LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1) How do we define and classify services, and how do they differ from goods?
2) What are the new services realities?
3) How can we achieve excellence is services marketing?
4) How can we improve service quality?
5) How can goods marketers improve customer-support services?
SUMMARY
1. A service is any act or performance that one party can offer to another that is
2. Services are intangible, inseparable, variable, and perishable. Each characteristic poses
challenges and requires certain strategies. Marketers must find ways to give tangibility to
3. Marketing of services faces new realities in the 21st Century due to customer
4. In the past, service industries lagged behind manufacturing firms in adopting and using
marketing concepts and tools, but this situation has now changed. Achieving excellence
5. Top service companies excel at the following practices: a strategic concept, a history of
6. Superior service delivery requires managing customer expectations and incorporating
C H A P T E R
13
DESIGNING AND
MANAGING SERVICES
7. Even product-based companies must provide postpurchase service. To provide the best
OPENING THOUGHT
The teaching of “services marketing” can pose a challenge to the instructor by the very
nature of a “service”—its intangibility, inseparability, variability, and perishability.
Challenges to the instructor in teaching this course lies in connecting these concepts to
the students in ways that they will relate to and understand. Students use services
everyday, in their role as a student, it means that they are receiving a service—
instruction.
Students may have some difficulty in conceptualizing the service dimensions of
reliability, responsiveness, assurance, empathy, and tangibles as part of the service
marketing dimensions. The instructor is encouraged to use multiple examples of excellent
service companies, guest speakers, and personal or student real life examples to illustrate
the challenges facing the marketing of services to the public.
TEACHING STRATEGY AND CLASS ORGANIZATION
PROJECTS
1. At this point in the semester-long project, those students who have selected a
2. Using the information on marketing research covered in this text, ask the students to
prepare a teaching SERQUAL® form to be administered in all the classes taught in
3. Sonic PDA Marketing Plan: All marketers need to develop a service strategy when
preparing their marketing plans. Marketers of intangible products must consider how
to manage customer expectations and satisfaction. Marketers of tangible products
must create suitable support services. You are planning product support services for
Sonic’s PDA. The following questions will help you map your service strategy:
• What support services do buyers of PDA products want and need? Consider what
Sonic’s competitors are doing in this area.
Summarize your recommendations in a written marketing plan or enter the information in
the Product Offering and Service section of the Marketing Mix heading in Marketing
Plan Pro.
ASSIGNMENTS
As the opening vignette indicated, The Mayo Clinic has been built as one of the most
powerful services brands on its firmly held belief and focus on the experience of the
patient. As one staff member explained, “People don’t come to the hospital alone.” In
small groups, students should review their local hospitals (especially the one on campus)
to see if their local hospital adheres to the tenants’ of a good service provider. A starting
point is an examination of the hospital’s mission statement, beliefs, and patient rights
policies (if available).
Search and experience qualities are two characteristics of service providers. Yet each
provides consumers with differing “clues” as to the competency of the service provider.
In this assignment, students are to identify two different service providers—one that is
high in search qualities and one that is high in experience qualities. Using the consumer
expectancy-value model and non-compensatory models of consumer choice covered in
Chapter 6 of this text, students should outline their understanding of how consumers
select a service high in search qualities and high in credence qualities.
END–OF–CHAPTER SUPPORT
MARKETING DEBATE—Is Service Marketing Different From Product Marketing?
Some service marketers vehemently maintain that service marketing is fundamentally
different from product marketing and that different skills are involved. Some traditional
product marketers disagree, saying, “good marketing is good marketing.”
Take a position: Product and services marketing are fundamentally different versus product
and services marketing are highly related.
have a role in this process, participate in the successful outcome, and that the service marketer
must adjust for fluctuating demand and supply timing, are different from product marketers.
Marketing Excellence: THE RITZ CARLTON
1) How does The Ritz-Carlton match up to competitive hotels? What are the key
differences?
Suggested Answer: The Ritz-Carlton occupies a distinctive “niche” in consumer/customer
expectations and performance—ultimate luxury and unparalleled customer service. The Ritz–
Marketing Excellence: MAYO CLINIC
1) Explain why Mayo Clinic is so good at customer service. Why has it been so
successful at practicing medicine differently from other hospitals?
