Services

Marketing
Services versus Goods
 Services versus Goods
• Goods
– Objects
– Devices
– Things

• Services
– Deed
– Effort
– Performance

• Continuum
Value Creation is Dominated by Intangible Elements

Physical Elements

High

Salt
Detergents
CD Player
Wine
Golf Clubs
New Car
Tailored clothing Plumbing Repair

Fast-Food Restaurant Health Club

Airline Flight
Landscape Maintenance
Consulting
Life Insurance
Internet Banking

Low High
Source: Adapted from Lynn Shostack Intangible Elements
 What differentiates services from goods

• Intangibility – manage the evidence

– Servicescape, brand, communication-wom, guarantee
• Variability in service performance
– standardized procedures, training, customization
• Perishability – manage the demand
– Demand smoothening, managing wait time
• Inseparability from provider – manage the
interaction
– Employee training, motivation, interpersonal skills,
customer management, other customers, mass-
production challenges, internal marketing
The Service Marketing Triangle
 Internal Marketing
• Important marketing strategy particularly for
service firms
• Orienting and motivating employees and
supporting service people to work as a team
to provide customer satisfaction and be
involved in the business
 7Ps of Services
3 additional Ps
• Physical Evidence
• Process
• People
How to succeed in a service business
 How to succeed in a service business
• Designing the service offering
• The funding mechanism
• Employee management
• Customer management
How to succeed in a service business

• Designing the service offering

– Match attributes with targeted
customers’ priorities
• Wal-mart
How to succeed in a service business

• Designing the service offering

– Match attributes with targeted customers’
priorities
• Wal-mart
– Price
– Selection
– Quality
– Sales help
– Ambience
• Airlines
 How to succeed in a service business
• Designing the service offering
• Funding the excellence – you or your customer
• Commerce bank - America’s fastest growing bank for several
years in terms of deposit base- grew from 1 branch in 1973 to
435 branches in 2006
• Commerce bank: 7 days a week, 7:30 am – 8:30 pm
• Bank timings, internet banking, employee attitude
• Newspaper, coffee offered to customers
• Removed glass from teller booth
• Instant creation of ATM
• “America’s most Convenient bank”
• Deposit rates - low

• Starbucks, airlines
• Progressive Insurance
 How to succeed in a service business
• The service offering
• Funding the excellence
• Employee management
– Average employee should be able to provide
excellence
• Taj
• Commerce Bank
 How to succeed in a service business
• Designing the service offering
– Can you afford to be bad at anything?
– Attribute Map
• Funding the excellence
– You or your customer
• Employee management
• Customer management
– Train, motivate, influence behavior; Systems
• Zipcar
• Starbucks
Customer Training at Starbucks
 Customer Training at Starbucks
How to Order

Cup: If you don’t specify, we’ll put in our logo cup. But you can also ask for a
for-here, iced, or personal cup.

Shots and size: Do you want extra decaf or extra espresso? Tall (12 oz) drinks
usually come with one shot; Grande (16 oz) drinks have two; Venti drinks have
two (for 20 oz hot drinks) or three (for 24 oz cold drinks). So if you add a shot
to your Tall, you’re getting a Double Tall.

Syrup: This is the most popular way to customize. We have many different
flavors to sweeten or spice up your drink.

Milk and other modifiers: This is when you tell us what milk you want. And if
you want something else, like “extra hot” or “extra foamy”.

The drink itself: Don’t forget the most important part! Are you having a latte, a
mocha…or something entirely different?
 Customer Training at Starbucks

• “I want small latte; skim milk, not whole milk;

make sure it is hot and use that cup over
there, …no, the other small one…; and two
shots of expresso”

• “double tall nonfat latte”

 Customer Training at Starbucks

How to Order

If you are nervous about ordering, don’t be.

There is no right way to order at Starbucks. Just tell us what you

want and we’ll get it to you. But if you call your drink back in a way
that’s different from what you told us, we are not correcting you.
We’re just translating your order into “barista-speak” a standard way
our baristas call out orders. The language gives the baristas the info
they need in the order they need it, so they can make your drink as
quickly and efficiently as possible.
 Elements of Service Excellence

Funding How is the excellence

mechanism paid for?

Service
Employee Are employees set up
Offering
management for success?
system
Which specific
attributes of
service are you Customer
competing on? management How are customers
system managed and trained?
Shouldice Hospital
Dilemma in the case
• Should Shouldice expand?
• How successful is the Shouldice Hospital?
• How do you measure its success
– What benefits it provides to
• Patients
• Service providers
• Investors
• Entire consumption process?
• What accounts for its performance?
• Uniqueness/challenges in the Business Model
 Is it a successful service model?
• Profit making (pg 7)
• Low recurrence rate (pg 2)
– 12 times lower than average of 10% in the US
• Shouldice doctors are most productive
– Perform 750 operations/yr against average of 25-50
• 4 months backlog of patients (2,400 waiting)
• 60% patients outside Toronto area (pg 2)
• Competitors advertise using Shouldice method
• Patients are so satisfied that many attend annual
reunion
 Service Consumption at Shouldice?

