1. Copyright © 2003 Prentice-Hall, Inc. 15-1 Chapter 15 Designing and Managing Services by PowerPoint by Milton M. Pressley University of New Orleans

2. Copyright © 2003 Prentice-Hall, Inc. 15-2 Every business is a service business. Does your service put a smile on the customer’s face? Kotler on Marketing

3. Copyright © 2003 Prentice-Hall, Inc. 15-3 Chapter Objectives  In this chapter, we focus on the following questions:  How are services defined and classified?  How do services differ from goods?  How can service firms improve their differentiation, quality, and productivity?  How can goods-producing companies improve their customer support services?

4. Copyright © 2003 Prentice-Hall, Inc. 15-4 Keen.com is a virtual advice marketplace The Nature of Services  Government sector  Private non-profit sector  Business sector  Manufacturing sector  Service

5. Copyright © 2003 Prentice-Hall, Inc. 15-5  Categories of Service Mix  Pure tangible good  Tangible good with accompanying services  Hybrid  Major service with accompanying minor goods and services  Pure service The Nature of Services

6. Copyright © 2003 Prentice-Hall, Inc. 15-6  Characteristics of Services and Their Marketing Implications  Intangibility  Service positioning strategy can be made tangible through:  Place  People  Equipment  Communication material  Symbols  Price The Nature of Services

7. Copyright © 2003 Prentice-Hall, Inc. 15-7 Online companies that provide services are often directly impacted by the quality of a customer’s computer or the customer’s Internet connection. Can you think of another service sector that has so little control over the environment in which their services are provided?

8. Copyright © 2003 Prentice-Hall, Inc. 15-8 The Nature of Services  Carbone and Haeckel purpose the following for customer experience engineering  Performance and context clues  Humanics  Mechanics  Experience blueprint

9. Copyright © 2003 Prentice-Hall, Inc. 15-9 The Nature of Services  Inseparability  Variability  Quality control by:  Good hiring and training procedures  Service blueprint  Monitoring customer satisfaction

10. Copyright © 2003 Prentice-Hall, Inc. 15-10 Figure 15.1: A Service-Performance-Process Map: Nationwide Floral Delivery

11. Copyright © 2003 Prentice-Hall, Inc. 15-11  Perishability  Strategies for better matching between demand and supply in a service business  Differential pricing  Nonpeak demand  Complementary services  Reservation systems  Part-time employees  Peak-time efficiency  Increased consumer participation  Shared services  Facilities for future expansion The Nature of Services

12. Copyright © 2003 Prentice-Hall, Inc. 15-12 Marketing Strategies for Service Firms  Three Additional Ps  People  Physical evidence  presentation  Process

13. Copyright © 2003 Prentice-Hall, Inc. 15-13 Figure 15.2: Elements in a Service Encounter

14. Copyright © 2003 Prentice-Hall, Inc. 15-14 Figure 15.3: Three Types of Marketing in Service Industries

15. Copyright © 2003 Prentice-Hall, Inc. 15-15 Figure 15.4: Continuum of Evaluation for Different Types of Products

16. Copyright © 2003 Prentice-Hall, Inc. 15-16 Marketing Strategies for Service Firms  Service Companies face three tasks:  Competitive differentiation  Service quality  Productivity  Managing differentiation  Offering  Primary service package  Secondary service features

17. Copyright © 2003 Prentice-Hall, Inc. 15-17 Kaiser Permanente Online has over 30,000 registered users

18. Copyright © 2003 Prentice-Hall, Inc. 15-18 Marketing Strategies for Service Firms  Faster and Better Delivery  Reliability  Resilience  Innovativeness  Image  Managing Service Quality  Perceived service  Expected service

19. Copyright © 2003 Prentice-Hall, Inc. 15-19 FedEx and UPS have taken over much of the US Postal Service’s business, mostly through flexibility and innovation that the USPS can’t match. Can you think of another governmental service (anywhere in the world) where a private company has been able to take the profitable segment of a service, and leave the less profitable or more risky segment for a government agency?

20. Copyright © 2003 Prentice-Hall, Inc. 15-20 Marketing Strategies for Service Firms  Five gaps that cause unsuccessful delivery  Gap between consumer expectation and management perception  Gap between management perception and service-quality specification  Gap between service-quality specification and service delivery  Gap between service delivery and external communications  Gap between perceived service and expected service

21. Copyright © 2003 Prentice-Hall, Inc. 15-21 Figure 15.5: Service-Quality Model

22. Copyright © 2003 Prentice-Hall, Inc. 15-22  Five determinants of service quality  Reliability  Responsiveness  Assurance  Empathy  Tangibles  Strategic Concept  Top-Management Commitment  High Standards  Self-Service Technologies (SSTS) Marketing Strategies for Service Firms

23. Copyright © 2003 Prentice-Hall, Inc. 15-23 Myalert.com provides access to services that users can perform themselves

24. Copyright © 2003 Prentice-Hall, Inc. 15-24 Marketing Strategies for Service Firms  Monitoring Systems  Voice of the Customer (VOC) measurements  Customer importance and company performance  Importance-performance analysis Figure 15.6: Tracking Customer Service Performance

25. Copyright © 2003 Prentice-Hall, Inc. 15-25 Table 15.1 Customer Importance and Performance Ratings for an Auto Dealership MeanMean AttributeImportancePerformance Number Attribute Description RatingRating 1 Job done right the first time 3.832.63 2 Fast action on complaints 3.632.73 3 Prompt warranty work 3.603.15 4 Able to do any job needed 3.563.00 See text for complete table

26. Copyright © 2003 Prentice-Hall, Inc. 15-26 Figure 15.7: Importance- Performance Analysis

27. Copyright © 2003 Prentice-Hall, Inc. 15-27 Marketing Strategies for Service Firms  Satisfying Customer Complaints  Satisfying Employees As Well As Customers  Managing Productivity  Seven approaches to improving service productivity:  Have service providers work more skillfully  Increase the quantity of service by surrendering some quality  “Industrialize the service” by adding equipment and standardizing production  Reduce or make obsolete the need for a service by inventing a product solution  Design a more effective service  Present customers with incentives to substitute their own labor for company labor  Harness the power of technology to give customers access to better service and make service workers more productive

28. Copyright © 2003 Prentice-Hall, Inc. 15-28 Managing Product Support Services  Customers have three worries  Reliability and failure frequency  Downtime duration  Out-of-pocket costs of maintenance and repair  Life-cycle cost

29. Copyright © 2003 Prentice-Hall, Inc. 15-29 Audible.com’s home page

30. Copyright © 2003 Prentice-Hall, Inc. 15-30 Managing Product Support Services  To provide the best support for expensive equipment, firms offer:  Facilitating services  Value-augmenting services  Herman Miller Office Furniture Company offers:  Five-year product warranties  Quality audits after installation  Guaranteed move-in dates  Trade-in allowances on systems products

31. Copyright © 2003 Prentice-Hall, Inc. 15-31 Managing Product Support Services  Postsale Service Strategy  Major trends in product support service  Lele has noted the following:  Equipment manufacturers are building more reliable and more easily fixable equipment  Customers are becoming more sophisticated about buying product support services  “Service unbundling”

32. Copyright © 2003 Prentice-Hall, Inc. 15-32 Managing Product Support Services  Customers dislike dealing with multiple service providers handling different types of equipment  Third-party service organizations  Service contracts (extended warranties) may diminish in importance  Customer service choices are increasing rapidly–this is holding down prices and profits  Companies are increasing the quality of their call centers and their customer service representatives (CSRs)