services marketing strategy

Valarie A. Zeithaml, Mary Jo Bitner, and

Dwayne D. Gremler

Services marketing strategy focuses on delivering

processes, experiences, and intangibles to
customers rather than physical goods and
transactions. It involves integrating a focus on
the customer throughout the firm and across all
functions. All company functions marketing,
selling, human resources, operations, and
R&D must work together to create effective
services marketing strategy. Rather than
the traditional goods marketing focus on
transactions and exchange, services marketing
strategy is centered on the customer, usage, and
relationships (Vargo and Lusch, 2004a).
Services, which can be defined as deeds,
processes, and performances, fall into several
categories. Many services, such as hotels,
transportation, and health care, are offerings
in and of themselves and are the primary
revenue-producing activities of the firms.
Another category of service is customer service,
which includes the service provided in support
of a companys core products. Typically,
customer service does not directly produce
revenue but rather addresses customer requests,
questions, and complaints, besides providing
answers and solutions. Service can also be a
value-add for manufactured products many
companies provide training, installation, and
repair services for the goods they produce often
for a fee. Finally, many services are derived from
or are provided by manufactured products such
as cell phones, computers, software, and mobile
phones. In early writings on services, scholars
distinguished services from goods by noting
that they were intangible, perishable, variable,
and that the producer and consumer were
inseparable. Recently, it has been suggested
that these distinctive characteristics should not
be viewed as unique to services but that they
are also relevant to goods, that all products
are services, and that economic exchange is
fundamentally about service provision (Vargo
and Lusch, 2004b). Although this view is rather
abstract, it does suggest that all types of organizations can gain valuable insights from services
marketing frameworks, tools, and strategies.

The four Ps of marketing (product, price,

promotion, and place) are only partially adequate to conduct effective services marketing
strategy. Three additional Ps people, process,
and physical evidence are also needed. Because
services are usually produced and consumed
simultaneously, customers are often present
in the firms factory, interact directly with
the firms personnel, and are actually part of
the service production process. Therefore,
all human actors (the P corresponding to
people) play a part in service delivery and thus
influence the customers perceptions. The firms
personnel, the customer, and other customers
in the service environment each provide cues to
the customer regarding the nature of the service
itself. Employee dress, personal appearance,
attitudes, and behaviors all influence the
customer perceptions of the service. Physical
evidence pertains to the environment in which
the service is delivered; all tangible components
that facilitate performance or communication of
the service also affect services marketing. This
includes all the tangible representations of the
service such as brochures, letterheads, business
cards, report formats, signage, and equipment,
and the servicescape, the physical facility where
the service is offered. This P (physical evidence)
is needed for services because customers often
have little on which to judge the actual quality
of an intangible offering and thus will rely on
any tangible components of the service offering.
Finally, process including the operating
systems, procedures, mechanisms, and flow of
activities by which the service is delivered is an
element of the services marketing mix. This P
(process) addresses how the service is delivered,
which, in many cases, may be perceived by
customers to be as important as the outcome of
the service. In the discussion that follows, the
impact of these additional three Ps in services
marketing strategy will be obvious.

GAPS MODEL OF SERVICE QUALITY

Executives of services organizations have long
struggled with how to approach service design
and delivery in an organized manner. The
dominant approach to viewing the delivery of
service quality in a structured and integrated
way is called the gaps model of service quality

Wiley International Encyclopedia of Marketing, edited by Jagdish N. Sheth and Naresh K. Malhotra.
Copyright 2010 John Wiley & Sons Ltd

