zeithaml, parasuraman & berry 1985 jm

7/27/2019 Zeithaml, Parasuraman & Berry 1985 JM

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Problems and Strategies in Services MarketingAuthor(s): Valarie A. Zeithaml, A. Parasuraman, Leonard L. BerrySource: The Journal of Marketing, Vol. 49, No. 2 (Spring, 1985), pp. 33-46Published by: American Marketing AssociationStable URL: http://www.jstor.org/stable/1251563

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ValarieA. Zeithaml,A. Parasuraman,& LeonardL. BerryProblems a n d Strategiesn

Services MarketingThis articlecompares problemsand strategies cited in the services marketing iteraturewith those re-portedby actual service suppliersin a study conductedby the authors. Discussion centers on severalbroad themes that emerge from this comparison and on guidelines for future work in services marketing.

THREE basicassumptions ervade hegrowingbodyof literature n servicesmarketing.The firstholdsthat a numberof unique characteristics-notably in-tangibility, nseparability f productionandconsump-tion, heterogeneity,and perishability-separate ser-vices from tangible goods. The second assumptionmaintains hatthese characteristicspose vexing prob-lemsfor servicesmarketers hatare not facedby goodsmarketers.The third and final assumptionholds thatservicesmarketingproblemsrequireservices market-ing solutions-that strategiesdeveloped from expe-rience in goods marketingare often insufficient.The purposesof this articleare:(1) to offer a con-ceptual frameworksummarizingthe unique charac-teristicsof services,the problems temming romthesecharacteristics, ndthe strategiessuggestedas appro-priate to overcome the problems; (2) to report thefindingsof a nationalsurvey of managersof servicefirmsconcerning he problemsthey face andthe mar-keting strategies they use to overcome them; (3) to

Valarie .ZeithamlsAssistantrofessorfMarketing,.ParasuramanisAssociaterofessorf Marketing,ndLeonard.Berrys Professorof Marketing,exasA&M niversity.heauthorsratefullycknowl-edge hecontributionsadebyGregory pah nd ouranonymousreviewers.

Journal of MarketingVol. 49 (Spring 1985), 33-46.

comparethe problemsand strategiescited in the lit-eraturewith those reportedby managersof servicesfirms;and (4) to offer recommendations or the de-velopmentof services marketing hought.Literatureon Services MarketingTherationale or a separate reatmentof servicesmar-keting centerson the existence of a number of char-acteristicsof services which are consistentlycited inthe literature:ntangibility, inseparabilityof produc-tion and consumption,heterogeneity,and perishabil-ity. Figure 1 presents a summaryof the referencesdocumenting hese differences.The fundamentaldifference universally cited byauthors(e.g., Bateson 1977; Berry 1980; Lovelock1981; Rathmell 1966, 1974; Shostack 1977a) is in-tangibility.Because services areperformances,ratherthan objects, they cannot be seen, felt, tasted, ortouchedin the same mannerin which goods can besensed. Intangibility,accordingto Bateson (1979) isthe criticalgoods-services distinctionfromwhich allotherdifferencesemerge.Inseparability of production and consumption in-volves the simultaneousproductionand consumptionwhichcharacterizesmost services. Whereasgoods arefirstproduced, hen sold andthenconsumed, servicesare first sold, then producedand consumed simulta-

ProblemsndStrategiesnServicesMarketing33


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FIGUREUnique Service Features and Resultings Resulting Marketing Problems1. Services cannot be stored.

2. Cannot protect services throughpatents.3. Cannot readily display orcommunicate services.4. Prices are difficult to set.1. Consumer involved in production.2. Other consumers involved inproduction.3. Centralizedmass production ofservices difficult.

Marketing ProblemsSelected References Citing ProblemsBateson (1977), Berry (1980), Langeardet al. (1981), Sasser (1976)

Eiglier and Langeard (1975, 1976), Judd(1968)Rathmell (1974)Dearden (1978), Lovelock (1981), Thomas(1978)Booms and Nyquist (1981)Bateson (1977), George (1977),Gronroos (1978)Sasser et al. (1978), Upah (1980)

Heterogeneity 1. Standardizationand quality control Berry(1980), Booms and Bitner (1981)difficult to achieve.Perishability 1. Services cannot be inventoried. Bateson (1977), Sasser (1976)

FIGURESuggested Marketing Strategies for Problems Stemming from Unique Service FeaturesUnique Service Features Marketing Strategies to Solve Problems References Citing Strategies1. Stress tangible cues. Berry(1980), Booms and Bitner (1982),George and Berry (1981), Shostack(1977a)

2. Use personal sources more than Donnelly (1980), Johnson (1969)nonpersonal sources.3. Simulate or stimulate word-of-mouth Davis, Guiltinan, and Jones (1979),

Intangibility communications. George and Berry (1981)4. Create strong organizational image. Judd (1968), Knisely (1979a), Thomas(1978), Uhl and Upah (1980)5. Use cost accounting to help set Beard and Hoyle (1976), Dearden (1978)prices.6. Engage in post-purchase Bessom and Jackson (1975), Fisk (1981),communications. Zeithaml (1981)1. Emphasize selection and training of Berry (1981), Davidson (1978), Georgepublic contact personnel. (1977), Gronroos (1978)

Inseparability 2. Manage consumers. Lovelock (1981)3. Use multisite locations. Carman and Langeard (1980), Langeardet al. (1981), Upah (1980)1. Industrializeservice.a Levitt (1972, 1976)Heterogeneity 2. Customize service. Bell (1981), Berry (1980), Johnson (1981),Regan (1963), Sasser and Arbeit (1978)1. Use strategies to cope with Lovelock (1981)fluctuating demand.Perishability 2. Make simultaneous adjustments in Sasser (1976)demand and capacity to achieve acloser match between the two.

