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322 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 13 NO. 4/5 1998, pp. 322-338 © MCB UNIVERSITY PRESS, 0885-8624

Introduction
In the service marketing literature, services are frequently described by
characteristics such as intangibility, heterogeneity, inseparability of
consumption from production and the impossibility to keep services in stock.
Many of these, for example the first two, are not specific for services, and
others, for example the last two, follow from the most important
characteristic of services, i.e. the process nature of services. Physical goods
are preproduced in a factory, whereas services are produced in a process in
which consumers interact with the production resources of the service firm.
Some part of the service may be prepared before the customers enter the
process, but for service quality perception the crucial part of the service
process[1] takes place in interaction with customers and in their presence.
What the customer consumes in a service context is, therefore,
fundamentally different from what is the focus of consumption in the context
of physical goods.

The purpose of the present article is to discuss solutions to customer
problems – and at the same time the objects of marketing – in a service
context and the implications for service marketing that follow from the
characteristic of service consumption. The analysis is based on the research
tradition of the Nordic School of marketing thought (see Grönroos and
Gummesson, 1985), which has been recognized as one of three major
research streams in service marketing (Berry and Parasuraman, 1993).

Process and outcome consumption
A central part of service marketing is based on the fact that the
consumption of a service is process consumptionrather than outcome
consumption, where the consumer or user perceives the production process
as part of the service consumption, not just the outcome of that process as
in traditional marketing of physical goods. When consuming a physical
product customers make use of the product itself, i.e. they consume the
outcome of the production process. In contrast, when consuming services
customers perceive the process of producing the service to a larger or
smaller degree, but always to a critical extent, moreover taking part in the
process. The consumption process leads to an outcome for the customer,
which is the result of the service process. Thus, the consumption of the
service process is a critical part of the service experience. As service quality
research demonstrates, perception of the process is important for the
perception of the total quality of a service, even though a satisfactory
outcome is necessary and a prerequisite for good perceived quality. In many
situations the service firm cannot differentiate its outcomes from those of
its competitors. In some situations the customers take the quality of the
outcome for granted, but in other situations it is difficult for the customer to
evaluate the quality of the outcome of the service process. However, in all
situations customers take part in the production process and sometimes

Marketing services: the case of a
missing product
Christian Grönroos
Professor of Marketing, CERSCenter for Relationship Marketing and
Service Management, Hanken Swedish School of Economics, Helsinki,
Finland

Discussing solutions to
customer problems

Page 2

more, sometimes less actively interact with the employees, physical
resources and production system of the service organization. Because of
this inseparability of the service process and the consumption of a service,
the process can be characterized as an open process. Hence, regardless of
how the customer perceives the outcome of a service process, service
consumption is basically process consumption.

Thus service consumption and production have interfaces that are always
critical to the customers’ perception of the service and consequently to their
long-term purchasing behavior. In the service marketing literature, the
management of these interfaces is called interactive marketing (Grönroos,
1982, 1990). If a service firm wants to keep its customers, interactive
marketing, i.e. the marketing effect of the simultaneous service production
and consumption processes, must be positive. Hence, for the long-term
success of a service firm the customer orientation of the service process is
crucial. If the process fails from the customers’ point of view, no traditional
external marketing efforts, and frequently not even a good outcome of the
service process, will make them stay in the long run. Only a low price may
save the situation, at least for a while.

In traditional product marketing, the physical goods, that is the products that
are the outcomes of the production process, are the key variable around
which the other marketing activities revolve. According to the 4P model,
there has to be a preproduced product that can be priced, communicated
about, and distributed to the consumers. However, when there is no such
product, marketing becomes different, because there is no ready-made,
preproduced object of marketing and consumption. There is only a process
that cannot begin until the consumer or user enters the process.

In the following sections we will first discuss the nature of traditional
marketing of physical goods, i.e. product marketing which is traditionally
based on outcome consumption. Next we will explore how the nature of
marketing changes when outcome consumption is replaced by process
consumption as is the case with services. As a means of illustrating the
nature of marketing we use the marketing triangle. This way of illustrating
the field of marketing is adapted from Philip Kotler (1991), who uses it to
illustrate the holistic concept of marketing suggested by the Nordic School
approach to services marketing and management.

Outcome consumption and the nature of product marketing
A product in the traditional sense, is the result of how various resources,
such as people, technologies, raw materials, knowledge and information,
have been managed in a factory so that a number of features that customers
in target markets are looking for are incorporated into it. The production
process can be characterized as a closed process, where the customer takes
no direct part. Thus, a product evolves as a more or less preproduced
package of resources and features that is ready to be exchanged. The task of
marketing (including sales) is to find out what product features the
customers are interested in and to give promises about such features to a
segment of potential customers through external marketing activities such as
sales and advertising campaigns. If the product includes features that the
customers want, it will almost by itself fulfil the promises that have been
given to the customers. This marketing situation is illustrated in the product
marketing triangle in Figure 1.

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 13 NO. 4/5 1998 323

Traditional product
marketing

A closed process

Page 8

service marketing elements perceived service quality was empirically
studied, the “how” and “what” dimensions of the model as well as the image
component were clearly supported. This study also indicated that the
perception of the process (functional quality, how) frequently seemed to be
at least as important to the total perception of the quality of a service as the
outcome (technical quality, what). Subsequently these findings have been
supported by a number of studies about service quality in business-to-
business markets as well as in consumer markets (e.g. Brown and Swartz,
1989; Chandon et al.,1997; Crosby et al.,1990; Lapierre, 1996; Lehtinen
and Lehtinen, 1991; Palmer, 1997; Price et al.,1995). Of course, the
importance of the process dimension does not contradict the position of the
outcome dimension as a prerequisite for good service quality.