services marketing strategy

(Parasuraman, Zeithaml, and Berry, 1985). The

gaps model positions the key concepts, strategies, and decisions in delivering quality service
in a manner that begins with the customer and
builds the organizations tasks around what
is needed to close the gap between customer
expectations and perceptions. The gaps model
provides a comprehensive and integrating
framework for delivering service excellence and
customer-driven service innovation.
The model is particularly relevant in
service strategy because it captures the crossfunctionality inherent in service management.
Although the authors are marketing academics
and their original publications appeared in
marketing journals, their work has been widely
cited and used across academic disciplines
and implemented in different functions within
organizations. The model draws heavily from
logic, theories, and strategies in operations,
human resources, marketing, and increasingly
from information systems.
The model, illustrated in Figure 1, is
anchored on the customer and integrates customer focus throughout all gaps within the
model. As depicted in the model, a firms
primary goal should be to meet or exceed
customer expectations, and strategies used to
achieve that objective (whether operations,
human resource, or technology-based) are all
focused on the customer. Every gap and every
strategy used to close the gaps in the model
retains a focus on the customer at its core.
The central focus of the model is the customer
gap the difference between customer expectations of what will be delivered and perceptions of
the service as it is actually delivered. The other
four gaps in the model are known as the provider
gaps and each represents a potential cause behind
a firms failure to meet customer expectations.
Closing the customer gap delivering quality
service at the top of the model is a complex
undertaking involving many different organizational and employee skills and tasks. These tasks
can be sorted into four other gaps the provider
gaps each of which needs to be closed in order
to close the customer gap.
The following four provider gaps, shown
under the horizontal line in Figure 1, are the
underlying causes behind the customer gap:

Gap 1:
Gap 2:
Gap 3:
Gap 4:

The listening gap

The service design and standards gap
The performance gap
The communication gap.

At its most basic level, the logic of the model

suggests that the customer gap is a function
of any one or all of the four provider gaps.
Early publications of the gaps model enumerated
the complex reasons that cause each of these
provider gaps. Later publications and a leading
services marketing textbook (Zeithaml, Bitner,
and Gremler, 2009) have further elaborated on
the gaps by delineating specific strategies for
closing each of them. We will expand briefly on
key strategies used to close each of the gaps.

THE CUSTOMER GAP

The customer gap is the heart of the gaps model.
It represents the difference between customer
expectations and perceptions of service performance. The model suggests that closing this gap
by matching or exceeding customer expectations
will result in the achievement of service quality
from the customers perspective. In the years
since the introduction of the model, there has
been significant focus on both customer expectations and perceptions in terms of conceptualizing
these constructs, developing measures for them,
and studying their effects.
A prominent focus of both academic and practical research has involved identifying the dimensions of service quality. Considerable exploratory
and empirical work resulted in the identification
of five dimensions:
1.

2.
3.
4.
5.

Assurance: Knowledge and courtesy of

employees and their ability to inspire trust
and confidence.
Empathy: Caring, individualized attention
the firm provides its customers.
Reliability: Ability to perform the promised
service dependably and accurately.
Responsiveness: Willingness to help customers and provide prompt service.
Tangibles: Appearance of physical facilities,
equipment, personnel, and communication
materials.

services marketing strategy 3

Expected service
Customer

Customer
gap

Perceived service

Listen gap

External communications
to customers

Service delivery

Company
Performance gap

Communication
gap

Customer-driven service
designs and standards
Service design and standards gap

Company perceptions
of consumer expectations
Figure 1 Gaps model of service quality.

The five dimensions of service quality

have been captured in a questionnaire called
SERVQUAL, consisting of a total of 21 items
measuring these dimensions. The SERVQUAL
measure has been applied in and adapted to
many industry settings. Related streams of
research have developed in parallel to study
service encounters, customer satisfaction,
customer loyalty, and their relationships with
service quality. None of these now-prominent
streams of research existed prior to the 1980s,
and all continue to spawn research today.

GAP 1 THE LISTENING GAP

Provider gap 1, the listening gap, is the difference
between customer expectations of service and
company understanding of those expectations.
A primary cause in many firms for not meeting
customers expectations that is, the customer
gap is that the firm lacks accurate understanding of exactly what those expectations are.
Many reasons exist for managers not being aware
of what customers expect: They may not interact
directly with customers, they may be unwilling
to ask about expectations, or they may be unprepared to address them. Closing the listening
gap requires that management or empowered
employees acquire accurate information about
customers expectations. Customer expectations