"Levittuggests specifictechniques o substituteorganizedpreplanned ystems for individual ervice operations (e.g., a travelagencycouldofferprepackagedacation ours to obviatethe need for the selling,tailoring,and hagglinginvolved n customi-zation).Thisstrategy s the oppositeof customization.

Problemsand Strategiesin ServicesMarketing 35

Unique Service Feature;

Intangibility

Inseparability

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The StudyThe literature eview (Figures2 and3) provideda ba-sis for developing the questionnaireused in a mailsurveyof 1,000 service firms. This survey was con-ducted to determine 1) the extent to which problemsreported o be associated with services actually pre-sentedproblemsfor the samplefirms, and (2) the de-gree to which sample firms used the suggested mar-keting strategiesto overcome the problems.The SampleA randomsampleof 1,000 servicefirms was selectedfromDun and Bradstreet'sMillion Dollar Directory(Dunand Bradstreet1982). A questionnaire ndcoverletter were mailed to the presidentof each firm. Afollow-upletterand secondquestionnairewere mailedto nonrespondentshree weeks later. Of the original1,000 questionnaires,323 (32.3%) were returnedandusable. Table 1 shows the results of chi-squareanal-yses performed o determinewhethersignificantdif-ferences existed between respondentand nonrespon-dent firmsin termsof distribution f SIC codes, salesrevenue, and number of employees. The tests re-vealed no significant differences between the twogroupson anyof the threedimensions,suggestingthatnonresponsebias was negligible.Almost 70% of the respondents filling out thequestionnaireheld top managementpositions such asCEO, President, and Vice President, while the restheldtitles such as MarketingManager,MarketingDi-rector,and GeneralManager.The QuestionnaireThe questionnaire ontainedthree sections. The firstsectionincluded items classifying service businesses:geographic scope of operations, primary customergroup, need for customer'sphysical presence (Love-lock 1980), anddurationof benefits (Lovelock 1980).The second sectionlisted eight itemscapturing he es-sence of what the literaturesuggests are difficultiesuniqueto services (shown in Figure 2): (1) servicescannotbe stored;(2) services cannot be transported;(3) services cannot be mass produced; (4) servicescannotbe protectedby patents;(5) service quality isdifficult to control; (6) service costs are difficult tocalculate;(7) demandfor services fluctuates;and (8)consumers hemselvesareinvolved duringthe serviceproductionprocess. In this section, respondentswereasked to indicateon a scale of 1 (no problemat all)to 5 (majorproblem) he extentto which theybelievedeach itemcreateddifficulties in theirfirms. Partthreelisted statementsconcerning business practices andstrategies see Figure3) which arefrequentlycited inthe literature s solutions to service relatedproblems.Respondents ndicatedthe extent to which each state-

mentappliedto their firm on a scale rangingfrom 1(does not applyto ourfirm)to 5 (definitelyappliestoourfirm).Results

Forthe sampleas a whole, mean scores (on a 1 to 5scale)werecalculated or eachproblemarea,businesspractice,andstrategy.'In addition,meanscores acrosscategoriesundereachof the fourservice classificationvariables e.g., geographicscope of operations)wereexaminedusing a one-wayANOVA model. The gen-erallinear model (GLM)procedureof the SAS statis-ticalpackagewas employedfor this purpose(SAS In-stitute1983). SignificantANOVA resultswere furtherinvestigated using Duncan's multiple range test toidentify the categoriesof firms that differed signifi-cantlyin terms of theirmean scores.Problem AreasTable 2 reports he means of the respondents'percep-tions concerningthe extent to which service charac-teristicspresentedproblemsin their firms. The tablealso isolates significantdifferences in perceptionsofproblemareasamongdifferenttypes of service firms.Judging romthe averageresponsesof all firms, ser-vice suppliersdid not consider the eight problemstobe of majorconcern to them. Only one problemarea("Thedemand or services luctuates")eceiveda meanscoreexceeding he midpointon the5-pointscale. Twoproblemareas("Servicescannot be stored"and "Ser-vices cannot be protectedby patents")received ex-tremelylow average responses, indicatingthat mostmanagersfelt them to be of little or no problem intheir irms.Theremainingproblemareasreceived av-erage scores below the midpointof the scales. Thelow averagescores were further upportedby low per-centages of respondentsreportingthat the problemsapplyto their firms(indicatedby respondents'check-ing a 4 or 5 on the problem tems). While 47% of therespondents iewed demand luctuationas a problem,less thanone-quarterperceivedany of the remainingseven problemsas relevant to their firms (see finalcolumn of Table2). One possible explanation or lowscoreson theseproblemareas s that servicefirmsmaybe dealingwith themeffectively andthereforedo notperceivethem to be troublesome.A few significant differences in perceptions ofproblemareas surfaced among the types of servicefirms. However, only some of these differences oc-

'All of these scales were anchored at their end points (i.e., 1 and5) with the descriptive phrases mentioned earlier. Other points alongthe scales were not labeled. Subjects were simply instructed to circlethe number along the continuum on each scale that came closest totheir perception of the statement's relevance to their firm.

