LYCEUM OF THE PHILIPPINES UNIVERSITY

A.Y. 2023-2024

MIDTERM TOPICS
SERVICE MARKETING (ELEN02B)

SUBMITTED TO:
MS. LANILYN DE OCAMPO

PREPARED BY:
BA-MM 202
 CHAPTER 4
Service Relationship and Brands

Core Meaning of Interaction

 Action and Reaction: Interaction involves an action by one party followed

by a response or reaction from the other.

This can be:

 Verbal: Conversations, greetings, explanations.
 Non-verbal: Facial expressions, gestures, body language.
 Physical: Handing over goods, performing a service, guiding a customer.

Types of Interaction:
 Direct Interaction
 Indirect Interaction

Transactional Approach

Core Principles:
 Speed and Convenience:
 Limited Interaction:
 Standardization:

Benefits:
 Efficiency:
 Cost-Effectiveness:
  Scalability:

Relational Approach

Core Principles:
 Customer Centricity.
 Trust and Rapport
 Relationship Building

Benefits:
 Increased Customer Satisfaction
 Enhanced Customer Loyalty
 Higher Customer Lifetime Value
 Valuable Customer Insights

Difference of transactional and relational approach

Transactional: Efficient, fast, but lacks a personal touch.

Relational: Invests time in building connections, leading to long-term customer

value.

Identify the different forms of interaction that occur in service setting.

Direct Interaction:
● Face-to-Face Communication:
● Physical Interaction:
● Non-verbal Communication:
Indirect Interaction:
● Digital Communication
● Self-Service Technology:
● Physical Environment:

Examples of Interaction Across Different Service Industries:

● Retail:
● Banking:
● Healthcare:

Describe the key relational constructs of trust, commitment and understanding:

1. Trust
2. Commitment
3. Understanding

The Interconnectedness:
● These relational constructs are not isolated; they strengthen each other:
● Trust leads to commitment:
● Commitment fosters trust:
● Understanding facilitates trust and commitment

Understanding the Rich Tapestry of Service Relationships:

Customer interactions extend far beyond a single transaction. Service
relationships can take many shapes, each offering distinct benefits and
influencing brand perception.
● Transactional Relationships:
● Functional Relationships:
● Relational Relationships:
● Community Relationships:

Appreciate different relational forms:

1. Transactional Relationship
2. Functional Relationship
3. Relational Relationship
4. Community Relationship

Appreciating Each Form:

1. Recognize the Purpose
2. Tailor Your Interaction
3. Leverage Technology
4. Focus on Customer Needs

Benefits of Appreciating Different Relationship:

1. Improved Customer Satisfaction
2. Enchanced Brand Loyalty
3. Increased Customer Lifetime
4. Positive Brand Image

Describing the main features of CRM program:

1. Contact Management
2. Sales Pipeline Management
3. Customer Service Management
4. Reporting and Analytics
5. Integration with Other Systems

Understanding the Importance of Service Loyalty:

Service loyalty refers to the degree of commitment and repeat patronage that
customers exhibit towards a particular service provider or brand. It is a crucial
aspect of business success in service industries because loyal customers not only
contribute to revenue generation but also serve as advocates who promote the
brand to others. Here's why service loyalty is important:

● Revenue Generation
○ Loyal customers are more likely to make repeat purchases or engage with
the service provider repeatedly over time. This consistent patronage contributes
significantly to revenue stability and growth.

● Cost Efficiency
○ Acquiring new customers can be expensive due to marketing and
promotional efforts. Loyal customers require less investment in marketing and
are less sensitive to price changes, resulting in higher profitability.

● Word-of-Mouth Marketing
○ Satisfied and loyal customers often recommend the service provider to
others, leading to positive word-of-mouth marketing. This organic promotion is
invaluable for attracting new customers and building brand reputation.

● Feedback and Improvement

○ Loyal customers tend to provide valuable feedback and suggestions for
improvement since they have a vested interest in the success of the service
provider. This feedback loop helps the provider to enhance service quality and
meet customer expectations.

