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    SERVICES MARKETING:

    People, Technology, Strategy 5/e

    Christopher Lovelock and Jochen Wirtz

    PRENTICE HALL, 2004

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 1

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    20 Years of Services Marketing

    1984 Lovelock, 1st edition

    1991 Lovelock, 2nd edition

    1996 - Lovelock, 3rd edition

    2001 - Lovelock, 4th edition

    2002 - Lovelock, Wirtz, and Keh, Services Marketing in Asia

    2004 - Lovelock & Wirtz, 5th edition

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 2

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    Whats New?

    New co-author Jochen Wirtz

    New streamlined structure slimmed down from18 chapters to 15, more tightly written

    Coverage of latest research and developmentsin management practice (check the references!)

    New examples

    New readings 6 of 8 are newNew cases 12 of 15 are new, balance all updated

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 3

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    Jochen Wirtz, PhDAssociate Professor, National University of Singapore

    Born in Germany PhD in services marketing, London

    Business School (chair: John Bateson)

    Winner of six best paper awards,including (with Patricia Chew) mostoutstanding article of 2002 inInternational Journal of ServiceIndustry, 2002

    Co-author, Services Marketing in Asia(Prentice Hall 2001)

    Six awards for outstanding teaching,including university-wide award, 2003

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 4

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    1 - 5Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

    EE

    Jochen and family at Awards Banquet forNUS Outstanding Educator Award, 2003

    NUS OutstandingEducator Award,(university-wide)2003

    (Only two awardseach year among2,700 NUS faculty)

    Previous teaching

    Awards at NUSBusiness School,1996, 1998, 1999,2001, 2002

    T

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    7/421 - 6Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/EEE

    Target Markets for SM5

    Primary targets MBA courses in services marketing, service management Upper division undergraduate courses (same)

    Secondary targets (with supplementary readings and cases) MBA courses in public and nonprofit marketing Courses in tourism, hotel and restaurant marketing Courses in marketing at other professional schools

    (e.g., architecture, public health)

    Can also be used in executive education coursesthat emphasize services marketing/management

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    Part II

    Key Elements of Services Marketing

    Creating the Service Product

    Designing the Service Communications Mix

    Pricing and Revenue Management

    Distributing Services

    Part I

    Understanding Services, Consumers & Markets

    Introduction to Services Marketing

    Consumer Behavior and Service Encounters

    Positioning Services in Competitive Markets

    Part III

    Managing the Service Delivery Process

    Designing and Managing Service Processes

    Balancing Demand and Capacity

    Planning the Service Environment

    Managing People for Service Advantage

    Part IV

    Implementing Services Marketing

    Managing Relationships and Building Loyalty

    Customer Feedback and Service Recovery

    Improving Service Quality and Productivity

    Organizing for Service Leadership

    Part I

    Understanding Services, Consumers & Markets

    Part II

    Key Elements of Services Marketing

    Part III

    Managing the Service Delivery Process

    Part IV

    Implementing Services Marketing

    Part III

    Managing the Service Delivery Process

    Designing and Managing Service Processes

    Balancing Demand and Capacity

    Planning the Service Environment

    Managing People for Service Advantagegg

    1 - 7Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

    Services Marketing 5/e: A Simple, IntuitiveStructure Students Understand Right Away

    Part IUnderstanding Service Products, Consumers & Markets

    Introduction to Services Marketing

    Consumer Behavior and Service Encounters

    Positioning Services in Competitive Markets

    Part IIKey Elements of Services Marketing

    Creating the Service Product

    Designing the Service Communications Mix

    Pricing and Revenue Management

    Distributing Services

    Part IV

    Implementing Services Marketing

    Managing Relationships and Building Loyalty

    Customer Feedback and Service Recovery

    Improving Service Quality and Productivity

    Organizing for Service Leadership

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    Implementation in a Course

    SM5 offers an integrative package: 15 chapters of text (with lots of examples) 8 readings 15 cases

    Not built around a central conceptual framework that must bebuilt through a pre-defined sequence of chapters

    Instead, offers a toolbox of important concepts andtheoretical constructs that have practical application tomanagement

    Very flexibleafter Part 1, chapters can be taught inmultiple sequences; certain topics can be omitted in shortcourses

    Links research findings to good managerial practice

    End-chapter questions, cases study questions, and suggestedstudent papers/projects get students to work through concepts, come

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    10/421 - 9Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

    up with detailed analysis and practical solutions

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    SM5 CONTENT HIGHLIGHTS

    Chapters, Readings, Cases,

    Pedagogical Aids

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 9

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    tt

    Part 1: Understanding Service Products,Consumers and Markets

    1. Introduction to Services Marketing

    Differences among services are as important as differencesbetween goods and services

    Service success requires focus on both customers and competitive

    markets

    2. Consumer Behavior in Service Encounters

    3. Positioning Services in Competitive Markets

    Positioning distinguishes a service brand from its competitors Using positioning maps to plot competitive strategy

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 10

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    Four Categories of ServicesEmploying Different Underlying Processes (Fig. 1.5)

    What is the

    Nature of the

    Service Act?