must be assessed accurately before new services

are developed, and they must be tracked after
the services are introduced.
Figure 2 lists the three key strategies for
closing the listening gap. Each of these strategies
is backed by research and practical applications.
The first strategy is to listen to customers
in multiple ways through customer research
and employee upward communication. Such
research includes the full range of traditional
marketing research methods such as surveys,
focus groups, and complaint handling. There
have also been research methods uniquely
useful in service situations such as SERVQUAL
surveys, mystery shopping, and critical incidents analysis. A distinguishing factor between
marketing research on goods and services is
that services research must capture human
performance. Whereas goods research can
evaluate goods independent of the individuals
who create them, service is often created in
the interaction between customers and contact
personnel. The behavior of personnel can be
highly variable across individuals as well as
with employees from day to day, so constant
monitoring must occur. For that reason,
additional techniques are needed to assess and
feedback information about the performance of
individuals. Mystery shopping hiring people

services marketing strategy

Gap
1

Listen to customers in multiple ways

through customer research and
employee communication.
Build relationships by understanding
and meeting customer needs over time.
Know and act on what customers
expect when they experience a
service failure.

Figure 2 Strategies for closing the listening gap.

to pose as customers to evaluate performance

is typically used in restaurants and other
retail service settings. Critical incidents research,
in which a customer recalls and discusses
both satisfying and unsatisfying experiences
with a service provider and its employees, is
particularly useful in examining and improving
service encounters. Another marketing research
approach that is particularly useful in service
firms is the trailer call, a short survey that follows
(trails) a service event or encounter. The
trailer call offers quick feedback on employees
and also allows a company to fix its processes in
a timely fashion.
The second strategy that closes provider gap
1 is to focus on building relationships by understanding and meeting customer needs over time.
In firms where customers and companies have
interpersonal contact, this can involve many
different strategies: learning customers names,
their businesses, their industries, and their histories with the firm. Even in direct marketing or
online situations, a firm can develop a virtual
relationship with customers by learning their
preferences and history. The stronger the firms
relationship with its customers, the better is the
firms ability to listen to customers (and thus
close the listening gap).
The final key factor associated with provider
gap 1 is lack of service recovery, or a failure to
understand and act on what customers expect
when there is a service failure. Even the best
companies, with the best of intentions and clear
understanding of their customers expectations,
sometimes fail. It is critical for an organization to understand the importance of service
recovery why people complain, what they
expect when they complain, and how to develop
effective service recovery strategies for dealing
with inevitable service failures. Such strategies

might involve a well-defined complaint-handling

procedure and an emphasis on empowering
employees to react on the spot, in real time,
to fix the failure; at other times, it involves a
service guarantee or ways to compensate the
customer for the unfulfilled promise. Firms that
learn from their failures which often result from
not fully understanding their customers expectations can reduce or eliminate the listening
gap.

GAP 2 THE DESIGN AND STANDARDS GAP

Closing gap 1 through research and effective
management of customer relationships is necessary, but not sufficient, for achieving service
excellence. Even when a company has a thorough
and ongoing understanding of its customers
expectations, it is still very possible, in fact,
quite easy, to fail to deliver quality service.
Focusing on gap 2, the design and standards
gap, is the next step toward ensuring against such
failure. This gap is concerned with translating
customer expectations into actual service designs
and developing standards to measure service
operations against customer expectations.
Figure 3 summarizes several key strategies
for closing gap 2. The first strategy is to employ
well-defined new-service development and
innovation practices for designing services.
Some have referred to this as formalization of a
services R&D practice. While standardized
new-product development processes and R&D
are common in technology and manufacturing,
they are still quite rare in services (for a major
exception, we note the investment of the IBM
Corporation in service innovation research
through its global research labs). A formalized
process typically involves a series of steps
beginning with strategy formulation and idea

services marketing strategy 5

Gap
2

Employ well-defined new service

development and innovation practicesservices R&D.
Understand the total customer
experiance through service blueprinting.
Measure service operations via
customer -defined rather than companydefined standards.
Incorporate physical evidence in service
design.