CONSUMER PURCHASE DECISION PROCESS

I: PRE-PURCHASE STAGE
II: ENCOUNTER
III: POST-ENCOUNTER
 Service Consumption at Shouldice?

I: PRE-PURCHASE STAGE

• Diagnosis by own doctor or self-diagnosis

• Learnt about SH typically by word-of-mouth
• Contact SH
[if live nearby] visit facility for appraisal or
[if distant] complete medical information questionnaire
• Surgeon determines type of hernia and possible risks (e.g.,
overweight, heart condition, need for general anesthesia)
• Screening: Some prospective patients are declined due to
risk factors (or no hernia)
• Receive operating date, brochure, and (if necessary) weight
loss program
 Service Consumption at Shouldice?

II: SERVICE ENCOUNTER STAGE

(A) Pre-process activities (afternoon/evening of arrival)

• Arrive at SH during afternoon before operation

• Join other patients in waiting room
• 20-minute examination by surgeon, reassured as needed; a few patients
dismissed for failure to lose weight, other risk factors, or absence of hernia
• Patient goes to room, unpack, meet roommates, change into pyjamas
• Patient shaves self in area of operation
• Nurse’s orientation for group of incoming patients (=education)
• Dinner
• Recreation
• Tea and cookies—pre-op patients talk with post-op patients
• Retire to bed
 Service Consumption at Shouldice?
II: SERVICE ENCOUNTER STAGE

(B) Core service activities (first morning)

• 5:30 am: awakened, pre-op sedation
• Go to pre-op room for analgesic
• Surgeon administers local anesthetic (80% of patients; others get general
anesthesia)
• Patients helped by surgeon to walk to post op room

(C) Post-core service

• Return to rooms in wheelchair, thereafter encouraged to exercise by
nurses and housekeepers
• Begin exercising
• Meet new patients in evening
(following days)
• Exercise, explore premises, eat meals, make new friends
• Depart on fourth / fifth day
 Service Consumption at Shouldice?

III: POST-ENCOUNTER STAGE

• Former patients entitled to free annual checkups
• Invited to annual reunions
• Does it create value for the customer?
https://www.youtube.com/watch?v=Yr1Jg9gC3QA
Uniqueness of Business Model
 Uniqueness of the Model
• Porter’s generic strategies
– Competitive advantage
 Uniqueness of the Model
• Porter’s generic strategies
– Competitive advantage
• How? Quality and experience at low cost
– Laser target approach
– Ailment of external abdominal hernia
– Predominantly male, older in age
– Otherwise healthy, not overweight, good condition for
an operation
– Similar to ‘skimming’
• Advantages?
 Uniqueness of the Model
• Porter’s generic strategies
– Competitive advantage
• How?
– Laser target approach
– Ailment of external abdominal hernia
– Predominantly male, older in age
– Otherwise healthy, not overweight, good condition for an
operation
– Similar to ‘skimming’
• Advantages
– Quickest ambulatory time (usually patients walk from
surgical table), nursing and house-keeping costs low
 Quality and experience at low cost
• Processes:
– Patients actively participate- Pre-op, post-op
– Anesthesia costs
– Higher utilization of doctors and equipment due to ‘focused-factory’
approach- higher efficiency and effectiveness-repetition
– Nursing, house-keeping costs low- attitude

• People
– Hiring, training in standard procedure, supervision, rotation, consultations
– Recurrences assigned to the same doctor
– Cross-training to administrative staff
– Motivated staff, high compensation, fixed hours

• Physical evidence
– Design: avoid typical hospital atmosphere- carpeting, stairways
– Docs, staff pick meal from kitchen; patients and docs eat the same meal
– Recreational facilities (pool table, exercycle, TV), patients with similar interest
share room and surgeries are scheduled together
 Expansion issues
Should it expand?
 Expansion issues
• Saturday shifts
– Compare the lifestyle
– Who are they hiring?
• Get excited at prospect of doing hernias forever
• Won’t get famous at Shouldice
• Want to spend time with family
• Fixed hours, very low risks
 Issues
• How do you add capacity without affecting
the Culture
– Work as a team, eat together, family atmosphere
– Lot of free time
– Depersonalization of relationships?
– Employee turnover/ attitude changes?
 Other potential problems
• Growth?
• Improvements to implement? Hernia ice-age?
• Competition from local doctors?
 Insights

• “Focused Service” often ignored strategy

• Success not in spite of, Because of FOCUS!!
• Possible to achieve “Differentiation” and
“Low Cost Service” model together
• Problems in expansion of service business
that is highly “atmosphere dependent”
 Laser Focus or Multifocussed?
• Incumbent multifocussed firms face threats
from focused firms like Shouldice
• How to survive and defend this threat
Source: Frei, 2008
Source: Frei, 2008
Service Design of Multifocussed firms
Distinct Service Models with Sharing