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13 Designing and Managing Services

Chapter Questions

How do we define and classify services and how do they differ from goods? What are the new services realities? How can we achieve excellence in services marketing? How can we improve service quality? How can goods marketers improve customer support services?

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Is Service Marketing Different From Product Marketing?

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Services are going to move in this decade to being the front edge of the industry

LouisV. Gerstner IBMs former CEO

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Illustrates the changes sweeping across industry in the 21st century. Many business that were once viewed as manufacturing giants are shifting their focus to services. IBM has led the pack. Actions of current IBM CEO, have reinforced this focus on service at several levels

IBM has been led in the expansion of its outsourcing businesses and accentuated its focus on client solutions. Its purchase of PriceWaterhouseCoopers to gain broader strategic services consulting expertise and in its focus in service products and solutions. IBM is the largest service business in the world, its the global leader in information technology (IT) services and consulting with approximately 200,000 services professionals around the world.

IBM coined the term Service Science, Management and Engineering (SSME) often called service science for short, which integrates key disciplines required to design, improve, and scale service systems. To achieve this IBM believes future graduates should be T shaped

T-Shaped Professionals (Broad and Deep)

Many team-oriented service projects completed
(resume: outcomes, accomplishments & awards)

Many disciplines
(understanding & communications)

Many systems
(understanding & communications)

Deep in at least one discipline

Deep in at least one system

(analytic thinking & problem solving)

(analytic thinking & problem solving)

Why Study Services?

Why Study Services?

Services dominate most economies and are growing rapidly:

In emerging economies, the service output is growing rapidly and often represents at least half of the gross domestic product (GDP).
Services account for more than 60% of GDP worldwide Almost all economies have a substantial service sector

In most of the more highly developed nations, services account for between twothirds and three-fourths of the GDP.

Most new employment is provided by services Fastest growth expected in knowledge-based industries: those that are intensive users of high technology and/or have relatively skilled workforces. Significant training and educational qualifications required, but employees will be more highly compensated Will service jobs be lost to lower-cost countries? Yes, some service jobs can be exported

Strongest growth area for marketing Understanding services offers you a personal competitive advantage

Services Dominate the Global Economy

Contribution of Service Industries to GDP Globally

Manufacturing 32%

Services 64%

Agriculture
4%
Source: The World Factbook 2008, Central Intelligence Agency

Which are the worlds most service dominated economies?

Cayman Islands (95%) a group of small, British-administered islands in the Western Caribbean, known for both tourism and offshore financial and insurance services. China (40%) is dominated by a substantial agricultural sector and booming manufacturing and construction industries. However, chinas economic growth is now leading to increased demand for business and customer services. Investing heavily in service infrastructure, including shipping facilities and new airport terminals.

Estimated Size of Service Sector in Selected Countries

Jersey (97%), Cayman Islands (95%), Hong Kong (92%) Bahamas (90%), Bermuda ( 89%), Luxembourg (86%) USA (79%), Fiji (78%), Barbados (78%), France (77%), U.K. (76%) Japan (72%), Taiwan (71%), Australia (71%), Italy (71%) Canada (70%), Germany (69%), Israel (67%) South Africa (65%), Brazil (66%), Poland (66%) Turkey (63%), Mexico (62%) Argentina (57%), Russia (55%) Malaysia (46%), Chile (45%) Indonesia (41%), China (40%) Saudi Arabia (35%)

Services as Percent of GDP

10 20 30 40 50 60 70 80 90

Source: The World Factbook 2008, Central Intelligence Agency

Why Study Services?

