1. DESIGNING AND MANAGING SERVICES
Lecture 7
DESIGNING AND MANAGING SERVICES

2. Objectives How are services defined and classified?
How do services differ from good?
How can service firm improve their differentiation, and quality?
How can goods producing companies improve their customer support service?

3. IBM moved from goods business to service business
Famous for its accomplishments in computer hardware and software, IBM has undergone a massive transformation.
Currently, almost half of its $81 billion in annual revenues comes from global services.
Companies such as American Express are signing up for consulting engagements that involve customized software, hardware, and systems solutions worth literally billions of dollars to IBM.
IBM's "e-business on demand” Initiative is a company-wide effort to help other companies harness the lower of technology through IBM products and services. To fulfil its service promises, IBM has had to develop new skills and become more customer
focused.
The $3.5 billion acquisition of Price Waterhouse Coopers Consulting
in October 2002 has provided valuable strategic expertise. To help improve R&D designs and service implementation
IBM moved from goods business to service business

4. Services
Definition:
A service is any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything.
The production of services may or may not be linked to any physical product
Service sectors are quite varied. The government sector, with its courts, employment services, hospitals, loan agencies, military services, polices, and fire department.
The private non-profit sector like museums, charities, mosques, colleges.

5. Classification of services mix
A company’s offering to the market often includes some services. The service components can be a minor or major part of the total offering. There are 5 categories of offerings
- Pure tangible goods:
Offering consist primarily of a tangible good with no services accompany the product such as Soap, salt, paper
- Tangible with accompanying services:
The offering consist of a tangible good with one or more services.

6. - Major Service with accompanying minor goods/service
- Hybrid:
The offering consist of equal part of good and services for example restaurants provide both food and service.
- Major Service with accompanying minor goods/service
The offering consist of major services along with additional services or supporting goods. For example air travel is a major service of travelling along with food, shopping on air etc is the accompanying minor goods
- Pure Services:
The offering consist primarily of a service. For example a hair cut or tailoring a suit.

7. Characteristic of services
Services have four major characteristics that greatly affect the design of marketing program: intangibility, inseparability, variability and perishability.
- Intangibility:
Unlike physical products services cannot be seen, tasted, heard or smelled before they are bought. For Example, a person getting a face lift cannot see the exact result before the purchase, and patient cannot know the out come of it.
- Inseparability:
Services are typically produced and consumed simultaneously. This not true as physical goods, which are manufactured, put into inventory, distributed through multiple reseller and consumed later.

8. - Variability: - Perishability:
Services are highly variable because it depend upon who provide them when and where they are provided. Some surgeons are very successful in performing operation; others are less successful. Buyers are aware of variability and often talk to other before selecting a provider
- Perishability:
Services cannot be stored. The perishability of services is not a problem when demand is steady. When demand fluctuates, services firms have problem. For example rush hours in transportation might cause the transporter problems.

9. 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

10. People: Physical Evidence: Processes:
Most of the services are provided by people therefore the selection, training, and motivation of employees can make a huge difference in customer satisfaction.
Ideally employees should exhibit competence, caring attitude, responsiveness, initiative and problem solving ability.
Physical Evidence:
Companies also try to demonstrate their service quality through physical evidence and presentation. For example, A hotel will develop a look and style of dealing with customers that realises its intended value position such as cleanliness, speed or some other benefits.
Processes:
The process of giving a service, and the behaviour of those who deliver are crucial to customer satisfaction. Issues such as waiting time, the information given to customer and helpfulness of staff are important to keep customer happy.

11. Product/Service evaluation
It is some time hard to evaluate the technical quality even after receiving the services. The figure shows the products and services according to the difficulty of evaluation.
Goods high in search quality are the characteristics which a buyer can evaluate before buying.
In the middle are goods high in experience quality the characteristics buyer can evaluate after purchasing.
Credence quality, the characteristics which the buyer finds hard to evaluate even after the use of service.

12. Product/service evaluation

13. Three types of marketing in Services

14. Three types of marketing in services
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. L. Barry (1986) says that the most important contribution that a marketing department can make is to get everyone else in the organisation to practice marketing

15. Continue...
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

16. Managing differentiation in services
Differentiation in services is difficult as compared to products. The deregulation of several major services industries-communication, transportation, energy, banking- participated in intense price competition.
Alternative to price competition, services can be differentiated in terms of offerings, delivery, or image.
Offering
Customer are paying for primary service packages but the service provider can add secondary services features. For example a coffee shop owner offer secondary package of Wi-Fi along with coffee and sandwiches.

17. Faster and better Delivery:
A service company can differentiate itself by designing a better and faster delivery system. Many distribution experts believe that a company’s money would be better spent on improving delivery performance than on advertising.
Furthermore, its hard for a competitor to duplicate the distributions system to an advertisement campaign.
Image:
Service companies can also differentiate through symbols and branding.

18. Managing service quality
The service quality of a firm is tested at each service encounter. Customers form service expectations from many sources, such as past experiences, word of mouth, and advertising.
In general, 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. Delighting customers is a matter of exceeding expectations.

19. Researcher ( Parasuraman, Zeithaml, Berry) formulated a service quality model that highlight the main requirement for delivering high service quality.
1. Gap between consumer expectation and management perception -Management does not always correctly perceive what customers want. Hospital administrators may think that patients want better food, but patients may be more concerned with nurse responsiveness.
2. Gap between management perception and service-quality specification –
Management might correctly perceive customers' wants but not set a performance standard. Hospital administrators may tell the nurses to give "fast" service without specifying it in minutes.

20. 4. Gap between service delivery and external communications
3. Gap between service-quality specifications and service delivery
Personnel might be poorly trained, or incapable of or unwilling to meet the standard; or they may be held to conflicting standards, such as taking time to listen to customers and serving them fast.
4. Gap between service delivery and external communications
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 communications have distorted the customer‘s expectations.
5. Gap between perceived service and expected service –
This gap 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.

21. Managing service quality

22. Managing product support services
Thus far we have focused on service industries. Not less important are product-based industries that must provide a service bundle. Manufacturers of equipment—small appliances, office machines, tractors, mainframes, airplanes—all have to provide product support services.
Product support service is becoming a major battleground for gaining competitive advantage with key service differentiators—ordering ease, delivery, installation, customer training, customer consulting, and maintenance and repair.
Some equipment companies, such as Caterpillar Tractor, make over 50 percent of their profits from these services. In the global marketplace, companies that make a good product but provide poor local service support are seriously disadvantaged.
Firms that provide high-quality service outperform their less-service-oriented competitors.

23. Customers have three specific worries:
The company must define customer needs carefully in designing a service support program.
Customers have three specific worries:
They worry about reliability and failure frequency. A farmer may tolerate a combine (ماشين‌ درو وخرمن‌كوبي‌، ) that will break down once a year, but not two or three times a year.
They worry about downtime. The longer the downtime, the higher the cost. The customer counts on the seller's service dependability—the seller's ability to fix the machine quickly, or at least provide a loaner.
They worry about out-of-pocket costs. How much does the customer have to spend on regular maintenance and repair costs?

24. End of Chapter 3