Figure 3 Strategies for closing the design and standards gap.

generation and ending with full-scale implementation. Because of the nature of services (their
process orientation, intangibility, cocreation by
customers), it is more challenging to engage in
these typical steps that are so well established
in other industries. However, it is clear that
following a well-defined process, engaging
customers along the way, and carefully planning
and prototyping the complexities of service
implementation are all essential in ensuring
service designs that meet customer expectations.
Building prototypes of services and planning for
eventual full-scale implementation again means
that operations, marketing, and, in many cases,
human resource functions must work together.
A second strategy for closing gap 2 relates
to understanding the total customer experience
and designing all elements of that experience in
ways that meet or exceed customer expectations.
This involves considering everything that occurs
from the moment the customer engages the
service through the entire length of the service
experience. Common elements of the service
experience that need to be designed include
customer-facing processes, the physical space
where the service is delivered, and the interactions between service employees and customers.
Viewing these operational elements from the
customers perspective and designing them to
be consistent with expectations, or to reinforce
a desired service image, are critical to closing
gap 2. Because of the special challenges inherent
in designing services, techniques such as service
blueprinting have evolved to aid in the design
process (Zeithaml, Bitner, and Gremler, 2009).
The purpose of a service blueprint is to make a
complex and intangible service concrete through
its visual depiction of all of the steps, actors,

processes, and physical evidence of the service.

The key feature of service blueprints is their
focus on the customer the customers experience is documented before any of the internal
processes are determined.
A third strategy for closing gap 2 involves
measuring service operations via customer-defined
standards. These are standards set to correspond to customer expectations rather than
to firm-focused goals. The quality of service
delivered by customer-contact personnel is critically influenced by the standards against which
they are evaluated and compensated. Standards
signal to contact personnel what the management priorities are and which types of performance really count. When service standards are
absent or when the standards in place do not
reflect customers expectations, quality of service
as perceived by customers is likely to suffer.
Customer-defined standards can either take the
form of operational (hard) or perceptual (soft)
standards.
The final strategy that closes gap 2 involves
the use of physical evidence in service design and
in meeting customer expectations. This includes
everything tangible in the service-delivery
process, such as business cards, reports, signage,
Internet presence, equipment, and facilities
used to deliver the service. The servicescape, the
physical setting where the service is delivered,
is a particular focus of physical evidence and
is critical in industries such as restaurants and
hotels to communicate about the service and
make the entire experience pleasurable. In these
cases, the servicescape plays a variety of roles,
from serving as a visual metaphor for what the
company stands for to actually facilitating the
activities of both consumers and employees.

services marketing strategy

Gap
3

Align human resource practices (hiring,

training, support systems, and rewards)
around delivering service excellence.
Define customers roles and help them
to understand and perform effectively.
Integrate technology effectively and
appropriately to aid service performance.
Motivate and incentirize intermediaries to
perform service according to firm standards.
Manage fluctuations in supply and demand.

Figure 4 Strategies for closing the service performance gap.

Given the importance of physical evidence

and its potentially powerful influence on both
customers and employees, it is important for
firms to think strategically about the design and
management of the tangible evidence of service.
To accomplish the type of customer-focused
service design described above means that
marketing and operations functions within the
firm must at least share information, and, in the
best case, actually collaborate in designing the
service and setting standards for its delivery.
Because of the interpersonal nature of many
services it is critical to design and plan for the
human element as well; thus, effective service
design and customer-defined standards will
reflect collaboration with the human resource
function in the organization. These types
of cross-functional collaborations are not as
essential in goods marketing where process,
people, and physical evidence (the new-services
marketing mix elements) are not as critical in
defining the product.

GAP 3 THE PERFORMANCE GAP

Although a company may have closed both
the listening gap and the service design and
standards gap, it may still fall short of providing
service that meets customers expectations if it
is unable to deliver service in the way the service
was designed. Gap 3, the service performance
gap, must also be closed to make sure there
is no discrepancy between customer-driven
service design and standards and actual service
delivery. Even when guidelines exist for
performing service well and treating customers
correctly, high-quality service performance is
not a certainty. Standards must be backed by
appropriate resources (people, systems, and

