID, call waiting, and call forwarding. Cable television providers are starting to offer
broad band Internet access. Many banks sell insurance products in the hope of increasing the
number of profitable relationships with existing customers. American Express, too, offers a full
range of insurance products, including auto, home, and umbrella policies. And at least one
insurance company—State Farm Insurance—has gone into the banking business, relying on its
well-established brand name to help draw customers. Process line extensions are less
innovative than process innovations. But they do often represent distinctive new ways of
delivering existing products, either with the intent of offering more convenience and a different
experience for existing customers or of attracting new customers who find the traditional
approach unappealing. Most commonly, they involve adding a lower-contact distribution
channel to an existing high-contact channel, as when a financial service firm develops
telephone-based or Internet-based services or a bricks-and-mortar retailer adds catalog sales or
a Web site. For example, Barnes and Noble, the leading bookstore chain in the United States,
added a new Internet subsidiary, BarnesandNoble.com, to help it compete against
Amazon.com.

5. Supplementary service innovations involve adding new facilitating or enhancing service

elements to an existing core service, or significantly improving an existing supplementary
service. Low-tech innovations for an existing service can be as simple as adding parking at a
retail site or agreeing to accept credit cards for payment. Multiple improvements may have the
effect of creating what customers perceive as an altogether new experience, even though it is
built around the same core. Theme restaurants like the Rainforest Cafe are examples of
enhancing the core with new experiences. The cafes are designed to keep customers
entertained with aquariums, live parrots, waterfalls, fiberglass monkeys, talking trees that
spout environmentally related information, and regularly timed thunderstorms, complete with
lightning.

6. Service improvements are the most common type of innovation. They involve modest
changes in the performance of current products, including improvements to either the core
product or to existing supplementary services. For instance, a movie theater might renovate its
interior, adding ergonomically designed seats with built-in cup holders to increase both comfort
and convenience for customers during the show or an airline might add power sockets for
laptops in its business-class cabins.

7. Style changes represent the simplest type of innovation, typically involving no changes in
either processes or performance. However they are often highly visible, create excitement, and
may serve to motivate employees. Examples include repainting retail branches and vehicles in
new color schemes, outfitting service employees in new uniforms, introducing a new bank
check design, or making minor changes in service scripts for employees. As you can see, service
innovation can occur at many different levels. It's important to recognize that not every type of
innovation has an impact on the characteristics of the core product or results in a significant
change in the customer's experience.

Dimensions of Service Quality

Dimensions of Service Quality:

Barasuramm, Barry and Zaithaml listed various aspects that a customer expects from different
services.
1. Reliability: This refers to the ability of the company to perform the promised service
dependably and accurately. Reliability is probably the single most important dimension of
quality. Customers expect that companies will do what they say and they will do when they say
they will do it.

2. Tangibles: This refers to the appearance of the physical facilities, equipment, personnel, and
communication materials. As services are intangible, the tangibles give an impression to the
customers about the quality of service they can expect from a firm. A bank in a shabby building
will make the customer wonder whether their money will be safe in such a bank.

3. Responsiveness: This refers to the willingness of the employees to help customers and
provide prompt service. When you go to a bank the minimum that you expect is that the
employees would attend to you rather than chit-chat amongst themselves.

4. Assurance: This factor is linked to several minor factors such as competence, courtesy,
credibility and security. Competence depends on the service provider's possession of the
required skills and knowledge to perform the service. The politeness, respect, consideration,
and friendliness of the service providers can be bundled into the term courtesy. Credibility
refers to the perceived trustworthiness, believability, and honesty of the service provider.
Security refers to the fact that the service should be free from danger, risk, and doubt. In sum,
the assurance factor refers to the knowledge and courtesy of employees and their ability to
inspire trust and confidence.

5. Empathy: Empathy refers to the caring, individualized attention the firm provides to its
customers. It includes access, communication and understanding. Access refers to the
approachability and ease with which the customer can contact the firm. Communication refers
to keeping the customer informed in the language they can understand and listening to them.
Understanding has to do with the efforts made by the service provider to know customers and
their needs.

Of these five dimensions, reliability has consistently proven to be the most important factor in
customers' judgments of service quality. Reliability improvements lie at the heart of service
quality enhancement efforts because unreliable service implies broken promises on the
attributes that customers care about. If the core service is not performed reliably, customers
may assume that the company is incompetent and may switch to another service provider. For
a perspective on the dimensions of service quality in online environments, see the box "Service
Quality Goes Online."

