Designing and managing Services
Services
Service:
A form of product that consists of activities, benefits or satisfactions
offered for sale that are essentially intangible and do not result in the
ownership of anything.
Service industries are everywhere:
The government sector, with its court, employment services, hospitals,
loan agencies, military services, police and fire department, postal
service and schools, in the service business.
Classification of services mix
A company’s offering to the market often includes some
services. The service components can be a minor or major
part of the total offering. There are 5 categories of
offerings
- Pure tangible goods:
Offering consist primarily of a tangible good with no services
accompany the product such as Soap, salt, paper
- Tangible with accompanying services:
The offering consist of a tangible good with one or more
services.
Cont...
- Hybrid:
The offering consist of equal part of good and services
for example restaurants provide both food and service.
- Major Service with accompanying minor goods/service
The offering consist of major services along with
additional services or supporting goods. For example air travel
is a major service of travelling along with food, shopping on
air etc is the accompanying minor goods
- Pure Services:
The offering consist primarily of a service. For example a
hair cut or tailoring a suit.
Marketing strategies for service firms
• The traditional four P’s marketing approach work well for goods, but
additional elements require attention in services businesses. Three more
elements of marketing mix are suggested which are:
– People
– Physical evidence
– Process
Marketing strategies for service firms
•
People
An essential ingredient to any service provision is the use of appropriate staff and
people. Recruiting the right staff and training them appropriately in the delivery of
their service is essential if the organization wants to obtain a form of competitive
advantage. Consumers make judgments and deliver perceptions of the service
based on the employees they interact with.
• Process
Refers to the systems used to assist the organization in delivering the service.
Imagine you walk into Burger King and you order a Whopper Meal and you get it
delivered within 2 minutes. What was the process that allowed you to obtain an
efficient service delivery? Banks that send out Credit Cards automatically when
their customers old one has expired again require an efficient process to identify
expiry dates and renewal.
Marketing strategies for service firms
• Physical Evidence
Where is the service being delivered? Physical Evidence is the element of the
service mix which allows the consumer again to make judgments on the
organization. If you walk into a restaurant your expectations are of a clean, friendly
environment. On an aircraft if you travel first class you expect enough room to be
able to lay down.
Nature of services
• Distinctive characteristics of services:
services have four distinctive characteristics that greatly affect the design
of marketing programs: intangibility, inseparability, variability, and perish
ability.
• Intangibility: unlike physical products, services cannot be seen, tasted,
felt, heard or smelled before they are bought.
For example a person getting cosmetic surgery cannot see the results
before the purchase.
Service companies can try to demonstrate their service quality through
physical evidence and presentation. Like: Place, People, Equipment,
communication material and price.
Nature of services
• Intangibility cont…
• Place: the exterior and interior should have clean lines. The desks should be
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properly placed and the traffic flow should be planned carefully, waiting lines
should not get overly long.
People: Personnel should be busy, but there should be a sufficient number of
employees to manage the work load.
Equipment: Computers, copying machines, and desks should be and look like
“state of the art”.
Communication material: printed material, text and photos should suggest
efficiency and speed.
Price: the company could advertise that it will give some incentives to
customers if the product or service not delivered/offered on time.
– For example: pizza hut, if unable to deliver the pizza in 20 minutes then the pizza will
be free. Banks could advertise that it will deposit RS. 50 in the account of any
customer who waits in the line for more than five minutes.
Nature of services
• Inseparability: whereas physical goods are manufactured, put into
inventory, distributed through multiple reseller, and consumed later,
services are typically produced and consumed simultaneously. Service
provider and client interaction is a special feature of services marketing.
– For example: a barber cannot give a haircut without being present.
• Variability: the quality of services depends on who provides them,
when and where and to whom, services are highly variable.
– For example, some doctors will provide excellent services other may
not.
Service buyers are aware of this variability and often talk to others before
selecting a service provider. To reassure customers, some firms offer
service guarantees that may reduce customers perceptions of risk.
Nature of services
• Perish ability:
• services cannot be stored, so their parish ability can be a problem when
demand fluctuates.
– For example transportation companies charge high rate in peak hours,
and low rate in off peak hours, because of demand.
