Copyright © 2003 Prentice-Hall, Inc. 15-1 Chapter 15 Designing and Managing Services by PowerPoint by Milton M. Pressley University of New Orleans

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Copyright © 2003 Prentice-Hall, Inc.

Chapter 15 Chapter 15 Designing and Managing Designing and Managing ServicesServicesbyby

PowerPoint byPowerPoint byMilton M. PressleyMilton M. Pressley

University of New OrleansUniversity of New Orleans

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Every business is a service business. Does your service put a smile on the customer’s face?

Kotler on Marketing

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Chapter Objectives In this chapter, we focus on the following In this chapter, we focus on the following

questions:questions: How are services defined and classified?How are services defined and classified? How do services differ from goods?How do services differ from goods? How can service firms improve their How can service firms improve their

differentiation, quality, and productivity?differentiation, quality, and productivity? How can goods-producing companies How can goods-producing companies

improve their customer support services?improve their customer support services?

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Keen.com is a virtual Keen.com is a virtual advice marketplaceadvice marketplace

The Nature of Services Government sectorGovernment sector Private non-profit Private non-profit

sectorsector Business Business

sectorsector Manufacturing Manufacturing

sectorsector

ServiceService

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Categories of Service MixCategories of Service Mix Pure tangible goodPure tangible good Tangible good with Tangible good with

accompanying services accompanying services HybridHybrid Major service with accompanying Major service with accompanying

minor goods and servicesminor goods and services Pure servicePure service

The Nature of Services

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Characteristics of Services and Their Characteristics of Services and Their Marketing ImplicationsMarketing Implications IntangibilityIntangibility

Service positioning strategy can be Service positioning strategy can be made tangible through:made tangible through:

PlacePlace PeoplePeople EquipmentEquipment Communication materialCommunication material SymbolsSymbols PricePrice


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Online companies that provide services are Online companies that provide services are often directly impacted by the quality of a often directly impacted by the quality of a customer’s computer or the customer’s customer’s computer or the customer’s Internet connection. Can you think of Internet connection. Can you think of another service sector that has so little another service sector that has so little control over the environment control over the environment in which their services in which their services are provided?are provided?

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Carbone and Haeckel purpose the Carbone and Haeckel purpose the following for following for customer experience customer experience engineeringengineering Performance and context cluesPerformance and context clues

HumanicsHumanics MechanicsMechanics

Experience blueprintExperience blueprint

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The Nature of Services InseparabilityInseparability VariabilityVariability

Quality control by:Quality control by: Good hiring and training proceduresGood hiring and training procedures Service blueprintService blueprint Monitoring Monitoring

customer customer satisfactionsatisfaction

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Figure 15.1: A Service-Performance-Process Map: Nationwide Floral Delivery

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PerishabilityPerishability Strategies for better matching between demand and Strategies for better matching between demand and

supply in a service businesssupply in a service business Differential pricingDifferential pricing Nonpeak demandNonpeak demand Complementary servicesComplementary services Reservation systemsReservation systems Part-time employeesPart-time employees Peak-time efficiencyPeak-time efficiency Increased consumer participationIncreased consumer participation Shared servicesShared services Facilities for future expansionFacilities for future expansion


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Marketing Strategies for Service Firms

Three Additional PsThree Additional Ps PeoplePeople Physical Physical

evidenceevidence presentationpresentation

ProcessProcess

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Figure 15.2: Elements in a Service Encounter

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Figure 15.3: Three Types of Marketing in Service Industries

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Figure 15.4: Continuum of Evaluation for Different Types of Products

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Service Companies face three tasks:Service Companies face three tasks: Competitive differentiationCompetitive differentiation Service qualityService quality ProductivityProductivity

Managing differentiationManaging differentiation OfferingOffering

Primary service packagePrimary service package Secondary service featuresSecondary service features

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Kaiser Permanente Online has Kaiser Permanente Online has over 30,000 registered usersover 30,000 registered users

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Faster and Better DeliveryFaster and Better Delivery ReliabilityReliability ResilienceResilience InnovativenessInnovativeness

ImageImage

Managing Service QualityManaging Service Quality Perceived servicePerceived service Expected serviceExpected service

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FedEx and UPS have taken over much of the FedEx and UPS have taken over much of the US Postal Service’s business, mostly through US Postal Service’s business, mostly through flexibility and innovation that the USPS can’t flexibility and innovation that the USPS can’t match. Can you think of another governmental match. Can you think of another governmental service (anywhere in the world) where a private service (anywhere in the world) where a private company has been able to take the profitable company has been able to take the profitable segment of a service, and segment of a service, and leave the less profitable or leave the less profitable or more risky segment for a more risky segment for a government agency? government agency?