technology) and also must be enforced to be

effective that is, employees must be measured
and compensated on the basis of performance
along those standards. Thus, even when standards accurately reflect customers expectations,
if the company fails to provide support for those
standards if it does not facilitate, encourage,
and require their achievement standards do
no good. When the level of service delivery falls
short of the standards, it falls short of what
customers expect as well. Narrowing gap 3 by
ensuring that all the resources needed to achieve
the standards are in place reduces the customer
gap.
The key strategies for closing gap 3 are
depicted in Figure 4. The first strategy is to
align the firms human resource strategies around
delivering service excellence. In particular, in
order to deliver service as it was designed a firm
needs to ensure that employees are willing and
able to deliver quality services and that they
are motivated to perform in customer-oriented,
service-minded ways. In creating such a workforce, an organization must hire the right people,
develop those people to deliver service quality,
and retain the best people. To effectively deliver
service quality, considerable attention should
also be focused on recruiting and hiring the right
service personnel. Service employees need two
complementary capacities: service competencies
the skills and knowledge necessary to do the job
and service inclination an interest in doing
service-related work. Once the right people are
in place, to provide quality service they need
to be developed through ongoing training in
the necessary technical skills and interactive
skills. An organization that hires the right people
and trains and develops them to deliver service
quality must also work to retain them. If a

services marketing strategy 7

Company
(management)

Internal marketing
"Enabling the promise"

External marketing
"Making the promise"

Employees

Customers
Interactive marketing
"Delivering the promise"

Figure 5 The services marketing triangle.

company wants the strongest service performers

to stay with the organization, it must reward and
promote them. Organizations use a variety of
rewards to retain the best employees; traditional
approaches such as higher pay, promotions, and
one-time monetary awards or prizes are often
linked to service performance.
Services marketing is about promises made
and promises kept to customers. A strategic
framework known as the services triangle
(Figure 5) visually reinforces the importance
of people in the ability of firms to keep their
promises and succeed in building customer
relationships (Bitner, 1995; Kotler, 1994;
Gronroos, 2007).
The triangle shows the three interlinked
groups that work together to develop, promote,
and deliver services. These key players are
labeled on the points of the triangle: the
company (or SBU (small business unit) or
department or management), the customers,
and the providers. Providers can be the firms
employees, subcontractors, or outsourced
entities who actually deliver the companys
services. Between these three points on the
triangle, three types of marketing must be
successfully carried out for a service to succeed:
external marketing, interactive marketing, and
internal marketing.
On the right side of the triangle are the
external-marketing efforts that the firm engages
in to set up its customers expectations and make
promises to customers regarding what is to be

delivered. Anything or anyone that communicates to the customer before service delivery can
be viewed as part of this external-marketing
function. But external marketing is just the
beginning for services marketers: promises made
must be kept. On the bottom of the triangle is
what has been termed interactive marketing or
real-time marketing. This is where promises are
kept or broken by the firms employees, subcontractors, or agents. People are critical at this
juncture. If promises are not kept, customers
become dissatisfied and eventually leave. The
left side of the triangle suggests the critical
role played by internal marketing. Management
engages in these activities to aid the providers
in their ability to deliver on the service promise:
recruiting, training, motivating, rewarding, and
providing equipment and technology. Unless
service employees are able and willing to deliver
on the promises made, the firm will not be
successful, and the services triangle will collapse.
All three sides of the triangle are essential to
complete the whole, and the sides of the triangle
should be aligned that is, what is promised
through external marketing should be the same
as what is delivered; and the enabling activities
inside the organization should be aligned with
what is expected of service providers.
For many services, customers are participants in service production and cocreators of
value and, therefore, play a key role in the
service-delivery process that is, customers
themselves can influence whether the service

services marketing strategy

meets customer-defined specifications and can

potentially contribute to the widening of gap
3. Therefore, a second strategy for closing the
performance gap is to define customers roles and
assist them in understanding and performing
their roles effectively. Sometimes customers
widen gap 3 because they lack understanding
of their roles and exactly what they are to do in a
given situation or because they are unwilling
or unable to perform for some reason. To
reduce this gap the organization needs to clearly
define and communicate what the customers
role entails in essence, the customers job
description. Once the customers role is clearly
defined, the firm needs to help facilitate that role.
In a sense, the customer is a partial employee
of the organization, and strategies for managing
customer behavior in service production and
delivery can mimic, to some degree, the efforts
aimed at service employees discussed in the
previous paragraph.
A third strategy for closing gap 3 involves
integrating technology effectively and appropriately to aid service performance. For service
workers (and customers) to be efficient and effective in performing their jobs, technology that
facilitates their efforts is often required. Technology can help employees to be more effective
and efficient in serving customers. Technology
can also help customers become more educated
and involved in cocreating service. In some
cases, technology can serve as a substitute for
employees, and actually deliver the service to
the customer without any need for human interaction. These types of services called self-service
technologies are prevalent today across industries.
A fourth difficulty associated with provider
gap 3 involves the challenge in delivering
service through such intermediaries as retailers,
franchisees, agents, brokers, subcontractors,
and outsourcers. Because quality in service
often occurs in the human interaction between
customers and service providers, control over
the service encounter by the company is crucial,
yet it rarely is fully possible. Most service
(and many manufacturing) companies face an
even more formidable task: attaining service
excellence and consistency in the presence of
intermediaries who represent them and interact
with their customers yet are not under their