● Competitive Advantage
○ In competitive markets, service loyalty can be a significant differentiator.
Providers with a loyal customer base have a competitive edge over rivals as they
are less vulnerable to competitive pressures and customer churn.

● Long-Term Relationships
○ Building loyalty fosters long-term relationships with customers, leading to
a stable and sustainable business model. These relationships go beyond
individual transactions and create a foundation for mutual trust and loyalty.

Categorizing Customers According to Their Loyalty Characteristics:

Customers can be categorized based on their loyalty characteristics, which helps

service providers tailor their strategies to meet the needs of different customer
segments. Here are common categories:

Loyal Customers: These are customers who consistently choose the same
service provider over competitors. They exhibit high levels of satisfaction, repeat
purchases, and are advocates for the brand.

Switchers: Switchers are customers who frequently change service providers

based on factors such as price, promotions, or convenience. They may not exhibit
strong loyalty and are more susceptible to competitive offerings.

Hesitant Customers: Hesitant customers are those who are satisfied with the
service but may not be fully committed or loyal. They require additional efforts
to strengthen the relationship and enhance loyalty.
New Customers: New customers are those who have recently started using the
service. They represent an opportunity for providers to make a positive
impression and convert them into loyal patrons through exceptional service and
personalized experiences.

Dissatisfied Customers: Dissatisfied customers have had negative experiences

with the service and are at risk of defection. Providers must address their
concerns promptly and effectively to prevent churn and potentially regain their
loyalty.

By categorizing customers based on their loyalty characteristics, service

providers can develop targeted strategies to nurture loyalty, improve retention
rates, and maximizes the lifetime value of their customer base. This segmentation
allows providers to allocate resources efficiently and deliver personalized
experiences that resonate with each customer segment's needs and preferences.

Main steps in building a brand:

Building a brand is a strategic process that involves several key steps to establish
a strong identity, create value, and foster customer loyalty. Here are the main
steps in building a brand:

Define Your Brand Identity:

Determine your brand's mission, values, and personality.

Clarify what sets your brand apart from competitors and what unique benefits it
offers to customers.

Understand Your Target Audience:

Conduct market research to identify your target demographic, their needs,
preferences, and pain points.
Develop customer personas to understand their motivations, behaviors, and
communication preferences.

Create a Distinctive Brand Name and Logo:

Choose a memorable and meaningful brand name that reflects your identity and
resonates with your target audience.
Design a visually appealing and recognizable logo that communicates your
brand's essence and values.

Develop Brand Messaging and Positioning:

Craft a compelling brand story and messaging that conveys your brand's purpose,
values, and unique selling proposition (USP).
Position your brand in the minds of consumers by highlighting its strengths and
differentiation in the market.

Design Brand Visuals and Assets:

Develop cohesive brand visuals, including color palette, typography, imagery,

and design elements.
Create branded assets such as website, packaging, marketing materials, and
social media profiles to maintain consistency across touchpoints.

Build Brand Awareness:

Implement marketing strategies to increase brand visibility and reach your target
audience.
Utilize a mix of channels, including advertising, content marketing, social media,
events, and partnerships, to raise awareness and generate interest in your brand.

Deliver Consistent Brand Experience:

Ensure consistency in how your brand is represented across all customer

touchpoints, including interactions with employees, products or services, and
communication channels.
Deliver on your brand promise consistently to build trust and credibility with
customers.

Engage and Connect with Customers:

Foster meaningful connections with your audience through engagement and

interaction.
Listen to customer feedback, address their needs and concerns, and show
appreciation for their support to build a loyal community around your brand.

Monitor and Manage Brand Reputation:

Monitor brand mentions and customer sentiment online to assess brand

perception and identify potential issues or opportunities.
Manage reputation by promptly addressing any negative feedback or crises and
reinforcing positive brand associations.

Evolve and Adapt Over Time:

Continuously evaluate and refine your brand strategy based on market dynamics,
consumer trends, and feedback.
Stay agile and adaptable to evolving customer needs and preferences to remain
relevant and competitive in the long term.