    TANGIBLE

    Who or What is the Direct Recipient of the Service?

    DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

    People ProcessingPossession Processing

    ACTS

    INTANGIBLEACTS

    e.g., airlines, hospitals,

    haircutting, restaurants

    hotels, fitness centers

    Mental StimulusProcessing

    e.g., freight, repair,

    cleaning, landscaping,

    retailing, recycling

    Information Processing(directed at intangible assets)

    e.g., broadcasting, consulting,

    education, psychotherapye.g., accounting, banking,

    insurance, legal, research

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 11

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    Positioning after New Hotel Construction:Price vs. Service Level (Fig. 3.6)

    New GrandMandarin

    HeritageMarriott

    Continent al

    Expensive

    Regency

    Action?

    PALACE

    HighService

    Shangri-LaNo action?

    Atlantic

    ModerateService

    Sheraton

    Italia

    Less Expensive

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    CastleAlexander IV

    AirportPlaza

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 12

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    Part 2: Key Elements of Services Marketing

    4. Creating the Service Product Flower of Service model of core and supplementary services

    5. Designing the Communications Mix for Services

    6. Pricing and Revenue Management Activity based costing (ABC) Revenue management (+ Kimes & Chase reading + 2 cases) Ethical concerns and perceived fairness in pricing policies

    7. Distributing Services

    Place, cyberspace, and time Role of intermediaries, franchising (Aussie Pooch case) International distribution of services

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 13

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    The Flower of Service:Categorizing Supplementary Services (Fig. 4-5)

    Information

    Payment Consultation

    KEY:

    Billing

    Exceptions

    Cor

    e

    Order-Taking

    Hospitality

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    sssssssssssssss

    Facilitating elements

    Enhancing elements

    Safekeeping

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 14

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    44444

    Splitting Responsibilities for DeliveringSupplementary Services (Fig. 7.2)

    As created byoriginating firm

    Core

    As enhancedby distributor

    +

    As experiencedby customer

    = Core

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 15

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    24/421 -Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/EEE

    Part 3: Managing the Service Delivery Process

    8. Designing and Managing Service Processes Detailed review and example of blueprinting The customer as productive co-producervs. the Jaycustomer as

    abusive threat to profitability, quality, and safety

    9. Balancing Demand and Capacity

    10. Planning the Service Environment

    Designing and managing the servicecape: role of music, scents,and colors (+ Haeckel, Carbone, and Berry reading)

    Role of architecture and other visual design elements, illustrated byphotos

    11. Managing People for Service Advantage

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    Arrive,

    valet park

    Check-inat reception

    Backstage

    Front

    Stage

    ttttttttttttttttttttttttttttttt

    1 -Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

    Simplified Example: Blueprinting a Hotel Visit(extract only)

    PhysicalEvidence

    Line of

    CustomerActions

    Makereservation

    Hotel exterior, lobby,employees, key

    Elevator, corridor,room, bellhop

    Go to

    room

    InteractionEmployee

    Actions

    Face-to-face

    Doormangreets, valet

    takes car

    Receptionistverifies, gives

    key to room

    Line ofVisibility

    Phone

    ContactRep.

    records,

    confirms

    Enter

    data

    Valet

    Parks Car

    Register

    guest data

    Make up

    Room

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    CCCCCCCCCCCCCCCCCCCCCCCCCCCCCCC

    Comparison of Hotel Lobbies(Figure 10.1)

    The servicescape is part of the value proposition!

    Orbit Hotel and Hostel, Los Angeles

    Four Seasons Hotel, New York

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    Part 4: Implementing Services Marketing

    12. Managing Relationships and Building Loyalty How to calculate customer lifetime value (+ Mass Audubon case) Customer relationship management systems

    13. Customer Feedback and Service Recovery

    14. Improving Service Quality and Productivity

    15. Organizing for Service Leadership

    Integrating marketing, operations, and human resources

    Moving up the service leadership ladder losers, nonentities,professionals, leaders

    Individual leadership qualities, culture and climate

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 19

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    1 -Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/EEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

    The Wheel of Loyalty (Fig. 12.7)

    Enabled through:

    3. ReduceChurn Drivers

    Conduct churn diagnostic

    Address key churn drivers

    Implement complainthandling & service

    1. Build aFoundationfor Loyalty

    Segment the market

    Be selective in acquisition

    Use effective tiering

    Frontlinestaff

    Accountmanagers

    Membership

    programs

    CRM

    Systems

    recovery

    Increaseswitching costs

    Buildhigher levelbonds

    Customer

    Loyalty

    2. Create LoyaltyBonds

    Giveloyalty

    rewards

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    1 -Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

    of service.

