Chapter 10 Crafting the Service Environment Slide 2007

Chapter 10: Crafting the Service Environment Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 1

Overview of Chapter 10 § What Is the Purpose of Service Environments? § Understanding Consumer Responses to Service Environments § Dimensions of the Service Environment § Putting It All Together Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 2

What Is the Purpose of Service Environments? Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 3

Purpose of Service Environments § Helps firm to create distinctive image and unique positioning § Service environment affects buyer behavior in three ways: Ø Message-creating medium: Symbolic cues to communicate the distinctive nature and quality of the service experience Ø Attention-creating medium: Make servicescape stand out from competition and attract customers from target segments Ø Effect-creating medium: Use colors, textures, sounds, scents and spatial design to enhance desired service experience Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 4

Comparison of Hotel Lobbies (Fig 10. 1) Each servicescape clearly communicates and reinforces its hotel’s respective positioning and sets service expectations as guests arrive Orbit Hotel and Hostel, Los Angeles Slide © 2007 by Christopher Lovelock and Jochen Wirtz Four Seasons Hotel, New York Services Marketing 6/E Chapter 10 - 5

Servicescape as Part of Value Proposition § Physical surroundings help shape appropriate feelings and reactions in customers and employees Ø For example: Disneyland, Denmark’s Legoland § Servicescapes form a core part of the value proposition Ø For example: Florida-based Muvico - Florida-based Muvico: Builds extravagant movie theatres and offers plush amenities. “What sets you apart is how you package it. . ” (Muvico’s CEO, Hamid Hashemi) § The power of servicescapes is being discovered Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 6

Understanding Consumer Responses to Service Environments Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 7

The Mehrabian-Russell Stimulus-Response Model (Fig 10. 2) Feelings Are a Key Driver of Customer Responses to Service Environments Environmental Stimuli and Cognitive Processes Slide © 2007 by Christopher Lovelock and Jochen Wirtz Dimensions of Affect: Response/ Behavior: Pleasure and Arousal Approach Avoidance and Cognitive Processes Services Marketing 6/E Chapter 10 - 8

Insights from Mehrabian-Russell Stimulus-Response Model § Simple yet fundamental model of how people respond to environments § The environment, its conscious and unconscious perceptions, and interpretation influence how people feel in that environment § Feelings, rather than perceptions/thoughts drive behavior § Typical outcome variable is “approach” or “avoidance” of an environment, but other possible outcomes can be added to model Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 9

The Russell Model of Affect Fig 10. 3 Arousing Distressing Exciting Unpleasant Pleasant Relaxing Boring Sleepy Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 10

Insights from Russell Model of Affect § Emotional responses to environments can be described along two main dimensions: Ø Pleasure: Direct, subjective, depending on how much individual likes or dislikes environment Ø Arousal: How stimulated individual feels, depends largely on information rate or load of an environment § Russell separated cognitive part of emotions from these two emotional dimensions § Advantage: simplicity, allows a direct assessment of how customers feel Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 11

Drivers of Affect § Affect can be caused by perceptions and cognitive processes of any degree of complexity § It’s the simple cognitive processes that determine how people feel in a service setting § If higher levels of cognitive processes are triggered, the interpretation of this process determines people’s feelings § The more complex a cognitive process becomes, the more powerful its potential impact on affect. § However, most service encounters are routine and simple processes can determine affect. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 12

Behavioral Consequence of Affect § Pleasant environments result in approach, whereas unpleasant ones result in avoidance § Arousal amplifies the basic effect of pleasure on behavior Ø If environment is pleasant, increasing arousal can generate excitement, leading to a stronger positive consumer response Ø If environment is unpleasant, increasing arousal level will move customers into the “distressed” region § Feelings during service encounters are an important driver of customer loyalty Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 13

Dimensions of the Service Environment Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 14

Main Dimensions in Servicescape Model § Ambient Conditions Ø Characteristics of environment pertaining to our five senses § Spatial Layout and Functionality Ø Spatial layout: - Floorplan - Size and shape of furnishings, counters, machinery, equipment, and how they are arranged Ø Functionality: Ability of those items to facilitate performance § Signs, Symbols, and Artifacts Ø Explicit or implicit signals to: - Communicate firm’s image - Help consumers find their way - Convey rules of behavior Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 15