It isn't easy for many types of service businesses to maintain high levels of reliability day-in and
day-out. When customers enter a service factory and are involved in service production, they
experience mistakes directly—often before a firm has an opportunity to correct them. In labor-
intensive services, employees add a large degree of variability to the service production
process. It's difficult for service providers to control such variations, since each employee is
somewhat different from the others in personality, skills, and attitudes. Moreover, the same
employee can provide radically different service from one customer to the next—or the same
customer over time—depending on situational factors like customer behavior, task complexity,
and the employee's physical and mental state.

Quality Gaps
A service performance that surprises and delights customers by falling above their desired
service levels will be seen as superior in quality. If service delivery falls within their zone of
tolerance, they will feel that it's adequate. But if perceived quality falls below the adequate
service level expected by customers, a discrepancy—or quality gap—has occurred between the
service provider's performance and customer expectations.

Why do quality failures occur? Gaps can occur at seven different points in the design,
production, and delivery of services. The service gap is the most critical, because it involves the
customer's overall assessment of the service, comparing what was expected against
perceptions of what was received. The ultimate goal in improving service quality is to narrow
this gap as much as possible. To do so, service providers may have to reduce or close the six
other gaps. The seven potential gaps in service quality are:

1. The knowledge gap—the difference between what service providers believe customers
expect and customers' actual needs and expectations
2. The standards gap—the difference between managements perceptions of customer
expectations and the quality standards established for service delivery
3. The delivery gap—the difference between specified delivery standards and the service
provider's actual performance
4. The internal communications gap—the difference between what the company's advertising
and sales personnel think are the product's features, performance, and service quality level and
what the company is actually able to deliver
5. The perceptions gap—the difference between what is actually delivered and what customers
perceive they have received (because they are unable to accurately evaluate service quality)
6. The interpretation gap—the difference between what a service provider's communication
efforts actually promise and what a customer thinks was promised by these communications
7. The service gap—the difference between what customers expect to receive and their
perceptions of the service that is actually delivered

The presence of any one of these seven quality gaps can lead to a disappointing outcome that
damages relationships with customers. Avoiding service gaps in every service encounter will
help a firm improve its reputation for quality service. Although careful planning and monitoring
will help reduce the likelihood that one of these gaps will occur, when customers indicate that
service outcomes are disappointing, it's important to identify and eliminate the gap(s) that lead
to this result.

A major problem in some firms is that service standards are defined by operations managers
who have no knowledge of customer needs and expectations. Hence, it's vital that marketers
be involved in the task of designing service standards and measuring performance against
them.

Learning from Service Failures

Although every firm should have contingency plans for service recovery, there's no substitute
for doing it right the first time. Recovery procedures shouldn't be seen as a substitute for
improved service reliability. When a problem is caused by controllable, internal forces, there's
no excuse for allowing it to happen again. Recurring service failures lower service quality and
reduce productivity as time and money are wasted on correcting mistakes. With prevention in
mind, let's look briefly at some simple but powerful tools for monitoring quality and
determining the root causes of service failures. Among the many tools available to quality
improvement specialists, the following ones are particularly helpful for managers in identifying
service failures and designing effective recovery strategies.

Flowcharts and Service Blueprints Flowcharts : Service blueprints are useful tools for
thoroughly examining service delivery processes. Once managers understand these processes,
it's easier for them to identify potential failure points, which are weak links in the chain.
Knowing what can go wrong, and where, is an important first step in improving productivity and
preventing service quality problems.

Control Charts It's frequently said that "you cannot manage what you do not measure." Control
charts offer a simple method for graphing performance over time against specific quality
criteria. Because the charts are visual, trends are easily identified.

Cause-and-Effect Charts The Japanese/quality expert Kaoru Ishikawa created the fishbone
diagram for use in manufacturing firms. To produce a fishbone diagram (also known as a cause-
and-effect chart), groups of managers and employees brainstorm factors that might be creating
a specific problem. In a traditional version of this diagram, the resulting factors are then
categorized into one of five groupings— equipment, people, materials, procedures, and other.
It's important to recognize that failures are often sequential, with one problem leading to
another in a different category.