The perceived service quality model was never intended to be an operational
model of service quality. It was developed and introduced as a theoretical
construct to help academics and practitioners understand the nature of the
missing product of service firms, i.e. to understand the service process itself
as the solution to customer problems – the object of marketing – in order to
develop a consistent service marketing model and well-functioning
marketing programs in service firms. How good the quality of the service
was perceived to be by customers was expected to be measured using
customer satisfaction approaches.

However, the introduction of the perceived service quality model created an
interest in measuring service quality instead of only measuring customer
satisfaction as traditionally was done. The best measurement instrument is
the SERVQUAL model developed by Berry, Parasuraman and Zeithaml
(Parasuraman et al.,1988, 1994). When operationalizing the perceived
service quality model it has become evident that the expectation construct is
complicated and difficult to measure in a valid way. For example,
customers’ expectations after the service process may be different from their
expectations before the process (cf. Boulding et al.,1989; Gardial et al.,
1994; Grönroos, 1993). Furthermore, expectations that change during the
service consumption process may also affect how the service is perceived.
Based on their empirical findings, Boulding et al.(1989) note that “a
person’s expectations color the way he or she perceives reality” (p. 11). They
suggest two types of expectations: predictive “will” expectations and
normative “should” expectations, and finally observe that “though we
suggest conceptually, and demonstrate empirically, that customers update
their expectations and perceptions, interesting aspects of this process have
not been investigated” (p. 25). Recent research by Johnson and Matthews
(1997) suggests that customers’ experiences influence the formation of
“will” expectations but not of “should” expectations.

Tse and Wilton (1988) propose that more than one comparison standard may
be used by customers. In a study in the service sector of how several
comparison standards function in a disconfirmation approach Liljander
(1995) showed that the best approximation of perceived service quality is
achieved by omitting the expectation variable and other comparison
standards altogether and only measuring the service experience. This is in
line with the observations of Teas (1993) and Cronin and Taylor (1994).
Theoretically the disconfirmation concept still seems to make sense for the
understanding of how service quality is perceived (Grönroos, 1993; see also
Cronin and Taylor, 1994). However, even the theoretical value of the
disconfirmation concept has been questioned in a recently published study of

JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 13 NO. 4/5 1998 329

A theoretical construct

More than one
comparison standard
may be used

Page 9

the validity of the perceived service quality construct (Persson and
Lindquist, 1997).

As the original perceived service quality model was intended to be a
replacement of the preproduced product that is missing in service contexts, it
is obvious that this quality construct relates to one single service process and
one single service experience. Hence, it is not a long-term quality
perception. It is the quality perception here and now. From this follows
clearly that the perceived service quality construct cannot be a synonym of
customer satisfaction. In addition to the perception of a service, satisfaction
with a service is also at least dependent on the sacrifice incurred by a
customer for this service. Because the perceived service quality construct
has often been interpreted as something else and more than the perception of
quality of a given service process here and now (with the outcome of the
process as an integral part of it), there has been substantial confusion about
the relationship between perceived quality and satisfaction in the service
marketing and service quality literature. Sometimes service quality is
considered to influence customer satisfaction (e.g. Parasuraman et al., 1985),
sometimes again service quality is considered a long-term concept, whereas
customer satisfaction is described as something that is perceived on the basis
of a specific service encounter (cf. Cronin and Taylor, 1994 citing research
conducted by Parasuraman et al.reported in Parasuraman et al.1988). Teas
(1993) argues that service quality comes before customer satisfaction and
suggests two service quality concepts, a transaction-specific quality concept
that influences customer satisfaction and a relational quality concept that is a
long-term concept. Spreng and Mackoy (1996) draw the following
conclusion: “There seems to be great deal of similarity between these two
concepts (service quality and customer satisfaction), yet researchers are
usually careful to state that these are different constructs” (p. 201). (For a
further discussion of the relationship between service quality and customer
satisfaction see, for example, Oliver, 1993.)

However, if the perceived service quality construct had been understood as a
construct that replaces the missing product in a service marketing context,
this rather confusing debate could have been avoided. Perceived service
quality comes first, then satisfaction with quality (and the value of this given
quality). From this also follows that perceived service quality can be viewed
as a concept for the understanding of how to develop services, whereas
customer satisfaction is a concept for the evaluation of how successfully
these services are fulfilling the needs and desires of customers.

Managing the missing product
In order to create good perceived quality of a service, the firm must manage
the service process as well as all resources needed in that process. As
previously was observed, this process is an open process, where the
customer not only sees and experiences how the process functions but also
takes part in it and interacts with the resources that the firm directly controls.
In Figure 2 these resources were systematized as personnel, technology,
knowledge, the customer’s time as well as the customer. A system has to be
developed so that these resources are used in a way that leads to good
perceived quality. As early as the 1970s Eiglier and Langeard in France
developed a structure for the understanding of these resources and of the
system for managing the them (Eiglier and Langeard, 1976; see also Eiglier
and Langeard, 1981). In Figure 4 a service process model based on the

330 JOURNAL OF BUSINESS & INDUSTRIAL MARKETING, VOL. 13 NO. 4/5 1998

Perceived quality comes
first

Here and now perception

Page 16

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