What the extra eighty cents buys: Part of what a customer pays for at Lena's is the loaf. The rest is the way she is served.
Goldcrust
- Forty metres from Kofi's counter on Market Square.
- A loaf for $2.20.
Lena's
- A loaf for $3.
- Most of Kofi's regulars still queue here.
Ask a regular why: She does not talk about flour. 'They know I like it sliced thin. They keep one back for me on Saturdays. I am out of the door in a minute.'
A loaf is a good: you can touch it and take it home (it is tangible, 1.1.1). Being served is a service: there is nothing to hold (it is intangible). Much of what Lena's sells is a service wrapped around a good: serving at the counter, lunches made while you wait, bread delivered to cafés and hotels before they open.
The four Ps you have met, product, price, place and promotion (4.5.1 to 4.5.4), were built for goods. A service needs three more.
The four Ps, plus three more for services: people, process and physical evidence. Together they make the seven Ps (the extended marketing mix).
Interactive diagram
Explore the labelled diagram, charts and maps for this topic in full study mode.
Why a service needs three more Ps
It is made by a person, in front of you
The counter assistant is part of what you buy. The same loaf, served badly, is a worse morning. So the staff are an element of the mix: people.
It is made fresh every time
Every customer goes through the same steps: order, wait, pay, leave. If one step is slow or goes wrong, the service fails. So the steps are an element of the mix: process.
It cannot be tried before it is bought
You cannot test a service first, so you judge it by what you can see: the shop, the staff's aprons, the bag. So those clues are an element of the mix: physical evidence.
The three service Ps in one line each: People: the staff who serve, and their relationships with customers.
Process: the steps the customer goes through to get the service.
Physical evidence: the things the customer can see or touch that show what the service will be like.
Free preview
This is the free notes preview
You're reading the free notes. Aimnova Pro unlocks the full study experience — and you can try it with your first topic free to keep:
- FlashcardsLock in vocabulary and key terms with spaced repetition.
- Practice questionsAnswer exam-style questions and get instant AI marking.
- Mock exams & past-paper vaultSit full mocks and see exactly how examiners award marks.
- Personalised study planA daily plan built around your exam date and weak areas.
The bond between the people who serve and the people who buy is the employee–customer relationship. In a service business it is part of the product.
Kofi's regulars: When Goldcrust opened near Market Square, Kofi expected to lose half his regulars (4.1.3). He kept most of them. His counter staff know their names, how they like their bread and which ones will want the last seeded loaf.
Why the relationship matters
Customers come back
A regular who is known by name has a reason to walk past a cheaper rival. Repeat customers are the steadiest sales a shop has.
It is worth paying for
The relationship is part of why a Lena's loaf can cost eighty cents more than Goldcrust's. A rival can copy a recipe more easily than it can copy Kofi's staff.
Customers tell staff what they want
Lena's started selling lunches because customers kept asking at Kofi's counter (4.1.1). Staff who talk to customers hear things no survey asks.
One bad moment is enough
A service is only as good as the person on shift. One rude reply or a wrong order, and a regular of five years tries the shop on the corner.
So a service business manages its people as carefully as its product. It recruits for attitude as well as skill. It trains staff to know what they sell, for example which loaves contain nuts, and to deal with a complaint (2.1.3). It lets them put a problem right on the spot, with a free pastry or a loaf held back. And it tries to keep them, because a regular who sees a new face every month has no one to know (labour turnover, 2.1.6).
Summer on Market Square: From June to August, tour coaches from abroad stop on Market Square, and Kofi's queue fills with visitors. The chat that his regulars love makes some of them uneasy.
What some visitors do
- One leaves coins on the counter.
- Another waits for her change to be put down rather than handed to her.
Cultural variation: What counts as good service is not the same everywhere. It varies between cultures (cultural variation in employee–customer relationships).
| In some cultures | In others | What it means at Kofi's counter | |
|---|---|---|---|
| Names and greetings | First names and a joke are friendly | A title and a surname show respect | Staff follow the customer's lead instead of using one greeting for all |
| Chat or speed | Talk while serving is part of good service | A quick, quiet sale is the polite one | A long chat can feel like a delay to one customer and a welcome to another |
| Smiling | A server is expected to smile at everyone | A big smile at a stranger can seem forced | Warmth that feels natural, not a smile by rule |
| Tipping | A tip for good service is normal, as in the United States | A tip is not expected, and can confuse, as in Japan | Staff thank the customer and never expect one |
| Handing over money | Change goes from hand to hand | Money is placed on a small tray, as in Japan | A tray by the till lets the customer choose |
| Complaining | Customers say straight away what is wrong | Customers stay polite and simply do not come back | Staff ask, and watch for the quiet signs |
One script does not fit every customer: A business that trains every assistant to say the same words in the same way can please one group and put off another. That matters for any shop with visitors, and even more for a business serving customers in more than one country.
What works
- Staff who read the customer and adapt: a greeting, a pace and a manner that fit the person in front of them.
- Hiring staff who speak the visitors' languages helps too.
Memorize terms 3x faster
Smart flashcards show you cards right before you forget them. Perfect for definitions and key concepts.
Four minutes at Station Road: Aisha's focus groups found that commuters at Station Road have about four minutes between the bus and the train, and will not queue (4.4.4).
