Services Marketing
Expanding the Marketing Mix Exploring the Physical Environment
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Important Differences Exist between Services and Physical Goods
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Implications of Service Processes (1) Seeking Efficiency May Lower Satisfaction Processes determine how services are created/delivered — process change may affect customer satisfaction. Service providers must balance productivity with quality.
Beware of imposing new processes on customers,
especially if it means replacing people with machines
New processes that improve efficiency by cutting costs may hurt service quality
Best new processes deliver benefits desired by customers ¾ Faster ¾ Simpler ¾ More conveniently
Customers may need to be educated about new procedures and how to use them
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Implications of Service Processes (2) Designing the “Service Factory” People-processing services require customers to visit the “service factory,” so:
Think of facility as a “stage” for service performance Design process around customer Choose convenient location Create pleasing appearance, avoid unwanted noises, etc. Consider customer needs--info, parking, food, toilets, etc.
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Implications of Service Processes (3) Evaluating Alternative Delivery Channels Processes determine how services are created/delivered — process change may affect customer satisfaction
Customers come to the service factory Customers come to a retail office Service employees visit customer’s home or workplace Business is conducted at arm’s length through - physical channels (e.g., mail, courier service) - electronic channels (e.g., phone, fax, email, Web site)
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Implications of Service Processes (4) Balancing Demand and Capacity When capacity to serve is limited and demand varies widely, problems arise because service output can’t be stored:
If demand is high and exceeds supply, business may be lost
If demand is low, productive capacity is wasted Potential solutions:
- Manage demand - Manage capacity 6
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Implications of Service Processes (5) Applying Information Technology All services can benefit from IT, but mental-stimulus processing and information-processing services have the most to gain:
Remote delivery of information-based services “anywhere, anytime”
New service features through websites, email, and internet (e.g., information, reservations)
More opportunities for self-service New types of services 7
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Implications of Service Processes (6) Including People as Part of the Product Involvement in service delivery often entails contact with other people:
Managers should be concerned about employees’ appearance, social skills, technical skills
Other customers may enhance or detract from service experience--need to manage customer behavior
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Services Marketing Mix – The Seven Ps
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Elements of The Services Marketing Mix: “7Ps” vs. the Traditional “4Ps” Rethinking the original 4Ps Product elements Place and time Promotion and education Price and other user outlays Adding Three New Elements Process People Physical environment 10
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (1) Product Elements All Aspects of Service Performance that Create Value
Core product features—both tangible and intangible elements
Bundle of supplementary service elements Performance levels relative to competition Benefits delivered to customers (customers don’t buy a hotel room, they buy a good night’s sleep)
Guarantees 11
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (2) Place and Time Delivery Decisions: Where, When, and How
Geographic locations served Service schedules Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (3) Promotion, Information, and Education Informing, Educating, Persuading, and Reminding Customers
Marketing communication tools ¾ media elements (print, broadcast, outdoor, retail, Internet, etc.) ¾ personal selling, customer service ¾ sales promotion ¾ publicity/PR
Imagery and recognition ¾ branding ¾ corporate design
Content ¾ information, advice ¾ persuasive messages ¾ customer education/training 13
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (4) Price and Other User Outlays Customer Outlays Involve More than the Price Paid to Seller Traditional Pricing Tasks
Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Identify and Minimize Other Costs Incurred by Users
Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, etc.) Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences 14
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (5) Process Method and Sequence in Service Creation and Delivery
Design of activity flows Number and sequence of actions for customers Providers of value chain components Nature of customer involvement Role of contact personnel Role of technology, degree of automation
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (6) People Managing the Human Side of the Enterprise
Right customer-contact employees performing tasks well ¾ job design ¾ recruiting/selection ¾ training ¾ motivation ¾ evaluation/rewards ¾ empowerment/teamwork
The right customers for the firm’s mission ¾ fit well with product/processes/corporate goals ¾ appreciate benefits and value offered ¾ possess (or can be educated to have) needed skills (co-production) ¾ firm is able to manage customer behavior 16
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The 7Ps: (7) Physical Environment Designing the Servicescape and providing tangible evidence of service performances
Create and maintaining physical appearances ¾ buildings/landscaping ¾ interior design/furnishings ¾ vehicles/equipment ¾ staff grooming/clothing ¾ sounds and smells ¾ other tangibles
Select tangible metaphors for use in marketing communications
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Physical Environment
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as Part of The Value Proposition
Servicescape:
“The environment in which the service is assembled and in which the seller and customer interact, combined with tangible commodities that facilitate performance or communication of the service" (Booms and Bitner, 1981, p. 36).
