Designing and Managing Services

SERVICES INDUSTRIES

The government sector, - courts, employment services, hospitals, loan

agencies, military services, police and fire departments, postal service,
regulatory agencies, and schools.

The private nonprofit sector—museums, charities, temples, colleges,

foundations, and hospitals

The business sector — airlines, banks, hotels, insurance companies, law

firms, management consulting firms, medical practices, motion picture
companies, plumbing repair companies, and real estate firms.
 The manufacturing sector — workers as computer operators,
accountants, and legal staff, who are really service providers.
(In fact, they make up a “service factory” providing services to the
“goods factory.”)

 The retail sector — cashiers, clerks, salespeople, and customer service

representatives.
 SERVICES INDUSTRIES ARE EVERYWHERE

Many workers in the manufacturing sector, such as computer operators,

accountants, and legal staff, are really service providers. In fact, they make
up a “service factory” providing services to the “goods factory.”

Also those in the retail sector, such as cashiers, clerks, salespeople, and
customer service representatives, are also providing a service.

A service is any act or performance 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.

Manufacturers, distributors, and retailers are providing value-added

services, or simply excellent customer service, to differentiate themselves.
Categories of Service Mix
1. Pure tangible good - a tangible good such as toothpaste,
with no accompanying services.

2. Tangible good with accompanying services - a tangible

good, like a cell phone, accompanied by one or more
services.

3. Hybrid - an offering, like a restaurant meal, equal parts

goods and services.
Categories of Service Mix

4. Major service with accompanying minor goods and

services - a major service, like air travel with additional
services or supporting goods such as drinks.

5. Pure service - primarily an intangible service, such as

lectures, babysitting, consultancy or psychotherapy.
Distinctive Characteristics of Services

1. Intangibility
2. Inseparability
3. Variability
4. Perish ability
5. Customer participation
6. No ownership
7. People as part of the product
1. Intangibility

 Unlike tangible goods, services cannot generally be seen,

tasted, felt, heard or smelled before being consumed.

 The potential customer is often unable to perceive the service

before and sometimes during and after the service delivery.

 Example: For many customers of car repair, the service is

totally intangible – they frequently cannot see what is being
done and many are unable to evaluate what has been done.
…. Intangibility

 Although services often include tangible elements – such as

sitting in an airline seat, eating a meal or getting damaged
equipment repaired – the service performance itself is
basically an intangible.

 The benefits of owning and using a manufactured product

come from its physical characteristics. In services, the
benefits come from the nature of the performance.
…. Intangibility

 Rental services include a physical object like a car or a power

tool. But marketing a car hire performance is very different
from attempting to market the sale of the car.
 Lack of Emotion: Physical products can trigger an emotional
impulse compelling the customer to buy. Color, shape, and
style are important for physical products—especially those
aimed at the general public.

 No such built-in emotional appeal exists in the intangible

world of services. The consumer might have a hard time even
imagining all the details involved in what is done for them by
a service business.

 No product or service can be completely tangible or

intangible. For example, a law firm selling legal services needs
business cards, computers, and other tangible objects to
practice law—but the firm’s clients aren’t paying for them
2. Inseparability

 There is a marked distinction between physical goods and

services in terms of the sequence of production and
consumption:

Physical goods Services

Production Sold
↓ ↓
Storage Produced and consumed
↓ at the same time
Sold
↓
Consumed
…. Inseparability

 Goods are first produced, then stored and finally sold and
consumed. Services are first sold, then produced and
consumed simultaneously.

 For example, counseling, hairdressing, rail travel, hotels – for the

production the customer must be physically present.

 Some services may be produced and delivered where the

customer’s presence is optional, e.g. carpet cleaning, plumbing.

 Services may rely more on written communication, e.g. distance

learning course, or on technology as in home banking.
…. Inseparability - implications

 How teachers, doctors, bankers, lawyers, car mechanics,

hairdressers conduct themselves in the presence of the
customer may determine the likelihood of repeat business.

 Therefore, proper selection and training of customer contact

personnel is necessary to ensure the delivery of quality
3. Variability

 An unavoidable consequence of simultaneous production and

consumption is variability in performance of a service.

 The quality of the service may vary depending on who provides

it, as well as when and how it is provided. Eg., A hotel providing
fast efficient service and another a slow, inefficient service.
3. Variability - Implications

 Reducing variability involves determining the causes.

 There may be good sound reasons for variations in performance.

For example, it could be due to poor training and supervision,
lack of communication, lack of regular support.
4. Perishability

 Services cannot be stored for later sales or use.

 Example: Hotel rooms not occupied, airline seats not

purchased and college places not filled cannot be reclaimed.

 If demand far exceeds supply, services cannot be met.

 Also, if capacity far exceeds demand, the revenue and or

value of that service is lost.
…. Perish ability - Implications

 Fluctuations in demand characterize service organizations and

may pose problems especially where fluctuations are
unpredictable.

