McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-2Chapter 2 Conceptual Framework of the Book: The Gaps Model of Service Quality  The Customer Gap  The Provider Gaps:  Gap 1 – The Listening Gap  not knowing what customers expect  Gap 2 – The Service Design and Standards Gap  not having the right service designs and standards  Gap 3 – The Service Performance Gap  not delivering to service standards  Gap 4 – The Communication Gap  not matching performance to promises  Putting It All Together: Closing the Gaps McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-3 Objectives for Chapter 2: The Gaps Model of Service Quality  Introduce the framework, called the gaps model of service quality, used to organize this textbook.  Demonstrate that the gaps model is a useful framework for understanding service quality in an organization.  Demonstrate that the most critical service quality gap to close is the customer gap, the difference between customer expectations and perceptions.  Show that four gaps that occur in companies, which we call provider gaps, are responsible for the customer gap.  Identify the factors responsible for each of the four provider gaps.

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-4 The Customer Gap McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-5  Provider Gap 1: Not knowing what customers expect  Provider Gap 2: Not having the right service designs and standards  Provider Gap 3: Not delivering to service standards  Provider Gap 4: Not matching performance to promises Customer Expectations Customer Perceptions Key Factors Leading to the Customer Gap Customer Gap McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-6 Gaps Model of Service Quality  Customer Gap:  difference between customer expectations and perceptions  Provider Gap 1 (Listening Gap):  not knowing what customers expect  Provider Gap 2 (Service Design & Standards Gap):  not having the right service designs and standards  Provider Gap 3 (Service Performance Gap):  not delivering to service standards  Provider Gap 4 (Communication Gap):  not matching performance to promises McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-7 Company perceptions of customer expectations Customer expectations CUSTOMER COMPANY Gap 1: The Listening Gap Provider Gap 1 Perceived Service McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-8 Key Factors Leading to Provider Gap 1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-9 CUSTOMER COMPANY Gap 2: The Service Design and Standards Gap Customer-driven service designs and standards Company perceptions of customer expectations Provider Gap 2 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-10 Key Factors Leading to Provider Gap 2 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-11 CUSTOMER COMPANY Service delivery Gap 3: The Service Performance GapCustomer-driven service designs and standards Provider Gap 3 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-12 Key Factors Leading to Provider Gap 3 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-13 CUSTOMER COMPANY External communications to customers Gap 4: The Communication Gap Provider Gap 4 Service delivery McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-14 Key Factors Leading to Provider Gap 4 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-15 Gaps Model of Service Quality McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-16 Ways to Use Gap Analysis  Overall Strategic Assessment:  How are we doing overall in meeting or exceeding customer expectations?  How are we doing overall in closing the four company gaps?  Which gaps represent our strengths and where are our weaknesses?

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-17 Ways to Use Gap Analysis Specific Service Implementation  Who is the customer? What is the service?  Are we consistently meeting/exceeding customer expectations with this service?  If not, where are the gaps and what changes are needed? (Examine gaps 1-4 for this particular service.) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-2 Part 1 FOUNDATIONS FOR SERVICES MARKETING McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-3 Introduction to Services What are Services? Why Service Marketing? Service and Technology Characteristics of Services Service Marketing Mix Staying Focused on the Customer Chapter 1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-4 Objectives for Chapter 1: Introduction to Services  Explain what services are and identify important trends in services.  Explain the need for special service marketing concepts and practices and why the need has developed and is accelerating.  Explore the profound impact of technology on service.  Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.  Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text.

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-5 What are Services? Services are deeds, processes, and performances provided, coproduced, or cocreated by one entity or person for and/or with another entity or person. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-6 Examples of Service Industries  Health Care  hospital, medical practice, dentistry, eye care  Professional Services  accounting, legal, architectural  Financial Services  banking, investment advising, insurance  Hospitality  restaurant, hotel/motel, bed & breakfast  ski resort, rafting  Travel  airline, travel agency, theme park  Others  hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-7 Contributions of Service Industries to U.S.

Gross Domestic Product (Figure 1.1) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-8 Tangibility Spectrum (Figure 1.2) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-9 Why Service Marketing? Services dominate U.S. and worldwide economies Service as a business imperative in goods- focused businesses Deregulated industries and professional service needs Service marketing is different Service leads to profits McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-10 Percent of U.S. Labor Force by Industry (Figure 1.3) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-11 Percent of U.S.