Servicescape includes facilities: ¾ The exterior - landscape, exterior design, signage, parking,
surrounding environment ¾ The interior - interior design & decor, equipment, signage, layout, air quality, temperature and ambience
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as Part of The Value Proposition
'Physical Evidence' - Servicescape combines with other
tangibles like business cards, stationary, billing statements, reports, employee dress, uniforms, brochures, web pages and virtual servicescape forms the physical structure for the marketing of services.
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Purpose of Service Environments The service environment influences buyer behavior in 3 ways
Attention-creating Medium: to make the servicescape stand out from other competing establishments, and to attract customers from target segments.
Message-creating Medium: symbolic cues to communicate the distinctive nature and quality of the service experience.
Effect-creating Medium: colors, textures, sounds, scents and spatial design to enhance the desired service experience, and/or to heighten an appetite for certain goods, services or experiences
Helps the firm to create a distinctive image & positioning that is unique. 21
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Comparison of Hotel Lobbies The servicescape is part of the value proposition! These servicescapes clearly communicate and reinforce the hotel’s respective positioning and sets service expectations as guests arrive.
Orbit Hotel and Hostel, Los Angeles 22
Four Seasons Hotel, New York
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as part of the Value Proposition
Physical surroundings help shape appropriate feelings and reactions in customers and employees ¾ For example: Disneyland, Denmark’s Legoland
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Disneyland versus Legoland
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as part of the Value Proposition
Servicescapes form a core part of the value proposition ¾ Club Med:
- Repositioned several properties to a somewhat more wholesome fun resort, visually striking entertainment center ¾ Florida-based Muvico:
- Florida-based Muvico: Builds extravagant movie theatres and offers plush amenities. “What sets you apart is how you package it...” (Muvico’s CEO, Hamid Hashemi)
The power of servicescapes is still being discovered
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as part of the Value Proposition Muvico: Exterior
Muvico theaters are known for the themes that several theaters have, such as the Egyptian theme, the '50s drive-in theme, the French opera house theme. http://www.ddg-usa.com/Projects/Muvico-Parisian_20/Project.html
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as part of the Value Proposition Muvico: Dining and Bar
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as part of the Value Proposition Muvico: Seating
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Servicescape as part of the Value Proposition Starbucks
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Affect and the Mehrabian-Russell Stimulus-Response Model
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Mehrabian-Russell Stimulus-Response Model Feelings Are a Key Driver of Customer Responses to Service Environments
Environmental Stimuli and Cognitive Processes
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Dimensions of Affect:
Response/ Behavior:
Pleasure and Arousal
Approach Avoidance and Cognitive Processes
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Mehrabian-Russell Stimulus-Response Model
Simple, yet fundamental, model of how people respond to environments
Peoples’ conscious and unconscious perceptions and interpretation of the environment influence how they feel in that environment
Feelings, rather than perceptions or thoughts drive behavior
Typical outcome variable is ‘approach’ or ‘avoidance’ of an environment, but other possible outcomes can be added to the model as well 32
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Russell Model of Affect
Emotional responses to environments can be described along two main dimensions, pleasure and arousal.
Pleasure is subjective depending on how much the individual likes or dislikes the environment
Arousal quality of an environment is dependent on its “information load”, i.e., its degree of
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¾
Novelty (unexpected, surprising, new, familiar) and
¾
Complexity (number of elements, extent of motion or change)
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Russell Model of Affect
Arousing Distressing
Exciting
Unpleasant
Pleasant
Relaxing
Boring Sleepy 34
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Drivers of Affect
Affect can be caused by perceptions and cognitive processes of any degree of complexity.
