Chapter 13

1. Chapter 13 Designing & Managing Services S. Idrees Alhassan, MBA (Marketing)

2. The Marketing Process Capture Value from customers Create Value for Customers and Build Customer Relationships We are here ! S. Idrees Alhassan, MBA (Marketing)

3. Chapter Outline S. Idrees Alhassan, MBA (Marketing)

4. Definition: Any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Note: Services can also be used to “Add Value” to other Tangible & Intangible products. (Services as Products vs. Value Adding Services) S. Idrees Alhassan, MBA (Marketing)

5. Categories of Service Mix • In a market offering, the service component can be a “major” or a “minor” component. • FIVE Categories of Offerings: • Pure Tangible Goods – soap, salt (no service comes along) • Major Tangible Goods with minor Services • Hybrid (equally tangible and intangible) • Major service with minor services or goods • Pure Service – baby-sitting, psychotherapy etc. The difference in the forms of services makes it very hard to generalize about services. S. Idrees Alhassan, MBA (Marketing)

6. Additional Distinctions • Equipment-Based Service– automated car-washing • People-Based Service – accounting services etc. (skilled, unskilled or professional levels) • Various processes or formats – restaurants choose cafeteria, buffet, fast-food & candle-light • Client’s presence critical or not – hair-cut vs. car fix • Personal need or business need– either one takes a different marketing program • Objectives & Ownerships: Ownership Private Public Type A Type B Objective Non-profit Profit Type C Type D S. Idrees Alhassan, MBA (Marketing)

7. How consumers evaluate Quality of Services (Hard to evaluate, though!) • Search Quality • The characteristics that the buyer can evaluate BEFORE purchase. • Experience Quality • The characteristics the buyer can evaluate AFTER the purchase. • Credence Quality • Hard to evaluate EVEN AFTER the consumption. • Usually services are high in “Experience & Credence” Qualities making it very “Risky” affair for buyers which results in the following; • Consumers generally rely on “word of mouth” for services • Heavy reliance on price, personnel & physical cues • Loyalty is high to those who satisfy the needs • Because of “switching’ costs, hard to attract from competitor’s S. Idrees Alhassan, MBA (Marketing)

8. A Intangibility Services cannot be seen, tasted, felt, heard or smelled before purchase B Inseparability Services cannot be separated from their providers D Perishability Services cannot be stored for later sale or use C Variability Quality of service depends on who provides them and when, where and how S. Idrees Alhassan, MBA (Marketing)

9. A – Intangibility • This makes buyers very uncertain. • To make them certain enough, “Tangibalize” the service by adding “physical evidence” and “presentation”. • “Body-Soul” Relationship. • Goods sellers add abstract ideas to complement it; service sellers add “physical body”. • For example: • A bank that want to be positioned as “Fast” Bank (Idea) will tangibalize it through; • Place – queues, space • People – busy people, enough people to keep it fast • Equipment – state of the art, furniture etc. • Communication Material – texts, photos emitting speed • Symbols – names, symbols should also suggest so • Price – warrantees or $5 to be refunded if you waited for 5 minutes S. Idrees Alhassan, MBA (Marketing)

10. B – Inseparability • Services are produced & consumed simultaneously • Hence, “Provider-Client Interaction” is a special feature of service marketing • Usually “Provider Preference” is a key attribute of consumer behavior i.e. preferring a certain provider over another. • Inseparability puts limitson efficiency e.g. one hair-dresser can not be available at two places at the same time. • E.g. psychotherapists, now, work with groups of over 100 clients at the same time in a large hotel ball room. S. Idrees Alhassan, MBA (Marketing)

11. C – Variability • “Who-provides-it-when-&-where” makes services highly Variable • Usually, customers will talk to others before opting for any. • THREE steps to improve Quality of “Who-When-Where”. • Invest in Good Hiring & Trainingprocedures • Standardize the service-performance process throughout the organization • Monitor customer satisfaction – use customer complaints, surveys etc. S. Idrees Alhassan, MBA (Marketing)

