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SERVICE

According to Kotler, Any activity or benefit that is

essentially intangible & does not result in the

ownership of anything. Its production may or may

not be tied to physical product

Service clients are paying for expertise, experience,

advice, skills, knowledge & the benefits they bring.

The benefits may last but service itself is of limited

duration.

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Core Product Core Benefit of the Service

Insurance piece of mind

Hairdresser look & feel goodFootball Team emotions & enjoyment

Car Mechanic safe, reliable motoring

Examples:Transport (Rail, Road, Air, Water)

Communication (Telephone, Radio, TV)

Public Utilities (Electricity, LPG, Sanitary)Finance, Insurance & Real Estate

Hospitality, Tourism & Recreation

Legal, Education & Health

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1. Intangibility - u cant touch this

2. Production (or performing the service) and

Consumption (using the service) - happens at the

same time Inseperability

3. Heterogeneity - services are not always deliveredthe same way

4. Perishability - cannot be put in inventory or stored

for later use i.e. You cant buy 2 haircuts

4 Characteristics of Services

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1. Intangibility - u cant touch this

Services cannot be stored

Services cannot be protected through patents

therefore a really great travel package and service can

be copied

Hard to explain and display Services if you cant see

them

Prices are difficult to set - depends on customersexpectations

Characteristics of Services

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2. Inseparability of Production (or performingthe service) and Consumption (using the

service) - happens at the same time


Many people involved in delivering a service

mass production of services is hard to do

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3. Heterogeneity - services are not alwaysdelivered the same way

It is very difficult to standardize services

eg. A machine can make ice cream cones a

standard size 100% of the time

A person filling an ice cream cone with a scoop

cannot do it the same amount each time, unlessyou use a machine to dispense the ice cream


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3. Heterogeneity - services are not alwaysdelivered the same way

eg. A Taxi driver cannot drive you to the office in

exactly the same time each day because the trafficpatterns change

eg. A travel agent can sell you a vacation package -

but cannot guarantee you will like the trip exactlythe same way another tourist did.


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4. Perishability - cannot be put in inventory orstored for later use ie. You cant buy 2 haircuts

Demand fluctuates and changes, sometimes

depending on the season, or weather

eg. Taxi in the rain, vacation in summer


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Distinguishing Characteristics of Services

Customers do not obtain ownership of services

Service products are ephemeral and cannot be inventoried

Intangible elements dominate value creation

Greater involvement of customers in production process

Other people may form part of product experience

Greater variability in operational inputs and outputs

Many services are difficult for customers to evaluate

Time factor is more important--speed may be key

Delivery systems include electronic and physical channels

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Marketing Implications - 1

No ownership

Customers obtain temporary rentals, hiring of personnel, or access tofacilities and systems

Pricing often based on time

Customer choice criteria may differ for renting vs. purchase--may include

convenience, quality of personnel

Cant own people (no slavery!) but can hire expertise and labor

Services cannot be inventoried after production

Service performances are ephemeraltransitory, perishable

Exception: some information-based output can be recordedin electronic/printed form and re-used many times

Balancing demand and supply may be vital marketing strategy

Key to profits: target right segments at right times at right price

Need to determine whether benefits are perishable or durable

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Customers may be involved in production process

Customer involvement includes self-service and cooperation with servicepersonnel

Think of customers in these settings as partial employees

Customer behavior and competence can help or hinder productivity, so

marketers need to educate/train customers

Changing the delivery process may affect role played by customers

Design service facilities, equipment, and systems with customers in

mind: user-friendly, convenient locations/schedules

Intangible elements dominate value creation

Understand value added by labor and expertise of personnel

Effective HR management is critical to achieve service quality

Make highly intangible services more concrete by creating and

communicating physical images and tangible clues

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Other people are often part of the service product

Achieve competitive edge through perceived quality of employees Ensure job specs and standards for frontline service personnel reflect both

marketing and operational criteria

Recognize that appearance and behavior of other customers can influence

service experience positively or negatively

Avoid inappropriate mix of customer segments at same time Manage customer behavior (the customer is notalways right!)