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TABLE1Profile of Respondents and NonrespondentsPercentage ofNumber of Employees: Respondents NonrespondentsFewerthan 25 18 2725-49 14 1350-99 15 17100-199 13 12200-499 13 12

500 and over 20 13Not available 7 6100 100(base = 323) (base = 677)X2= 10.96; df = 6. No significant difference between respondents and nonrespondents.

Percentage ofAnnual Sales Revenue: Respondents NonrespondentsLess than $1 million 9 14$1 million-less than $5 million 13 17$5 million-less than $10 million 10 9$10 million-less than $50 million 23 15$50 million and over 11 9not available 34 36100 100(base = 323) (base = 677)X2= 9.81; df = 5. No significant difference between respondents and nonrespondents.

Percentage ofSICGroupings': Respondents Nonrespondents15, 16, 17 Construction 6 842, 44, 45 Transportation 5 548, 49 Utilities 4 460 Banking: State banks 16 1360 Banking: National banks 7 661 Savings and loans 4 361 Nonbank credit agencies 3 362, 65, 67 Brokeragefirms 9 1570 Hotels & lodging places 8 872 Personal services 3 173 Business services 17 1675, 76 Repairservices 5 478, 79 Recreation 6 9miscellaneous 7 5100 100(base = 323) (base = 677)X2= 15.38; df = 13. No significant difference between respondents and nonrespondents."Categorieshown in the table are collapsedcategories o ensureadequatecell sizes for the chi-squareanalysis.However, oprovidemore specificity,ndustries romwhichat least two firmsrespondedare furtherdetailedbelow: Contractors:eneralcontractors, eavyconstruction;Transportation:otor reight,airtransport;Utilities:elephone,electric,gas; BrokerageFirms:securitiesbrokers,holding&investment ompanies,realestateagencies,insurance arriers;PersonalServices:powerlaundries,linensupply&cleaningservices,beautysalons& barber hops, photographicervices;BusinessServices:advertising'gencies,credit reportingservices, janitorial&cleaning services, computer programming/data processing services, equipment rental& leas-ing services, consulting firms, photofinishing laboratories; Recreation:amusement parks, public golf courses, audio/video enter-tainment, membership sports and recreationclubs.

curred on items that had large enough overall meanscores to warrant discussion of the differences. Theinability to mass produce services appeared to affectbusinesses serving institutional customers more thanthose serving individual customers. Costs of servicesappearto be more difficult to calculate as the duration

of benefits increases. Associating direct and indirectcosts with the provision of a service evidently be-comes less precise and more difficult as the serviceextends over a longer time period. Quality control dif-ficulties were more salient to nonlocal than to localfirms, possibly because nonlocal firms generally op-

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TABLESignificant Differences in Perceptions of Problem Areas among Types of Service FirmsaPercent-Need forCustomer's age oFirmsPrimaryCustomer Group GeographicSpread Duration of Benefits Presence Check-Individual Institutional Statewide- Imme- Short- Long- Me- All ing a 4ProblemAreas Customers Customers Both Local Regional Natl. Intl. diate term term High dium Low Firms or 5

Services cannot be 2.15b 1.55c 1.85bC 1.87 16stored. (1.36)Services cannot be 1.65 9transported. (1.17)Qualityof services 2.22b 2.60c 2.92c 2.53b,c 2.52 20difficult o control (1.07)Services cannot be 2.01b 2.41C 1.83b 2.13 19"mass pro- (1.32)duced."Services cannot be 1.64b 2.09C 2.08bc 1.78 1.66 2.07b 2.27C 1.89 16protected by pat- (1.35)ents.Costs of providing 2.33b 2.44b'c 2.76c 2.59 23services are diffi- (1.25)cult to calculate.Customersthem- 2.13 12selves are in- (1.15)volved duringtheproductionofservices.The demand for 3.27 47services fluc- (1.29)tuates.Sample Size 125 129 52 100 76 74 49 87 47 173 73 125 114 323

aNumbersare mean values on a 5-pointscale, on which the higher the value, the more a characteristicapplies to a firm; numbers within parentheses in the second lastcolumn are standarddeviations;numbers in the last column are percentages.b'CMeansith the same superscriptsare not significantlydifferent. Means with differentsuperscriptsare significantlydifferent.

eratea greaternumberof units that are moredispersedgeographically.Nevertheless, quality must be care-fully guardedbecause a bad experience in one outletcan affect business in otheroutlets.An important inding is the absence of significantdifferencesacross different ypes of firmson the prob-lem areathathad the highestmean score (3.27)-"thedemand or servicefluctuates."Perceptionof demandfluctuationas a somewhat serious problemis appar-ently universal.Practices/StrategiesTable 3 summarizes he extent to which various busi-ness practices and strategies are used to overcomeproblemsassociated with servicesacross all firms andin differenttypes of firms. These practicesand strat-egies have been cited in the services marketing iter-atureas particularlyappropriateor service firms.