direct control. Franchisers of services depend on

their franchisees to execute service delivery as
they have specified it. And it is in the execution
by the franchisee that the customer evaluates the
service quality of the company. With franchises
and other types of intermediaries, someone
other than the producer is responsible for the
fulfillment of quality service. This issue has
become particularly relevant as firms increase
the outsourcing of their customer support
to other countries; concerns about language,
quality control, and consistency of performance
are the ultimate trade-offs for lower costs.
Because firms often provide service through
intermediaries, they must develop ways to either
control or motivate these intermediaries to meet
company goals and perform as well as their own
employees.
A final issue in provider gap 3 is the need
in service firms to synchronize demand and
capacity. Because services are perishable and
cannot be inventoried, service companies
frequently face situations of over demand or
under demand. Lacking inventories to handle
over demand, companies lose sales when
capacity is inadequate to handle customer
needs. On the other hand, capacity is frequently
underutilized in service companies during slow
periods. Most companies rely on operations
strategies such as cross training or varying the
size of the employee pool to synchronize supply
and demand. Marketing strategies for managing
demand such as price changes, advertising,
promotion, and alternative service offerings can
supplement approaches for managing supply.

GAP 4 THE COMMUNICATION GAP

Even when a firm has done everything suggested
by the other three gaps to ensure service quality,
there can still be a failure to meet customer
expectations if communications about the service
do not match with what is delivered. Thus, the
final provider gap that must be closed is the
communication gap, or gap 4. This gap focuses
on the difference between service delivery and
what is communicated externally to customers
through advertising, pricing, and other forms of
communications.
Figure 6 captures several key strategies for
closing gap 4. The first strategy revolves around

services marketing strategy 9

Gap
4

Employ integrated services marketing

communication strategies around everything
and everyone sending a message or signal
to the customer.
Manage customer expectations effectively
throughout the experience.
Develop mechanisms for internal
communication to avoid overpromising and
ensure successful delivery.
Manage the service brand.
Price services appropriately.

Figure 6 Strategies for closing the communication gap.

integrated services marketing communication

that ensures that everything and everyone
sending messages or signals about the service
does so in a manner that is consistent with what
customers expect and what is actually delivered.
The challenge with this strategy is that there
are a myriad of communication channels and
modes that send messages to customers more
today than every before including traditional
websites, personal sales, direct mail, print media,
blogs, virtual communities, mobile advertising,
and television. Beyond these types of channels,
which are also available to goods-producing
firms, service customers receive additional
communication from servicescapes, customer
service representatives, and everyday service
encounters with company employees. Ensuring
that all of these channels communicate effectively and consistently is a daunting task, yet one
that is essential to an integrated communication
strategy. Unfortunately, the people within
companies that deal with these different
communication vehicles are not always located
in the same department, leading to disparate,
conflicting messages.
A second key strategy for closing the communication gap is to manage customer expectations
effectively throughout the service experience.
Many services (e.g., many business-to-business
services and consumer membership services)
take place over an extended time frame that
might mean a few hours, days, weeks, or even
years. These extended service experiences often
change over time, varying from the original
service promise as a result of business realities (for either the provider or the customer) that
change the nature of the service, customer needs
that change over time, and financial pressures

