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Chapter 13: Designing and managing services

Service: any act or performance one party can offer to another that is essentially intangible and does
not result in the ownership of anything. May or may not be tied to a physical product.

Categories of service mix:

1. Pure tangible good, 2. Tangible good with accompanying service, 3. Hybrid (equal goods/service,
like restaurant meal), 4. Major service with accompanying minor goods and services, 5. Pure service.

Characteristics of services:
Intangibility, inseparability (produced/consumed at same time), variability (depends on
who/when/where/to whom provided), perishability (can’t be stored: demand/supply strategies).

New realities 21st century: customer empowerment, customer co-production, and the need to satisfy
employees as well as customers.

Marketing excellence:
- External marketing: describes the normal work of preparing, pricing, distributing, and
promoting the service to customers.
- Internal marketing: describes training and motivating employees to serve customers well.
- Interactive marketing: describes the employees’ skill in serving the client.

Top service companies excel at the following practices:

A strategic concept, a history of top-management commitment to quality, high standards, profit tiers
(important customers), and systems for monitoring service performance and customer complaints.

Differentiate brands through primary and secondary service features and continual innovation.

Factors leading to customer switching behavior: pricing, inconvenience, core service failure, service
encounter failures, response to service failure, competition, ethical problems, involuntary switching.

Service-quality model: 5 gaps that cause unsuccessful delivery:

Consumer expectation  management perception  service-quality specification  service
delivery  external communications. Perceived services  expected service.

5 determinants of service quality: reliability, responsiveness, assurance, empathy, tangibles.

Superior service delivery: managing customer expectations and incorporating self-service

technologies.

Service mix: presale services (facilitating and value-augmenting services), post-sale services
(customer service departments, repair and maintenance systems).

Life-cycle cost: the product’s purchase cost plus the discounted cost of maintenance and repair less the
discounted salvage value.

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