Serial No.

8
Chapter 15
Designing and managing Services
 Services
Service:
A form of product that consists of activities, benefits or satisfactions
offered for sale that are essentially intangible and do not result in the
ownership of anything.

Service industries are everywhere:

The government sector, with its court, employment services,
hospitals, loan agencies, military services, police and fire department,
postal service and schools, in the service business.
 Marketing strategies for service firms

• The traditional four P’s marketing approach work well for goods, but
additional elements require attention in services businesses. Three more
elements of marketing mix are suggested which are:

– People
– Physical evidence
– Process
 Marketing strategies for service firms
• People
An essential ingredient to any service provision is the use of appropriate staff and
people. Recruiting the right staff and training them appropriately in the delivery of
their service is essential if the organization wants to obtain a form of competitive
advantage. Consumers make judgments and deliver perceptions of the service
based on the employees they interact with.

• Process
Refers to the systems used to assist the organization in delivering the service.
Imagine you walk into Burger King and you order a Whopper Meal and you get it
delivered within 2 minutes. What was the process that allowed you to obtain an
efficient service delivery? Banks that send out Credit Cards automatically when
their customers old one has expired again require an efficient process to identify
expiry dates and renewal.
 Marketing strategies for service firms

• Physical Evidence
Where is the service being delivered? Physical Evidence is the element of the
service mix which allows the consumer again to make judgments on the
organization. If you walk into a restaurant your expectations are of a clean,
friendly environment. On an aircraft if you travel first class you expect enough
room to be able to lay down.
 Nature of services
• Distinctive characteristics of services:
services have four distinctive characteristics that greatly affect the design
of marketing programs: intangibility, inseparability, variability, and perish
ability.
• Intangibility: unlike physical products, services cannot be seen, tasted,
felt, heard or smelled before they are bought.
For example a person getting cosmetic surgery cannot see the results
before the purchase.
Service companies can try to demonstrate their service quality through
physical evidence and presentation. Like: Place, People, Equipment,
communication material and price.
 Nature of services
• Inseparability: whereas physical goods are manufactured, put into
inventory, distributed through multiple reseller, and consumed later,
services are typically produced and consumed simultaneously. Service
provider and client interaction is a special feature of services marketing.
– For example: a barber cannot give a haircut without being present.

• Variability: the quality of services depends on who provides them, when

and where and to whom, services are highly variable.
– For example, some doctors will provide excellent services other may
not.
Service buyers are aware of this variability and often talk to others before
selecting a service provider. To reassure customers, some firms offer
service guarantees that may reduce customers perceptions of risk.
 Nature of services

• Perish ability:

• services cannot be stored, so their parish ability can be a problem when

demand fluctuates.
– For example transportation companies charge high rate in peak hours,
and low rate in off peak hours, because of demand.
– Some doctors charge patients for missed appointments because the
service value (doctors availability).
Three types of marketing in Services
Three types of marketing in Services cont...
• Service marketing require not only external marketing but internal and
interactive marketing.
• External marketing describe the normal work of preparing pricing
distributing and promoting the services to customer.
• Internal marketing describe the work to train and motivate employees to
serve customer.
• Interactive marketing describes the employees skill in serving the clients
because the client judges services not only by technical quality but also its
functional quality.
• For example in hospital a successful operation is the technical quality from
the doctors, but the way the doctors show their concerns and giving
confidence to the patients is the interactive marketing
 Managing service Quality
• The service quality of a firm is tested at each service encounter. If service
personnel are bored, cannot answer simple questions, or visiting with each
other while customers are waiting, customers will think twice about doing
business again with that seller.

• Customer expectations: customers form service expectations from many

sources, such as past experiences, word of mouth, and advertising.
Customers compare the perceived service with the expected service. If the
perceived service falls below the expected service, customers are
disappointed.
• If the perceived service meets or exceeds their expectations, they are
suitable to use the provider again. Successful companies add benefits to
their offering that not only satisfy customers but surprise and delight them.
 Gaps Model
for improving service quality
 Managing service Quality
• Customer expectations cont…..
• There are five gaps that cause unsuccessful delivery of quality service.
1. Gap between customer expectation and management perception:
management does not always perceive what customers want.
For example: hospital administrations may think patients want better
food, but patient may be more concerned with nurse responsiveness.
2. Gap between management perception and service quality perception:
Management might correctly perceived customers want but not set a
performance standards. Hospital administrators may tell the nurse to give
fast service without specifying it in minutes.
3. Gap between service quality specification and service delivery: personnel
might be poorly trained, or incapable of or unwilling to meet the
standard.
 Managing service Quality
Customer expectations cont…..

4. Gap between service delivery and external communication: consumer

expectations are affected by statements made by company
representatives and ads. If a hospital brochure shows a beautiful room,
but the patient arrives and finds the room to be cheap and tacky
looking, external communication have distorted the customer’s
expectations.
5. Gap between perceived service and expected service: this gape occurs
when the consumer misperceives the service quality . The physician may
keep visiting the patient to show care, but the patient may interpret this
as an indication that something really is wrong
 Best practice of service-quality management

• Various studies have shown that well managed service companies share
the following common practices

• A strategic concept
• Top management commitment to quality
• High standards
• Self service technologies
• System for monitoring service performance and customer complaints.
• Emphasis on employee satisfaction
 Best practice of service-quality management

• Strategic control: top service companies are customer obsessed. They

have a clear sense of their target customers and their needs. They have
developed a distinctive strategy for satisfying these needs.

• Top management commitment: organization such as Marriot, Pearl

Continental have a thorough commitment to service quality. Their
managements look not only at financial performance on a monthly basis,
but also at service performance.

• High standards: the best service providers set high service quality
standards. Citibank aims to answer phone calls within 10 seconds and
customer letters within 2 days. Pizza hut aims to deliver the pizza within
20 minutes.
 Best practice of service-quality management

• Self service technology: consumers prefer those services they are convenient.
Many person to person service interactions are being replaced by self service
technologies. For example Automated Teller Machines (ATMs). Online ticket
purchasing.

• Monitoring systems and customers complaints: top firms audit service

performance, both their own and competitors, on a regular basis.
customers complaint is a gift if handled well. Companies that encourage
disappointed customers complain, and also empower employees to remedy the
situation on the spot, have been shown to achieve higher revenues and greater
profits than companies that do not have systematic approach for addressing
service failures.
Pizza Hut prints its toll-free number on all pizza boxes, when customer complains,
Pizza Hut sends voice mail to the store manager, who must call the customer
within 48 hours and resolve the complaints.
 Best practice of service-quality management

• Satisfying employees as well as customers:

Excellent service companies know that positive employee attitudes will
promote stronger customer loyalty. Instilling a strong customer
orientation in employees can also increase their job satisfaction and
commitment, especially if they are in service settings that allow for a high
degree of customer contact time.