Slide 0 in Chapter 12

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Chapter 12

• Designing and Managing Services

PowerPoint by Karen E. James Louisiana State
University - Shreveport
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Objectives

• Learn how services are defined and classified.
• Understand how service firms improve their
  competitive differentiation, service quality, and
  productivity.
• Identify how goods-producing companies can
  improve their customer support services.

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Nature of Services

• The Service Industry includes the
• Government sector
• Private nonprofit sector
• Business sector
• Manufacturing sector

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Nature of Services

• Service Mix Categories
• Pure tangible good no services
• Tangible good with accompanying services
• Hybrid equal parts service and goods
• Major service with accompanying minor goods and
  services
• Pure service

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Nature of Services

• Characteristics
• Intangibility
• Inseparability
• Variability
• Perishability

• Cannot be touched, seen, tasted, heard, or
  smelled before purchase
• Lack of trial means higher consumer risk
• Consumers rely on cues to draw quality inferences
• Marketers must try to tangibilize the intangible

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Nature of Services

• Characteristics
• Intangibility
• Inseparability
• Variability
• Perishability

• Services are produced and consumed at the same
  time (air travel)
• Service providers and sometimes other customers
  become part of the service (restaurant)
• Strong preferences for service providers exist

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Nature of Services

• Characteristics
• Intangibility
• Inseparability
• Variability
• Perishability

• Service providers vary with respect to attitudes,
  skills, mood, etc. Even the same provider may
  give different service on a different day.
• Quality control is critical
• Hiring the right people
• Standardizing service
• Monitoring satisfaction

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Nature of Services

• Characteristics
• Intangibility
• Inseparability
• Variability
• Perishability

• Services can not be inventoried or otherwise
  stored
• Capacity / demand management is critical
• Demand side strategies
• Supply side strategies

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Nature of Services

• Demand-side strategies
• Use differential pricing
• Cultivate nonpeak demand
• Develop complementary services
• Install reservation systems

• Supply-side strategies
• Hire part-time employees
• Introduce peak-time efficiency routines
• Increase consumer participation
• Plan facilities for future expansion
• Share services

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Marketing Strategies

• People, physical evidence, and process must be
  considered in addition to the 4 Ps when
  creating external marketing plans.
• Successfully delivering a service often depends
  on staff being trained via internal marketing
  efforts.

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Marketing Strategies

• Interactive marketing refers to the employees
  skill in serving the client.
• Customers judge a service by its
• Technical quality
• Functional quality
• Search qualities, experience qualities and
  credence qualities are evaluated by customers.

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Marketing Strategies

• Marketing Tasks
• Managing differentiation
• Managing service quality
• Managing productivity

• Can not differentiate on price alone
• Innovative features
• Delivery system
• Reliability
• Resilience
• Innovativeness
• Image and branding

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Marketing Strategies

• Marketing Tasks
• Managing differentiation
• Managing service quality
• Managing productivity

• The service quality model identifies five gaps
  that can cause service delivery failure
• Service companies that successfully address these
  gaps follow common practices

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Marketing Strategies
Service Delivery Failure Results from Gaps
Between

• Consumer expectations and management perceptions
• Management perception and service-quality
  specification

• Service-quality specifications and service
  delivery
• Service delivery and external communications

• Service-quality specifications and service
  delivery

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Marketing Strategies
Well-Managed Service Firms Share These
Characteristics

• A strategic concept
• Commitment from top-management

• High standards
• Firm and customer monitoring systems

• Satisfaction of employees and customers

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Marketing Strategies

• Marketing Tasks
• Managing differentiation
• Managing service quality
• Managing productivity

• Have service providers work more skillfully
• Decrease service quality, increase service
  quantity
• Industrialize the service
• Reduce need for service
• Design a more effective service
• Give customers incentives to serve themselves
• Use technology

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Managing Product Support Services

• Product support services are often sources of
  competitive advantage
• When designing service support programs,
  marketers must consider key customer concerns
• Failure frequency
• Downtime duration
• Out-of-pocket expenses

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Managing Product Support Services

• Marketers must design appealing and competitive
  service offerings that will attract customers.
  Service offerings should include
• Facilitating services
• Value-augmenting services
• Optional service contracts