Gross Domestic Product by Industry (Figure 1.4) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-12Goods Companies Expanding into Services Caterpillar GE IB PetSmart Procter & Gamble Xerox McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-13 Service and Technology Technology…  Is the foundation of many service offerings  Provides new ways to deliver service  Enables both customers and employees.  Extends the global reach of services The Internet is a service! Some outcomes may be negative. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-14 Characteristics of Services Compared to Goods Intangibility Perishability Simultaneous Production and Consumption Heterogeneity McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-15 Comparing Goods and Services (Table 1.1) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-16 Implications of Intangibility Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-17 Implications of Heterogeneity Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-18 Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-19 Implications of Perishability It is difficult to synchronize supply and demand with services Services cannot be returned or resold McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-20 Search, Experience, and Credence Qualities (Figure 1.5) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-21 Challenges and Questions for Service Marketers  Defining and improving quality  Designing and testing new services  Communicating and maintaining a consistent image  Accommodating fluctuating demand  Motivating and sustaining employee commitment  Setting prices  Organizing to facilitate strategic and tactical decision- making  Finding a balance between standardization and personalization  Protecting new service concepts from competitors  Communicating quality and value to customers  Ensuring the delivery of consistent quality service Presenter Presentation Notes Jerome The are 3 main reasons why our program is focusing on services.

It provides a higher profit margin than tangible products, Increases satisfaction and retention, Provides a competitive advantage over others. I am going to use two examples to illustrate these points. The automotive industry has typically been perceived as a manufacturing industry. However, after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealer’s profits It is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that billion in after sale revenue produced

Mcgraw Hillirwin 2018 The Mcgraw Hill Companies All Rights Reserve

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-2Chapter 2 Conceptual Framework of the Book: The Gaps Model of Service Quality  The Customer Gap  The Provider Gaps:  Gap 1 – The Listening Gap  not knowing what customers expect  Gap 2 – The Service Design and Standards Gap  not having the right service designs and standards  Gap 3 – The Service Performance Gap  not delivering to service standards  Gap 4 – The Communication Gap  not matching performance to promises  Putting It All Together: Closing the Gaps McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-3 Objectives for Chapter 2: The Gaps Model of Service Quality  Introduce the framework, called the gaps model of service quality, used to organize this textbook.  Demonstrate that the gaps model is a useful framework for understanding service quality in an organization.  Demonstrate that the most critical service quality gap to close is the customer gap, the difference between customer expectations and perceptions.  Show that four gaps that occur in companies, which we call provider gaps, are responsible for the customer gap.  Identify the factors responsible for each of the four provider gaps.

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-4 The Customer Gap McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-5  Provider Gap 1: Not knowing what customers expect  Provider Gap 2: Not having the right service designs and standards  Provider Gap 3: Not delivering to service standards  Provider Gap 4: Not matching performance to promises Customer Expectations Customer Perceptions Key Factors Leading to the Customer Gap Customer Gap McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-6 Gaps Model of Service Quality  Customer Gap:  difference between customer expectations and perceptions  Provider Gap 1 (Listening Gap):  not knowing what customers expect  Provider Gap 2 (Service Design & Standards Gap):  not having the right service designs and standards  Provider Gap 3 (Service Performance Gap):  not delivering to service standards  Provider Gap 4 (Communication Gap):  not matching performance to promises McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-7 Company perceptions of customer expectations Customer expectations CUSTOMER COMPANY Gap 1: The Listening Gap Provider Gap 1 Perceived Service McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-8 Key Factors Leading to Provider Gap 1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-9 CUSTOMER COMPANY Gap 2: The Service Design and Standards Gap Customer-driven service designs and standards Company perceptions of customer expectations Provider Gap 2 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-10 Key Factors Leading to Provider Gap 2 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-11 CUSTOMER COMPANY Service delivery Gap 3: The Service Performance GapCustomer-driven service designs and standards Provider Gap 3 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-12 Key Factors Leading to Provider Gap 3 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-13 CUSTOMER COMPANY External communications to customers Gap 4: The Communication Gap Provider Gap 4 Service delivery McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-14 Key Factors Leading to Provider Gap 4 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-15 Gaps Model of Service Quality McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-16 Ways to Use Gap Analysis  Overall Strategic Assessment:  How are we doing overall in meeting or exceeding customer expectations?  How are we doing overall in closing the four company gaps?  Which gaps represent our strengths and where are our weaknesses?

