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Problem: narrow exposure of managers to the variety of service industries; managers perceive their
service as unique; management personnel is usually inbred; as a result, marketing thought in the
field of services is underdeveloped.
E.g., hoteliers often spend their whole life in the industry or even one company, most airline
managers have grown up in the commercial aviation industry, bankers and hospital administrators
usually work within the confines of banking and health care, respectively.
Managers from manufacturing sector find themselves unprepared to deal with servicing problems.
Services are neither a homogeneous group, nor different in-between according to industry
classification. Services can be segmented into clusters that share certain marketing-relevant
characteristics.
Classifications.
Import from tangible products domain:
- Copelands convenience, shopping, specialty goods. (Retail service institutions can also use this
approach; e.g., from financial services providers to restaurants).
- Durability. (For services: durability of benefits is relevant to repurchase frequency).
- Consumer/industrial. (Different evaluation of competing alternatives, purchasing procedures
and usage behavior is also transferable to services).
Operations approach to classification: every service is different (insisting that airlines marketing
has nothing to do with banks, insurance, motels, etc.).
However, marketing views demonstrate a lot of similarities in sharply different services; valid
classification highlights implications for managers concepts and strategies can be shared between
industries.
Classification will have managerial value if it offers strategic insight i.e. implications for
managers. This includes both the core and supplementary services.
CATEGORIZING SERVICE PROCESS:
WHAT IS THE NATURE OF THE SERVICE ACTIVITY?
Different types of processes result in different levels of customer involvement.
If services are deeds, acts, or performances, two questions arise:
- at whom (or what) is the activity directed;
- is the activity tangible or intangible.
What is the nature of the
service act?
Tangible actions
Intangible actions
I. People processing.
Managers should think about the process and output in terms of what happens to the customer (or
other object process) to identify what benefits are being created.
Reflecting on the service process itself helps to identify some of the non-financial costs time,
mental and physical effort, and even fear and pain that customers incur in obtaining the services.
Critical factors:
- moving to the service factory (or service people going to clients);
- getting into contact and cooperation;
II. Possession processing.
Frequently quasi-manufacturing operations.
The services are the entire chain of activities that may take place during the lifetime of the object in
question.
Receivers are not necessary to be present.
III. Mental stimulus processing.
Strong ethical standards and careful oversight may be required.
Receivers physical presence is not necessary, but communication/participation is required.
IV. Information processing.
Customer involvement is determined by traditions and personal desire; operationally it is not
required.
Insights and implications.
The model helps answering a question what business are we in? and formulating the benefits
provided by services to the users.
Customer satisfaction is influenced by:
- encounters with service personnel;
- appearance and features of service facilities both exterior and interior;
- interactions with self-service equipment;
- characteristics and behavior of other customers.
Advancement of telecommunication forms a uniform channel for informational-type services
delivery - internet.
Trend is the move from high-contact service into a low-contact with offering customers greater
convenience.
HOW IS THE SERVICE DELIVERED?
Issues:
- the current method of delivery and
- the number of distribution sites.
Key question: does the firm currently require customers to be in direct physical contact with
personnel, equipment, and facilities?
If the firm does require direct physical contact, do customers have to visit the facilities of the
service organization or will the latter send personnel and equipment to customers own sites?
Alternatively, can transactions between provider and customer be completed at arms length?
Another issue: distribution does the company require one or multiple distribution sites?
Nature of interaction b/w
customer and service
organization
Customer goes to service
organization
Service organization
comes to customer
Customer and service
organization transact at
arms length (mail or
through Internet)
Theater;
Barbershop.
Lawncare service;
Pest control service;
Taxi
Credit card company;
Local TV station.
Multiple sites
-
Bus service;
Fast-food chain.
Mail delivery;
Auto club road service.
Broadcast network;
Telephone company.
Electricity;
Natural gas;
Telephone;
Hospital maternity unit;
Police and fire emergencies
Accounting and tax preparation;
Passenger transportation;
Hotels/motels;
Restaurants;
Theaters.
Narrow
-
Insurance;
Legal services;
Banking;
Laundry and dry cleaning.
Managing demand is the major challenge for many service marketers, especially in peopleprocessing and possession-processing services when opportunities to manage the level of physical
capacity (facilities or personnel) are tightly constrained.
Questions, managers should answer:
Are demand fluctuations cyclical, what is the cycle period?
What are the underlying causes of fluctuations?
Do fluctuations reflect customer habits that can be changed by marketing? Or are they formed by 3d
parties (working or classroom hours)? Or random events?
Smoothing demand is done through marketing strategies that affect customer behavior or queuing
system (which inventories demand rather than supply). Reservation system can also be
implemented. (What other implementations are possible to smooth demand?).
WHAT ARE THE ATTRIBUTES OF THE SERVICE EXPERIENCE?
Equipment- or people-based, or both.
The parameters are rather continuous.
Insights and implications.
The greater the degree of physical involvement by the customer in the service process, the more
likely service personnel, equipment, and facilities are to form an important part of the service
experience.
Customers may choose suppliers by the appraisal of these elements and evaluation of the output.
Managers may get insights from other service businesses with similar facilities/people emphasis.
(E.g. hospitals may import from hotels, public accounting firm management consulting company).
However, marketing strategies used by one type of service in an industry may not be generalizable
to other services offered by that same industry (e.g. conventional and electronic banking, hotels and
motels).
People based services are harder to manage than equipment-based (in general).
General trend switch to self-service (in what industries?).
WHAT TYPE OF RELATIONSHIPS DOES THE SERVICE ORGANIZATION HAVE WITH ITS
CUSTOMERS?
Continuous relationship or discreet transaction?
Nature of service delivery
Continuous delivery of
service
Discrete transactions
Low
Legal services;
Health care/surgery;
Architectural design;
Real estate agency;
Taxi service;
Beautician;
Plumber;
Education (tutorials).
Telephone service;
Hotel services;
Retail banking (excluding major
loans);
Good restaurant.
5
Public transportation;
Routine appliance repair;
Fast-food restaurant;
Movie theater;
Spectator sports.
Services analysis frameworks