bmgt 411 marketing management fall 2014 chris lovett

1. BMGT 411: Chapter 11
Designing and Managing Services

2. Chapter Questions?
• How do we define and classify services and how do they differ from goods?
• What are the new services realities?
• How can we improve service quality?
• How can goods marketers improve customer support services?

3. 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.

4. Services are Everywhere
• Think of some companies that provide a service
• What do they provide?
• How is success measured?
• Where is the service delivered?

5. Categories of Service Mix
• Pure tangible good: A tangible good with no accompanying service provided
• Ex: Toothpaste
• Good with accompanying services: A good that is accompanied by one or
more service
• Ex. smartphone (good) with data plan (service)
• Hybrid: An offering with equal parts goods and services
• Ex. Restaurant or Grocery Store

6. Categories of Service Mix
• Major Service with Accompanying minor Goods or Service: A major service
with additional services or goods
• Ex. Airline Service with Drink Service during flight
• Pure Service: Primarily an intangible service being provided, with no goods
included
• Ex. Dentists, Childcare, etc

7. Figure 11.1 Continuum of Evaluation for
Different Types of Products

8. Qualities of Goods and Services
• Search Qualities: The buyer can usually evaluate even before purchases and
compare
• Ex. Clothing, Food, etc
• Experience Qualities: Characteristics the buyer can evaluate after it is
purchased
• Ex. Haircut, Vacations
• Credence Qualities: The buyer can find it hard to evaluate even after
consumption
• Ex. Auto Repair, Dental Work, Medical

9. Distinctive Characteristics
of Services
Intangibility
Inseparability
Variability
Perishability

10. Intangibility
• Services cannot be seen,
tasted, felt, heard, or smelled
• Service firms try to
demonstrate their service by
physical evidence
• Ex. Colleges will publish
employment statistics, etc to
make the intangible seem
tangible

11. Inseparability
• Services are usually produced
and consumed simultaneously
vs goods produced elsewhere
• Provider/Client interaction is a
special feature of service
marketing
• More training may be involved
to make customer service
outstanding since it is so visible

12. Variability
• Services are highly variable
because the quality depends
on who provides them
• Good hiring and training
(Starbucks)
• Standardize service
performance (Zappos)
• Monitor customer satisfaction
(Most retailers)

13. Perishability
• Services cannot be stored, so
perishability can be a problem
when demand fluctuates
• Off- Peak Pricing (Sonic Happy
Hour)
• Cultivating non-peak demand
(McDonald’s Breakfast)
• Offering complimentary
services as alternatives (ATM
Banking Vs. Tellers)

14. New Service Realities
• Customer Empowerment:
Social Media has enabled
customers to broadcast a bad
experience to a very wide
audience
• Most companies have their
customer service departments
monitoring social media for
negative feedback, and
responding almost instantly
• Led by @comcastcares and
@frankelliason

15. Figure 11.2 Root Causes of Customer Failure

16. • Redesign processes and redefine customer roles to simplify service
encounters
• Incorporate the right technology to aid employees and customers
• Create high-performance customers by enhancing their role clarity,
motivation, and ability
• Encourage customer citizenship where customers help customers
Solutions to Customer Failures

17. Best Practices in Service Companies
• Strategic Concept: Customer service is behind everything the company
does
• Top-Management Commitment: Management commitment to putting
service performance along with financial performance as a quality metric
• High Standards: Setting very high quality standards to avoid the most
customer disruptions
• Ex. a 98% errors rate with an electrical supplier would result in no
electricity for 8 days

18. Best Practices in Service Companies
• Self-Service (Better Options) Technologies: Providing customers with
different levels of comfort to use technology to increase service (Airline self
check in, grocery store self-checkout, ATMs, Online Banking)
• Profit Tiers: Customizing service levels based on profitability of the
customers
• Ex. AMEX Black Card, Lincoln Concierge
• Monitoring Systems
• Satisfying Customer Complaints

19. Figure 11.3: Service Quality Model

20. • Gap between consumer expectation and management expectation
• The customer may want something entirely different than what is being
delivered
• Gap between management perception and service quality specification
• Ex: Being very clear on specifications, speed in minutes, etc
• Gap between service quality specifications and service delivery
• Often a result of poor training
Managing Customer Expectations

21. • Gap between service delivery and external communications
• Ex. Toys R Us Foursquare Check in Discount
• Gap between perceived service and expected service
• Occurs when the customer misperceives the service quality
Managing Customer Expectations

22. Determinants of Service Quality
1.Reliability
2.Responsiveness
3.Assurance
4.Empathy
5.Tangibles