    Deliverquality

    service.

    Deepen

    therelati

    onship

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    Service Encounteris Dissatisfactory

    Take some formof public action

    Take some formof private action

    Take no action

    Complain to theservice firm

    Complain to athird party

    Take legal actionto seek redress

    Defect (switchprovider)

    Negative word-of-mouth

    Any one or a combination ofthese responses is possible

    Complain to athird party

    ake legal actionto seek redress

    Take some formof private action

    Defect (switchprovider)

    Take no action

    egative word-of-

    mouth

    Courses of Action Open to a DissatisfiedCustomer(Figure 13.1)

    Complain to theservice firm

    Take some formof public action

    Service Encounteris Dissatisfactory

    N

    Any one or a combination ofthese responses is possible

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    Cause and Effect Chart forAirline Departure Delays (Fig. 14.3)

    Facilities,Equipment

    FrontstagePersonnel

    Procedure

    Arrive lateOversized bags

    Aircraft late togate

    MechanicalFailures

    Gate agents

    cannot process

    fast enough

    Delayed check-inprocedure

    Acceptance of late

    Customers

    Other Causes

    Weather

    Late pushback

    Late foodservice

    Late baggage

    Late/unavailable

    airline crew

    Late cabincleaners

    passengers

    DelayedD epartures

    Poor announcement of

    departures

    Air trafficLate fuel Weight and balance

    sheet late

    Materials, Supp lies

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    BackstagePersonnel

    Information

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    Eight Readings Important Insights fromThoughtful Practitioners and Leading Researchers

    Selected for readability and potential tostimulate classroom discussion

    On average, shorter than those in previous edition

    Two carried over from 4th

    edition, six new

    Academic authors featured are: Len Berry, Dick Chase, Marc Epstein, Ray Fisk, Steve Grove,

    Sherri Kimes, Kay Lemon, Roland Rust, Tony Simons, RobertWestbrook, Valarie Zeithaml

    Topics: service theater, competing in a weak industry,service brand equity, yield management, leading thecustomer experience, investing to build customer equity,why service stinks, action-profit linkage model

    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 23

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    15 Terrific Classroom-Tested Cases, OfferingInstructors Lots of Choice and Flexibility

    Number of cases has been increased to 15 (including a3-part case series) up from 10 in 4th edition 12 cases are new to this edition, 3 carried over from 4th

    edition and updated

    Students will appreciate an exceptionally up-to-dateselection all 2000 or later, most 2003 or 2004 A mix of lengths and levels of difficulty

    Cases drawn from Harvard, Yale, and INSEAD collections,

    as well as new cases from Lovelock and Wirtz

    A broad cross-section of service industries and situations Teaching notes provide detailed analysis and teaching

    suggestions to help instructors do a great job in class

    1 24

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 24

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    3333

    Most Cases Can Be Used for Class or WrittenAssignments; Depict a Wide Array of Situations

    Fast food High tech

    Car insurance

    e-Service

    Restaurant

    Environmentalorganization

    Car sales and repair Telecommunications

    Retail banking

    Apparel retailing

    Hotels

    Franchised dog washing

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 25

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    Aussie Pooch Mobile: When the Client is a Dog,CB means Canine Behavior

    APM franchisee Elaine Bealwashes Zak the Rottweileroutside his owners home insuburban Brisbane

    Slid 2004 b Ch i t h L l k d J h Wi t S i M k ti 5/E 1 26

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 26

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    FF

    Pedagogical Aids in the Book

    Introduction to each chapter highlights key issues andquestions

    Four types of boxed inserts Best Practice in Action (application of best practices)

    Research Insights (summaries of research findings) Service Perspectives (in-depth examples illustrating key concepts) Management Memo (reviews of key concepts)

    Review questions and application exercises

    Suggested study questions for all cases Good selection of graphics (many also as PowerPoints)

    Occasional cartoons use humor to make a pointSlide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 27

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    Instructors Resource Material

    Detailed instructors manual on course website Summaries of chapters with teaching hintsAnswers to study questions Sample course outlines

    Summaries of readings with teaching hints 16 student exercises and 5 comprehensive projectsAdvice on how to succeed in case teaching Outstanding teaching notes for cases

    More than 280 PowerPoint slides, organized into15 chapter-specific files

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    Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 28