Chapter 11 – Designing and Managing Services
I Chapter Overview/Objectives/Outline
A. Overview
As the United States moves increasingly toward a service economy and beyond, marketers
and supply capacities better in the face of service perishability.
Because services generally are intangible, customers perceive them as a more risky proposition
and evaluation more difficult. Accordingly, they tend to rely more on personal references or
information sources, reputation (brand name and image), and the price and/or facilities of the
marketing concepts, but this is changing. Services marketing strategy calls not only for external
marketing but also for internal marketing to motivate employees, and interactive marketing to
create skills in the service providers. Further, in the future customers will use more technical
and functional criteria to judge the quality of services.
quality, and find ways to increase service productivity without reducing the perceived service
level.
B. Learning Objectives
Learn how to define and classify various services.
Understand the distinctive characteristics of services.
C. Chapter Outline
I. Introduction
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II. The Nature of Services
services based upon quality)
1. Pure tangible good – no accompanying service (e.g. toothpaste)
2. Tangible good with accompanying services (e.g. cell phone)
restaurant)
travel)
5. Pure service (degree of people and equipment based service activity
provides an important variable in the goods-to-service mix) (e.g.
babysitting)
B. Distinctive characteristics of services
1. Intangibility – services cannot be seen, heard, touched, tasted or felt. A
demonstrated via physical evidence and presentation.
3. Variability – the quality of a service depends on when, where, and by
the service logistics knowing that standards may be a combination of
make it actionable.
4. Perishability – services cannot be stored for later use. There are several
III. The New Services Realities
1. Customer Empowerment
select the services they desire
b) Internet has provide consumers with more information and
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experiences. (Refer to “Marketing Skills insert “Service
recovery”)
2. Customer Production
behavior is not the same as the employee. One study estimated
customer failures
3. Satisfying Employees as Well as Customers
a) If employee is satisfied, in increases the chances of the employee
satisfying the customer. Some employee initiatives include:
(1) Pamper the customer
(2) Accurately identify customer needs
(3) Develop a personal relationship with the customer
proper training, monitor employee satisfaction, support and
reward good performance
B. Marketing Excellence – 3 requirements: External, Internal and Interactive
1. External Marketing – Managing the marketing mix
2. Internal Marketing – Through a variety of methods (e.g. training,
marketing effort.
3. Interactive Marketing – employee’s skill in serving the customer
expectation
c) Employee must be flexible and empowered to adapt to the
may inhibit the service delivery
4. Well-managed service companies share similar characteristics
a) Strategic concept – “customer obsessed”
b) Top Management Commitment
c) High Standards
benefits
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e) Monitoring systems – Audit performance of themselves as well
as that of the competition. Collect “Voice of Customer” (VOC)
measurements to probe customer satisfiers and dissatisfiers
president”
C. Differentiating Services
1. Primary service package meets customer expectation
2. Secondary service features are additional to primary and hopefully
exceed customer expectation thereby providing differentiation
switching)
A. Managing Customer Expectations
1. Five gaps from service quality model created by Parasurman, Zeithaml,
and Berry (refer to figure 11.3 in text)
a) Gap between consumer expectation and management perception
needs, and service quality specifications
c) Gap between service quality specifications and service delivery
d) Gap between service delivery and external communication to
consumer
e) Gap between perceived (i.e., the experience) and expected
service
B. Incorporating Self-Service Technologies (SSTs)
1. Many person-to-person service interactions being replace by technology.
(ATM, Radio Frequency Identification or RFID enabled technology such
as recognition at gas pumps, open-road tolling)
2. Adoption of technology raises initial costs but subsequent cost savings
justify investment.
convenience and decrease time
5. Satisfying customer complaints
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the 5% only half receive satisfactory resolution
b) Studies also show that a satisfied customer on average will tell
three people about their experience while dissatisfied customers
c) Speed of resolution affects loyalty
(1) 34% with a resolved major complaint and 52% with a
resolved minor complaint will buy from the same
organization again
(3) Organizations that encourage disappointed customers to
complain while empowering employees to remedy the
situation immediately achieve higher revenues and profits
systematically
6. Satisfying both employees and customers
a) Positive employee attitudes promote stronger customer loyalty
b) Requires training and empowerment
c) Can be stressful for employees
V. Managing Product –Support Services – product services can be an excellent way to
differentiate the company
A. Identifying and Satisfying Customer Needs
1. Customers worry about three things:
a) Reliability and failure frequency
b) Downtime duration (the longer the downtime the higher the cost,
which leads to concerns over service dependability)
c) Out-of-pocket costs (maintenance and repair)
2. Buyer attempts to estimate the life-cycle cost, which is the cost to
purchase the product plus the discounted cost of maintenance and repair
less the discounted salvage value.
3. Company must identify services customers value most and their relative
importance.
4. Company can offer and charge for product-support services in different
ways
a) Standard offering plus basic service, then charge extra for
additional services
b) Service Contracts or extended warranties
B. Post-sale Service Strategy
1. Some customers request post-sale service while some companies
proactively offer
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have:
a) Economies of scale
b) More locations allowing them to be closer and more responsive
to the customer
c) Usually offer lower prices, faster service, and more extensive
services
VI. Executive Summary
II. Lecture
“Services Marketing Takes a Turn”
This discussion focuses on the changing role of strategy in the important services marketing
setting and the broader value of effective services marketing.
Teaching Objectives
marketing.
Develop an understanding of some of the areas where service marketing has changed
and become effectively marketing-oriented.
Role of service strategies and policies in helping the firm achieve a better market
position.
Discussion
tourism in the United States, there has been little effort to market it properly. In fact, many
international competitors for the international tourism dollar place far more creativity and raw
spending on tourism than the United States. The United States ranks 33rd in the world in
marketing dollars spent on tourism, coming just after Tunisia.
cities, states, and firms jumped on the tourism bandwagon. They recognized that even though
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tourism was the second largest industry in the U.S., the lack of a unified marketing approach
take a position on the matter. Further, the importance of marketing in the process is becoming
even more evident in discussions throughout the United States. Concerns are rising as we look
at our infrastructure in terms of whether or not it provides a pleasing situation for visitors.
Unfortunately, even before the recent security concerns, customs officials and others at airports
There is, however, an effort in many areas to spotlight cultural resources that attract tourists.
Many top proponents of American culture are developing very marketing-oriented stances,
portraying the vital role of America’s cultural heritage as a major treasure that deserves to be
carefully marketed. Increasingly, there is also an interest in the development of a national
strategic marketing analysis.
interest to experience.
Garrison Keillor, of “Prairie Home Companion” fame, and one of the most important figures in
American culture today, points out that while infrastructure, an educated workforce, and
superior technology are important to the health of travel and tourism, in the final analysis most
people travel to America to experience and celebrate its diverse cultural heritage.
marketing to be only the tip of the iceberg, we need to take a macro approach in tourism
marketing by planning and developing optimum, long-term marketing strategies for the
tourism industry, focusing on the best in our culture rather than some of the less savory sides of
American life.
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