Suggested Answer: Student answers will vary but good students will cite and refer to the 5
2) Do conflicts of interest exist between wanting to make your patient happy and
providing the best medical care possible? Why or why not?
Suggested Answers: Student answers will vary and a strong case can be made for both.
medical care.
MARKETING DISCUSSION
Colleges, universities, and other educational institutions can be classified as service
organizations. How can you apply the marketing principles developed in this chapter to your
school? Do you have any advice as to how they could become better service marketers?
Student answers will differ. However, the following marketing principles developed in the
chapter were:
• A service differs from a product in its intangibility, inseparability, variability, and
perishability.
DETAILED CHAPTER OUTLINE
As product companies find it harder and harder to differentiate their physical products, they
turn to service differentiation. Many find significant profitability in delivering superior service,
create memorable customer experiences.
THE NATURE OF SERVICES
The Bureau of Labor Statistics reports that the service-producing sector will continue to
be the dominant employment generator in the economy, adding 20.5 million jobs by
2010.
Service Industries Are Everywhere
A) Government sector
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. Its production may or may not be
tied to a physical product.
A) Manufacturers, distributors, and retailers can provide value-added services or simply
excellent customer service to differentiate themselves.
Categories of Service Mix
The service component can be a minor or major part of the total offering. We distinguish
five categories of service offerings:
A) Pure tangible goods
B) Tangible goods with accompanying services
C) Hybrid
D) Major service with accompanying minor goods and services
E) Pure service
1) Services vary as to whether they are:
3) Some services require the client’s presence and some do not.
4) Services differ as to whether they meet a personal need or a business need. Service
5) Service providers differ in their objectives (profit and nonprofit)
2) In the middle are goods and services high in experience qualities—characteristics
the buyer can evaluate after purchase.
3) Goods and services high in credence qualities—characteristics the buyer normally
2) Service consumers rely heavily on price, personnel, and physical cues to judge
quality.
4) Because of the switching costs involved, much consumer inertia can exist. It can
be challenging to entice a customer away from a competitor.
Distinctive Characteristics of Services
Services have four distinctive characteristics that greatly affect the design of marketing
programs: intangibility, inseparability, variability, and perishability.
Intangibility
A) Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before
they are bought.
B) To reduce uncertainty, buyers will look for evidence of quality. They will draw
inferences about quality from the place, people, equipment, communication material,
symbols, and price that they see.
Inseparability
A) Services are typically produced and consumed simultaneously.
B) Because the client is also present as the service is produced, provider-client interaction
is a special feature of service marketing.
C) Several strategies exist for getting around this limitation:
1) Work with larger groups
Variability
A) Because they depend on who provides them and when and where they are provided,
services are highly variable.
B) To reassure customers, some firms offer service guarantees that may reduce consumer
perception of risk.
Perishability
A) Services cannot be stored.
B) Perishability is not a problem when demand is steady.
demand side:
1) Differential pricing
2) Non-peak demand
3) Shared services
4) Facilities for future expansion
THE NEW SERVICE REALITIES
At one time, service firms lagged behind manufacturing firms in their use of marketing
because they were small or professional businesses that did not use marketing, or faced
large demand or little competition. This has changed. Some of the most skilled marketers
are now service firms.
A Shifting Customer Relationship
Not all companies, however, have invested in providing superior service, at least not to
all customers.
Customer Empowerment
Most importantly, the Internet has empowered customers by letting them vent their rage about
bad service—or reward good service—and send their comments around the world with the
dissatisfaction from occurring in the future.
Customer Coproduction
The reality is that customers do not merely purchase and use a service; they play an
active role in its delivery.
i
Their words and actions affect the quality of their service
experiences and those of others, and the productivity of frontline employees.
Customers often feel they derive more value, and feel a stronger connection to the service
provider, if they are actively involved in the service process.
Preventing service failures is crucial, since recovery is always challenging. One of the biggest
problems is attribution—customers often feel the firm is at fault or, even if not, that it is still
responsible for righting any wrongs.
1. Redesign processes and redefine customer roles to simplify service encounters.
2. Incorporate the right technology to aid employees and customers.
SATISFYING EMPLOYEES AS WELL AS CUSTOMERS
Excellent service companies know that positive employee attitudes will promote stronger
customer loyalty.