Pricing. Averageresponsesacross all firms showthatcost-oriented ricing strategiesare used more thancompetition-and demand-orientedpricing strategies.Basing prices on what it costs to providethe servicehada highermean(3.78) thaneitherbasingprices onwhatcompetitioncharges(mean of 2.99) or on whatthe market s willing to pay (mean of 2.90). Consis-tent with these averages are the percentages of re-spondentschecking a 4 or 5 on the scales (indicatingthatthe strategyappliesto theirfirm):63% base priceson costs whereas a much lower percentagebase price

on competition(36%)and marketwillingness to pay(36%).Althoughservice costs maybe difficultto cal-culate(according o the literature nd, to some extent,the findingsof this study), service companiesare ap-parentlymakingestimatesof costs to be sure thattheyare covered. Competition-oriented ricing, althoughsimpler,maynotprovideassuranceof coveringcosts.Demand-orientedpricing may be as difficult to im-plementas cost-orientedpricing and does not guar-anteethat costs will be covered.Consistentwith the relativepopularityof cost-ori-entedpricing, the use of cost accounting systems ap-pears to be moderatelywidespread(mean of 3.28).The only significant difference in pricing strategiesamong types of firms involves the use of cost ac-counting systems: local firms use the systems signif-icantly ess thando statewide-regionalirms,probablybecause these firms tend to be smaller and less so-phisticated.

Advertising.The datapertaining o advertising n-dicate significantdifferences in usage of advertisingamongtypes of service firms. As is usually the casewithgoods firms, service firmswith institutional us-tomersreported hatadvertising s not as importantotheirmarketingprogramsas firms marketing o con-sumers. Moreover, institutionalfirms report signifi-cantly lower usage of television and newspaperad-vertising, which tend to be consumermedia. Firmswhichrequire hecustomer'sphysicalpresenceduring

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TABLESignificant Differences in Usage of Business Strategies among Types of Service FirmsaNeed for Percent-Customer's age ofFirmsPrimaryCustomer Group GeographicSpread Duration of Benefits Presence ChecCheck-Individual Institutional Statewide- Imme- Short- Long- Me- All ing a 4Business Practices Customers Customers Both Local Regional Natl. Intl. diate term term High dium Low Firms or 5

PricingBase prices onwhat it costsusBase prices onwhat competi-tion chargesBase prices onwhat marketiswilling to payUse a cost ac-counting sys-temAdvertisingandWord of MouthAdvertisingis an 3.55bimportantpartof marketingprogramTelevision adver- 1.90btising is impor-tant partNewspaper ad- 3.23bvertising is im-portantpartDirectmail adver-tising is impor-tant partSpecific effort toencourage cus-tomers to tellothers aboutservicePersonalSellingDo a lot of per-sonal selling ofservicesContactcus- 2.81btomers afterpurchaseCarefully choose 3.98bpersonnel whointeract withconsumersTrainpersonnelto interact wellInstitutional mageMuch of market-ing geared toprojectingspe-cific companyimageHave customercontact em-ployeesdressed in acertainway toachieve imageDesign facilities 3.63bto achieve spe-cific marketingor image objec-tivesQualityControlFormal system 3.34bfor controllingqualityMarketingOrientation

Regularly collect 3.23binformationabout customerneeds

3.02b 3.65c 3.19bc 3.48b'c

2.69c 3.59b

1.42c 1.59b,c

3.78(1.27)2.99

(1.22)2.90(1.37)3.28(1.49)

3.57b 3.08bc 3.02c 3.66b 3.29b 2.60c 3.20(1.45)

1.95b 1.59b c 1.48c 1.88b 1.74b 1.38c 1.65(1.20)1.75c 3.20b 3.31 2.47c 2.05c 2.02c 3.07b 2.69bc 2.31 3.01b 2.84b 2.06c 2.61(1.57)

2.82(1.43)3.99b 4.00b 2.60c 3.86(1.30)

3.84(1.44)3.93 3.17b 2.72b 3.38c 3.81c,d 4.32d 3.35(1.45)

4.11(1.01)4.31c 3.89b 3.94b 4.06b 4.12b 4.52c

4.08(1.03)3.78(1.29)

3.53b 3.23b'c 2.98c 3.24(1.46)

3.01 3.64b 3.78b 3.04C 3.15c 3.29C 3.66b 3.02C 3.30bc 3.74b 3.49b 2.98C 3.37(1.44)

3.80C 3.37b 3.17a 3.57b 3.88b 3.87b 3.54(1.25)

3.97c 3.36b 3.20b 3.70C 3.72 4.21d 3.60(1.28)

63

36

36

51

45

12

35

3468

67

50

76

73

67

50

53

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TABLE (continued)Percent-Need for eCustomer's ageofFirmsPrimaryCustomer Group Geographic Spread Durationof Benefits Presence Check-

Individual Institutional Statewide- Imme- Short- Long- Me- All ing a 4Business Practices Customers Customers Both Local Regional Natl. Intl. diate term term High dium Low Firms or 5Marketingactivi- 3.45b 3.89c 3.36b 3.32b 3.70C 3.83c 3.88c 3.75b 3.38c 3.84b 3.62 59ties are based (1.19)on knowledgeabout cus-tomersFirmactivities are 3.70b 4.22C 4.09c 4.23c 4.34b 3.78C 4.06b 4.00 72coordinated to (1.06)ensure cus-tomer satisfac-tionChiefmarketing 4.34 84executive par- (1.05)ticipates in topmanagementdecisionsWillingto pro- 3.23b 4.01c 3.40b 3.29 3.49b'c 3.93c 3.84c 3.59 60duce customer- (1.47)designed ser-vices for clientsWhen a customer 2.70 31is dissatisfied, (1.50)redo service