Understand some of the problems in managing service brands:

Understanding the problems in managing service brands is essential for

businesses to overcome challenges and effectively build and maintain brand
equity. Here are some common problems associated with managing service
brands:

Intangibility:

Services are intangible, making it difficult for customers to evaluate their quality
before purchase. This intangibility poses challenges in communicating the value
proposition of the service and differentiating it from competitors.

Inconsistency:

Services are often delivered by people, and variations in employee performance

can lead to inconsistencies in service quality. Maintaining consistency across
multiple service delivery points, such as different branches or franchise locations,
can be challenging.

Perishability:

Services are perishable and cannot be stored or inventoried. This characteristic

poses challenges in managing demand fluctuations and optimizing resource
utilization, leading to potential revenue loss during periods of underutilization.
Heterogeneity:

Services are heterogeneous, meaning that each customer interaction may differ
based on factors such as the service provider's skills, customer preferences, and
situational context. Managing and standardizing service quality across diverse
customer segments and service delivery channels can be complex.

Customer Involvement:

Customers are often actively involved in the service delivery process, co-creating
value with the service provider. Managing customer expectations, preferences,
and interactions effectively while ensuring a positive customer experience can be
challenging.

Lack of Physical Evidence:

Unlike tangible products, services lack physical evidence of quality, making it

challenging for customers to assess their value. This absence of tangible cues can
lead to uncertainty and skepticism among customers, affecting their willingness
to engage with the service brand.

Employee Training and Motivation:

Service employees play a crucial role in delivering service experiences and

representing the brand. However, recruiting, training, and motivating frontline
staff to consistently deliver high-quality service can be challenging, especially in
high-turnover industries.

Managing Service Recovery:

Service failures and customer complaints are inevitable in service industries.
Effectively managing service recovery and addressing customer grievances in a
timely and satisfactory manner is crucial for preserving customer loyalty and
brand reputation.

Building Brand Trust and Credibility:

Establishing trust and credibility is essential for service brands, particularly in

industries where customers rely on the expertise and integrity of the service
provider. Managing brand perceptions, addressing skepticism, and building trust
over time require ongoing efforts and transparency.

Adapting to Technological Advances:

Rapid technological advancements are reshaping the service landscape,

introducing new delivery channels, tools, and customer expectations. Service
brands must adapt to these changes quickly to remain competitive and relevant in
the digital age.
By understanding and addressing these challenges, service brands can enhance
their competitiveness, build customer loyalty, and sustain long-term success in
the marketplace.
 CHAPTER 5
SERVICE QUALITY
Quality refers to a set of characteristics expected from products or services. It is
a combination of various factors such as design, performance, reliability, safety,
efficiency, effectiveness, economy, and timeliness. In other words, quality means
conformance with specific standards. It also implies a measure of how well a
product or service meets its purpose.
1) Employees' perspective
Employees define quality as their perception of the overall value they get from
working in an organization. This includes the following aspects:
• Knowing clearly what is expected of them
• Feeling proud of the work (job satisfaction)
• Ability to earn more money than elsewhere.
• Ability to improve processes and ability to make changes (empowerment)
2) Organization's perspective
Organizations define quality as the level of customer satisfaction, leading to
higher profits and market share. They also consider the following aspects when
defining quality:
• Long term profits
• Being market leader
• Meeting specifications
• Better client satisfaction
• Cost-effectiveness.
• Reliability
3) Customer's perspective
The customer defines quality as the extent to which they get what they want from
the organization.

Customers consider the following aspects:

• Getting a good product or service
• Low maintenance
• Free from deficiencies
• Aesthetics
• "wow" effect
Service Quality
• Safety
4) Supplier's Perspective
Suppliers define quality as the degree of conformity between the delivered goods
and the required specifications. They consider the following aspects:
• Technical compliance and acceptance by the buyer
• Re-orders
• Reduced variation
• Doing it right the first time
• Timely delivery
5) Society's perspective
Society defines quality as the extent of social benefits derived from the
organization. It considers the following aspects:
• Less waste
• Durable products
• Employment opportunities
• Low pollution
• Social responsibility
• Environmental sustainability
It can be concluded that there is no single definition of quality but rather multiple
perspectives on the same concept. The above definitions show that quality is not
just about delivering high-quality products or services. Instead, it is a complex
phenomenon that involves many different stakeholders. There is no one way to
define quality. It varies according to the stakeholder involved.