Instilling a strong customer orientation in employees can also increase their job
satisfaction and commitment, especially if they have high customer contact.
Employees thrive in customer-contact positions when they have an internal drive to
A) pamper customers,
C) develop a personal relationship with customers, and
D) deliver quality service to solve customers’ problems.
Given the importance of positive employee attitudes to customer satisfaction, service
companies must attract the best employees they can find.
ACHIEVING EXCELLENCE IN SERVICES MARKETING
Marketing Excellence
Marketing excellence with services requires excellence in three broad areas: external,
internal, and interactive marketing (see Figure 13.5).
A. External marketing describes the normal work of preparing, pricing,
distributing, and promoting the service to customers.
Best Practices of Top Service Companies
In achieving marketing excellence with their customers, well-managed service companies
share a strategic concept, a history of top-management commitment to quality, high
standards, profit tiers, and systems for monitoring service performance and customer
complaints.
A. Strategic Concept
Companies such as Marriott, Disney, and USAA have a thorough commitment to
service quality. Their managements look monthly not only at financial performance,
but also at service performance.
C. High Standards
The best service providers set high quality standards.
We can judge services on customer importance and company performance.
• Importance-performance analysis rates the various elements of the service
bundle and identifies required actions.
Table 13.2 lists the 4 quadrants for performance ratings for an auto dealership.
Satisfying Customer Complaints
On average, 40% of customers who suffer through a bad service experience stop doing
business with the company.
Differentiating Services
Finally, customers who view a service as fairly homogeneous care less about the provider
than about the price.
Innovation with Services
Many companies are using the Web to offer primary or secondary service features that
were never possible before.
MANAGING SERVICE QUALITY
The service quality of a firm is tested at each service encounter.
Customer Expectations
A) Customers form service expectations from many sources:
1) Past experiences
2) Word-of–mouth
3) Advertising
B) In general, customers compare the perceived service with the expected service.
1) If the perceived service falls below the expected service customers are
disappointed.
Marketing Memo: Recommendations for Improving Service Quality
Lists the ten lessons that are essential for improving service quality across
service industries: listening, reliability, basic service, service design, recovery,
surprising customers, fair play, teamwork, employee research, servant
leadership.
Managing Customer Expectations
Customers form service expectations from many sources, such as past
experiences, word of mouth, and advertising.
1) Gap between consumer expectations and management perception.
E) Based upon this service-quality model, these researchers identified the following five
determinants of service quality, in order of importance:
1) Reliability
F) Based on these five factors, the researchers developed the 21-item SERVQUAL scale.
One dynamic process model of service quality was based on the premise that customer
perceptions and expectations of service quality change over time, but at any one point
1. Increasing customer expectations of what the firm will deliver can lead to improved
perceptions of overall service quality.
2. Decreasing customer expectations of what the firm should deliver can also lead to
improved perceptions of overall service quality.
Long-term service relationships can have a dark side. An ad agency client may feel that
over time the agency is losing objectivity, becoming stale in its thinking, or beginning to
take advantage of the relationship.
Incorporating Self-Service Technologies (SSTs)
As with products, consumers value convenience in services.
A) Many person-to-person interactions are being replaced by self-service technologies.
MANAGING PRODUCT-SUPPORT SERVICES
No less important than service industries are product-based industries that must provide a
service bundle. Manufacturers of equipment—small appliances, office machines, tractors,
Marketing Memo: Assessing e-service quality
Defining service quality for online services included the core dimensions of regular
service quality were: efficiency, fulfillment, reliability, and privacy.
Identifying and Satisfying Customer Needs
The company must define customer needs carefully in designing a service support
program.
A) Customers have three specific worries:
1) They worry about reliability and failure frequency.
2) They worry about downtime.
F) A manufacturer can offer and charge for product support services in different ways.
1) It can provide a standard offering plus a basic level of services.
2) If the customer wants additional services, it can pay extra or increase its annual
purchases to a higher level, in which case the additional services would be at extra
Postsale Service Strategy
The quality of customer service departments varies greatly. In providing service, most
companies progress through a series of stages from simply transferring customer calls to
Customer Service Evolution
Manufacturers usually start by running their own parts-and-service departments.
The Customer Service Imperative
Customer-service choices are increasing rapidly, however, and equipment manufacturers