Sample size 125 129 52 103 76 74 49 87 47 173 73 125 114 323aNumbersare mean values on a 5-pointscale on which the higher the value, the more a characteristicapplies to a firm; numbers within parentheses in the second lastcolumn are standard deviations;numbers in the last column are percentages.b'c'dMeansith same superscripts are not significantlydifferent.Means with differentsuperscripts are significantlydifferent.

servicedeliveryreport hatadvertising s moreappro-priate(and use both television and newspaperadver-tising more) than those where the customer can ini-tiateor terminate he service transactionat a distance.Firms marketingservices where benefits are im-mediate(hotels) use television and newspaperadver-tisingmore than thosewherebenefitsendure or a longtime (landscaping irms). A possible explanationforthis finding is that services with enduringbenefits (acollegeeducation) re moreexpensiveandrequiremoreinvolvementby the buyer. In these cases, advertisingin the newspaperand on television is less likely totriggera purchasethan with lower priced, lower in-volvementpurchaseswherebenefits are immediate(arestaurantmeal).Forthe sampleas a whole, direct mail and news-paperappear o be more importantadvertisingmediathantelevision. While 35% of the respondents ndi-catethatnewspaper s important nd34%indicatethatdirect mail is important,only 12%claim that televi-sion is an importantpartof theirmarketingprograms(see finalcolumn of Table3). Television's advertisingstrengths-which include demonstrationas well assight, sound, and motion benefits-may be less ap-propriate or services because of their intangibility.Unless a service is associatedwith relevanttangibles(theequipment n a healthclub), the service firmmayhave little to demonstrate.Television, generally themost expensive medium, may also not be feasible formany service firms.

Respondent firms report attempts to encourageword-of-mouthadvertising,a finding consistentwiththeemphasisplaced uponthis activityin the literature(BessomandJackson1975;Davis, Guiltinan, ndJones1979; Fisk 1981). The average response of 3.86 onthe item, "Wemakea specific effortto encourageourcustomers o tell otherpeople about our service," in-dicatesthatmanyservice firmsplace a high degreeofimportance n word-of-mouth ommunications.Sixty-eight percentof the respondentschecked a 4 or 5 onthis item.

Personal selling. Average scores for all firms ontheusageof personalselling andimagecreatingstrat-egies revealparticular mphasisin these areas.Over-all, respondent irms appear o choose carefullytheircustomercontactpersonnel(4.11) and to trainthemto interactwell with customers 4.08). These high av-erages are consistent with high percentages of re-spondentschecking a 4 or 5 on these items: 76%re-port careful selection of personnel and 73% reporttraining hem in interactionskills. Firms that sell toinstitutional ustomersreportgreatercarein choosingpersonnel(4.31) thanfirms selling to individualcus-tomers 3.98), perhapsbecause here s frequentlymoreriding on each sale to institutionalcustomers.Also,international irms indicate greatercare in selectingpersonnel hanfirmswhich operateat local, regional-statewide,or nationallevels. This resultmay be dueto the largenumberof people manyinternationalirms

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employ, necessitatingmore sophisticatedhiringprac-tices.Institutional mage. Overall, firms appearto em-phasize designing facilities to achieve specific mar-ketingor image objectives (3.57), dressingcustomercontactpersonnel n a certainway (3.24), andgearingmuchof theirmarketing o projectinga specific com-pany image (3.78). Differences amongtypes of firmssurfacedmainly in terms of facilities design; on thisitem, significantdifferencesoccurred n all four clas-sifications.As mightbe expected, servicefirmswhichemphasize facilities design most are those the con-sumervisits: firms whose primarycustomergroup isindividual customers (travel agencies), whose geo-graphic cope is local (haircutting alons), whose ben-efits are immediate (child care centers), and whoseneed forthecustomer'spresence s high (healthspas).Customerorientation. Items meant to reflect thedegreeof customer rientation f respondentirmsdrewmixedresponses.High mean scores on items such as

coordinatingactivitiesto ensurecustomersatisfaction(4.00) and involving marketing executives in topmanagementdecisions (4.34) indicatemarketingsen-sitivity. However, lower scores obtained on othermarketingorientation tems, such as performingtheserviceover if the customer s dissatisfied(2.70), re-veal less sensitivityto customerneeds.Analysis revealed a number of differences be-tween types of firms. Nonlocal firms, perhapsdue togreater esourcesat theirdisposal, seem moreinclinedto researchcustomerneeds than local firms. Institu-tional firms also seem more inclined to do customerresearchthan consumerfirms. This finding may beexplainedby the long-termrelationships hatneed tobe cultivated with institutionalcustomers, but it iscontraryo studies in goods marketing, ndicating hatconsumerfirms are more prone to conduct customerresearchthan institutionalfirms (see, for example,Cooper and Little 1977, McNamara1972). In gen-eral, service firms servinginstitutionalcustomersap-pearto be moremarketingorientedthanservice firmsservingend consumers.Strategiesto cope withfluctuatingdemand.Table4 presentsaverageresponsesfor all firms concerningthe use of strategiesto cope with fluctuatingdemandas well as differencesamongtypesof firms. Strategiesfor peak demand periods which apply most to thesamplefirmsincludehiringextrapart-time mployees(3.55), having employees work overtime(3.54), andcross-training mployees (3.73). Peak-timestrategieswhich apply least to respondent irms include lettingwork fall behind (1.62), taking care of regularcus-tomers irstandallowingothercustomerso wait(1.68),turning waybusiness(1.68), and subcontracting orkto others (1.95). These inferences are confirmedby