 Strategies need to be developed for producing better match

between supply and demand
5. Customer participation

 Performing a service involves assembling and delivering the

output of a mix of physical facilities and mental or physical
labour.

 Often customers are actively involved in helping to create the

service product – either by serving themselves (withdrawing
money from ATM) or by cooperating with service personnel in
settings (such as hairdressers, hotels, colleges or hospitals).
…. Customer participation

 Service firms have much to gain from trying to educate their

customers so as to make them more competent.

 Services can be categorized according to the extent of contact

that the customer has with the service organisation.
6. No Ownership

 Key distinction between goods and services lies in the fact that
customers usually derive value from services without obtaining
permanent ownership of any tangible elements.

 In many instances, service marketers offer customers the

opportunity to rent the use of a physical object like a car or hotel
room, or for a short period of time, or the labour and expertise
of people – for surgery.
…… No Ownership

 You can buy a product, take it home, own it for years, and
perhaps even resell it. But you can’t do the same with a service.
You can avail it only for a specific period of time and then it’s
over--unless you pay again. The lack of physical ownership
makes it harder to sell services.
7. People as part of the product

 In high-contact services, customers not only come into contact

with service personnel, but they may also rub shoulders with
other customers;, Eg., travel by bus or train.

 Type of customers who patronize a particular service business

helps to define the nature of the service experience. Eg., in a
soccer match, the behaviour of the fans can be a big bonus and
add to the excitement of the game if they are enthusiastic but
well-behaved. Rowdiness can detract.
…..People as part of the product

 Services are heterogeneous. Service businesses operate through

several diverse elements and interactions. A bank may offer
customer service through a helpline or website and cash
withdrawals through ATMs and bank counters.

 In most industries, the service delivery process involves a lot of

human interaction. As human behavior is subjective and
unpredictable, no two sets of services can be identical in their
details and results.
Summary

1. Customers do not obtain ownership of services.

2. Service products are intangible performances.

3. There is greater involvement of customers in the production

process.

4. Other people may form part of the product.

5. There is greater variability in operational inputs and

outputs.
….Summary

6. Many services are difficult for customers to evaluate.

7. There is typically an absence of inventories.

8. The time factor is relatively more important.

9. Delivery systems may involve both electronic and physical

channels.
Strategies produce a better match between service demand and supply.

On the Demand side:

 Differential pricing. Low morning movie prices
 Nonpeak demand McDonald’s pushing breakfast service
 Complementary services Welcome drink at hotels
 Reservation systems Airlines, hotels, physicians use them extensively

On the Supply side:

 Part-time employees Colleges add part-time teachers
 Peak-time efficiency Paramedics assist physicians during busy periods.
 Increased consumer participation Consumers bag their own groceries.
 Shared services Several hospitals share medical-equipment.
 Facilities for future expansion Amusement park buys surrounding land
for later development
Strategies For Service Marketing

1. START WITH YOUR CUSTOMERS

 Conduct extensive research. Take the time to analyze your

findings and discover the real needs of your customers.

 Develop your ideal customer personas, and then customize

your service concept to fit the needs of those personas.
Think in terms of problems and solutions. You should
understand your customers and services in terms of “jobs”
that consumers need done.
 For instance, a company hiring an SEO agency wants more
customers to visit the company’s website—the job that
needs doing. You need to make sure that you are ready
and able to complete the customer’s job.

Develop a positioning statement for your service. The

statement describes how you want your customers to
perceive your service.
 Is it quick, reliable, entertaining, modern, or classic, or
something else? Consider your competitors’ positioning
and create a unique, valuable, relevant, and easy to
understand positioning for your service.
B2B Services Marketing. A typical B2B sales cycle can start
with targeted emails and/or cold-calls.

 Your first adversary might be the telephone operator, whose

sole job might seem to be to stop you from reaching the
person you need to follow up with. If you succeed in beating
the gate keeper and survive the red tape of ‘due process’, you
can end up with a board or a committee that will make the
final decision.

 It’s a long road. You should be prepared for personal

meetings and presentations, as well as develop other
marketing tools. Create a lot of sharable informative
content—presentations, PDFs, videos, webinars….
2. DEFINE YOUR SERVICE CONCEPT

 Product marketers define the product concept as

marketing mix or 4 Ps—Product, Price, Promotion,
and Placement. They try to create the perfect marketing
mix before they take the product to the market, so the
customer would be more likely to buy it right off the shelf.

 But in service marketing management, the real game

starts after the consumer meets the service provider. This
makes the job of service marketers much broader and
expands the service concept beyond the 4 Ps.
 People include the employees who deliver the service.
Because no company ever made happy customers with
unhappy or unable employees, you will need to train your
staff well, and keep them satisfied in their work.

 Process is the service delivery process that we’re going to

create in the next step.