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 2-17 Ways to Use Gap Analysis Specific Service Implementation  Who is the customer? What is the service?  Are we consistently meeting/exceeding customer expectations with this service?  If not, where are the gaps and what changes are needed? (Examine gaps 1-4 for this particular service.) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-2 Part 1 FOUNDATIONS FOR SERVICES MARKETING McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-3 Introduction to Services What are Services? Why Service Marketing? Service and Technology Characteristics of Services Service Marketing Mix Staying Focused on the Customer Chapter 1 McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-4 Objectives for Chapter 1: Introduction to Services  Explain what services are and identify important trends in services.  Explain the need for special service marketing concepts and practices and why the need has developed and is accelerating.  Explore the profound impact of technology on service.  Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.  Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text.

McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-5 What are Services? Services are deeds, processes, and performances provided, coproduced, or cocreated by one entity or person for and/or with another entity or person. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-6 Examples of Service Industries  Health Care  hospital, medical practice, dentistry, eye care  Professional Services  accounting, legal, architectural  Financial Services  banking, investment advising, insurance  Hospitality  restaurant, hotel/motel, bed & breakfast  ski resort, rafting  Travel  airline, travel agency, theme park  Others  hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-7 Contributions of Service Industries to U.S.

Gross Domestic Product (Figure 1.1) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-8 Tangibility Spectrum (Figure 1.2) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-9 Why Service Marketing? Services dominate U.S. and worldwide economies Service as a business imperative in goods- focused businesses Deregulated industries and professional service needs Service marketing is different Service leads to profits McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-10 Percent of U.S. Labor Force by Industry (Figure 1.3) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-11 Percent of U.S.

Gross Domestic Product by Industry (Figure 1.4) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-12Goods Companies Expanding into Services Caterpillar GE IB PetSmart Procter & Gamble Xerox McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-13 Service and Technology Technology…  Is the foundation of many service offerings  Provides new ways to deliver service  Enables both customers and employees.  Extends the global reach of services The Internet is a service! Some outcomes may be negative. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-14 Characteristics of Services Compared to Goods Intangibility Perishability Simultaneous Production and Consumption Heterogeneity McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-15 Comparing Goods and Services (Table 1.1) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-16 Implications of Intangibility Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-17 Implications of Heterogeneity Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-18 Implications of Simultaneous Production and Consumption Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-19 Implications of Perishability It is difficult to synchronize supply and demand with services Services cannot be returned or resold McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-20 Search, Experience, and Credence Qualities (Figure 1.5) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-21 Challenges and Questions for Service Marketers  Defining and improving quality  Designing and testing new services  Communicating and maintaining a consistent image  Accommodating fluctuating demand  Motivating and sustaining employee commitment  Setting prices  Organizing to facilitate strategic and tactical decision- making  Finding a balance between standardization and personalization  Protecting new service concepts from competitors  Communicating quality and value to customers  Ensuring the delivery of consistent quality service Presenter Presentation Notes Jerome The are 3 main reasons why our program is focusing on services.

It provides a higher profit margin than tangible products, Increases satisfaction and retention, Provides a competitive advantage over others. I am going to use two examples to illustrate these points. The automotive industry has typically been perceived as a manufacturing industry. However, after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealer’s profits It is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that $9 billion in after sale revenue produced $2 billion in profits (22% margin).

Profits from $150 billion car sales were much lower. JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars) Hyundai’s success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customer’s perception of the brand The same can be said about the personal computer industry. With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale.

Company responsiveness to customer calls is the biggest driver customer satisfaction with its product. Dell revolutionized the industry by being the first to offer mass customization of personal computers. ------------------------- Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profits Services related revenue exceeds first-time product sales by 500% - 2000% Retail industry derive largest margins from sale of extended warranties It is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus GE, IBM other good examples. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-22 Traditional Marketing Mix Elements an organization controls that can be used to satisfy or communicate with customers:  Product  Price  Place  Promotion McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-23 Expanded Mix for Services – The 7 Ps The 4 Ps plus… People All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

Physical Evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. Process The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-24 Expanded Marketing Mix for Services (Table 1.2) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-25 Customer Focus: A Critical Theme  All strategies should be developed with an eye on the customer  All implementations should be carried out with an understanding of their impact on the customer.  All decisions regarding new services, communications, operations, and human resources should integrate the customer' Slide Number 1 Slide Number 2 Introduction to Services Objectives for Chapter 1:Introduction to Services What are Services?