12. D – Perishability • Services can’t be stored. • Perishability is not a problem when demand is steady. • But, when demand fluctuates, firms begin to show signs of stress. • E.g. public transportation system (what to do with demand?) S. Idrees Alhassan, MBA (Marketing)

13. D – Perishability • Strategy to produce a better match betweenSupply & Demand to avoid perishability problem: • On Demand side: • Differential pricing will move some demand from peak to off-peak periods e.g. weekend discounts, early movie low prices etc. • Non-peak demand can be cultivated e.g. McDonald’s breakfast, hotels’ mini-vacations. • Complementary services can be developed to provide alternatives to waiting customers e.g. cocktail lounge in restaurants, ATM in banks etc. • Reservation Systems are widely used by Airlines, Hotels & Physicians to cope up with the perishability issue of service • On Supply side: • Part-time Employees – for peak times especially. • Peak-time Efficiency – routine shall be introduced e.g. chefs, surgeons etc. • Increased consumer participation – patients fill out their own forms, consumers bag their own groceries etc. • Shared services – several hospitals can share a medical equipment • Facilities for future expansion – parks buy lands for future needs S. Idrees Alhassan, MBA (Marketing)

14. Chapter Outline S. Idrees Alhassan, MBA (Marketing)

15. A few words • Bigger spenders used to be treated more favorably & efficiently than the rest. • Now, a service firm should strategize to squeeze every bit out of possibly all customers (big or small). • And • Customers NOW are more sophisticated and informed & pressing for “Service Unbundling” • Service Unbundling – asking for the prices of individual services & their relative worth. S. Idrees Alhassan, MBA (Marketing)

16. All above leads to One Conclusion: • “A Holistic Marketing Perspective” is especially important because of the “Complexity”of interactions affecting the service encounters. • Keaveney identified more than 800 behaviors responsible for customer switching services. • These 800 behaviors are put in EIGHT categories; • Pricing • High price • Price increases • Unfair pricing • Deceptive pricing • Inconvenience • Location/hours • Wait for appointment • Wait for service • Core Service Failure • Service mistakes • Billing errors • Service catastrophe • Service Encounter Failure • Uncaring & Impolite • Unresponsive • Unknowledgeable • Response to Service Failure • Negative Response • No response • Reluctant response • Competition • Found Better Service • Involuntary Switching • Customer moved • Provider closed S. Idrees Alhassan, MBA (Marketing)

17. Holistic Marketing Perspective for Services External Marketing Company Customers Internal Marketing Interactive Marketing Employees Functional Quality: Was the surgeon concerned enough? Highly Trained, motivated & empowered staff Technical Quality: Was the surgery a success? Integrated Marketing Program S. Idrees Alhassan, MBA (Marketing)

18. Chapter Outline S. Idrees Alhassan, MBA (Marketing)

19. Customer Expectations • Service Quality is tested at each “Service Encounter”. • Not only Satisfy them, but Delight them. • FIVE GAPS that cause Dissatisfaction: Word-of-Mouth Personal Needs Past Experience Expected Service Gap 5 Perceived Service Consumer Marketer Service Delivery External Communications to Consumers Gap 3 Gap 4 Gap 1 Translation of Perception into Service Quality Gap 2 Management Perceptions of Consumer Expectations S. Idrees Alhassan, MBA (Marketing)

20. Based on the Service Quality Model (previous slide), FIVE Determinants of Service Quality are as follow (in order of importance); • Reliability – the ability to perform the promised service accurately & dependably • Responsiveness – the willingness to help customers • Assurance – the knowledge & courtesy of employees & their ability to convey trust & confidence • Empathy – the provision of caring, individualized attention to customers • Tangibles – the appearance of physical facilities, equipment, personnel, and communication materials S. Idrees Alhassan, MBA (Marketing)