the percentagesof firms checking a 4 or 5 on eachitem (final column of Table 4).The mostprominent trategy orresponding o pe-riodsof low demand nvolved tryingto increasebusi-ness by calling on customers (3.47). A surprisingfinding is that many service firms apparentlydo notreduce prices to increase business during slow pe-riods:offeringpricereductions coredbelow 2.0. Only17%of the respondentschecked4 or 5 on this item,indicatingthat a minorityof firms use the strategy.Nor is new servicedevelopmenta prominent trategy:offeringdifferent ervices to use resourcesduringslowperiodsscoredjust above 2.0.Considerableariationn usageof strategieso copewith fluctuatingdemandexisted between firms serv-ing end consumersandfirmsservinginstitutional us-tomers. Consumerfirms scored higher than institu-tionalfirmson only two strategies:differentialsched-ulingof employeesandeducationof customers o useservices during nonpeak times. Firms serving insti-tutionalcustomers, on the other hand, had signifi-cantly higher usage scores on eight strategies. Insti-tutional firms, which typically have sales forces,showedsharplygreaterusage of the strategy,"Trytoincreasebusinessby calling on customers,"thancon-sumerfirms. Institutional irms also reportedsignifi-cantly higher usage of several employee hiring andscheduling strategies:letting employees work over-time, hiringextrafull-timeemployees, andlayingoffemployees. Finally, institutionalfirms reportedsig-nificantlyhigher usage of strategiessuch as turningaway business, takingcare of regularcustomersandallowing others to wait, seeking subcontractworkduringslow times, and offering differentservices touse resourcesduringslow periods.Whilemeanscoresfortheselast fourstrategieswere low, thedataoverallsuggestthatinstitutional irmsuse a morevariedrep-ertoire of strategiesto cope with fluctuatingdemandthando consumerfirms.Strategies o synchronizesupplyanddemandvar-ied mostby geographic cope of operationswithusageof 12 of the 19 strategiesshowing significantdiffer-ences across categories. National firms appearedtomakethe greatestuse of the strategies,scoringhigherthanfirms in othercategorieson seven of the strate-gies (i.e., differentialschedulingof existing employ-ees, taking care of regularcustomers and allowingothers o wait, cross-trainingmployees,offeringpricereductions, ncreasingadvertising, urningawaybusi-ness, and calling on customers). Size and sophisti-cationof nationalfirms most likely account for theirhigherusageof strategies o cope with the problemoffluctuatingdemand.A numberof significantdifferenceswere also re-vealed in terms of durationof benefits (usage of thestrategieswas generallyhighestin the immediateben-



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TABLESignificant Differences in Usage of Strategies to Cope with Fluctuating Demand'~Needor Percent-Need for age ofCustomer's Fom

trti to C PrimaryCustomer Group GeographicSpread Duration of Benefits PresenceStrategies to Cope Check-with Fluctuating Individual Institutional Statewide- Imme- Short- Long- Me- All ing a 4Demand Customers Customers Both Local Regional Natl. Intl. diate term term High dium Low Firms or 5Periods of HighDemandHireextra full-time

employeesHireextra part-timeemployeesUse differentialscheduling of ex-isting employeesduring peaktimesHave employeesworkovertimeSubcontractworkto othersLetwork fall be-hindTakecare of regu-larcustomersand allow othersto waitTurnaway businessCross-train mploy-ees to performother tasksEducate customersto use serviceduring nonpeaktimesOfferincentives tocustomers usingservice duringnonpeaktimesPeriods of LowDemandLayoff employeesUse differential

scheduling of ex-isting employeesduringslowtimesUse employees toperformnonvitaltasks during slowtimesOfferprice reduc-tionsIncreaseadvertisingTryto increasebusiness by call-ing on customersSeek subcontractworkduringslowtimesOfferdifferent ser-vices to use re-sources duringslow periods

3.12c 2.62b,c 2.16b 3.37C 2.96c 3.23C3.96b 4.35b

3.20c 3.75b 3.40b'C 3.73c 3.90c 3.05b 4.00b 3.09C

3.26b 4.00C 3.24b 2.97b 3.66C 4.05c 4.10C

1.47b 1.99C 1.53b 1.47b 1.85c 1.92C 1.65b,c

1.48b 2.00 1.39b 1.33b 1.85C 1.92C 1.88c3.84b 3.75b 3.90 3.22C

3.13b 2.50C 2.85b,c3.42c4.11b 4.03b 3.33c 3.43c

2.00b 1.47C 1.70b'c

1.99C 2.78b

2.75b 1.69c 1.62c 2.69b 1.61c 1.81c

2.96c 2.04b 1.88 2.97c 3.08c 3.14c 3.00b 2.88b' 2.35c3.72b 3.88b 2.77C 3.69b 3.03c 3.18C