Service Quality vs. Customer Satisfaction

Customer Satisfaction - A customer's perception of how well a service meets
their expectations. It's a post-encounter evaluation.
Service Quality - The overall quality of a service as perceived by the customer,
considering various aspects like reliability, responsiveness, and courtesy.
1. Satisfaction depends on meeting expectations:
• Customers are satisfied if the service quality meets or exceeds their
expectations.
• Even a low-quality service can lead to satisfaction if it meets low expectations
(e.g., a cheap fast-food joint).
• Conversely, a high-quality service might lead to dissatisfaction if expectations
were even higher (e.g., an expensive restaurant).
2. Importance of managing both:
• Businesses should focus on managing both service quality and customer
expectations.
• Service quality assessments (like SERVQUAL) help identify gaps between
perceived and delivered service.
• Understanding these gaps helps improve customer satisfaction strategically.
3. Prioritize service quality or adjust expectations?
• Companies should consider their competitive strategy when addressing
customer satisfaction issues.
• Drastically changing service quality might affect target markets and
competitors.
• Aligning expectations with delivered service quality is often a more tactical
approach.
• In many cases, improving service quality is more crucial than just boosting
satisfaction scores.

Disconfirmation Model of Service Quality

Disconfirmation Model of Service Quality is a prominent framework used to
assess customer satisfaction with services. Proposed by Richard L. Oliver in
1980, it suggests that customer satisfaction is influenced by the comparison
between their expectations and their actual experiences with a service. The model
posits that satisfaction results from the discrepancy between expected and
perceived service performance.
1. Expectations: Customers develop expectations about a service based on
various factors such as past experiences, word-of-mouth, marketing
communications, and personal needs. These expectations serve as a benchmark
against which the actual service performance is evaluated.
2. Perceived Performance: This refers to customers' perceptions of the actual
performance of the service they receive. It encompasses aspects such as
reliability, responsiveness, assurance, empathy, and tangibles associated with
service delivery.
3. Disconfirmation: Disconfirmation occurs when there is a difference between
customers' expectations and their perceived performance of the service. This
discrepancy can be positive, negative, or neutral:
Positive Disconfirmation - When perceived performance exceeds expectations,
leading to satisfaction.
Negative Disconfirmation - When perceived performance falls short of
expectations, resulting in dissatisfaction.
Neutral Disconfirmation - When there is no significant difference between
expectations and perceived performance.
4. Customer Satisfaction: The degree of disconfirmation influences customer
satisfaction. When perceived performance aligns with or exceeds expectations,
satisfaction is likely to occur. Conversely, when perceived performance is below
expectations, dissatisfaction is more probable.
5. Post-Purchase Evaluation: After experiencing the service, customers may
adjust their expectations based on their perceived performance. This can
influence future expectations and behaviors, such as repeat purchase intentions or
word-of-mouth recommendations.
Technical and Functional Quality in Service Quality
Technical Quality - refers to the core outcome or deliverable of the service
itself. It’s what the customer receives because of interacting with the service
provider.
Technical quality is often easier to measure objectively. You can weigh a meal,
check room temperature, or verify a diagnosis.
Examples:
• A delicious meal in a restaurant
• A clean and comfortable room in a hotel
• A correctly diagnosed and treated illness by a doctor
Functional Quality - This dimension focuses on how the service is delivered. It
refers to the process and interaction between the customer and the service
provider.
Functional quality can be more subjective to evaluate as it involves perceptions
of the service experience.
Examples:
• Courtesy and helpfulness of the staff
• Promptness and efficiency of service delivery
• Friendliness and attentiveness of the service personnel

