Chapter # 8

Designing & Managing Services

Chapter Outline

Definition of Service Categories of Service Mix Nature of services Marketing strategies for services firms Managing product support services

What is a 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.”

“A service is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything; its production may or may not be tied to a physical product.”

Service Sectors

Government Private Non Profit Business Manufacturing Retail

PurePureServiceService

Categories of Service Mix

TangibleTangibleGoodGood

w/w/ServicesServices

MajorMajorServiceService

w/ Goodsw/ GoodsHybridHybrid

PurePureTangibleTangible

GoodGood

Categories of Service Mix

A company’s offering to the market often includes some products and some services. The service components can be a minor or major part of the total offering. There are 5 categories of offerings;

1- Pure Tangible Goods:The offering which consists primarily of a tangible good with no services accompany the product. For example: Soap, salt, paper etc

2- Tangible with Accompanying Services:The offering which consists of a tangible good with one or more services. For example: Nokia with warranty

Categories of Service Mix Cont...

3- Hybrid:The offering which consists of equal part of good & services. For example: Restaurants provide both food & service.

4- Major Service with Accompanying Minor Goods/Service

The offering which consists 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 airport etc is the accompanying minor goods.

5- Pure Services:The offering consist primarily of a service. For example: a hair cut, tailoring a suit etc.

Marketing Strategies for Service Firms

The traditional four P’s of marketing approach work well for goods and services, but additional some elements require attention in services businesses especially. Three more elements of marketing mix are suggested for services along with 4 P’s which are as follows: Product/ Service Price Place Promotion People Process Physical evidence

Marketing Strategies for Service Firms

Price Strategy Prices must be more flexible for services Service demand is highly volatile/ unpredictable Use price to shift demand away from peak periods Offer more negotiated prices for your service

Place Strategy Location/convenience are critical

Cannot store or ship Cannot postpone, substitute

Short, Direct Channels Intermediaries are agents or

brokers

Marketing Strategies for Service Firms

Promotion Strategy Must promote the benefits of the service Build a tangible image of the service & Personalize the

firm Personal selling is very critical for the professional

service provider. People Strategy

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.

Marketing Strategies for Service Firms

Process Strategy Process refers to the systems used to assist

the organization in delivering the service. For Example: 1) If you order a burger in a

Burger King and you get it delivered within 2 minutes, so this is the process. 2)If the Bank send you the new Credit Cards automatically when their customers old one has expired again it requires an efficient process.

Marketing Strategies for Service Firms

Physical Evidence Strategy Physical evidence means that 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.

For Example: 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.

ServicesServices

Inseparability

Services cannotbe separated

from theirproviders

Inseparability

Services cannotbe separated

from theirproviders

Perishability

Services cannotbe stored for

later sale or use

Perishability

Services cannotbe stored for

later sale or use

Intangibility

Services cannotbe seen, tasted,

felt, heard, orsmelled before

purchase

Intangibility

Services cannotbe seen, tasted,

felt, heard, orsmelled before

purchase

Variability

Quality ofservices dependson who providesthem and when,where, and how

Variability

Quality ofservices dependson who providesthem and when,where, and how

ServicesServices

Variability

Standardizeservice

production& delivery

Variability

Standardizeservice

production& delivery

Three Types of Marketingin Service Industries

Internalmarketing

CompanyCompany

CustomersCustomers

Externalmarketing

EmployeesEmployees Interactivemarketing

Cleaning/maintenance

services

Financial/bankingservices

Restaurantindustry

Three Types of Marketingin Service Industries

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.

Improving Service Quality

Service quality can be improved by all these following steps taken in favor of your customers to make them more delighted & satisfied.

Listening Reliability Basic service Service design Recovery

Fair play Teamwork Employee research Servant leadership Surprising

customers

How to Increase Quality Control for Service

Invest money in good hiring and training procedures of your employees.

Standardize the service-performance processes for all of your services to reduce variability in your services.

Monitor customer satisfaction by different ways of ensuring their maximum satisfaction.

Solutions to Customer Failures

Redesign processes and redefine customer roles to simplify service benefits for them.

Provide the right technology to help both employees and customers for better service delivery.

Create high-performance customers by enhancing their roles clarity, motivation, and ability to gain.

Encourage customer citizenship where customers help other customers in service motivation and provision.

Customer Complaint Resolution Hiring Criteria & Training for Employees Develop Guidelines for Fairness Remove Complaint Barriers Analyze Types & Sources of Complaints

END OF CHAPTER