The extra categories are designed to provide additional information for service firms. For
example, the People category has been changed to Front-Stage Personnel and Backstage
Personnel. This highlights the fact that front-stage service problems are often experienced
directly by customers, whereas backstage failures tend to show up more indirectly. Information
has been split from Procedures because many service problems result from information-related
failures. For example, inadequate information about flight departures may lead passengers to
arrive late at the gate. The expanded fishbone diagram also includes a new category—
Customers—to acknowledge their increased involvement in service production and delivery,
because customers can also be the cause of problems for a service business. As we've discussed
before, customers of high-contact services are often heavily involved in front-stage operations.
If they don't play their roles correctly, they may reduce service productivity and cause quality
problems for themselves and other customers. For instance, an aircraft that seats hundreds of
passengers can be delayed if a single traveler tries to board at the last minute with an oversized
bag, which then has to be loaded into the cargo hold.

Pareto Analysis The technique known as Pareto analysis (named after the Italian economist
who first developed it) is useful in identifying the principal causes of observed outcomes.
Application of this technique often highlights a phenomenon known as the "80/20 rule,"
showing that approximately 80 percent of the value of one variable (in this instance, the
number of service failures) is accounted for by only 20 percent of the causal variables (i.e., the
number of possible causes). In the airline example , 88 percent of the company's late-departing
flights were caused by only four (15 percent) of all the possible causes—late passengers, late
push back tug, late fuel, and late weight and balance sheet. So, focus on these four factors
rather than tackling all potential causes simultaneously—especially when time and other
resources are limited.

MINIMIZING THE PERCEIVED LENGTH OF THE WAIT

As we've discussed in earlier chapters, customers may view the time and effort spent on
consuming services as a burden. People don't like wasting their time on unproductive activities
any more than they like -wasting money. They also prefer to avoid unwanted mental or physical
effort, including anxiety or discomfort. Research shows that people often think they have
waited longer for a service than they actually did. Studies of public transportation use, for
instance, have shown that travelers perceive time spent waiting for a bus or train as passing
one and a half to seven times more slowly than the time actually spent traveling in the vehicle.
The Psychology of Waiting Time The noted philosopher William James observed: "Boredom
results from being attentive to the passage of time itself." Based on this observation, David
Maister formulated eight principles about waiting time.
Unoccupied Time Feels Longer Than Occupied Time When you're sitting around with nothing
to do, time seems to crawl. Thus many service organizations give customers something to do to
distract them while waiting. Doctors and dentists stock their waiting rooms with piles of
magazines for people to read while waiting. Car repair facilities may have a television for
customers to watch. One tire dealer goes further, providing customers with free popcorn, soft
drinks, coffee, and ice cream while they wait for their cars to be returned. Theme parks supply
roving bands of entertainers to amuse customers waiting in line for the most popular
attractions.

Pre- and Post-Process Waits Feel Longer Than In-Process Waits There's a perceived difference
between waiting to buy a ticket to enter a theme park and waiting to ride on a roller coaster
once you're in the park. There's also a difference between waiting for coffee to arrive near the
end of a restaurant meal and waiting for the server to bring you the check once you're ready to
leave. Customers are typically more patient during the core service delivery process than before
it starts or after it's completed.
Anxiety Makes Waits Seem Longer Can you remember waiting for someone to show up to
meet you and worrying about whether you had the time and/or the location correct? This
makes the perceived waiting time longer, because you are worried about whether you (or the
person you're meeting) might have made a mistake. While waiting in unfamiliar locations,
especially out-of-doors and after dark, people are often anxious about their personal safety.

Uncertain Waits Are Longer Than Known, Finite Waits Although any wait may be frustrating,
we can usually adjust mentally to a wait of known length. It's the unknown that keeps us on
edge. Maybe you've had the experience of waiting for a delayed flight when you haven't been
told how long the delay is going to be. This is unsettling, because you don't know whether you
have time to get up and walk around the terminal or whether to stay at the gate in case the
flight is called any minute. Airlines often try to appease their customers by giving them new
take-off times for delayed flights (which are usually extended several times before the aircraft
actually leaves the gate).

Unexplained Waits Are Longer Than Explained Waits Have you ever been in a subway or an
elevator that has stopped for no apparent reason? Not only is there uncertainty about the
length of the wait, there's added worry about what is going to happen. Has there been an
accident on the line? Will you have to exit the subway in the tunnel? Is the elevator broken?
Will you be stuck for hours in close proximity with strangers?

Unfair Waits Are Longer Than Equitable Waits Expectations about what is fair or unfair
sometimes vary from one culture or country to another. In America, Canada, or Britain, for
example, people expect everybody to wait their turn in line and are likely to get irritated if they
see others jumping ahead or being given priority for no apparent good reason. In some other
countries, it is acceptable to push or shove to the front of a line to receive faster service.