Powerful forces are transforming service markets

Government policies, social changes, business trends, advances in IT, internationalization Forces that reshape:

Demand
Supply The competitive landscape Customers choices, power, and decision making

Transformation of the Service Economy

Social Changes Government Policies Business Trends

Advances In IT

Globalization
New markets and product categories Increase in demand for services More intense competition

Innovation in service products & delivery systems, stimulated by better technology Customers have more choices and exercise more power Success hinges on: Understanding customers and competitors Viable business models Creation of value for customers and firm Increased focus on services marketing and management

Factors Stimulating Transformation of the Service Economy

Social Changes Government Policies

Business Trends

Advances In IT

Globalization

Changes in regulations Privatization New rules to protect customers, employees, and the environment New agreement on trade in services

Factors Stimulating Transformation of the Service Economy

Social Changes Government Policies

Business Trends

Advances In IT

Globalization

Rising consumer expectations More affluence More people short of time Increased desire for buying experiences vs. things Rising consumer ownership of high tech equipment Easier access to information Immigration Growing but aging population

Factors Stimulating Transformation of the Service Economy

Social Changes
Government Policies Push to increase shareholder value Emphasis on productivity and cost savings Manufacturers add value through service and sell services More strategic alliances and outsourcing Focus on quality and customer satisfaction Growth of franchising Marketing emphasis by nonprofits

Business Trends

Advances In IT

Globalization

Factors Stimulating Transformation of the Service Economy

Social Changes Government Policies Growth of Internet Greater bandwidth Compact mobile equipment Wireless networking Faster, more powerful software Digitization of text, graphics, audio, video Business Trends

Advances In IT

Globalization

Factors Stimulating Transformation of the Service Economy

Social Changes Government Policies More companies operating on transnational basis Increased international travel International mergers and alliances Offshoring of customer service Foreign competitors invade domestic markets Business Trends

Advances In IT

Globalization

What is a Service?
A service is any act of performance that one party can offer 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.

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Services are Everywhere

A) Government sector B) Private nonprofit sector C) Business sector D) Manufacturing sector E) Retail sector Manufacturers, distributors, and retailers can provide value-added services or simply excellent customer service to differentiate themselves. Many pure service firms are now using the Internet to reach customers, some are purely online.
Zipar car sharing in Europe as a means to extend public transportation. Zipcar offers its fast-growing customer base a practical, environmentally friendly alternative to car ownership. Customers book online and use a sophisticated reservation system to reserve a specific car in their neighborhood.
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Definition of services

Services are economic activities offered by one party to another. Often time-based, performances bring about desired results to recipients, objects, or other assets for which purchasers have responsibility.

In exchange for money, time and effort, service customers expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.

Definition of services

Services

are economic activities offered by one party to another most commonly employ time-based performances to bring about desired results

In exchange for their money, time, and effort, service customers expect to obtain value from

access to goods, labor, facilities, environments, professional skills, networks, and systems;
normally do not take ownership of any of the physical elements involved.

Value Creation is Dominated by Intangible Elements

Services tend to be more intangible than manufactured products, and manufactured products tend to be more tangible than services Ex: the fast food industry, while classified as a service, also has many tangible components such as the food, the packaging, and so on. Automobiles, while classified within the manufacturing sector, supply many intangibles such as transportation and navigation services. The intangible elements including the labor and expertise of services employees that dominate the creation of value in service performances

Value Creation is Dominated by Intangible Elements

Physical Elements High

Salt Detergents CD Player Wine Golf Clubs New Car Tailored clothing Fast-Food Restaurant

Plumbing Repair Health Club Airline Flight Landscape Maintenance Consulting Life Insurance Internet Banking

Low Intangible Elements

High

Source; Adapted from Lynn Shostack

Categories of Service Mix

Pure tangible good: is a tangible good such as soap, toothpaste, or salt with no accompanying services.

Good w/ accompanying services: is a tangible good, like a

car, computer, or cell phone, accompanied by one or more services.

Hybrid: is an offering, like a restaurant meal, of equal parts goods and services. A major service with accompanying minor goods and services refers to a major service, like air travel, with additional services or supporting goods such as snacks and drinks. This offering requires a capital-intensive goodan airplanefor its realization, but the primary item is a service. A pure service is primarily an intangible service, such as babysitting, psychotherapy, or massage

Service Distinctions
The range of service offerings makes it difficult to generalize without a few further distinctions Equipment-based or people-based(skilled, unskilled, or professional) Service processes Clients presence required or not Personal needs or business needs Objectives (profit or nonprofit) and ownership (private or public).
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Services Process Matrix

Concepts of service management should be applicable to all service organizations. For ex: hospital administrations could learn something about their own business from the restaurant and hotel trade

Services Process Matrix is one approach to foster understanding across service sectors and hopefully catalyze service innovation is to come up with classification schemes for services. One such classification, is the service process matrix, originally proposed by Roger Schmenner in 1986.