1.50b1.99b

4.13c 3.35b 2.96b

2.05C2.46c3.63C

2.47C2.58C4.00C

2.05c2.28b,c3.72C

2.27b 1.80c2.61b 2.10

1.59c 2.66b 1.72C 1.68c2.15c 2.75b 2.12c 2.09c

3.34b,C 3.27b 3.79

2.07 1.48b 1.35b 1.90c,d 1.73b,d 2.33c

1.94b 2.38c 1.75b 1.74b 1.97b, 2.42c,d 2.60d

Sample size 125 129 52 100 76 74 49 87 47 173 73 125 114 323'Numbers are mean values on a 5-pointscale, on which the higher the value the more a characteristicapplies to a firm. Numberswithin parentheses in the second lastcolumnare standarddeviations;numbers in the last column are percentages.b'c'dMeansith the same superscriptare not significantlydifferent. Means with differentsuperscriptsare significantlydifferent.

efits category)andneed for customers'presence(firmswhich directly interact with the consumer use thestrategiesmore).In seven of the eight strategieswheresignificantdifferences occurred,companies that hada highneed for the customer'spresenceoutscoredtheother two categories in usage of strategies to syn-

42 / Journalf Marketing,pring 985

2.79(1.61)3.72(1.44)3.55(1.52)

3.54(1.38)1.95(1.41)1.62(0.93)1.68(1.09)

1.68(1.17)3.73(1.26)2.38(1.37)1.97

(1.38)

2.60(1.56)3.22(1.51)

2.99(1.38)

1.94(1.40)2.70(1.34)3.47(1.52)1.72(1.20)2.08

(1.37)

376360

551869

1160

22

18

3250

39

172057

14

19


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chronizesupplyand demand.These findings are per-haps as one would expect them to be-the need tomatchsupplywith demandis more urgentwhen cus-tomersareat the service site, waitingto be served (ina bankor restaurant)hanwhen the customers'phys-ical presence is not critical and the service benefitsendureover a longer period (architectural ervices).

DiscussionThis article presented a conceptual framework ofproblemsandstrategies n services marketing hatde-rive from four unique characteristicsof services: in-tangibility,inseparability,heterogeneity, and perish-ability. The framework s based on a review of thegrowing body of literaturen services marketing.Thearticle also reported findings from a national surveyof service firms concerning problems they face andstrategiesheyuse. Presentinghe literatureeviewandsurveydata in one article affords the opportunity ocomparepoints of emphasis in the literature-muchof which is nonempiricalat this stage in its devel-opment-with the inputof a cross-section of servicecompanies.Differences Among Service FirmsOne conclusion that can be drawn from the findingsis that mportant ifferencesexist amongservicefirms,not just between service firms and goods firms. Theexisting literature s dominatedby discussions of thedifferences between goods marketing and servicesmarketing.Much less has been written about the dif-ferences among service firms. In this study, respon-dent companies were classified four different ways:by primarycustomergroup, geographicspread, du-rationof benefits to the customer, and need for thecustomer'spresenceduringserviceproduction.As thedata reveal, many significant differences surfacedamongservice firmswhenclassifiedaccording o thesecriteria,especially with respect to usage of practicesand strategies.As an illustration, irms marketing o institutionalcustomersdiffer from firms marketingto end con-sumers in several importantways. Consistent withgoods marketingpractice,advertisingappears o be aless importantpart of institutionalfirms' marketingprograms.However, somewhat at odds with what weknow about goods marketing practices, institutionalfirms seem to be more marketingoriented:they aremoreaptto contactcustomersafterpurchase o ensuresatisfaction, o choose carefullythe personnelwho in-teractwith customers,and to regularlycollect infor-mationaboutcustomerneeds. One possible explana-tion for this difference is thatcustomersare fewer-and each customerspends more-in the institutionalmarket hanin the end consumermarket.Institutional

firms are also more aggressive in respondingto lowdemandperiods (by being more inclined to call oncustomers o try to increasebusiness)as well as highdemandperiods(by being more likely to let employ-ees work overtime).While it is useful to generalizeaboutthe charac-teristicsof services and servicebusinesses, it appearsto be equally important o recognize that differencesexistamongvariousservicesandamongthe firmsthatmarket hem. While possible explanations or the dif-ferencesrevealedby the studyhave been offered, re-searchinvestigatingthe causes and consequences ofsuchdifferences s needed. Lovelock (1983) has pro-vided a rich conceptualfoundationfor such researchefforts.Services MarketingProblemsAnotherconclusion to be drawnfrom the research sthatthe servicesmarketingiteratureorrespondsmoreclosely with the practicesand strategiesused by sam-ple firmsthanwith the problemsthey face. Eightop-erationsor marketingproblems associated with thecharacteristicsof services were identified from theservices marketing iterature.Only one of the eightproblemareas("Thedemandfor services fluctuates")receivedan averagescore above the midpointon thescale. Fourof the eight items werejust below orjustabovethe 2.0 mark,indicating hattheywere not per-ceived to be troublesome.A discrepancyexists between what the literaturesuggests would be the case and what respondents othe presentstudy claim is the case. One explanationfor this discrepancy s that service firms have inter-nalizedtheseproblemsandaredealingwiththemsuc-cessfullyby using the very strategiessuggestedin theliterature o be appropriate.That there were, by andlarge, higheroverall scores for the business practiceand strategy tems thanfor the problemitems on thequestionnaireendscredence o this explanation. f thisexplanation s valid, many of the problemscited intheliteratureouldbe lesscritical hanotherareaswhichwere not investigated(e.g., difficulty in developingnew services, difficulty in evaluating profitability,difficulty n motivatingpubliccontactpersonnel,etc.).It is also possible thatservicemanagersmay not havefully grasped he significanceof whatthey werebeingasked in one or more of the problemstatements e.g.,managersmay not think in termsof protection n theformof patentsbut still maybe concernedaboutcom-petitorscopying theirservices). The services market-ing literaturemay need to recognize and analyze ad-ditional problem areas that may be particularlytroublesome to service firms. Researchers testingmanagerialperceptionsmay also need to translate heconceptual problem statements into language moreappropriateo service managers.