– Some doctors charge patients for missed appointments because the
service value (doctors availability).
Three types of marketing in Services
Three types of marketing in Services cont...
• Service marketing require not only external marketing but internal and
interactive marketing.
• External marketing describe the normal work of preparing pricing
distributing and promoting the services to customer.
• Internal marketing describe the work to train and motivate employees to
serve customer.
• Interactive marketing describes the employees skill in serving the clients
because the client judges services not only by technical quality but also its
functional quality.
• For example in hospital a successful operation is the technical quality from
the doctors, but the way the doctors show their concerns and giving
confidence to the patients is the interactive marketing
Managing service Quality
• The service quality of a firm is tested at each service encounter. If service
personnel are bored, cannot answer simple questions, or visiting with
each other while customers are waiting, customers will think twice about
doing business again with that seller.
• Customer expectations: customers form service expectations from many
sources, such as past experiences, word of mouth, and advertising.
Customers compare the perceived service with the expected service. If the
perceived service falls below the expected service, customers are
disappointed.
• If the perceived service meets or exceeds their expectations, they are
suitable to use the provider again. Successful companies add benefits to
their offering that not only satisfy customers but surprise and delight
them.
Gaps Model
for improving service quality
Managing service Quality
• Customer expectations cont…..
• There are five gaps that cause unsuccessful delivery of quality service.
1. Gape between customer expectation and management perception:
management does not always perceive what customers want.
For example: hospital administrations may think patients want better
food, but patient may be more concerned with nurse responsiveness.
2. Gape between management perception and service quality perception:
Management might correctly perceived customers want but not set a
performance standards. Hospital administrators may tell the nurse to
give fast service without specifying it in minutes.
3. Gape between service quality specification and service delivery:
personnel might be poorly trained, or incapable of or unwilling to meet
the standard.
Managing service Quality
Customer expectations cont…..
4.
5.
Gape between service delivery and external communication: consumer
expectations are affected by statements made by company
representatives and ads. If a hospital brochure shows a beautiful room,
but the patient arrives and finds the room to be cheap and tacky looking,
external communication have distorted the customer’s expectations.
Gape between perceived service and expected service: this gape occurs
when the consumer misperceives the service quality . The physician may
keep visiting the patient to show care, but the patient may interpret this
as an indication that something really is wrong
Best practice of service-quality management
• Various studies have shown that well managed service companies share
the following common practices
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A strategic concept
Top management commitment to quality
High standards
Self service technologies
System for monitoring service performance and customer complaints.
Emphasis on employee satisfaction
Best practice of service-quality management
• Strategic control: top service companies are customer obsessed. They
have a clear sense of their target customers and their needs. They have
developed a distinctive strategy for satisfying these needs.
• Top management commitment: organization such as Marriot, Pearl
Continental have a thorough commitment to service quality. Their
managements look not only at financial performance on a monthly basis,
but also at service performance.
• High standards: the best service providers set high service quality
standards. Citibank aims to answer phone calls within 10 seconds and
customer letters within 2 days. Pizza hut aims to deliver the pizza within
20 minutes.
Best practice of service-quality management
• Self service technology: consumers prefer those services they are
convenient. Many person to person service interactions are being replaced
by self service technologies. For example Automated Teller Machines
(ATMs). Online ticket purchasing.
• Monitoring systems and customers complaints: top firms audit service
performance, both their own and competitors, on a regular basis.
customers complaint is a gift if handled well. Companies that encourage
disappointed customers complain, and also empower employees to
remedy the situation on the spot, have been shown to achieve higher
revenues and greater profits than companies that do not have systematic
approach for addressing service failures.
Pizza Hut prints its toll-free number on all pizza boxes, when customer
complains, Pizza Hut sends voice mail to the store manager, who must call
the customer within 48 hours and resolve the complaints.
Best practice of service-quality management
• Satisfying employees as well as customers:
Excellent service companies know that positive employee attitudes will
promote stronger customer loyalty. Instilling a strong customer orientation
in employees can also increase their job satisfaction and commitment,
especially if they are in service settings that allow for a high degree of
customer contact time.