The More Valuable the Service, the Longer People Will Wait People will queue overnight
under uncomfortable conditions to get good seats at a major concert, movie opening, or sports
event that is expected to sell out.

Solo Waits Feel Longer Than Group Waits It's reassuring to wait with one or more people you
know. Conversation with friends can help to pass the time, and some people are comfortable
conversing with strangers while they wait in line.

Physically Uncomfortable Waits Feel Longer Than Comfortable Waits "My feet are killing me!"
is one of the most frequently heard comments when people are forced to stand in line for a
long time. And whether sitting or standing, a wait seems more burdensome if the temperature
is too hot or too cold, if it's drafty or windy, or if there is no protection from rain or snow.

Unfamiliar Waits Seem Longer Than Familiar Ones Frequent users of a service know what to
expect and are less likely to worry while waiting. But new or occasional users of a service are
often nervous, wondering about the probable length of the wait and what happens next. They
may also be more concerned about such issues as personal safety.
What are the implications of these propositions about the psychology of waiting? When
increasing capacity is not feasible, managers should look for ways to make waiting more
palatable for customers. An experiment at a large bank in Boston found that installing an
electronic news display in the lobby didn't reduce the perceived time spent waiting for teller
service but it did lead to greater customer satisfaction. Some large hotels now provide these
digital news displays in their elevators to make rides less boring (in addition to the common
practice of putting mirrors near the elevators on each floor to shorten the perceived pre-
process wait). And the doorman at a Marriott Hotel in Boston has taken it upon himself to bring
a combination barometer/thermometer to work each day, hanging it on a pillar at the hotel
entrance where guests waiting can spend a moment or two examining it while they wait for a
taxi or for their car to be delivered from the valet parking."

Heated shelters equipped with seats make it more pleasant to wait for a bus or a train in cold
weather. Theme park operators cleverly design their waiting areas to make the wait look
shorter than it really is, find ways to give customers in line the impression of constant progress,
and make time seem to pass more quickly by keeping customers amused or diverted while they
wait. Restaurants solve the waiting problem by inviting dinner guests to have a drink in the bar
until their table is ready—an approach that makes money for the house as well as keeping
customers occupied. In similar fashion, guests waiting in line for a show at a casino may find
themselves queuing in a corridor lined with slot machines.

Six Sigma Quality

Six Sigma is a business management strategy, originally developed by Motorola in 1986. Six
Sigma became well known after Jack Welch made it a central focus of his business strategy at
General Electric in 1995,[3] and today it is widely used in many sectors of industry.[citation needed]

Six Sigma seeks to improve the quality of process outputs by identifying and removing the
causes of defects (errors) and minimizing variability in manufacturing and business processes.[4]
It uses a set of quality management methods, including statistical methods, and creates a
special infrastructure of people within the organization ("Black Belts", "Green Belts", etc.) who
are experts in these methods. [4] Each Six Sigma project carried out within an organization
follows a defined sequence of steps and has quantified financial targets (cost reduction and/or
profit increase).[4]

The term Six Sigma originated from terminology associated with manufacturing, specifically
terms associated with statistical modeling of manufacturing processes. The maturity of a
manufacturing process can be described by a sigma rating indicating its yield or the percentage
of defect-free products it creates. A six sigma process is one in which 99.99966% of the
products manufactured are statistically expected to be free of defects (3.4 defects per million).
Motorola set a goal of "six sigma" for all of its manufacturing operations, and this goal became
a byword for the management and engineering practices used to achieve it.
The name - Six Sigma - wants some explaining. Imaging that you are weighing bags of potatoes
as they come out of a bagging process. The bags are supposed to weigh 10 pounds, but the
actual weights will vary. If they are overweight, you are giving away potatoes. If they are
underweight, you are ripping people off. So...you record the weights, and use some software to
construct a histogram of the distribution. You would hope that the distribution would be
centered on 10 lbs., and that there wouldn't be long tails on either side. If your specification
calls for all bags to exceed 9.5 lbs., and to be less than 10.5 lbs., you can draw these spec limits
on the histogram.

So... you're measuring along, and plotting the histogram, and you come across a bag that
weighs 9.4 lbs. It is out of spec. It may cause trouble with customers if you ship it. What do you
do? How many out of spec bags do you expect to find if you measure 1000 bags? You need
some way of predicting this. That's where statistics come in. You can find the average, or mean
weight of a bag of potatoes from all the ones you've weighed. You can calculate a standard
deviation, too, which gives you an idea of how much variation there is around the mean. If the
standard deviation is high, that means you have a lot of variation in the process. Here's where
the sigma comes in...the Greek letter sigma is usually used to symbolize the standard deviation
in statistical equations.

