Designing and

Managing Services

INTRODUCTION

Services are deeds, processes and performance

Intangible, but may have a tangible component

Generally produced and consumed at the same time

EXAMPLES OF SERVICE INDUSTRIES

Health Care

Hospital, Medical practices, health club

Professional Services

Accounting, Legal, Architectural

Financial Services

Banking, Investment advising, Insurance

Hospitality

Restaurant, Hotel/Motel

Ski resort, rafting

Travel

Airlines, Travel Agencies, Theme park ( Disney)

Others:

hair styling, pest control, plumbing, lawn maintenance, counseling services,

IMPORTANT DISTINCTIONS

Service Industries & Companies

Service As products

Customer Service

Derived Service

SERVICES CAN BE CLASSIFIED AS EQUIPMENT-

BASED OR PEOPLE-BASED

TANGIBILITY SPECTRUM

Tangible

Dominant

Intangible

Dominant

SaltSoft Drinks

Detergents

Automobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

CHARACTERISTICS OF SERVICES

Inseparability

IntangibilityPerishability

Variability

SERVICES MARKETING MIX: 7 PS FOR SERVICES

Expanded Mix for Services: 7 Ps

Building Customer Relationships Through People, Processes, and

Physical Evidence

EXPANDED MARKETING MIX FOR SERVICES

PEOPLE PHYSICAL EVIDENCE

PROCESS

Employees

Facility design Flow of activities

Customers Equipment Number of steps

Communicating culture and values

Signage Level of customer involvement

Employee research Employee dress

Other tangibles

ELEMENTS OF PHYSICAL EVIDENCE

Servicescape Other tangibles

Facility exteriorExterior designSignageParkingLandscapeSurrounding environment

Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature

Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages

CONSUMER EVALUATION PROCESSES FOR PRODUCTS

& SERVICES

Search Qualities

attributes a consumer can determine prior to purchase of a product

Experience Qualities

attributes a consumer can determine after purchase (or during

consumption) of a product

Credence Qualities

characteristics that may be impossible to evaluate even after purchase and

consumption

CONTINUUM OF EVALUATION FOR PRODUCTS & SERVICES

Difficult to evaluateEasy to evaluate

High in search

qualities

High in experience

qualities

High in credence

qualities

Most

Goods

Most

Services

PERCEIVED RISK

Time Risk

Financial Risk

Social Risk

Functional Risk : Will the product work, is it reliable ?

Psychological Risk

What are the risks associated with Direct Marketing Channels?

What are the risks associated with buying online?

What could e-tailers do reduce the risk?

SERVICE QUALITY

The customer’s judgment of overall excellence of the service provided

in relation to the quality that was expected.

Process and outcome quality are both important.

Gap b/w

Consumer expectations & Management Perception

Management Perception and service quality specification

Service Quality specification and delivery

Delivery and external communication

What is your perception about quality?

Having an Haircut

Airline Travel

Eating out at a Café Coffee Day

Camera

TV

SERVICE RECOVERY?

Recovery Paradox

Service Failure

WHAT TO DO AND WHAT NOT TO DO ?

Acknowledge problem

Explain causes

Apologize

Compensate/upgrade

Lay out options

Take responsibility

Ignore customer

Blame customer

Leave customer to fend for

him/herself

Downgrade

Act as if nothing is wrong

DO DON’T

THE SERVICE ENCOUNTER: A SNAPSHOT OF

ORGANIZATION’S SERVICE QUALITY

is the “moment of truth”

occurs any time the customer interacts with the firm

can potentially be critical in determining customer satisfaction and

loyalty

types of encounters:

remote encounters

phone encounters

face-to-face encounters

“First Moment of Truth” & “Second Moment of Truth”

SERVICE ENCOUNTER ….. IN A HOTEL

Parking your

vehicle

Security Check

Reception Desk

Check-InBellboy Takes to

Room

Restaurant Meal

Request Wake-Up

CallCheckout

CUSTOMER RELATIONSHIP MANAGEMENT

is a philosophy of doing business that focuses on keeping and improving

current customers

does not necessarily emphasize acquiring new customers

is usually cheaper (for the firm)--to keep a current customer costs less than

to attract a new one

goal = to build and maintain a base of committed customers who are

profitable for the organization

thus, the focus is on the attraction, retention, and enhancement of

customer relationships

CRM CYCLE

A LOYAL CUSTOMER IS ONE WHO...

Shows Behavioral Commitment

buys from only one supplier, even though other options exist

increasingly buys more and more from a particular supplier

provides constructive feedback/suggestions

Exhibits Psychological Commitment

wouldn’t consider terminating the relationship--psychological

commitment

has a positive attitude about the supplier

says good things about the supplier

CUSTOMER LOYALTY EXERCISE

Think of a service provider you are loyal to.

What do you do (your behaviors, actions, feelings) that indicates you

are loyal?

Why are you loyal to this provider?

BENEFITS TO THE ORGANIZATION OF

CUSTOMER LOYALTY

loyal customers tend to spend more with the organization over time

on average costs of relationship maintenance are lower than new

customer costs

employee retention is more likely with a stable customer base

lifetime value of a customer can be very high

CAUSES BEHIND SERVICE

SWITCHING

Service

Switching

Behavior

• High Price

• Price Increases

• Unfair Pricing

• Deceptive Pricing

Pricing

• Location/Hours

• Wait for Appointment

• Wait for Service

Inconvenience

• Service Mistakes

• Billing Errors

• Service Catastrophe

Core Service Failure

• Uncaring

• Impolite

• Unresponsive

• Unknowledgeable

Service Encounter Failures

• Negative Response

• No Response

• Reluctant Response

Response to Service Failure

• Found Better Service

Competition

• Cheat

• Hard Sell

• Unsafe

• Conflict of Interest

Ethical Problems

• Customer Moved

• Provider Closed

Involuntary SwitchingSource: Susane Keaveney

BUT SERVICE STINKS!

In a Nutshell

Companies know just how good a customer you are--and

unless you're a high roller, they would rather lose you

than take the time to fix your problem

AN EXAMPLE

The top 350 business clients are served by six

people.

The next tier of 700 are handled by six more,

30,000 others get two reps to serve their needs.

Meanwhile, the 300,000 residential customers at

the lowest end are left with an 800 number.

“No one is ignored, but our biggest customers

certainly get more attention than the rest.''