Services are classified under two dimensions: 1- Degree of labor intensity (vertical dimensions)
Defined as the ratio of labor cost to capital cost Capital-intensive services such as airlines and hospitals are found in the upper row because of their considerable investment in plant and equipment relative to labor costs. Services with high labor intensity are schools and retailers (mass services) which depends on the manual labor of educators and the retail managersemployees who perform the services. Such these services are found in the bottom row 2- Degree of interaction and customization (horizontal

dimension)

Ability of the service client to affect the value that is co-created Most professional services, (e.g., doctors, lawyers, and IT services) require a high-degree of customization Standardized services are the low-customization kind (e.g., clothes cleaning and auto repairs (service shops)) Little interaction between customer and service provider is needed when the service is standardized rather than customized.@

The four quadrants of the service process matrix have been given names as defined by the two dimensions to describe the nature of the services illustrated.

Service factories provide a standardized service with high capital investment, much like a line-flow manufacturing plant. Service shops permit more service customization, but they do so in a high a capital environment. Mass service customers will receive an undifferentiated service in a labor intensive environment Professional service will be given individual attention by highly trained specialists.

The Service Process Matrix

Degree of labor Intensity Degree of Interaction and Customization Low High Service Factory Service Shop * Airlines * Hospitals * Trucking * Auto repair * Hotels * Other repair services * Resorts and recreation
Mass Service * Retailing * Wholesaling * Schools * Retail banking Professional Service * Doctors * Lawyers * Accountants * Architects

Low

High

Managers of services in any category, share similar challenges, as noted in the following figure. Services with high capital requirements(low labor intensity), such as airlines and hospitals, require close monitoring of technological advances to remain competitive, also requires managers to schedule demand to maintain utilization of the equipment. Alternatively, managers of highly labor-intensive services, such as medical or legal professionals, must concentrate on personnel matters.

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Service A Process Perspective

Differences exist amongst services depending on what is being processed In services, people, physical objects and data can be processed The nature of the processing can be tangibles or intangibles

Tangibles actions: are performed on peoples bodies or to their physical possessions. Intangibles actions: are performed on peoples minds or to their intangible assets

Classification of services into

People processing Possession processing Mental stimulus processing Information processing

4 Categories of Services

People Processing
Services directed at peoples bodies, Ex: health care, passenger transportation, restaurants, beauty salons, exercise clinics

Customers must:
physically enter the service factory, a physical location where people or machines (both) create and deliver service benefits to customers. cooperate actively with the service operation

Managers should think about process and output from the customer s perspective
to identify benefits created and non-financial costs: Time, mental and physical effort

Possession Processing
customer s Involvement is limited to dropping off the item that needed treatment, requesting the service, explaining the problem, and later returning to pick up the item and pay the bill. customers are Less physical involvement Production and consumption are separable However, in some instances, the customer may prefer to be present during service delivery, perhaps wishing to supervise the hedge of cutting.

Mental Stimulus Processing

Services directed at peoples minds include education, news, information, professional advice (psychotherapy), entertainment (theaters and museums), and certain religious activities. Anything touching peoples minds has the power to shape attitudes and influence behavior. Ethical standards required:

Customers might be manipulated

Physical presence of recipients not required in a service factory

just mentally in communication with the information presented.@

Core content of services is information-based (whether music, voice or visual images)

Can be inventoried for consumption at a later date

Information Processing (intangible assets)

Not all information is processed by machines. Professionals in a wide variety of fields use their brains to perform information processing and packaging. Most intangible form of service May be transformed: Into enduring forms of service output as letters, reports,
plans, CD-ROMs, or DVDs

Line between information processing and mental stimulus processing may be unclear

Distinctive Characteristics of Services

Intangibility Inseparability Variability Perishability

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Characteristics of Services Compared to Goods

Intangibility

Heterogeneity

Simultaneous Production and Consumption

Perishability

Intangibility

Even after the service has been completed, customer may not fully comprehend the service performed. 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. 1) Therefore, the service providers task is to manage the evidence, to tangibilize the intangible. 2) Service companies can try to demonstrate their service quality through physical evidence and presentation. 3) Service marketers must be able to transform intangible services into concrete benefits.