With enough data, you can try to fit a curve to your data - drawing the line that best
approximates the mathematical function that really describes what is going on in the process.
The art of curve-fitting is an arcane one, and not one we need to go into here. Let's just take a
normal curve as an example of one that we might decide to use, if we went through a curve-
fitting exercise. If our histogram can be well-enough described by a normal distribution, then
68% of the bags we measure will weigh within one standard deviation, or one sigma, of the
mean value. If the mean is 10 lbs., and the standard deviation is 0.2 lbs., then 68% of the bags
would weigh between 9.8 lbs. and 10.2 lbs.

Again, if this is a normal distribution, we would find that 95.5% of the bags weighed within 2
sigmas, or 0.4 lbs. of the mean. If we look at the mean plus or minus 3 sigmas, or 10 +/- (3*0.2),
we would find that 99.7% of all bags would weigh between 9.4 lbs, and 10.6 lbs. A very few, just
0.3% of all bags, would weigh less than 9.4 lbs or more than 10.6 lbs.

If this is the case, though, our process is wider than our specification limits. Some of the bags
weigh less than 9.5 lbs, and some weigh more than 10.5 lbs. Does that matter? It depends. With
potato bags, maybe not. But what if we were measuring something with fine tolerances, or
something expensive, or something where precise mixtures were critical. We wouldn't want to
be finding instances where our process was not producing outputs that not in spec limits.

The Six Sigma Quality movement takes this very much to heart. In fact, six sigma advocates
believe that for many processes, there should be six sigmas between the mean and the
specification limits, so that the process is only making a few bad "parts" in every million. You
can, of course, do that by relaxing the specifications, but that isn't usually the way to please
customers. Instead, the variation in the process needs to be driven towards zero, so that the
histogram gets narrower, and fits more comfortably inside the spec limits.

Clearly, to get an accurate view of your critical processes, you need to have people who
understand variation and statistics. The Black Belt training spends a lot of time on this. Software
tools, such as control charts and histograms, are harnessed. So, too, are the tools of quality
improvement, teamwork, project management, and creative thinking. Root causes of variation
are explored, and the classic Deming PDCA cyle is used to plan improvements, try them, check
to see if they worked, and standardize on them if they did.

We don't see that a lot of the Six Sigma methodology is new. It combines elements of statistical
quality control, breakthrough thinking, and management science -- all valuable, powerful
disciplines. We are happy that in this new movement, the time-tested tools of quality and
process improvement are getting renewed high-profile attention and achieving excellent
results.

The statistical representation of Six Sigma describes quantitatively how a process is performing.
To achieve Six Sigma, a process must not produce more than 3.4 defects per million
opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six
Sigma opportunity is then the total quantity of chances for a defect. Process sigma can easily be
calculated using a Six Sigma calculator.

The fundamental objective of the Six Sigma methodology is the implementation of a

measurement-based strategy that focuses on process improvement and variation reduction
through the application of Six Sigma improvement projects. This is accomplished through the
use of two Six Sigma sub-methodologies: DMAIC and DMADV. The Six Sigma DMAIC process
(define, measure, analyze, improve, control) is an improvement system for existing processes
falling below specification and looking for incremental improvement. The Six Sigma DMADV
process (define, measure, analyze, design, verify) is an improvement system used to develop
new processes or products at Six Sigma quality levels. It can also be employed if a current
process requires more than just incremental improvement. Both Six Sigma processes are
executed by Six Sigma Green Belts and Six Sigma Black Belts, and are overseen by Six Sigma
Master Black Belts.

DMAIC

The DMAIC project methodology has five phases:

 Define the problem, the voice of the customer, and the project goals, specifically.
 Measure key aspects of the current process and collect relevant data.
 Analyze the data to investigate and verify cause-and-effect relationships. Determine
what the relationships are, and attempt to ensure that all factors have been considered.
Seek out root cause of the defect under investigation.
 Improve or optimize the current process based upon data analysis using techniques such
as design of experiments, poka yoke or mistake proofing, and standard work to create a
new, future state process. Set up pilot runs to establish process capability.
 Control the future state process to ensure that any deviations from target are corrected
before they result in defects. Implement control systems such as statistical process
control, production boards, visual workplaces, and continuously monitor the process.