Greater variability in operational inputs and outputs

Must work hard to control quality and achieve consistency Seek to improve productivity through standardization, and by training both

employees and customers

Need to have effective service recovery policies in place because it is more

difficult to shield customers from service failures

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Often difficult for customers to evaluate services Educate customers to help them make good choices, avoid risk

Tell customers what to expect, what to look for Create trusted brand with reputation for considerate, ethical behavior

Encourage positive word-of-mouth from satisfied customers

Time factor assumes great importance

Offer convenience of extended service hours up to 24/7 Understand customers time constraints and priorities

Minimize waiting time

Look for ways to compete on speed

Distribution channels take different forms Tangible activities must be delivered through physical channels

Use electronic channels to deliver intangible, information-based elementsinstantly and expand geographic reach

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S.No. Physical Goods Services

1. Tangible Intangible

2. Homogeneous Heterogeneous3. Product and distribution

separated from

consumption

Production, distribution

and consumption are

simultaneous process

4. A thing An activity5. Core value produced in

factory

Core value produced in

buyer-seller interaction

6. Customers do not

participate in the

production process

Customers participate in

production

7. Can be kept in stock Cannot be kept in stock

8. Transfer of ownership No transfer of ownership

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Four Categories of Services

Employing Different Underlying Processes

People Processin g Possession Processing

Mental Stimulu s

Processing

Information Processing

(directed at intang ible assets)

e.g., airlines, hospitals,

haircutting, restaurants

hotels, fitness centers

e.g., freight, repair,

cleaning, retailing,

recycling

e.g., broadcasting, consulting,

education, psychotherapy

e.g., accounting, banking,

insurance, legal, research

TANGIBLE

ACTS

INTANGIBLE

ACTS

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

What is the

Nature of th e

Service A ct?

Who or What is the Direct Recipient o f the Service?

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Elements of The Services Marketing Mix:

7Ps vs.the Traditional 4Ps

Rethinking the original 4Ps

Product elements

Place and time

Promotion and education

Price

Adding Three New Elements

Physical environment

Process

People

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The 7Ps:

(1) Product Elements

All Aspects of Service Performance that Create Value

Core product featuresboth tangible and intangible

elements

Bundle of supplementary service elements

Performance levels relative to competition

Benefits delivered to customers (customers dont buy

a hotel room, they buy a good nights sleep) Guarantees

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The 7Ps:

(2) Place and Time

Delivery Decisions: Where, When, and How

Geographic locations served

Service schedules

Physical channels

Electronic channels Customer control and convenience

Channel partners/intermediaries

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The 7Ps:

(3) Promotion and EducationInforming, Educating, Persuading, and Reminding Customers

Marketing communication tools media elements (print, broadcast, outdoor, retail, Internet, etc.)

personal selling, customer service

sales promotion

publicity/PR

Imagery and recognition

branding

Content

information, advice

persuasive messages

customer education/training

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The 7Ps:

(4) Price and Other User Outlays

Marketers Must Recognize that Customer Outlays Involve

More than the Price Paid to Seller

Traditional Pricing Tasks

Selling price, discounts, premiums

Margins for intermediaries (if any)

Credit terms

Identify and Minimize Other Costs Incurred by Users

Additional monetary costs associated with service usage (e.g., travel to servicelocation, parking, phone, babysitting,etc.)

Time expenditures, especially waiting

Unwanted mental and physical effort

Negative sensory experiences

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The 7Ps:

(5) Physical Environment

Designing the Servicescape and providing tangible

evidence of service performances

Create and maintaining physical appearances

buildings/landscaping

interior design/furnishings

vehicles/equipment

staff grooming/clothing

sounds and smells

other tangibles

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7Ps:

(6) Process

Method and Sequence in Service Creation and Delivery

Design of activity flows

Number and sequence of actions for customers

Nature of customer involvement

Role of contact personnel

Role of technology, degree of automation

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The 7Ps:

(7) People

Managing the Human Side of the Enterprise Customer-Contact Employees

job design

recruiting/selection

training

motivation

evaluation/rewards

empowerment/teamwork

Customers

possess (or can be educated to have) needed skills (co-production)

firm is able to manage customer behavior

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The Services Marketing Triangle

InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

enablingpromises

keeping promises

settingpromises

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Ways to Use the

Services Marketing Triangle

Overall Strategic

Assessment

How is the service

organization doing on allthree sides of the

triangle?

Where are the

weaknesses?

What are the strengths?

Specific Service

Implementation

What is being promoted

and by whom? How will it be delivered

and by whom?

Are the supporting

systems in place todeliver the promised

service?

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The Service Profit Chain

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Service Employees

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Service Employees

They are the service - provider.

They arethe organization in the customers eyes.

They are the brand.

They are marketers.

Their importance is evident in: The Services Marketing Mix (People)

The Service-Profit Chain

The Services Triangle

Frontline also drives customer loyalty, with employees playingkey role in anticipating customer needs, customizing servicedelivery and building personalizedrelationships

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Service EmployeesWho are they?

boundary spanners periphery, link the inside of theorganization to the outside world.

Emotional Labour - The act of expressing socially

desired emotions during service transactions.