So Lena's changed the steps
- A counter where each breakfast is made to order would have lost them at the door.
- Instead there is a shelf of ready-packed breakfasts.
- And customers can order by phone the night before.
The steps a customer goes through to get a service, from ordering to waiting to paying to receiving, make up its delivery process (the process in the seven Ps). For a commuter with four minutes, the process is most of the service: a good pastry that takes six minutes to reach her is a missed train.
A Station Road breakfast, step by step
In at 7.40
The shelf faces the door. The morning deal, a coffee and any pastry for $3, is on a board above it.
Take a bag
Breakfasts are packed before the doors open. A customer who ordered the night before finds hers on a second shelf, with her name on the bag.
Tap and go
Two tills take card or phone payment. Nobody waits behind someone counting coins.
Out in about a minute
Three minutes to spare for the train, and a reason to come back tomorrow.
A good process matters for four reasons. It is fast, so customers who are short of time buy at all. It is the same every time, whoever is on shift, so customers know what to expect. It serves more people in the rush between 6.30 and 9.00. And it costs less per customer, because fewer staff hours go into each sale.
What changing a process can bring
- Shorter waits, so customers who would have walked past now buy
- Lower costs per customer, and fewer mistakes
- New ways to buy, such as ordering ahead or delivery to the door
- A service that stays the same whoever is working
What it can cost
- Money for new equipment, a website or shelves
- Time to retrain staff, and mistakes while everyone learns
- Customers who cannot or will not use the new way, such as regulars without a smartphone
- Less contact between staff and customers, and with it the relationship
Process and people pull on each other: The Station Road process takes the chat out on purpose, because commuters want speed. The same change at Market Square could cost Kofi the regulars who come for the chat.
When an app does the serving: Lena's has seen a process change go the other way. Deliveries booked through an app are cheap, but the driver answers to the app, not to Aisha, and a box left in the rain is blamed on Lena's (2.1.7). Change the steps and you may change who the customer deals with.
Judging a shop from the pavement: A commuter who has never bought from Lena's walks up Station Road. She has four minutes and no way to taste anything first.
What she can see
- A clean window
- Trays of pastries
- Prices on a board
- A card reader by the till
- The name Lena's in green letters
- Staff in aprons with the green wheat ear
From those she decides, in a few seconds, whether the breakfast will be good.
The things a customer can see or touch that show what a service will be like are its physical evidence. The service itself is intangible; the evidence around it is not. It includes the premises and how clean and tidy they are, the layout, signs and boards, uniforms, bags and packaging, receipts, loyalty cards, and the website or phone screen a customer orders on.
Before buying
- The shop front, the window and the green Lena's sign
- Prices and the morning deal on a board outside
- The website where a commuter orders the night before
While buying
- A clean shelf and counter, and the food hygiene certificate by the till
- Staff in aprons with the green wheat ear
- Pastries on trays where the customer can see them
After buying
- The brown paper bag with the logo, carried onto the train
- The receipt and the loyalty card
- The wheat ear pressed into the crust at home
Physical evidence matters because a customer cannot judge an intangible service before buying it, so she judges by the clues. They reassure her: a clean shop and a hygiene certificate say the food is safe. They carry the brand (4.1.3): Station Road looks like the High Street shop, so a customer who trusts one trusts the other. And they support the price: a tidy shop with the Lena's look makes $3 for a coffee and a pastry seem fair, against $3.50 at Crumbline's kiosk in the station.
The evidence has to match the service: Physical evidence is a promise. A smart shop with a twelve-minute queue or a rude assistant breaks it, and the customer feels misled rather than reassured.
It costs money to keep up: Physical evidence costs money, once to build and every day to keep up. The Station Road fit-out is part of what the $120,000 bank loan pays for, and a dirty window on day ninety says as much as a clean one on day one.
Know your predicted grade
Take timed mock exams and get detailed feedback on every answer. See exactly where you're losing marks.
How this comes up: Short questions on a service business come for two or four marks. The three service Ps also belong in longer questions on a service business's marketing mix.
| The short question | Marks |
|---|---|
| Define physical evidence, or state two examples of it | 2 |
| Explain why the relationship between staff and customers matters to a named business | 2 |
| Explain one advantage and one disadvantage of changing the way it delivers its service | 4 |
In a longer question: The three service Ps count only when the business is a service and the case tells you something about its staff, its steps or its premises. Where the case says nothing about them, leave them out.
The four-mark pattern
- Name the advantage of the change. Ordering ahead cuts the time a customer waits, so more people buy instead of walking away.
- Show it in the case. Name the queue, the time or the customers the case describes.
- Name the disadvantage. A new process costs money, needs training, shuts out customers who will not use it, or takes away the contact that kept customers loyal.
- Show it in the case. Name the regulars, the staff or the cost the case gives you.
Two traps: The wrong P. A friendly greeting is people. The time spent in the queue is process. The clean window is physical evidence. Name the P the question asks about, not a neighbour.
No case, no second mark. 'Customers wait less' is one mark. 'Office workers who now leave a twelve-minute queue could collect their lunch in a minute' is two.
Explain one advantage and one disadvantage for Lena's Bakery of changing the lunch process at its Market Square shop so that customers order online and collect from a shelf.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.