The Disney Company is a master at tangibilizing the intangible and creating magical fantasies in its theme parks. Grand Royal, a hotel in Alex, that has been highly successful using its careful design to convey the classical and historical Roman personality of the hotel.

Physical Evidence and Presentation

Place People Equipment Communication material Symbols Price

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Table 13.1 Dimensions of Brand Experience

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Implications of Intangibility

Services cannot be inventoried and fluctuations in demand are often difficult to manage (tremendous demand for resort accommodations in December but little demand in July) Services cannot be easily patented

Services cannot be readily displayed or communicated to customers, therefore, quality may be difficult for consumers to assess. ( what to include in advertising and other promotional materials are challenging)
Pricing is difficult, the actual costs of a unit of service are hard to determine and the price-quality relationship is complex.

Inseparability

Where most goods are produced first, then sold and consumed , most services are sold first and then produced and consumed simultaneously. , e.g. a haircut, entertainment. Because the client is also often present, provider client interaction is a special feature of services marketing.

Implications of Simultaneous Production and Consumption

Mass production is difficult. The quality of service and customer satisfaction will be highly dependent on what happens in real time Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential ( the service can be delivered directly to the consumer in convenient locations)

1.

2.

3.

Several strategies exist for getting around the limitations of inseparability. The service provider can work with larger groups. The service provider can work faster and see more clients. The service organization can train more service providers and build up client confidence.

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Mashaweer started out as the first service company in Alex committed to running customers errands around the coastal city. It is not just about the service they provide, but also the way they provided it. the life blood of our company is good customer service, our strategy is simple and straightforward-your comfort says , Ahmed, a business partner, errands are run with high efficiency; and in way that positions them as a service with the values of being trust worthy, reachable, personal and effective. For example, delivery cars are equipped with GPS devices to ensure accurate tracking, along with a safe box to secure money and expensive objects. Mashaweer offers 24/7 hotline to meet any customers 'request. The demand for their services is uneven throughout the year: they are faced with a higher number of calls during the summer months. In order to match this above-normal number of calls, Mashaweer hires part-time employees to meet the high level of demand. Many of them are students who are on holiday during the summer. Mashaweer, has proven to be success, appealing to the modern sense that time is increasingly valuable.

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Mashaweer is a convenient service for customers in Alexandria, running errands to save them valuable time.

Heterogeneityvariabilty

Because the quality of services depend on who provides them and when and where and whom, services are provided, services are highly variable. Personalization of services increases their heterogeneous nature

Perceived quality-of-service varies from one client to the next

Implications of Heterogeneity

Service delivery and customer satisfaction depend on employee and customer actions Service quality depends on many uncontrollable factors such as the ability of customer to articulate his or her needs, the ability and willingness of personnel to satisfy those needs, the presence (absence) of others customers, and the level of demand for the service There is no sure knowledge that the service delivered matches what was planned and promoted

To reassure customers, some firms offer service guarantees that may reduce consumer perception of risk. There are three steps service firms can take to increase quality control:
1)

2)

Invest in good hiring and training procedures. e.g. Starbuck . Standardize the service-performance process throughout the organization. Prepare a service blueprint that depicts events and processes in a flowchart, map out the service process, the points

of customer contact, and the evidence of service from the customers point of view, with the objective
3)

of recognizing potential fail points. Monitor customer satisfaction.

Better trained personnel exhibit six characteristics

Competence: they possess the required skill and knowledge Courtesy: friendly, respectful and considerate Credibility: trustworthy Reliability: perform the service consistently and accurately Responsiveness: respond quickly to customers requests and
problems

Communication: they make an effort to understand the

customer and communicate clearly.

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Blueprinting:

A key tool used to design new services or redesign existing ones is a map of all the transactions constituting the service delivery process. A blueprint specifies in detail how a service process should be constructed and includes details as to what is visible to the customer, and where there are potential fail points in the service process. It suggests questions such as: what signage is necessary to facilitate customers actions? Are there transactions that can eliminated or made self-serve? Which transactions are potential fail-points?