Consider management expectations of restaurantservers:

deliver a highly satisfying dining experience to their

customers be fast and efficient at executing operational task of

serving customers

do selling and cross selling, e.g. We have some nice

desserts to follow your main course

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Sources of Conflict for

Boundary-Spanning Workers

Person vs. RoleConflicts between what jobs require and employees own personality and beliefs

Organization vs. ClientDilemma whether to follow company rules or to satisfy customer demands

Client vs. ClientConflicts between customers that demand service staff intervention

Quality vs. Productivity

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Employee Empowerment

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Factors Favoring Employee Empowerment

Firms strategy is based on competitive differentiation and onpersonalized, customized service

Emphasis on long-term relationships vs. one-time transactions

Use of complex and non-routine technologies

Environment is unpredictable, contains surprises

Managers are comfortable letting employees work

independently for benefit of firm and customers

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Empowerment

Benefits: quicker responses

employees feel moreresponsible

employees tend tointeract withwarmth/enthusiasm

empowered employees

are a great source ofideas

positive word-of-mouthfrom customers

Drawbacks: greater investments in

selection and training

higher labor costs

slower and/orinconsistent delivery

making bad decisions.

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Service Culture

A culture where an appreciation for good

service exists, and where giving good service

to internal as well as ultimate, external

customers, is considered one of the mostimportant norms by everyone in the

organization.

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Relationship Marketing

is a philosophy of doing business that focuses on keeping

current customers and improving relationships with them

does not necessarily emphasize acquiring new customers

is usually cheaper (for the firm) keeping a current customer costs less than attracting a

new one

thus, the focus is less on attraction, and more on

retention and enhancement of customer relationships

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Underlying Logic of Customer Retention Benefits

to the Organization

Customer Retention &

Increased Profits

Employee Loyalty

Quality

Service

Customer Satisfaction

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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: less need for information and assistance

& make fewer mistakes

employee retention is more likely with a stable customer base

Recommend new customers to firm (act as unpaid sales

people)

Trust leads to willingness to pay regular prices vs. shopping for

discounts

lifetime value of a customer can be very high

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Service Quality

The customers judgment of overall excellence

of the service provided in relation to the

quality that was expected.

Service quality assessments are formed on

judgments of:

Outcome quality

Process quality

Physical environment quality

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The Five Dimensions of

Service Quality

Ability to perform the promised servicedependably and accurately.

Knowledge and courtesy of employees andtheir ability to convey trust and confidence.

Physical facilities, equipment, andappearance of personnel.

Caring, individualized attention the firm

provides its customers.

Willingness to help customers and provideprompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy

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The Service Encounter

Occurs any time the customer interacts with the firm

can potentially be critical in determining customersatisfaction and loyalty

types of encounters:

phone encounters, face-to-face encounters

is an opportunity to:

build trust reinforce quality

build brand identity

increase loyalty

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Critical Service Encounters Research

GOAL - understanding actual events and

behaviors that cause customer dis/satisfaction

in service encounters

METHOD - Critical Incident Technique

DATA - stories from customers and employees

OUTPUT - identification of themes underlying

satisfaction and dissatisfaction with service

encounters

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Common Themes in Critical

Service Encounters Research

Recovery: Adaptability:

Spontaneity:Coping:

Employee Responseto Service Delivery

System Failure

Employee Responseto Customer Needs

and Requests

Employee Responseto Problem Customers

Unprompted EmployeeActions and Attitudes

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Coping

Listen

Try to accommodate

Explain

Let go of the customer

Take customers

dissatisfaction personally

Let customers dissatisfaction

affect others

DO DONT

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Adaptability

Recognize the seriousness of theneed

Acknowledge

Anticipate

Attempt to accommodate

Explain rules/policies

Take responsibility

Exert effort to accommodate

Promise, then fail to follow

through

Ignore

Show unwillingness to try

Embarrass the customer

Laugh at the customer Avoid responsibility

DO DONT

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Recovery

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 DONT

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Spontaneity

Take time

Be attentive

Anticipate needs

Listen

Provide information (even if not

asked) Treat customers fairly

Acknowledge by name

Exhibit impatience

Ignore Yell/laugh/swear

cheat a customer

Discriminate

Treat impersonally

DO DONT

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The Purchase Process for Services

Prepurchase Stage Awareness of need

Information search

Evaluation of alternative service suppliers

Service Encounter Stage

Request service from chosen supplier

Service delivery

Postpurchase Stage Evaluation of service performance

Future intentions

Possible Levels of Customer

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Possible Levels of Customer

Expectations

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Components of Customer Expectations

Desired Service Level: wished-for level of service

quality that customer believes can and should be

delivered

Adequate Service Level: minimum acceptable level of

service

Predicted Service Level: service level that customer

believes firm will actually deliver Zone of Tolerance:range within which customers are

willing to accept variations in service delivery

Documents

SM - 19-04