Examples of Service Industries Contributions of Service Industries to U.S. Gross Domestic Product (Figure 1.1) Tangibility Spectrum (Figure 1.2) Why Service Marketing? Percent of U.S. Labor Force by Industry (Figure 1.3) Percent of U.S. Gross Domestic Product by Industry (Figure 1.4) Goods Companies Expanding into Services Service and Technology Characteristics of ServicesCompared to Goods Comparing Goods and Services (Table 1.1) Implications of Intangibility Implications of Heterogeneity Implications of Simultaneous Production and Consumption Implications of Perishability Search, Experience, and Credence Qualities (Figure 1.5) Challenges and Questions for Service Marketers Traditional Marketing Mix Expanded Mix for Services –The 7 Ps Expanded Marketing Mix for Services (Table 1.2) Customer Focus: A Critical Theme

billion in profits (22% margin).

Profits from 0 billion car sales were much lower. JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars) Hyundai’s success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customer’s perception of the brand The same can be said about the personal computer industry. With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale.

Company responsiveness to customer calls is the biggest driver customer satisfaction with its product. Dell revolutionized the industry by being the first to offer mass customization of personal computers. ------------------------- Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profits Services related revenue exceeds first-time product sales by 500% - 2000% Retail industry derive largest margins from sale of extended warranties It is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus GE, IBM other good examples. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-22 Traditional Marketing Mix Elements an organization controls that can be used to satisfy or communicate with customers:  Product  Price  Place  Promotion McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-23 Expanded Mix for Services – The 7 Ps The 4 Ps plus… People All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

Physical Evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. Process The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems. McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-24 Expanded Marketing Mix for Services (Table 1.2) McGraw-Hill/Irwin © 2018 The McGraw-Hill Companies, All Rights Reserved Chapter 1-25 Customer Focus: A Critical Theme  All strategies should be developed with an eye on the customer  All implementations should be carried out with an understanding of their impact on the customer.  All decisions regarding new services, communications, operations, and human resources should integrate the customer' Slide Number 1 Slide Number 2 Introduction to Services Objectives for Chapter 1:Introduction to Services What are Services?

Examples of Service Industries Contributions of Service Industries to U.S. Gross Domestic Product (Figure 1.1) Tangibility Spectrum (Figure 1.2) Why Service Marketing? Percent of U.S. Labor Force by Industry (Figure 1.3) Percent of U.S. Gross Domestic Product by Industry (Figure 1.4) Goods Companies Expanding into Services Service and Technology Characteristics of ServicesCompared to Goods Comparing Goods and Services (Table 1.1) Implications of Intangibility Implications of Heterogeneity Implications of Simultaneous Production and Consumption Implications of Perishability Search, Experience, and Credence Qualities (Figure 1.5) Challenges and Questions for Service Marketers Traditional Marketing Mix Expanded Mix for Services –The 7 Ps Expanded Marketing Mix for Services (Table 1.2) Customer Focus: A Critical Theme

Paper for above instructions

Assignment Solution: The Gaps Model of Service Quality

Introduction to the Gaps Model of Service Quality
The service industry has rapidly expanded over the years, making an understanding of service quality imperative for organizational success. One of the most prominent frameworks for understanding and improving service quality is the Gaps Model, developed by Parasuraman, Zeithaml, and Berry. This model identifies several gaps that can exist between customer expectations of services and their actual experiences, which can lead to customer dissatisfaction. The primary objective of this assignment is to delve into the Gaps Model, focusing on identifying these gaps and the factors that responsible for them, using literature from marketing and service management.
Understanding the Gaps Model
The Gaps Model of Service Quality consists of five gaps: the customer gap and four provider gaps. The customer gap is the difference between customer expectations and perceptions of the service received. Provider gaps, which contribute to the customer gap, are classified into four categories:
1. Gap 1: The Listening Gap - This gap refers to the organization’s inability to understand customer expectations. It arises from insufficient market research and feedback mechanisms that fail to adequately capture customer perceptions (Zeithaml, Parasuraman, & Berry, 1990).
2. Gap 2: The Service Design and Standards Gap - This occurs when the service design does not align with the expectations identified in Gap 1. Organizations may have vague or poorly defined service standards, which leads to inconsistencies in service delivery (Carlson & Wilmot, 2006).
3. Gap 3: The Service Performance Gap - This gap is the difference between service standards and the actual service delivered. Factors such as employee training, motivation, and the operational environment can influence this gap (Kotler & Keller, 2016).
4. Gap 4: The Communication Gap - This gap arises when there is a discrepancy between what the company promises through communications and what is actually delivered. This can result from exaggerated advertising or misleading promotions (Kwortnik & Thompson, 2009).
Identifying the Customer Gap
The customer gap is the core of the Gaps Model. It represents the deficiency between what customers expect from a service and their actual experience. This gap is crucial because it drives customer satisfaction and loyalty. Closing this gap is imperative for companies aiming to enhance their service quality.
To effectively close the customer gap, companies must accurately identify and understand customer expectations and perceptions. Various methods, such as surveys, direct feedback, and service encounters, can elucidate customer expectations. Service quality perceptions can be gauged through customer satisfaction surveys and post-service feedback (Parasuraman, Zeithaml, & Berry, 1991).
Factors Leading to Provider Gaps