Developing a Blueprint

Developing a Blueprint

Identify key activities in creating and delivering service in questions and then specify the linkages between these activities. Define big picture before drilling down to obtain a higher level of detail Distinguish between frontstage and backstage Clarify interactions and support by backstage activities and systems Identify potential fail points; take preventive measures; prepare contingency Pinpoint stages where customer scommonly have to wait

Advantages of Blueprinting

Service Blueprint components

Physical evidence

Customer actions

Line of interaction

Onstage contact Employee Actions Line of Visibility

Backstage contact Employee Actions Line of Internal interaction

Support processes

Service Blueprint of Luxury Hotel

Fitzsimmons, J.A. and Fitzsimmons, M.J. (2008),, Service Management, Operations, Strategy, Information Technology, 6 th Ed., McGraw-Hill, p.72.

At the top we find the physical evidence that customers will see (e.g., hotel exterior, uniform worn by bell person, and room dcor) and experience(e.g., waiting for check-in, watching tv, and eating meal). Activities in the first row above the line of interaction are customer-initiated steps, choices, and interactions the customer performs in the process of purchasing, consuming and evaluating the service. Any vertical flow line crossing the "line of interaction depicts a direct contact between the customer and the organization( service encounter) Above the line of visibility are actions in full view of the customer and thus onstage (e.g., checking in and taking delivery of ones bags) Below the line of visibility are activities that are backstage and not see by the customers, such as taking food orders over the telephone. Below the "line of internal interactions the support processes that generate questions concerning the capacity requirements of these back-office system, such as a reservation information system and Copyright 2012 Pearson Education 13-59 kitchen.

Perishability

Refers to the fact that services cannot be saved, stored, resold, or returned. Perishability is not a problem when demand is steady. When demand fluctuates service firms have problems. Demand or yield management is critical

Implications of Perishability

It is difficult to synchronize supply and demand with services

Several strategies can produce a better match between supply and demand. On the demand side: Differential pricing(Weekend and night rates for long-distance telephone calls) Non-peak demand McDonalds pushes breakfast service, hotels promote minivacation weekends. Complementary services: can provide alternatives to waiting customers, such as
automated teller machines in banks(On the Run)

Reservation systems: are a way to manage the demand level. Airlines, hotels On the supply side: Part-time employees( part-Time Employees from student ) Shifts ( Cellular Companies). Increased consumer participation(Oriental Weavers Carpets in Egypt has a branch
in Four Season Hotel, customers are participating in carpets designing)

Shared services or capacity:( At small airports, airlines share the same gates, ramps,
baggage, and ground personnel)

Facilities for future expansion

Services cannot be returned or resold

What is Service Quality?

There are a number of definitions that refer to the importance of the clients/customer expectations of quality compared to perceptions, for instance, many authors such as (Gronroos,1982; Lehtinen & Lehtinen, 1982; and the extensive focus group interviews conducted by Parasuraman, et al., (1985,1988,1991,1994) Gronroos (1984) defined service perceived quality as the outcome of an evaluation process, where the consumer compares his/her expectations with the service he/she has received. Parasuraman, et al., (1988) summarised that perceived service quality as a global judgment, or attitude relating to the superiority of the service; It is viewed as the degree and direction of discrepancy between customers perceptions and expectations. Perceptions are defined as consumers beliefs concerning the service received or experienced service , and expectations are defined as desires or what consumer wants from the service provider . If the perceived service falls below the expected service, customers are disappointed and dissatisfied.

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. 2) If the perceived service meets or exceeds their expectations they are apt to use the provider again. C) Successful companies add benefits to their offering that not only satisfy customers but also surprise and delight them. D) Delighting customers is a matter of exceeding expectations. Flawless service delivery is the ideal state for any service
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Figure 13.6 Service-Quality Model

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Knowledge Gap or listening (Gap1) refers to the difference between customers expectation and management perception. Standards Gap or policy gap or (Gap2) refers to the difference between management perception and service quality specifications set for service delivery. Delivery Gap or the service performance gap (Gap3) refers to the difference between service quality specifications set for service delivery and the actual quality of service delivery. Communications Gap (Gap4) refers to the difference between the actual quality of service delivered and the quality of service described in the firms external communication. Service Gap or customer gap (Gap5) refers to the difference between customers expectation of a service and perception of the service actually delivered.