Simple Cognitive Processes, Perception of Stimuli ¾ tangible cues (of service ¾ consumer satisfaction
quality)
Complex Cognitive Processes ¾ affective charged schemata ¾ attribution processes
processing
The more complex a cognitive process becomes, the more powerful its potential impact on affect.However, most service encounters are routine. Simple processes can determine affect. 35
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Behavioral Consequence of Affect
Basically, pleasant environments result in approach,
and
unpleasant environments result in avoidance
Arousal acts as an amplifier of the basic effect of pleasure on behavior
If the environment is pleasant, increasing arousal can lead
to excitement and stronger positive consumer response. If the environment is unpleasant, increasing arousal level will move consumers into the Distressing region
Feelings during the service encounter is also an important driver of customer loyalty
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Stimulus-Organism Response Model
Personal moderators: ¾ Some people are arousal seekers ¾ Some can screen the environment better
Situational modeartors: ¾ Purpose for being there ¾ Mood ¾ Expecation for an environment
Valence moderators: ¾
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age-gender- social class can influance the response to stimuli produced by the environment
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Stimulus-Organism-Response Model
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
The Stimulus-Response Model was Expanded into Bitner’s Model Servicescape Model
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
An Integrated Framework – Bitner’s ServiceScape Model
Identifies the main dimensions in a service environment and views them holistically
Customer and employee responses classified under,
cognitive, emotional and psychological which would in turn lead to overt behavior towards the environment
Key to effective design is how well each individual dimension fits together with everything else
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
An Integrated Framework – Bitner’s ServiceScape Model Environmental Dimensions
Moderators Holistic Environment
Ambient Conditions
Space/ Function
Signs, Symbols & Artefacts
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Internal Responses Cognitive Emotional Psychological
Employee Response Moderator
Employee Responses
Perceived ServiceScape
Customer Response Moderator
Customer Responses Cognitive Emotional Psychological
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Behavior
Approach or Avoid Social Interaction Between Customers & Employees
Approach or Avoid
Main Dimensions in Servicescape Model
Ambient Conditions ¾ Characteristics of environment pertaining to our five senses
Spatial Layout and Functionality ¾ Spatial layout: Floorplan; Size and shape of furnishings,
counters, machinery,equipment, and how they are arranged ¾ Functionality: Ability of those items to facilitate performance
Signs, Symbols, and Artifacts ¾ Explicit or implicit signals to:
- Communicate firm’s image - Help consumers find their way - Convey rules of behavior
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Ambient Conditions
Ambient environment is composed of hundreds of
design elements and details that must work together to create desired service environment
Ambient conditions are perceived both separately and holistically, and include:
¾ Lighting and color schemes ¾ Size and shape perceptions ¾ Sounds such as noise and music ¾ Temperature ¾ Scents
Clever design of these conditions can elicit desired behavioral responses among consumers
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Music
In service settings, music can have a powerful effect on perceptions and behaviors, even if played at barely audible levels
Structural characteristics of music―such as tempo, volume, and harmony―are perceived holistically
¾ Fast tempo music and high volume music increase arousal levels ¾ People tend to adjust their pace, either voluntarily or involuntarily,
to match tempo of music
Careful selection of music can help select
the right customers….and deter the wrong type of customers
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Music on Restaurant Diners
Source: Ronald E. Milliman (1982), “Using Background Music to Affect the Behavior of Supermarket Shoppers,” Journal Of Marketing, 56 (3): pp. 86–91
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Scent
An ambient smell is one that pervades an environment ¾ May
or may not be consciously perceived by customers ¾ Not related to any particular product
Scents have distinct characteristics and can be used to
solicit emotional, physiological, and behavioral responses
In service settings, research has shown that
scents can have significant effect on customer perceptions, attitudes, and behaviors
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Scent on Perceptions of Store Environment Evaluation [Higher Number is More Positive]
Unscented Environment Mean Ratings
Scented Environment Mean Ratings
Difference
Negative/positive
4.65
5.24
+0.59
Outdated/modern
3.76
4.72
+0.96
Store Evaluation
Store Environment Unattractive/attractive
4.12
4.98
+0.86
Drab/colorful
3.63
4.72
+1.09
Boring/Stimulating
3.75
4.40
+0.65
Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80.
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Scent on Perceptions of Store Environment Evaluation [Higher Number is More Positive]
Unscented Environment Mean Ratings
Scented Environment Mean Ratings
Difference
Outdated/up-to-date style
4.71
5.43
+0.72
Inadequate/adequate
3.80
4.65
+0.85
Low/high quality
4.81
5.48
+0.67
Low/high price
5.20
4.93
-0.27
Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80.