that may cause increases in pricing or adjustments to the service contract. Thus, communications to the customer must also evolve
through time to ensure that expectations and
service performance match. This might mean
managing customer expectations relative to new
business realities, often in the form of managing
expectations downward when a service previously provided is discontinued or when prices
for similar services must be increased.
A third strategy for closing gap 4 is to
develop mechanisms for internal communication
so that the customer hears consistent messages
before the sale and during service delivery. A
common cause for the communications gap is
overpromising on the part of customer-contact
employees, salespeople, and marketing communications. While a certain amount of promotion
is needed in many cases to gain a sale, excessive
promotional activity can be detrimental when it
exceeds the ability of the delivery organization
to keep the promises made. Customers gained in
the short term through excessive promises can be
lost just as quickly through a failure to deliver. A
number of internal communication strategies can
help avoid the latter problem. These strategies
including effective vertical communication that
keeps employees informed of corporate plans and
marketing messages so that they communicate
accurately to consumers. Selling the brand inside
the company also helps employees to see its value
and to be realistic about what can and should be
promised to customers. Horizontal communication across marketing, operations, and service
design teams can also help align promises with
service-delivery capabilities.
A fourth strategy to close the communications gap is to create a strong brand image for

10

services marketing strategy

the service. A brand image reinforced by brand

characters, slogans, logos, and similar images
serves to unify perceptions of the brand. Service
organizations such as Chick-fil-a, with its ubiquitous cow, or McDonalds, with its golden arches,
have successfully created brand images over time
that reduce the communications gap.
A fifth issue in provider gap 4 is associated
with the pricing of services. In packaged goods
(and even in durable goods), customers possess
enough price knowledge before purchase to be
able to judge whether a price is fair or in line
with competition. With services, customers
often have no internal reference points for
prices before purchase and consumption. For
this reason, determining the value of a service
to customers, called demand-oriented pricing,
can be complicated. Further, pricing strategies
such as discounting, everyday low prices, and
couponing obviously need to be different in
service cases in which the customer has no initial
sense of prices. Even cost-based techniques
for developing prices for services are more
complicated than those for pricing tangible
goods, largely because the dominant cost factor
is labor. Placing a value on an employees time
is more difficult than knowing the costs of
components of a physical good.

SERVICE EQUALS PROFITS

Through the 1980s and early 1990s, many firms
jumped on the service bandwagon, investing
in service initiatives and promoting service
quality as ways to differentiate them and
create competitive advantage. Many of these
investments were based on faith and intuition
by managers who believed in serving customers
well and who felt in their hearts that quality
service made good business sense. Indeed,
a dedication to quality service has been the
foundation for success for many firms, across
industries. Since the mid-1990s firms have
demanded hard evidence of the bottom-line
effectiveness of service strategies. Fortunately,
researchers are building a convincing case that
service strategies, implemented appropriately,
can be very profitable. Work sponsored by
the Marketing Science Institute suggests
that corporate strategies focused on customer
satisfaction, revenue generation, and service

quality may actually be more profitable than

strategies focused on cost cutting or strategies
that attempt to do both simultaneously (Rust,
Moorman, and Dickson, 2002). Research from
the Harvard Business School builds a case for the
serviceprofit chain, linking internal service
and employee satisfaction to customer value
and ultimately to profits (Heskett et al., 1994).
Furthermore, considerable research has shown
linkages between customer satisfaction (often
driven by service outcomes) and profits
(Anderson and Mittal, 2000). The University
of Michigan American Customer Satisfaction
Index (ACSI) provides data suggesting that
customer satisfaction is directly linked to
shareholder value. Firms in the top 50% of
the ACSI rankings show significantly higher
shareholder value than do firms in the bottom
50% (Fornell, 2004). An important key to these
successes is that the right service strategies are
chosen and that these strategies are implemented
appropriately and well.

CONCLUSION
Services marketing strategy focuses on delivering processes, experiences, and intangibles
to customers rather than physical goods and
discrete transactions. Delivering experiences
successfully and building customer relationships
are complicated undertakings involving many
different strategies and tactics. Although
companies have often found it difficult to
attack service problems in an organized manner,
a well-established model called the gaps
model focuses on the customer and describes
the approaches necessary to close the gap
between customer expectations and perceptions.
Figure 1, the full gaps model, shows that closing
the all-important customer gap is a function
of closing four gaps on the service provider
side: the listening gap, the service design and
standards gap, the performance gap, and the
communication gap. Each of these gaps involves
concepts and tools designed to minimize the
gaps, and these were discussed in this article.
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