Gaps Model of Service Quality

Provider Gap 1 Knowledge Gap or listening

CUSTOMER Expected Service Perceived Service COMPANY Gap 1: The Listening Gap

Company Perceptions of Consumer Expectations

Key Factors Leading to Provider Gap 1

Provider Gap 2
CUSTOMER

COMPANY

Customer-Driven Service Designs and Standards Gap 2: The Design and Standards Gap Company Perceptions of Consumer Expectations

Key Factors Leading to Provider Gap 2

Provider Gap 3
CUSTOMER

COMPANY

Service Delivery Gap 3: The Performance Gap

Customer-Driven Service Designs and Standards

Key Factors Leading to Provider Gap 3

Provider Gap 4
CUSTOMER

COMPANY

Gap 4: The Communication Gap External Service Delivery Communications to Customers

Key Factors Leading to Provider Gap 4

Gaps Model of Service Quality

Table 13.3 Factors Leading to Customer Switching Behavior

The service outcome, and customer loyalty, are influenced by a host of variables:

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Dimensions of Service Quality

Tangibles Reliability
Appearance of physical elements Dependable and accurate performance Promptness; helpfulness

Responsiveness
Assurance Empathy

Competence, courtesy, credibility, security

Easy access, good communication, understanding of customer

Tangibles: physical facilities, equipment, appearance of personnel. Example: cleanliness. Reliability: ability to perform the promised service dependably and accurately. Example: receive mail at same time each day. Responsiveness: willingness to help customers and provide prompt service. Example: avoid keeping customers waiting for no apparent reason. Assurance: knowledge and courtesy of employees and their ability to inspire trust and confidence. Example: being polite and showing respect for customer.. Empathy: caring, individualised attention the company provides its customers. Example: being a good listener

Customer Expectations
Box 13.3: SERVQUAL Attributes

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Based on these five factors, the researchers developed the 21-item SERVQUAL scale. They also note that there is a zone of tolerance or range where consumer perceptions on service dimensions would be deemed satisfactory, anchored by the minimum level consumers would be willing to accept and the level that customer believe can and should be delivered.
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Perceived Service Quality

Word of mouth Personal needs Past experience

Service Quality Dimensions Reliability Responsiveness Assurance Empathy Tangibles

Expected service

Perceived service

Service Quality Assessment 1. Expectations exceeded ES<PS (Quality surprise) 2. Expectations met ES~PS (Satisfactory quality) 3. Expectations not met ES>PS (Unacceptable quality)

Improving Service Quality

Listening Reliability Basic service Service design Recovery

Surprising customers Fair play Teamwork Employee research Servant leadership

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How Product Characteristic Affect Ease of Evaluation

Customers cannot judge the technical quality of some services even after they have received them. Ease or difficulty of evaluating a product before purchase is a function of its attributes where it can be distinguished between three types:

Evaluating Alternatives Service Attributes

Search attributes: are tangible and help customers evaluate a product before purchase.

You can assess many attributes before visiting a particular restaurant E.g., type of food, location, type of restaurant and price Customers must experience the service before they can assess attributes such as reliability, ease of use, and customer support The consumer will not know how much s/he will enjoy the food, the service, and the atmosphere until the actual experience

Experience attributes cannot be evaluated before purchase

Credence attributes are those that customers find impossible to evaluate confidently even after purchase and consumption

The customer is forced to believe or trust that certain tasks have been performed at the promised level of quality E.g., hygiene conditions of the kitchen and the healthiness of the cooking ingredients Patients cant usually evaluate how well their dentists have performed complex dental procedures.