Gap 1: The Listening Gap

Several factors contribute to the Listening Gap. First, companies may not have reliable systems in place for collecting customer feedback. Secondly, organizations might ignore or misinterpret customer feedback due to biases or assumptions about what customers want. Additionally, a lack of engagement with customers can prevent organizations from appreciating the nuances of customer expectations (Fitzsimmons & Fitzsimmons, 2006).

Gap 2: The Service Design and Standards Gap

The Service Design and Standards Gap can be attributed to insufficient attention to service design from a customer perspective. Often, organizations create service blueprints based on internal processes rather than external customer needs. The lack of involvement from frontline employees during the service design phase can also lead to disconnects between design and execution (Lovelock & Wirtz, 2016).

Gap 3: The Service Performance Gap

Poor employee training programs and inadequate resources can lead to the Service Performance Gap. Employees may struggle to meet service standards if they are not adequately trained or motivated (Bitner, Booms, & Tetreault, 1990). Furthermore, inconsistencies in service performances can arise from employee autonomy in service delivery, which can vary significantly across different personnel (Schneider & Bowen, 1999).

Gap 4: The Communication Gap

The Communication Gap mainly stems from ineffective marketing communications and unclear messaging. Companies often promote services with promises that exceed what can realistically be delivered. Inaccurate representations in advertising can lead to inflated customer expectations, naturally resulting in dissatisfaction when expectations are not met (Bennett & Rundle-Thiele, 2005).
Closing the Gaps
Organizations can adopt several strategies to close these gaps effectively. Regularly revising customer feedback mechanisms, enhancing employee training programs, creating realistic marketing strategies, and involving customers in service design processes can significantly help in mitigating the identified gaps (Zeithaml et al., 1990).
For Gap 1, organizations should invest in robust market research and feedback tools, engaging with customers actively to understand their changing expectations. For Gap 2, aligning service design with customer needs can be achieved through customer journey mapping and co-creation workshops involving both employees and customers (Gummesson, 2006).
For Gap 3, companies should focus on employee training and maintaining a work environment that supports high performance. This may include fostering a culture of service excellence that motivates employees to deliver their best.
In terms of Gap 4, accurate communications can be achieved through transparent marketing strategies that align promises with reality, ensuring a consistent experience that builds trust with customers (Heskett et al., 1994).
Conclusion
The Gaps Model of Service Quality provides a valuable framework for understanding and improving service delivery within organizations. By systematically addressing each of the identified gaps, companies can enhance customer satisfaction, loyalty, and overall service quality. Regularly analyzing and adjusting service processes in light of customer expectations and perceptions is crucial to maintaining a competitive edge in today’s service-driven market.

References

1. Bennett, R. & Rundle-Thiele, S. (2005). The brand/brand loyalty relationship in a service context. Journal of Services Marketing, 19(4), 194–205.
2. Bitner, M.J., Booms, B.H., & Tetreault, M.S. (1990). The service encounter: Diagnosing favorable and unfavorable incidents. Journal of Marketing, 54(1), 71–84.
3. Carlson, J.R. & Wilmot, W.W. (2006). Service quality: A conceptual framework and critical assessment. Journal of Services Management, 17(4), 487–507.
4. Fitzsimmons, J.A. & Fitzsimmons, M.J. (2006). Service management: Operations, management, and strategy. McGraw-Hill Education.
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