Impact of Music § In service settings, music can have a powerful effect on perceptions and behaviors, even if played at barely audible levels § Structural characteristics of music―such as tempo, volume, and harmony―are perceived holistically Ø Fast tempo music and high volume music increase arousal levels Ø People tend to adjust their pace, either voluntarily or involuntarily, to match tempo of music § Careful selection of music can deter wrong type of customers Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 16

Impact of Music on Restaurant Diners Restaurant Patron Behavior Fast-beat Slow-beat Difference between Music Slow- and Fast-beat Environments Consumer time spent at table Spending on food Absolute Difference % Difference 45 min 56 min +11 min +24% $55. 12 $55. 81 +$0. 69 +1% Spending on beverages $21. 62 $30. 47 +$8. 85 +41% Total spending $76. 74 $86. 28 +$9. 54 +12% Estimated gross margin $48. 62 $55. 82 +$7. 20 +15% Source: Ronald E. Milliman (1982), “Using Background Music to Affect the Behavior of Supermarket Shoppers, ” Journal Of Marketing, 56 (3): pp. 86– 91 Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 17

Impact of Color § Colors can be stimulating, calming, expressive, disturbing, impressional, cultural, exuberant, symbolic § Color pervades every aspect of our lives, embellishes the ordinary, gives beauty and drama to everyday objects § Colors have a strong impact on people’s feelings § Colors can be defined into three dimensions: Ø Hue is the pigment of the color Ø Value is the degree of lightness or darkness of the color Ø Chroma refers to hue-intensity, saturation, or brilliance Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 18

Common Associations and Human Responses to Colors Color Degree of Warmth Nature Symbol (Table 10. 3) Common Association and Human Responses to Color Red Warm Earth High energy and passion; can excite and stimulate Orange Warmest Sunset Emotions, expressions, warmth Yellow Warm Sun Optimism, clarity, intellect, moodenhancing Green Cool Growth, grass, and trees Nurturing, healing, unconditional love Blue Coolest Sky and ocean Relaxation, serenity, loyalty Indigo Cool Sunset Mediation and spirituality Violet Cool Violet flower Spirituality, reduces stress, can create an inner feeling of calm Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 19

People Are Part of the Service Environment (Fig 10. 8) Distinctive Servicescapes Create Customer Expectations Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 20

Putting It All Together Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 21

Selection of Environmental Design Elements § Consumers perceive service environments holistically § Design with a holistic view Ø Servicescapes have to be seen holistically: No dimension of design can be optimized in isolation, because everything depends on everything else Ø Holistic characteristic of environments makes designing service environment an art § Must design from a customer’s perspective Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 22

Tools to Guide Servicescape Design § Keen observation of customers’ behavior and responses to the service environment by management, supervisors, branch managers, and frontline staff § Feedback and ideas from frontline staff and customers, using a broad array of research tools from suggestion boxes to focus groups and surveys. § Field experiments can be used to manipulate specific dimensions in an environment and the effects observed. § Blueprinting or service mapping—extended to include physical evidence in the environment. Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 23

Summary of Chapter 10: Crafting the Service Environment (1) § Service environment: Ø Shapes customers’ experiences and behavior Ø Facilitates service encounters Ø Enhances productivity § Mehrabian-Russell stimulus-response model and Russell’s model of affect help us understand customer responses to service environments Ø Pleasure and arousal Ø Approach/avoidance § Servicescape model is integrative framework of consumer responses to service environments. Main dimensions: Ø Ambient conditions—music, scent, color, etc. Ø Spatial layout and functionality Ø Signs, symbols, and artifacts § People are also part of service environment Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 24

Summary of Chapter 10: Crafting the Service Environment (2) § Putting it all together, firms should: Ø Design with a holistic view Ø Design from a customer’s perspective Ø Use tools to guide servicescape design § Some tools for guiding servicescape design are: Ø Keen observation of customers’ behavior and responses in service environments Ø Feedback and ideas from frontline staff and customers Ø Field experiments to manipulate specific dimensions to observe effects Ø Blueprinting physical evidence of environment Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 10 - 25