Welcome to Services Marketing 23C550 Lecture 1: Course practicalities Introduction to the topic & IHIP Gaps-model of service quality Service Blueprinting Emotional Journey Assignment 1
Dr. Mikko Laukkanen Academic Director, Aalto University Executive Education Post-Doctoral Researcher, Aalto University School of Business Activities: managing academic affairs, consulting, teaching, research Clients and partners: Wärtsilä, Nokia, KPMG, Neste, Terveystalo, Lindström, Ruukki, Valio, YIT, Fazer, Itella Areas of expertise: Strategic marketing, business models, service business, innovation management Education: D.Sc. (Economics) Aalto University School of Business; Visiting Scholar University of California, Berkeley; M.Sc. (Economics) Helsinki School of Economics
Course practicalities
Time and place Tuesdays 15:15-18:45 Last lecture on Thursday Feb. 6 th Attendance is strongly encouraged No lists will be passed around. However, the material covered in class exceeds that which is on the slides. Some points will be given for outstanding classroom participation. If you choose to not be here, do not ask me what you missed! Place: U7 / U135a Course homepage on MyCourses
Readings 1. Mandatory articles (i.e. will definitely be on the exam)- listed on the course website 2. Strongly recommended book - Services marketing : people, technology, strategy / Jochen Wirtz & Christopher Lovelock. / 8th ed., / World Scientific Publishing 3. Slides posted on the course website (will also definitely be on the exam)
Grading Assignments = 50 % First assignment is individual work Second assignment you will need to find a pair Exam = 50 % More information on the format and what to expect provided on the last lecture
Progression of Course Themes B2C-services and nature of services generally B2B- services and service innovation Service as strategy and service mindset
The Service Marketing Triangle
Introduction to the topic
SERVITIZATION Product Product + Service Service Product Service Progression of servitization in product industries
Some Trends in Services B2C
Some Trends in Services B2B (industrial)
IHIP
Two ways of looking at services 1.Services are a residual that which are not products; think history of marketing 2.Services are the unit of exchange think T. Levitt s Marketing Myopia (HBR 1960)
Goods vs. services (Zeithaml& Bitner& Gremler 2006) Goods Services Resulting implications Tangible Intangible Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is challenging Standardized Heterogeneous Service delivery and customer satisfaction depend on interaction Service quality depends on many uncontrollable factors Service delivered may not match what was planned and promoted
Goods vs. services (Zeithaml& Bitner& Gremler 2006) Goods Services Resulting implications Production separate from consumption Simultaneous production and consumption (or inseparable) Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult Nonperishable Perishable Difficult to synchronize supply and demand with services Services cannot be returned or resold
The Gaps Model of Service Quality
Why the Gaps Model? Gives managers one possible way of approaching service marketing in an organized way. Positions the topics and concepts of the course into a single (simplified) model. Offers a starting point for looking at service quality and service design. Provides students with a tool for their assignment work.
The Customer Gap Expected service is a result of previous experiences and knowledge Marketer can control: pricing, advertising, sales promises Marketer can t control: competitors actions, WoM, customer-specific needs Perceived service is the subjective assessment of the service received Expected service Perceived service Customer gap
Provider Gap 1: The Listening Gap The firm lacks understanding of customer expectations or fails to observe changes in expectations over time Four factors: 1. Inadequate marketing research orientation 2. Lack of upward communication 3. Insufficient relationship focus 4. Inadequate service recovery
Provider Gap 2: The Service Design and Standards Gap The firm is unable to translate identified customer preferences to service specifications which employees can execute. Three factors: 1. Poor service design 2. Absence of customer-driven standards 3. Inappropriate physical evidence and servicescape
Provider Gap 3: The Service Performance Gap The firm s employees fail to turn service standards and design into excellent service Four factors: 1. Deficiencies in human resource policies 2. Failure to match supply and demand 3. Customers not fulfilling roles 4. Problems with service intermediaries
Provider Gap 4: The Communication Gap The firm raises customer expectation to exceed perceived service level through communication. Five factors: 1. Lack of integrated services marketing communications 2. Ineffective management of customer expectations 3. Overpromising 4. Inadequate horizontal communications 5. Inappropriate pricing
Service Blueprinting
Read this before starting on the first assignment Service Blueprinting: A Practical Technique for Service Innovation Mary Jo Bitner, Amy L. Ostrom, Felicia N. Morgan, California Management Review, Vol. 50, No. 3, Spring 2006 Builds on seminal works by G. Lynn Shostack: Designing services that deliver - Harvard business review, 1984; Service positioning through structural change - The Journal of Marketing, 1987; How to design a service - European Journal of Marketing, 1993
The Service Context Unlike physical goods, services are dynamic, unfolding over a period of time through a sequence or constellation of events and steps. The service process can be viewed as a chain or constellation of activities that allow the service to function effectively (p. 68)
Managerial Challenges in Services A main issue for managers is whether the company has the capability to systematically manage that experience, or whether it is simply left to chance. (p. 69) Because services are intangible, variable, and delivered over time and space, people frequently resort to using words alone to specify them, resulting in oversimplification and incompleteness. (p.70)
General Strengths of the Technique Service blueprinting is a powerful technique that can be used to depict a service at multiple levels of analysis. That is, service blueprinting can facilitate the detailed refinement of a single step in the customer process as well as the creation of a comprehensive, visual overview of an entire service process. (p. 69)
Blueprinting as a Managerial Tool Because service blueprinting results in a visual rendering of the service process and underlying organizational structure that everyone can see, it is highly useful in the concept development stage of service development. (p. 70) The ultimate task is for each functional area involved in delivering the service to translate the final blueprint into detailed implementation plans to support their activities within the blueprint. (p. 71)
Potential managerial outcomes of a succesful blueprinting exercise 1. Providing a platform for innovation 2. Recognizing roles and interdependencies 3. Facilitating both strategic and tactical innovations 4. Transferring and storing innovation knowledge 5. Designing moments of truth 6. Clarifying competitive positioning 7. Understanding the ideal service experience 8. Other, creative uses of blueprinting
Components of Service Blueprints Physical Evidence Customer Actions Line of Interaction Onstage/Visible Contact Employee Actions Backstage/Invisible Contact Employee Actions Line of Visibility Line of Internal Interaction Support Processes
Emotional Journey
Emotional journey (Dasu & Chase 2010)
How do customers interpret experiences (Chase & Dasu 2001) 1. Order the end sticks with you 2. Duration how long it takes, how many actions we need Keep them excited, distracted, engaged Too many actions may increase frustration 3. Rationalizing disappointments need a scapegoat We want a simple explanation and reason We assume that any diversion from routines is the root cause of all problems We blame individuals, not the system
Help from behavioral science (De Vine & Gilson 2010; Chase & Dasu 2001) 1. Get the unfortunate parts over with quickly How do you start calls and meetings Avoid dodging or shifting blame 2. Separate the joys, merge the pain Example: the continuous disappointment of low-cost airlines Example: Disney parks and speed of rides
Help from behavioral science (De Vine & Gilson 2010; Chase & Dasu 2001) 3. Ensure a peak at the end The end is more important the beginning Example: Malaysian Airlines and luggage carousel Desire to see improvement Golden egg at the end Example: consulting final report
Help from behavioral science (De Vine & Gilson 2010; Chase & Dasu 2001) 4. Give customer (controlled) freedom to choose Strong recommendations Inferior alternatives Example: blood donors choice of arm 5. Do not disturb or disrupt the routines and habits of customers Think Daniel Kahneman s System 1 and System 2