Marketing Management

Part : 05
Product
Chapter-13

Designing and Managing Services

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MARKETING MANAGEMENT
12th edition

13
Designing and
Managing
Services

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Kotler
nt Keller
 Chapter Questions

 What are the characteristics of products and how can they be

classified?
 How can companies differentiate products?
 How can a company build and manage its product mix and
product lines?
 How can companies combine products to create strong co-
brands or ingredient brands?
 How can companies use packaging, labeling, warranties, and
guarantees as marketing tools?

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 IBM has moved
from a goods
business to a
service business

Currently, almost half of IBM

$81 billion in annual revenues
comes from global services.

Companies such as American

Express are signing up for consulting
engagements that involve customized
software, hardware, and systems
solutions worth billions of dollars
to IBM.

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 Service

Any act or performance that one

party can offer to another that is
essentially intangible and does not
result in the ownership of anything.

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 Service

 “A Service is any act or performance that one party can offer

to another that is essentially intangible and does not result in
the ownership of anything”.

Service sector includes :

Airlines, Banks, Insurance Companies, Hotels, Lawyers, Doctors,

Museums, Charities, Real Estate, Consultancy Firms etc.

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 Categories of Service Mix
 A company’s offerings often include some services. The
service component can be a minor or major part of the total
offering.
 Five categories of offerings can be distinguished.

1. Pure tangible good

2. Tangible good with accompanying services
3. Hybrid
4. Major Service with accompanying minor goods and services
5. Pure Service

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 Categories of Service Mix

Pure Tangible Good

Tangible Good with Accompanying Services

Hybrid

Major Service with accompanying minor goods and services

Pure Service

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 Categories of Service Mix
1. Pure tangible good : The offering consists of only tangible
goods with no service; e.g. Soap, Toothpaste or Salt etc.
2. Tangible good with accompanying services : The offering
consists of a tangible good with some service; e.g. installation
service with the purchase of air-conditioner.
3. Hybrid : The offering consists of equal parts of goods and
services; e.g. people rate restaurants for both food and
service.
4. Major Service with accompanying minor goods and services :
The offering consists of major service along-with some
tangible goods; e.g. airline passengers buy transportation,
but trip includes also tangible goods such as food, , drinks, a
ticket and magazines etc.
5. Pure Service : The offering consists only of service; e.g.
consultancy etc.
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 Distinctive Characteristics of Services

Intangibility

Characteristics
Perishability of Inseparability
Service

Variability

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 Distinctive Characteristics of Services
 Services have four distinctive characteristics.

1. Intangibility : Unlike physical products, services cannot be

seen, tasted, felt, heard or smelled before they are bought.

2. Inseparability : Services are typically produced and consumed

simultaneously. This is not true of physical products which
are manufactured, put into inventory, distributed through
multiple resellers, and consumed later. Because the client is
also present as the service is produced, provider-client
interaction is a special feature of services marketing.

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 Distinctive Characteristics of Services
3. Variability (Heterogeneity) : Because services depend on who
provides them and when and where they are provided, they
are highly variable. Like some surgeons are very successful in
performing a certain operation; others are not.
 Here are three steps service firms can take to increase quality
control.
a. Invest in good hiring and training procedures.
b. Standardize the service-performance process throughout the
organization.
c. Monitor customer satisfaction.

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 Distinctive Characteristics of Services

4. Perishability : Services cannot be stored.

 Perishability is not a problem when demand is steady,
however when demand fluctuates, service firms have
problems. For Example, a cruise-ship that sails with
unoccupied rooms represents available supply that is lost for
ever.

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 Best Practices of Service-Quality Management
 Various studies have shown that well-managed service
companies share the following common practices.
1. Strategic Concept (Top service companies are “Customer
Obsessed”. They have a clear sense of target customers and
their needs. They develop a distinctive strategy for satisfying
these needs)
2. Top-Management Commitment (Companies such as Marriott
and Disney have a thorough commitment to service quality.
Their managements look not only at financial performance on
a monthly basis, but also at service performance)
3. High Standards (The best service providers set high service-
quality standards; e.g. Citibank aims to answer phone calls
within 10 seconds and customer letters within 2 days)

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 Best Practices of Service-Quality Management
4. Self-Service Technologies-SSTS (As in the case with physical
goods, consumers value convenience in services; therefore
top service providers have replaced many person- to-person
service interactions by self-service technologies; like ATMs,
self-pumping at gas stations, self-check-out at hotels,
electronic check-in at airports, self-ticket purchasing on the
internet etc.)
5. Monitoring Systems (Top firms audit service performance,.
Both their own and competitors’, on a regular basis. They use
Voice of the Customer (VOC) measurements, Comparison
Shopping, Ghost Shopping/Mystery Shopping, Customer
Surveys, Suggestion/Complaint Forms, and Service Audit
Teams for this purpose)

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 Best Practices of Service-Quality Management
6. Satisfying Customer Complaints (Customers whose
complaints are satisfactorily resolved often become more
company loyal than customers who were never dissatisfied.
Every complaint is a gift if handled well. Companies that
encourage disappointed customers to complaint and also
empower employees to resolve their problem on the spot
have been shown to achieve higher revenues/profits.

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 Best Practices of Service-Quality Management

7. Satisfying Employees as well as Customers (Excellent service

companies know that positive employee attitudes will
promote stronger customer loyalty, and those companies
have found a high correlation between employee satisfaction,
customer satisfaction, and the profitability. Therefore top
service firms attract the best employees, they market career
rather than just a job, they design a sound training program
and reward for good performance, they use internal
newsletters, daily reminders, and employee roundtables to
reinforce customer-centred attitudes within its employees.

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 Managing Product Support Services
 Physical Product-Based Industries must provide a service
bundle as well.
 Manufacturers of equipment, small appliances, office
machines, tractors, mainframes, airplanes-all have to provide
Product Support Services.
 These days, firms that provide high-quality service
outperform their less service-oriented competitors.

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 Activity

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