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Aromatherapy: Effects of Selected Fragrances on People Fragrance
Aroma Type
Traditional Use
Potential Psychological Effect on People
Deodorant, antiseptic, soothing agent
Stimulating and energizing
Muscle relaxant, soothing agent, astringent
Relaxing and calming
Energizing, uplifting
Antiseptic, soothing agent
Soothing energy levels
Balancing, soothing
Muscle relaxant, aphrodisiac
Balancing people’s emotions
Eucalyptus
Camphoraceous
Lavender
Calming, Herbaceous balancing, soothing
Lemon
Citrus
Black pepper Spicy
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AromaTherapy Class Toning, stimulating
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Color
Colors can be stimulating, calming, expressive,
disturbing, impressional, cultural, exuberant, symbolic
Color pervades every aspect of our lives, embellishes the ordinary, gives beauty and drama to everyday objects
Colors have a strong impact on people’s feelings Colors can be defined into three dimensions: ¾ Hue is the pigment of the color ¾ Value is the degree of lightness
or darkness of the
color ¾ Chroma refers to hue-intensity, saturation, or brilliance 50
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Common Associations and Human Responses to Colors Color
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Degree of Warmth
Nature Symbol
Common Association and Human Responses to Color
Red
Warm
Earth
High energy and passion; can excite and stimulate
Orange
Warmest
Sunset
Emotions, expressions, warmth
Yellow
Warm
Sun
Optimism, clarity, intellect, moodenhancing
Green
Cool
Growth, grass, and trees
Nurturing, healing, unconditional love
Blue
Coolest
Sky and ocean
Relaxation, serenity, loyalty
Indigo
Cool
Sunset
Mediation and spirituality
Violet
Cool
Violet flower
Spirituality, reduces stress, can create an inner feeling of calm
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Space
Spatial Layout and Functionality ¾ Layout refers to size and shape of furnishings and the ways
it is arranged ¾ Functionality is the ability of those items to facilitate performance
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Space
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Impact of Signs, Symbols, and Artifacts
Signs, Symbols and Artifact ¾ Explicit
or implicit signals to communicate the firm’s image, help consumers find their way and to convey the rules of behavior
Guide customers clearly through process of service delivery
¾ Customers
will automatically try to draw meaning from the signs, symbols, and artifacts ¾ Unclear signals from a servicescape can result in anxiety and uncertainty about how to proceed and obtain the desired service ¾ For instance, signs can be used to reinforce behavioral rules (see picture on next slide) 54
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Signs Teach and Reinforce Behavioral Rules
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Combining Service Characteristics and Servicescapes: Guides for Service Providers
Putting it all Together
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Selection of Environmental Design Elements
Consumers perceive service environments
holistically….so we must design with a holistic view: ¾ Servicescapes
have to be seen holistically: No dimension of design can be optimized in isolation, because everything depends on everything else ¾ Holistic characteristic of environments makes designing service environment an art
Must design from a customer’s perspective
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Tools to Guide Servicescape Design
Keen observation of customers’ behavior and responses
to the service environment by management, supervisors, branch managers, and frontline staff
Feedback and ideas from frontline staff and customers, using a broad array of research tools from suggestion boxes to focus groups and surveys.
Field experiments can be used to manipulate specific
dimensions in an environment and the effects observed.
Blueprinting or service mapping—extended to include physical evidence in the environment.
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Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Summary: Crafting the Service Environment
Service environment: ¾ Shapes
customers’ experiences and behavior ¾ Facilitates service encounters ¾ Enhances productivity
Servicescape model is integrative framework of consumer responses to service environments. Main dimensions: ¾ Ambient conditions—music, scent, ¾ Spatial layout and functionality ¾ Signs, symbols, and artifacts
color, etc.
People are also part of service environment 59
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
Summary: Crafting the Service Environment
Putting it all together, firms should: ¾ Design
with a holistic view ¾ Design from a customer’s perspective ¾ Use tools to guide servicescape design
Some tools for guiding servicescape design are: ¾ Keen
observation of customers’ behavior and responses in service environments ¾ Feedback and ideas from frontline staff and customers ¾ Field experiments to manipulate specific dimensions to observe effects ¾ Blueprinting physical evidence of environment 60
Materials in these slides are adapted from Lovelock & Wirtz (2004) Services Marketing 5/E
