Designing & Managing services

N. Banerjee

Categories of a company’s offering
Pure tangible good Pure tangible good Good w/ accompanying services Good w/ accompanying services Hybrid Hybrid Service w/ accompanying goods Service w/ accompanying goods Pure service Pure service

What is a Service?
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.

Intangible Perishable Inseparable Variable

Service Distinctions
• Equipment-based (eg. ATM) or people-based. • Service processes (restaurants have developed cafeteriastyle, fast food, buffet, and candlelight service formats)

• Client’s presence required (surgery) or not (car

• Personal needs or business needs • Objectives (profit or nonprofit) and ownership (private
or public)

Figure: Continuum of Evaluation for Different Types of Products

Distinctive Characteristics of Services

Intangibility Inseparability Variability Perishability

Service Intangibility: A challenge for marketers
• Intangibility means ‘palpable’ intangibility & mental intangibility (-Bateson,1977). Marketers try to tangibilise the intangible through any number of marketing tools. Place, People, Equipment, Communication material, Symbol & Price play important part. Because of the service intangibility a company’s promotional program must be explicit about the benefits to be derived from the service, rather than emphasizing the service itself . 4 promotional strategies may be used to suggest service benefits and reduce the effect of intangibility Visualization / Association / Physical Representation / Documentation (past performance and future capability) Because of the intangibility factors additional P’s like People & Physical evidence have significant roles to play

Class Discussion Question

Q. A hospital positioning itself for cleanliness & hygiene. How you should attach tangibles to service intangibility to facilitate successful positioning.

• Simultaneous production and consumption of services.

• Services provided are highly variable as they depend on who provide them and when & where they are provided. • So it is imperative to take measures for maintain a standardize quality. • Steps for controlling quality:  Invest in good hiring & training procedures so that sales personnel become competent, learn to show courtesy, become trustworthy, their communication skills improve, learn to perform the service consistently and accurately, and become responsive.  Standardize the service performance process throughout the organization  Monitor customer satisfaction

• Services are perishable; they can’t be stored. • So, there should be a better match between demand & supply. • Related strategies: On the demand side:
    Differential pricing Cultivation of non peak demand Complimentary services Reservation system

On the supply side:
    Part time employees Peak-time efficiency Increased customer participation Facilities for future expansion

Elements in a Service Encounter

Service Marketing Mix • Strategies hovers around the service marketing mix:
Product Place Price Promotion People Process Physical evidence

Holistic marketing of services • Service marketing triangle;  External marketing  Internal marketing  Interactive marketing

Service Marketing Triangle

Internal Marketing
Enabling Promises

External Marketing
Giving Promises

Service Personnel

Delivering Promises


Interactive marketing

External Marketing: Contribute in Creating Expectation Internal & interactive Marketing: Create Perception

Key marketing issues before a service organization
• The unique characteristics of services present certain key marketing issues before a service provider. These include

 Managing differentiation among services  Managing productivity  Managing Service Quality

Differentiating from competitors
• • • • • • • Service Premises

Packaging Service personnel

Tools & equipment used Customers Convenience Name of the service establishment

Managing Productivity
Managing productivity in service organizations is a difficult task due to the multifunctional nature of service jobs. For example, in a fast-food outlet, the service personnel perform various tasks which include preparing the food (production), delivering the food to the customers (retail service), ensuring that the have an enjoyable eating experience (customer service), and accepting payment and tendering the change (transaction processing). Inventory management and routine maintenance of the premises may also be a part of the job in some instances. The multifunctional nature of their job makes measuring, monitoring and improving the performance of the personnel in service organizations a complex task.

Service Quality & managing service quality

Dimensions of SEC Quality

Perceived Service Quality, Expected service and Experienced service

The GAP model of service quality (-- Parasuraman et al, 1985)

Customer service expectations
• Sources of customer’s service expectations: Past Exp / WOM / Advt Based on the GAP model Customer’s service expectations can be measured along five dimensions of service qualities. They are:

 Assurance  Empathy  Reliability  Responsiveness  Tangibles • Companies try not only to satisfy but to delight their customers.

Service level expectation: Zone of Tolerance

Customer expectations of service can be of two types: desired and adequate. Desired service can be defined as the service that a customer desires and hopes to receive. Desired service expectations of a customer
increase when the customer is experienced and has good knowledge of what to expect in the service.

The desired service expectations of a customer may also depend on the service expectations of an associated party. Adequate service is the minimal level of service that a customer is willing to accept from a service provider and is based on the customer’s perception of what level of service is acceptable to him. Not meeting the Adequate level leads to dissatisfaction.

Zone of tolerance is the gap between a customer’s desired service expectations and the adequate service expectations as shown in Figure 4.1. This zone varies for each customer and for the same customer it differs in different situations. Customers view reliability as the core dimension of any service transaction and are not ready to compromise on reliability. Therefore, their zone of tolerance on the dimension of reliability is narrow. It is also narrow when customers have various service alternatives available.

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