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Designing and
Managing Services
INTRODUCTION
Services are deeds, processes and performance
Intangible, but may have a tangible component
Generally produced and consumed at the same time
EXAMPLES OF SERVICE INDUSTRIES
Health Care
Hospital, Medical practices, health club
Professional Services
Accounting, Legal, Architectural
Financial Services
Banking, Investment advising, Insurance
Hospitality
Restaurant, Hotel/Motel
Ski resort, rafting
Travel
Airlines, Travel Agencies, Theme park ( Disney)
Others:
hair styling, pest control, plumbing, lawn maintenance, counseling services,
IMPORTANT DISTINCTIONS
Service Industries & Companies
Service As products
Customer Service
Derived Service
SERVICES CAN BE CLASSIFIED AS EQUIPMENT-
BASED OR PEOPLE-BASED
TANGIBILITY SPECTRUM
Tangible
Dominant
Intangible
Dominant
SaltSoft Drinks
Detergents
Automobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teaching
Fast-foodOutlets
Fast-foodOutlets
CHARACTERISTICS OF SERVICES
Inseparability
IntangibilityPerishability
Variability
SERVICES MARKETING MIX: 7 PS FOR SERVICES
Expanded Mix for Services: 7 Ps
Building Customer Relationships Through People, Processes, and
Physical Evidence
EXPANDED MARKETING MIX FOR SERVICES
PEOPLE PHYSICAL EVIDENCE
PROCESS
Employees
Facility design Flow of activities
Customers Equipment Number of steps
Communicating culture and values
Signage Level of customer involvement
Employee research Employee dress
Other tangibles
ELEMENTS OF PHYSICAL EVIDENCE
Servicescape Other tangibles
Facility exteriorExterior designSignageParkingLandscapeSurrounding environment
Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature
Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages
CONSUMER EVALUATION PROCESSES FOR PRODUCTS
& SERVICES
Search Qualities
attributes a consumer can determine prior to purchase of a product
Experience Qualities
attributes a consumer can determine after purchase (or during
consumption) of a product
Credence Qualities
characteristics that may be impossible to evaluate even after purchase and
consumption
CONTINUUM OF EVALUATION FOR PRODUCTS & SERVICES
Difficult to evaluateEasy to evaluate
High in search
qualities
High in experience
qualities
High in credence
qualities
Most
Goods
Most
Services
PERCEIVED RISK
Time Risk
Financial Risk
Social Risk
Functional Risk : Will the product work, is it reliable ?
Psychological Risk
What are the risks associated with Direct Marketing Channels?
What are the risks associated with buying online?
What could e-tailers do reduce the risk?
SERVICE QUALITY
The customer’s judgment of overall excellence of the service provided
in relation to the quality that was expected.
Process and outcome quality are both important.
Gap b/w
Consumer expectations & Management Perception
Management Perception and service quality specification
Service Quality specification and delivery
Delivery and external communication
What is your perception about quality?
Having an Haircut
Airline Travel
Eating out at a Café Coffee Day
Camera
TV
SERVICE RECOVERY?
Recovery Paradox
Service Failure
WHAT TO DO AND WHAT NOT TO DO ?
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 DON’T
THE SERVICE ENCOUNTER: A SNAPSHOT OF
ORGANIZATION’S SERVICE QUALITY
is the “moment of truth”
occurs any time the customer interacts with the firm
can potentially be critical in determining customer satisfaction and
loyalty
types of encounters:
remote encounters
phone encounters
face-to-face encounters
“First Moment of Truth” & “Second Moment of Truth”
SERVICE ENCOUNTER ….. IN A HOTEL
Parking your
vehicle
Security Check
Reception Desk
Check-InBellboy Takes to
Room
Restaurant Meal
Request Wake-Up
CallCheckout
CUSTOMER RELATIONSHIP MANAGEMENT
is a philosophy of doing business that focuses on keeping and improving
current customers
does not necessarily emphasize acquiring new customers
is usually cheaper (for the firm)--to keep a current customer costs less than
to attract a new one
goal = to build and maintain a base of committed customers who are
profitable for the organization
thus, the focus is on the attraction, retention, and enhancement of
customer relationships
CRM CYCLE
A LOYAL CUSTOMER IS ONE WHO...
Shows Behavioral Commitment
buys from only one supplier, even though other options exist
increasingly buys more and more from a particular supplier
provides constructive feedback/suggestions
Exhibits Psychological Commitment
wouldn’t consider terminating the relationship--psychological
commitment
has a positive attitude about the supplier
says good things about the supplier
CUSTOMER LOYALTY EXERCISE
Think of a service provider you are loyal to.
What do you do (your behaviors, actions, feelings) that indicates you
are loyal?
Why are you loyal to this provider?
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
employee retention is more likely with a stable customer base
lifetime value of a customer can be very high
CAUSES BEHIND SERVICE
SWITCHING
Service
Switching
Behavior
• High Price
• Price Increases
• Unfair Pricing
• Deceptive Pricing
Pricing
• Location/Hours
• Wait for Appointment
• Wait for Service
Inconvenience
• Service Mistakes
• Billing Errors
• Service Catastrophe
Core Service Failure
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable
Service Encounter Failures
• Negative Response
• No Response
• Reluctant Response
Response to Service Failure
• Found Better Service
Competition
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Ethical Problems
• Customer Moved
• Provider Closed
Involuntary SwitchingSource: Susane Keaveney
BUT SERVICE STINKS!
In a Nutshell
Companies know just how good a customer you are--and
unless you're a high roller, they would rather lose you
than take the time to fix your problem
AN EXAMPLE
The top 350 business clients are served by six
people.
The next tier of 700 are handled by six more,
30,000 others get two reps to serve their needs.
Meanwhile, the 300,000 residential customers at
the lowest end are left with an 800 number.
“No one is ignored, but our biggest customers
certainly get more attention than the rest.''