ProblemsndStrategiesnServicesMarketing 43


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Implicationsfor FurtherResearchNumerousimplications for researchers nterestedinservicesmarketingarisefrom the findingsreported nthis article. Some of the more intriguing mplicationsare as follows:

1. The services marketingliterature ends to becharacterized y empiricalresearchwithincer-tain service industries (for example, bankingand healthcare)andby conceptualworkacrossservice industries. It is perhapsthis combina-tion that has contributed o the glossing overin the literatureof many differences betweentypes of service firms found in our study. Aresearchpriorityin services marketing s em-pirical studythat transcendsspecific industriesand tests service marketingconcepts.2. Forreasons uggestedearlier, his research tudydid not for the most part uncover the criticalproblems acingmost servicebusinessestoday.What aretheseproblems?How arethey chang-ingdue to environmental,ompetitive,and otherconditions?How do theydifferfor various ypesof service firms? The services marketinglit-erature needs to focus on the most criticalproblemsfacing service firms if it is to be ofmaximumvalue.3. Of the eight problemareas investigated,fluc-tuation in demand was considered to be mosttroublesomeby the sample. This would seemto be a fertile areafor additionalresearch. Thedatapresented n Table4 reveal that the samplecompaniesused some but not all of the listedstrategies or coping with demand luctuations.Why are some strategiesmoreuseful than oth-ers? How does theireffectiveness vary amongdifferent types of services? Are other usefulstrategiesoverlooked in the literature?4. The literature suggests that word-of-mouthcommunicationsare critical because servicesareintangibleandheterogeneousn nature.Thedata indicate that sample firms make specificefforts to encourage word-of-mouth commu-nications.Whatstrategiesare available to ser-vice finns attemptingo increaseword-of-mouthcommunications?What guidelines and advicecanbe offered in connectionwith these variousstrategies?Are certain strategiesmore appro-priatefor certaintypes of service businesses?Additionalresearch nto theseandrelatedques-tions would be helpful.5. Also suggested in the literature Kotler 1973,Lovelocket al. 1981)-and corroboratedy thisstudy-is the importanceof institutionalmageandtheuse of tangiblecues like physicalfacili-ties and personnel appearanceto enhance it.

Additionalinvestigationof such issues as theuse of employee uniforms, the role of archi-tecture in the marketingmix, and the natureandbuildingof corporate mage would be use-ful to many service companies.6. The emphasis placed on selection and trainingof service firmpersonnelin the literature,andby respondentsn the study,raisedprovocativeissues aboutmarketing rganization.Shouldthemarketingdepartment ontrol employee train-ing? Does the entire humanresourcesfunctionbelong in marketing?Conversely, would it bemore appropriate n certain service firms toconsider field managersas the chief "market-ers" and decentralizemarketing ather han addfunctions to a central staff (Gronroos1983)?These and other issues touching on employeeperformanceand marketing'srole in facilitat-ing it are worthyof much additionalwork.7. An unexpected indingof this studyis thatser-vice firms dealing with institutionalcustomersare moremarketingoriented hanfirmsdealingwith the end consumer:they are more apt tocontactcustomersafterpurchase o ensuresat-isfaction,to choose carefully he personnelwhointeract with customers, and to regularlycol-lect informationabout customerneeds. Why isthis finding differentfrom what we would ex-pect based on our knowledge of goods firms?Whataspects of services lead to this reversalin the importanceof marketingorientation?

ConclusionServicesmarketing s becominga recognizedand ac-cepted subset of the marketingdiscipline. Given thegrowthof the service sector in economies throughoutthe world, and the almostuniversalbelief by scholarsworking n this area that services marketing s in cer-tainkey respectsdifferentfromgoods marketing,therapidgrowthof service marketing iterature n recentyears is not surprising.An acceleration of academicinterestandresearchactivity in services marketing nthe years immediatelyahead is to be expected and isnecessary ecause armorequestions hananswersexistat this time. Implied by the set of researchimplica-tions reviewed above is the need for researchers othinkbroadlyaboutresearchablessues and to be will-ing to workin areas not normallyclassified as "mar-keting"(e.g., humanresourcesmanagementand fa-cilities design). A need exists for services marketingresearch o enter a new phase of empiricalwork thatintegratesvariousdisciplines and various service in-dustries.

44 / Journal f Marketing,pring 985


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