21. Based on FIVE Factors which were based on Service Quality Model are the SERVQUAL Attributes: • Reliability • Providing service as promised • Performing service right the first time & promised time • Maintaining error-free records • Responsiveness • Keeping customers informed about related issues • Prompt service to customers • Willingness to help customers • Readiness to respond to customers’ requests • Assurance • Employees who instill confidence • Making customers feel safe in their transaction • Consistently courteous employees • Empathy • Giving customers individual attention • Employees who deal with customers with care • Having customers’ best interest at heart • Convenient business hours • Tangibles • Modern equipment • Visually appealing facilities • Employees who have a neat, professional appearance • Visually appealing materials associated with the service S. Idrees Alhassan, MBA (Marketing)

22. Best Practice of Service-Quality Management • Well-managed service companies share these common practices; • Strategic Concept (customer obsession at strategic level) • A history of Top Management Commitment to Quality • High standards (Citibank aims to reply all inward communication within seconds & minutes) • Systems for monitoring service performance (e.g. Mystery shoppers, etc.) • Customer Complaint systems • Emphasis on Employee Satisfaction (it has a direct link with customer satisfaction in service industry) • TWO more; • Increasing customer expectations of what a firm “will” deliver can lead to improved perception of overall quality. • Decreasing customers expectations of what a firm “should” do can lead to improved perception of overall quality. S. Idrees Alhassan, MBA (Marketing)

23. Chapter Outline S. Idrees Alhassan, MBA (Marketing)

24. What are some famous Service Brands? • Differentiation • Very difficult but there are always “many ways”! Core Benefit Primary Service Package • e.g. Airlines add; • Air-to-ground telephone • Movies • Merchandise for sale etc. Secondary Service Features Services are added to Main Service to differentiate. However, Human Element can also differentiate; e.g. Pharmacies are adding “in-store health professional” S. Idrees Alhassan, MBA (Marketing)

25. Developing Brand Strategies for Services 1. Choose Brand Elements 3. Devise Branding Strategy 2. Establish Image Dimensions • Implied by Intangibility: • Easy name • Logo • Slogan • Symbols • Characters • The above will tangibalize the service • Develop a Brand Hierarchy or Brand Portfolio • It permits effective Positioning and Targeting of various segments either on the basis of Quality or Price. • Org. Associations • Perception about the people making up the org. or delivering the service (e.g. Bakhtar) • Key Association is Credibility, Expertise & Trustworthiness e.g. AUAF etc. S. Idrees Alhassan, MBA (Marketing)

26. Chapter Outline S. Idrees Alhassan, MBA (Marketing)

27. Differentiate between “Services as Products” and “Product Support Services”. • One is the Main Product of Service Industry and the other is “Value Addition” to a tangible from Goods industries. • Equally important for Product Based Firms to offer and manage a service bundle. • Appliances, office machines, tractors, airplanes – all must provide “Product Support Services” • Double Advantage of such “Product Support Services” • Makes Huge Profits in addition to main tangible product • Augments & differentiates the product S. Idrees Alhassan, MBA (Marketing)

28. Identifying & Satisfying Customer Needs • The real “Needs” of customers for “Product Support Services” stem from THREE WORRIES: • The worry about Reliability – breaking down once a year is ok. But not twice or thrice! • The worry about Downtime – waiting time till repair arrives • The worry about Out-of-Pocket Costs – How much do I (customer) have to spend on maintenance? • A buyer takes all the above THREE consideration while choosing a “Tangible Product”. • The THREE WORRIES can be addressed by providing: Facilitating Services Value-Augmenting Services • Installations • Staff Training • Maintenance & Repair • Five-year warranty • Guaranteed logistics • Quality audits after installation S. Idrees Alhassan, MBA (Marketing)

29. Pricing Strategy for such combinations • Main Product + Basic Service = Actual price • For extra services, PAY extra. • Service Contracts (extended warrantees) • Maintenance or repair for a specified period and for a specific amount of cash. S. Idrees Alhassan, MBA (Marketing)

30. Post-Sale Service Strategy • Little follow-up calls service • Expeditious follow-up calls service • Usually manufacturers handle the post-sale services themselves if the service requires strenuous training or high costs. • Gradually, such manufacturers transfer post-sale services to other vendors. • But, manufacturers stick to “the parts” provision which promises huge profits. • Conclusively, let’s call it a predicament! S. Idrees Alhassan, MBA (Marketing)