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Five gaps that cause unsuccessful Five gaps that cause unsuccessful deliverydelivery Gap between consumer Gap between consumer

expectation and management expectation and management perceptionperception

Gap between management Gap between management perception and service-quality perception and service-quality specificationspecification

Gap between service-quality Gap between service-quality specification and service deliveryspecification and service delivery

Gap between service delivery and Gap between service delivery and external communicationsexternal communications

Gap between perceived service Gap between perceived service and expected serviceand expected service

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Figure 15.5: Service-Quality Model

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Five determinants of service qualityFive determinants of service quality ReliabilityReliability ResponsivenessResponsiveness AssuranceAssurance EmpathyEmpathy TangiblesTangibles

Strategic ConceptStrategic Concept Top-Management CommitmentTop-Management Commitment High StandardsHigh Standards Self-Service Technologies (SSTS)Self-Service Technologies (SSTS)


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Myalert.com provides access to services Myalert.com provides access to services that users can perform themselvesthat users can perform themselves

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Monitoring SystemsMonitoring Systems Voice of the Customer (VOC) measurementsVoice of the Customer (VOC) measurements Customer importance and company performanceCustomer importance and company performance Importance-performance analysisImportance-performance analysis

Figure 15.6: Tracking Customer Service Performance

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Table 15.1 Customer Importance and Performance Ratings for an Auto Dealership

Mean Mean MeanMean

AttributeAttribute ImportanceImportance PerformancePerformance

NumberNumber Attribute DescriptionAttribute Description RatingRating RatingRating

11 Job done right the first timeJob done right the first time 3.833.83 2.632.63

22 Fast action on complaintsFast action on complaints 3.633.63 2.732.73

33 Prompt warranty workPrompt warranty work 3.603.60 3.153.15

44 Able to do any job neededAble to do any job needed 3.563.56 3.003.00

See text for complete table

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Figure 15.7: Importance-Performance Analysis

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Marketing Strategies for Service Firms Satisfying Customer ComplaintsSatisfying Customer Complaints Satisfying Employees As Well As CustomersSatisfying Employees As Well As Customers

Managing ProductivityManaging Productivity Seven approaches to improving service productivity:Seven approaches to improving service productivity:

Have service providers work more skillfullyHave service providers work more skillfully Increase the quantity of service by surrendering some qualityIncrease the quantity of service by surrendering some quality ““Industrialize the service” by adding equipment and standardizing productionIndustrialize the service” by adding equipment and standardizing production Reduce or make obsolete the need for a service by inventing a product solutionReduce or make obsolete the need for a service by inventing a product solution Design a more effective serviceDesign a more effective service Present customers with incentives to substitute their own labor for company laborPresent customers with incentives to substitute their own labor for company labor Harness the power of technology to give customers access to better service and Harness the power of technology to give customers access to better service and

make service workers more productive make service workers more productive

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Managing Product Support Services

Customers have three worriesCustomers have three worries Reliability and failure frequencyReliability and failure frequency Downtime durationDowntime duration Out-of-pocket costs of Out-of-pocket costs of

maintenance and repairmaintenance and repair

Life-cycle costLife-cycle cost

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Audible.com’s home pageAudible.com’s home page

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To provide the best support for expensive To provide the best support for expensive equipment, firms offer:equipment, firms offer:

Facilitating servicesFacilitating services Value-augmenting servicesValue-augmenting services

Herman Miller Office Furniture Company Herman Miller Office Furniture Company offers:offers:

Five-year product warrantiesFive-year product warranties Quality audits after installationQuality audits after installation Guaranteed move-in datesGuaranteed move-in dates Trade-in allowances on systems productsTrade-in allowances on systems products

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Postsale Service StrategyPostsale Service Strategy Major trends in product support serviceMajor trends in product support service

Lele has noted the following:Lele has noted the following: Equipment manufacturers are building more Equipment manufacturers are building more

reliable and more easily fixable equipmentreliable and more easily fixable equipment Customers are becoming more sophisticated Customers are becoming more sophisticated

about buying product support services about buying product support services ““Service unbundling”Service unbundling”

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Customers dislike dealing with multiple Customers dislike dealing with multiple service providers handling different types of service providers handling different types of equipmentequipment Third-party service organizationsThird-party service organizations

Service contracts (extended warranties) may Service contracts (extended warranties) may diminish in importancediminish in importance

Customer service choices are increasing Customer service choices are increasing rapidly–this is holding down prices and profitsrapidly–this is holding down prices and profits

Companies are increasing the quality of their Companies are increasing the quality of their call centers and their customer service call centers and their customer service representatives (CSRs)representatives (CSRs)

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Copyright © 2003 Prentice-Hall, Inc. 15-1 Chapter 15 Designing and Managing Services by PowerPoint by Milton M. Pressley University of New Orleans