Lecture 12: MANAGING SERVICE

BUSINESSES
Service
-Any act or performance that one party
can offer to 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.
Categories of Service Mix
1. Pure tangible good - offering
consists of primarily of a tangible
good; no services accompany the
product. (e.g. soap, toothpaste, or
salt)
2. Tangible good with accompanying
services (e.g. cars and computers
with customer services like display
rooms, delivery, repairs and
maintenance, installation, warranty
fulfillment)
3. Hybrid - offering consists of equal
parts of goods and services (e.g.
restaurants)
4. Major service with accompanying
minor goods and services - offering
consists of a major service along
with additional services or
supporting goods. (e.g. airline with
food and drinks, a ticket stub,
airline magazine)
5. Pure service - offering consists
primarily of a service. (e.g. babysitting, psychotherapy, massage)
Service Distinction
1. Equipment-based (e.g. automated
car washes, vending machines)
2. People-based (e.g. windowwashing, accounting services)
3. Clients presence (e.g. brain
surgery)
4. Personal need (personal services)
5. Business need (business services)
6. Objectives (profit and non-profit)
7. Ownership (private or public)

Four Service Characteristics

1. Intangibility (consider the place,
people, equipment, communication
material, symbols, price)
2. Inseparability
The provider-client interaction is a
special feature of services
marketing.
When clients have strong provider
preference:
a. The service provider can
learn to work with larger
groups.
b. The service provider can
learn to work faster.
c. The service organization
can train more service
providers and build up client
confidence.
3. Variability
-Services are highly variable
because they depend on who
provides them and when and
where they are provided.
-Service firms can take 3 steps
toward quality control:
a. Investing in good hiring and
training procedures.
b. Standardizing the serviceperformance process
throughout the organization
(service blueprint).
c. Monitoring customer
satisfaction through
suggestion/complaint
systems, customers surveys
and comparison shopping.
4. Perishability
-Services cannot be stored.
-Service perishability is not a
problem when demand is steady.
Strategies to match demand and
supply in service businesses:
1. Differential pricing will shift some
demand from peak to off-peak
periods.
2. Nonpeak demand can be
cultivated.
3. Complementary services can be
developed during peak time to

4.
5.
6.
7.

provide alternatives to waiting

customers.
Reservation systems are a way to
manage the demand level.
Part-time employees can be hired
to serve peak demand.
Peak-time efficiency routines can
be introduced.
Increased consumer participation
can be encouraged.

Non-transferability of ownership (e.g.

a person who buys an airline ticket is not
buying the plane or any other good
associated with the flight.)
3 Other Ps
1. People/Participants
2. Process Management -refers to the
actual service delivery how,
when, where, what of the service is
delivered and processed
-Service can be delivered in 3
ways: (at the clients home or place
of business; at the store or office;
via telecommunications or other
electronic means)
3. Physical Evidence - intangible
offering with physical evidence
(e.g. documents, awards,
brochures, support staff, clothing,
posters, gift items, exhibition
books, logos, mascots and other
graphic devices)
-Effective use of physical evidence
can be done before, during and after sales
occur:
a. To help make prospects
want to do business with a
firm;
b. To provide reassurance that
the vendor selected is
delivering a high quality
service;
c. To reassure customers that
future services will be
delivered in a high quality
manner.
Overcoming Service Challenges

1. Intangibility - use cues to make it

tangible
2. Inseparability - increase productivity of
providers
3. Variability standardize service
production & delivery
4. Perishability- match supply and demand
External Marketing - describes the normal
work to prepare, price, distribute and
promote the service to the customers.
Internal Marketing - describes the work to
train and monitor employees to serve
customers well.
Interactive Marketing - describes the
employees skill in serving the client.

Managing Service Differentiation

1. Offer
-can include innovative features
-customers expect a primary
service package, to this can be
added secondary service features.
2. Delivery
-service companies can hire better
people to deliver its service.
-can develop a more attractive
physical environment in which to
deliver the service.
-can design a superior delivery
service.
3. Image
-service companies can
differentiate their image through
symbols and branding.
Determinants of Service Quality
1. Reliability - ability to perform the
promised service dependably and
accurately
2. Responsiveness - willingness to
help customers and to provide
prompt service
3. Assurance - knowledge and
courtesy of employees and their
ability to convey trust and
confidence

4. Empathy - provision of caring,

individualized attention to
customers
5. Tangibles - appearance of physical
facilities, equipment, personnel and
communication materials
Complaint Resolution

1. Hiring Criteria & Training for

Employees
2. Develop Guidelines for Fairness
3. Remove Complaint Barriers
4. Analyze Types & Sources of
Complaints