SERVQUAL Model
The SERVQUAL model is based on the premise that customers evaluate service
quality by comparing their perceptions of service received with their
expectations. This
comparison across five dimensions helps identify gaps where service
improvements are needed:
Reliability: The ability to deliver promised services accurately and dependably.
Assurance: Competence, courtesy, credibility, and security of the service
provider.
Tangibles: Physical facilities, equipment, personnel, and communication
materials.
Empathy: Caring, individualized attention provided to customers.
Responsiveness: Willingness to help customers and provide prompt service.
Application of the SERVQUAL Model:
The implementation of the SERVQUAL model involves several steps:
• Identify customer expectations: Understand what customers expect from the
service based on their past experiences, marketing communications, and other
factors.
• Measure customer perceptions: Use surveys or feedback mechanisms to assess
customers' perceptions of service quality across the five dimensions.
• Calculate service quality gaps: Determine the gaps between customer
perceptions and expectations for each dimension.
• Analyze and prioritize gaps: Identify priority areas for improvement based on
the size and significance of the gaps.
• Implement improvements: Develop strategies and initiatives to address
identified gaps and enhance service quality.
• Monitor and reassess: Continuously monitor customer perceptions and reassess
expectations to ensure ongoing improvement.

Benefits of Using the SERVQUAL Model:

Systematic approach: The SERVQUAL model provides a structured framework
for assessing and improving service quality, enabling organizations to prioritize
efforts effectively.
Customer-centric focus: By focusing on customer perceptions and expectations,
the model helps organizations align their services with customer needs and
preferences.
Enhanced competitiveness: Improving service quality can lead to increased
customer satisfaction, loyalty, and positive word-of-mouth, enhancing an
organization's competitiveness in the market.

Basis of Six-Sigma Approach

Six Sigma is a powerful methodology that can be effectively applied to improve
service quality. Here's a breakdown of its core principles in the context of service
delivery:
Foundation: Data-Driven Process Improvement
Six Sigma emphasizes a data-driven approach to identify and eliminate variations
that lead to defects in service delivery. By focusing on measurable metrics,
organizations can pinpoint areas for improvement and track progress towards
achieving consistent, high-quality service.
DMAIC Cycle: A Structured Framework
Six Sigma utilizes the DMAIC cycle, a five-phase framework for process
improvement:
1. Define: Clearly define the problem or opportunity for improvement in service
quality. This involves identifying customer needs and expectations.
2. Measure: Establish metrics to measure the current state of service delivery.
This could include customer satisfaction scores, resolution times, or error rates.
3. Analyze: Analyze the collected data to identify the root causes of variations
and defects impacting service quality. Tools like cause-and-effect diagrams
(Fishbone diagrams) can be used here.
4. Improve: Develop and implement solutions to address the root causes
identified in the analysis phase. This might involve streamlining processes,
training staff, or implementing new technologies.
5. Control: Monitor and measure the effectiveness of the implemented solutions.
Continuously monitor processes to ensure consistent service quality and identify
opportunities for further improvement.

Benefits of Six Sigma for Service Quality

By implementing Six Sigma, service organizations can expect several benefits:
  Reduced Defects: Minimize errors and inconsistencies in service delivery,
leading to a more reliable and predictable experience for customers.
 Enhanced Customer Satisfaction: By addressing customer needs and
reducing defects, Six Sigma helps improve customer satisfaction and
loyalty.
 Increased Efficiency: Streamlined processes and reduced waste lead to
improved operational efficiency and cost savings.
 Data-Driven Decision Making: The focus on data analysis provides a strong
foundation for informed decision-making regarding service improvement
initiatives.

Appreciate some of the managerial problems in implementing service quality.

• Limited Resources: Improving service often requires investment in training,
technology, or additional staff. Managers may struggle to get budget approval,
especially if the benefits aren't immediately clear.
• Communication Silos: Different departments (like customer service and sales)
may not communicate well. This can lead to a disconnect between what
customers expect and what they experience.

• Unclear Standards: If employees aren't sure what "good service" looks like, it's
hard to deliver it consistently. Managers need to clearly define service standards
and how they'll be measured.
• Employee Resistance: Change can be uncomfortable. Employees may resist
new procedures or service approaches, especially if they feel unprepared or
unsupported.
• Misaligned Priorities: Short-term goals like cost-cutting might conflict with
long-term goals like customer satisfaction. Managers need to find a balance that
prioritizes service quality.