 Physical Evidence is the environment in which the service

is delivered. It includes the servicescape, or the physical
facility where the service is produced and sold.
3. CREATE YOUR SERVICE DELIVERY PROCESS

 Process, the sixth P, includes all the interactions involved in

service delivery. These interactions occur between
consumer and either service staff or technology.
 Front- and Back-Office Elements: Some of the elements of
service delivery will not be visible to the consumer. For
example, the purchase of materials for and the creation of
dental implants is not visible to the patients. These
elements are called back-office elements.
 (Front-office elements that are visible to the consumer
during the service process - dentist’s administrative staff,
waiting room, and rinse basin in the front-office).
4. ENGAGE YOUR PEOPLE FOR SERVICE DELIVERY

 You and your people are the face of your organization.

Motivated and engaged employees deliver high quality
services. Disgruntled and unhappy employees deliver
sloppy services. It’s that simple.

 Know your people. How can you expect your people to

build relationships with customers when you don’t have a
relationship with your employees?
 Provide basic training.
 Develop their careers.
 Recognize and reward.
 Build a customer-focused team.
 Minimize human interactions. Human interaction will
always be necessary for creating trust—remember, service
businesses are about relationships. You should, however,
automate as many customer interactions as you can
without jeopardizing the customer’s experience.

 From banks to restaurants and from airlines to government

offices, touch-screens are helping provide more efficient
service to customers. For example, airline check-in kiosks
help flyers who are not checking bags get their boarding
passes and to the gate sooner.
5. TRACK THE KPIs AND IMPROVE YOUR SERVICES

 In addition to tracking your marketing ROI, you should also

measure the quality of your services.

 Does your customer think your services are extraordinary

or just ordinary? (Key Performance Indicators)
 Redefined model with five elements:
1. Reliability: It is the ability to perform the promised service
dependably and accurately.

2. Assurance: It is the knowledge and courtesy of employees and

their ability to convey trust and confidence.

3. Tangibles: It is the appearance of physical facilities, equipment,

personnel and communication materials.

4. Empathy: It is the provision of caring, individualized attention to

customers.

5. Responsiveness: It is the willingness to help customers and to

provide prompt service.
Integrated Gaps Model of Service Quality

 The Service Quality Model, also known as the GAP Model,

was developed in 1985. It highlights the main
requirements for delivering a high level of service quality
by identifying five gaps that can lead to unsuccessful
delivery of service.

 Customers generally have a tendency to compare the

service they 'experience' with the service they 'expect' to
receive; thus, when the experience does not match the
expectation, a gap arises.
 GAP 1
Gap between consumer expectation and management perception: This
gap arises when the management or service provider does not correctly
perceive what the customer wants or needs.
 Example – hotel administrators may think guests want better food or
in-house restaurant facilities, but guests may be more concerned with
the responsiveness of the staff or the room cleanliness.
 Factors that affect the size of the knowledge gap include:
 Market research – (before introducing) to understand whether there
would be demand, what features to be incorporated etc. The better
this process is conducted, the smaller the knowledge gap will be.
 Communication channels - Fewer the layers between management
and customer contact personnel, the more likely that customer
preferences will be incorporated into higher-level decision making on
the product.
 GAP 2
Gap between management perception and service quality
specification:

 This is when the management or service provider might correctly

perceive what the customer wants, but may not set a performance
standard.

 Example - hospital administrators may tell the nurse to respond to a

request fast', but may not specify how fast'.
 GAP 3
Gap between service quality specification and service delivery:

 This gap may arise in situations pertaining to the service personnel. It

could happen due to poor training, incapability or unwillingness to
meet the set service standard.

 Example - when a doctor's office has very specific standards of

hygiene communicated but the hired staff may have been poorly
trained on the need to follow these strict protocols.
GAP 4
Gap between service delivery and external communication:

 Consumer expectations are highly influenced by statements made

by company representatives and advertisements. The gap arises
when these assumed expectations are not fulfilled at the time of
delivery of the service.

 Example – a hospital printed on its brochure may have clean and

furnished rooms but in reality, it may be poorly maintained – in this
case the patient's expectations are not met.
GAP 5

Gap between expected service and experienced service:

 This gap arises when the consumer misinterprets the

service quality.

 Example - The physician may keep visiting the patient to

show and ensure care, but the patient may interpret this as
an indication that something is really wrong.
 Range of service offerings makes it difficult to generalize
without a few further distinctions.

 Services vary as to whether they are equipment based

(automated car washes, vending machines) or people based
(window washing, accounting services).

 Service companies can choose among different processes to

deliver their service. Restaurants offer cafeteria-style, fast-
food, buffet, and candlelight service formats.

 Some services need the client’s presence. Brain surgery

requires the client’s presence, a car repair does not.
 Services may meet a personal need (personal services) or a
business need (business services). Marketing programs for
these markets.

 Service providers differ in their objectives (profit or nonprofit)

and ownership (private or public). These two characteristics,
when crossed, produce four quite different types of
organizations.

 The marketing programs of a private investor hospital will

differ from those of a private charity hospital.