How Product Attributes Affect Ease of Evaluation

Most Goods Most Services

Easy To Evaluate

Clothing Chair Motor Vehicle Foods High In Search Attributes

Restaurant Meals Lawn Fertilizer Haircut Entertainment

Computer Repair Education Legal Services Complex Surgery High In Credence Attributes

Difficult To evaluate

High In Experience Attributes

Source: Adapted from Valarie A. Zeithaml , How Consumer Evaluation Processes Differ Between Goods & Services, in J.H. Donelly and W. R. George, Marketing of Services (Chicago: American Marketing Association, 1981)

Because services are generally high in experience and credence qualities, there is more risk in their purchase that subsequently proves disappointing. Perceived risk: is especially relevant for services that are difficult to evaluate before purchase and consumption, and first time users are likely to face greater uncertainty.

Perceived Risks of Purchasing and Using Services

Functionalunsatisfactory performance outcomes:

Financial monetary loss, unexpected extra costs

Temporal wasted time, delays leading to problems Physical personal injury, damage to possessions Psychological fears and negative emotions Social how others may think and react Sensory unwanted impact on any of five senses (will I be kept awake by noise from the guests in the room next door?

How Might Consumers Handle Perceived Risk?

Seek information from respected personal sources

Compare service offerings and search for independent reviews and ratings via the Internet
Relying on a firm with good reputation Looking for guarantees and warranties Visiting service facilities or going for trials before purchase and examining tangible cues or other physical evidence Asking knowledgeable employees about competing services

Strategic Responses to Managing Customer Perceptions of Risk

Free trial (for services with high experience attributes) Use evidence management (e.g., furnishing, equipment etc.)

Advertise (helps to visualize)

Display credentials

Offer guarantees

Encourage visit to service facilities

Give customers online access about order status

Managing Service Brands

Differentiating Services
Like any brand, service brands must be skillful at differentiating themselves and developing appropriate brand strategies. The service offerings might be through people and processes that add value as well as including innovative features Primary service package what the customer expects Secondary service package what the provider can add (hotel industry, free breakfast buffets, merchandise for sale, and loyalty award programs. Many companies are using the web to offer secondary service features that were never possible before..

Etihad Airways offers a unique loyalty rewards system and complimentary hotel stays for business and first class passengers.

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Developing Brand Strategies for Services

Developing brand strategies for a service brand requires special attention to: Choosing brand elements Establishing image dimensions Devising branding strategy

Cirque du Soleils branding strategy includes spectacular themed performances by circus players with elaborate costumes and New Age music, and no animals. Each touring production is unique; there are no duplicate casts, protecting the brand from overexposure and easy imitation.
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Developing Brand Strategies for Services

Choosing Brand Elements:
The intangibility of services has implications for the choice of brand elements. Because service decisions and arrangements are often made away from the actual service location itself, brand recall becomes critically important. Memorable brand name Other brand elementslogos, symbols, characters, and slogans can also pick up the slack and complement the brand name to build awareness and brand image. These other brand elements often attempt to make the service and some of its key benefits more tangible, concrete, and real. Because a physical product does not exist, the physical facilities of the service provider, its primary and secondary signage, environmental design, reception area, and so on, are especially important. All aspects of the service delivery process can be branded.

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Establishing Image Dimensions : Brand personality is an important image dimension for services (Sheraton is positioning as warm, comforting and casual) Service firms can design marketing communication and information programs so that consumers learn more about the brand than in service encounters alone. ( in 2000, Mobinil
produced its ALO ads, which featured a different advertisement for each of four different regions of Egypt(upper, delta, cairo and alex). By catering to the different regions, ALO aimed to inform customers that it was available throughout Egypt.

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Devising Branding Strategy Finally, services also must consider developing a brand hierarchy and brand portfolio that permits positioning and targeting of different market segments. A) Classes of service can be branded vertically on the basis of price and quality. B) Vertical extensions often require sub-branding strategies where the corporate name is combined with an individual brand name or modifier. Hilton hotels has a portfolio of brands that includes Hilton Garden Inns to target budget-conscious business travelers and compete with the popular courtyard by marriott Copyright 2012 Pearson Education 13-94 chain and others

For Review

How do we define and classify services and how do they differ from goods? What are the new services realities? How can we achieve excellence in services marketing? How can we improve service quality? How can goods marketers improve customer support services?

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