The Gap Model of Service Quality

1
The Gap Model of Service Quality
Customer
Expected Service
Gap 5
Perceived Service
Service Delivery
External communications to customers
Gap 4
Gap 3
Customer-driven service designs and standards
Gap 1
Gap 2
Company
Company perceptions of consumer expectations
2
Summary of Provider Gap 3
Part 5 Delivering and Performing Service
Customer-driven service designs and standards
Gap 3
Service Delivery

• Factors that can contribute to Gap 3 are
• Employees (ch 11, p 303)
• Intermediaries (ch 12, p 338)
• Customers (ch 13, p. 365)
• Demand and Capacity (ch 14, p 390)
• International Marketing (ch 15, 416)

3
Provider GAP 4
External communications to customers
Part 6 Managing Service Promises
Gap 4
Service Delivery

• Managing service promises involves managing
• Advertising, personal selling, and other
  communication (ch 16, p. 453)
• Pricing (ch 17, p. 485)
• Physical evidence of services (ch 18, p. 519)

4
STRATEGIES FOR MATCHING CAPACITY TO DEMAND

• Yield Management
• is a pricing strategy that balances capacity
  utilization, pricing, market segmentation, and
  financial return.
• Where
• Actual revenue actual capacity x average actual
  price
• Potential revenue total capacity x maximum price

5
Yield management example

• Hotel with 200 rooms (See text, page 402.)
• Also see handout on Yield Management

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Challenges and Risks in Using Yield Management

• Loss of competitive focus
• Customer alienation
• Employee morale problems
• Incompatible incentive and reward systems
• Lack of employee training
• Inappropriate organization of the yield
  management function

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Chapter 17

• PRICING OF SERVICES

8
Key Factors Related to Pricing and Provider GAP 4

• Assuming that customers hold reference prices for
  services
• Narrowly defining price as monetary cost
• Signaling the wrong quality level with an
  inappropriate price
• Not understanding customer value definitions
• Not matching price strategy to customer value
  definitions

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THREE KEY WAYS SERVICE PRICES ARE DIFFERENT FOR
CONSUMERS

• Customer Knowledge of Service Prices (485-488)
• The Role of Nonmonetary Costs
  (489-490)
• Price as an Indicator of Service Quality (490-491)

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APPROACHES TO PRICING SERVICES

• Cost-based Pricing (491-494)
• Special Problems (492-493)
• Examples (493-494)
• Competition-based Pricing (494-496)
• Special Problems (494-495)
• Examples (495-496)
• Demand-based Pricing (496-513)

11
Value

• Perceived value is the consumers overall
  assessment of the utility of a service based on
  perceptions of what is received and what is given
  (SM, p.498)
• Value in business markets is the worth (in
  dollars) of the technical, economic, service, and
  social benefits in exchange for the price it pays
  for a market offering (HBR, Nov-Dec, 1998, p. 6)

12
Four Meanings of Perceived Value

• Value Is Low Price
• Value Is Whatever I Want in a Product or Service
• Value Is the Quality I Get for the Price I Pay
• Value Is What I Get for What I Give

13
Summary of Service Pricing Strategies for Four
Customer Definitions of Value
Value is Everything I Want in a Service

• Prestige Pricing
• Skimming Pricing

Value is All that I Get for All that I Give
Value is the Quality I Get for the Price I Pay

• Price Framing
• Price Bundling
• Complementary
• Pricing

• Value Pricing
• Market Segmentation
• Pricing

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Chapter 17 Terms

• Reference prices (486)
• Price visibility (488)
• Price framing (488)
• Cost-plus pricing (493)
• Fee for service (494)
• Price signaling (495)
• Going-rate pricing (496)
• Demand-based pricing (496)
• Value (497)

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Chapter 17 Terms

• Intrinsic attributes (500)
• Extrinsic attributes (500)
• Objective price (501)
• Brand name (501)
• Perceived sacrifice (501)
• Perceived quality (501)
• Perceived value(501)
• Place differentials (506)
• Time differentials (507)

16
Chapter 17 Terms

• Quantity differentials (507)
• Differentials as incentives (508)
• Client category (509)
• Service version (509)
• Mixed bundling (510)
• Mixed-leader bundling (510)
• Mixed-joint bundling (510)
• Loss leadership (511)