12 Designing and Managing Services

12
Designing and
Managing Services
Superior service providers consciously strive to create a

memorable customer experience by nurturing a culture for
serving.
They go beyond efficient and effective service design and

responsiveness to bring some degree of spirituality in service.
Services are intangible, inseparable, variable, and perishable.
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from
the United States edition of Marketing Management, 14e.
12-2
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.
12-3
Services Are Everywhere
The government sector, with its courts, employment services,

hospitals, loan agencies, military services, police and fire
departments, postal service, regulatory agencies, and schools, is in
the service business.
The private nonprofit sectormuseums, charities, colleges,
foundations, and hospitalsis in the service business.
A good part of the business sector, with its airlines, banks, hotels,
insurance companies, law firms, management consulting firms,
medical practices, motion picture companies, plumbing repair
companies, and real estate firms, is in the service business.
Many workers in the manufacturing sector, such as computer
operators, accountants, and legal staff, are really service providers. In
fact, they make up a service factory providing services to the goods
factory.
And those in the retail sector, such as cashiers, clerks, salespeople,
and customer service representatives, are also providing a service.
12-4
Categories of Service Mix
The service component can be a minor or a major part of the total

offering. We distinguish five categories of offerings.
A pure tangible good is a tangible good such as soap, toothpaste, or salt
with no accompanying services.
A tangible good with accompanying services is a tangible good, like a
car, computer, or cell phone, accompanied by one or more services.
A 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 good
an airplanefor its realization, but the primary item is a service.
A pure service is primarily an intangible service, such as babysitting,
psychotherapy, or massage.
12-5
Service Distinctions
Equipment-based or people-based (automated

car washes, vending machines)
Service processes
Clients presence required or not
Personal needs or business needs
Objectives and ownership
12-6
Distinctive Characteristics of Services

Intangibility: it is difficult to evaluate services unless we have tangible
cues and physical evidence to use.
Inseparability: we cannot separate the service from the experience of
the customer
Variability: services tend to vary from experience to experience
Perishability: we cannot inventory services

12-7
Matching Demand and Supply

Demand side
Supply side
Differential pricing will shift

Part-time employees can serve
some demand from peak to
peak demand.
off-peak periods.
Peak-time efficiency routines
Nonpeak demand can be

can allow employees to
cultivated.
perform only essential tasks
during peak periods.

Complementary services can
provide alternatives to waiting Increased consumer
participation frees service
customers.
providers time.
Reservation systems are a
Shared services can improve

way to manage the demand
offerings.
level.
Facilities for future expansion

can be a good investment.
12-8
Physical Evidence and Presentation

1. PlaceThe exterior and interior should have clean lines. The
layout of the desks and the traffic flow should be planned
carefully. Waiting lines should not get overly long.
2. PeopleEmployees should be busy, but there should be a
sufficient number to manage the workload.
3. EquipmentComputers, copy machines, desks and ATMs
should look like, and be, state of the art.
4. Communication materialPrinted materialstext and photos
should suggest efficiency and speed.
5. SymbolsThe banks name and symbol could suggest fast
service.
6. PriceThe bank could advertise that it will deposit Rs. 50 in the
account of any customer who waits in line more than five
minutes.
12-9
Figure 12.3 Root Causes of

Customer Failure
Source: Stephen Tax, Mark Colgate, and David

Bowen, MIT Sloan Management Review (Spring
2006): pp. 3038. 2006 by Massachusetts
Institute of Technology. All rights reserved.
Distributed by Tribune Media Services.
12-10
Solutions to Customer Failures
Redesign processes and redefine customer

roles to simplify service encounters
Incorporate the right technology to aid
employees and customers
Create high-performance customers by
enhancing their role clarity, motivation, and
ability
Encourage customer citizenship where
customers help customers
12-11
Figure 12.4 Types of Marketing in

Service Industries
12-12
External marketing describes the normal work of preparing,

pricing, distributing, and promoting the service to
customers.
Internal marketing describes training and motivating
employees to serve customers well. The most important
contribution the marketing department can make is
arguably to be exceptionally clever in getting everyone else
in the organization to practice marketing.
Interactive marketing describes the employees skill in
serving the client. Clients judge service not only by its
technical quality (Was the surgery successful?), but also by
its functional quality (Did the surgeon show concern and
inspire confidence?).
12-13
Table 12.3 Factors Leading to

Customer Switching Behavior
Pricing
Inconvenience
Core Service Failure
Service Encounter Failures
Response to Service Failure
Competition
Ethical Problems
Involuntary Switching
12-14
Improving Service Quality
Listening
Reliability
Basic service
Service design
Recovery
Surprising customers
Fair play
Teamwork
Employee research
Servant leadership
12-15
Figure 12.6 Service-Quality Model
Sources: A. Parasuraman, Valarie A. Zeithaml, and

Leonard L. Berry, A Conceptual Model of Service Quality
and Itsadaptation
Implications
for Future Research, Journal of
Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized
from
12-16
the United States edition of Marketing Management, 14e. Marketing (Fall 1985), p. 44.
Determinants of Service Quality

Based on this service-quality model, researchers identified five
determinants of service quality, in this order of importance.
ReliabilityThe ability to perform the promised service

dependably and accurately.
ResponsivenessWillingness to help customers and provide

prompt service.
AssuranceThe knowledge and courtesy of employees and their

ability to convey trust and confidence.
EmpathyThe provision of caring, individualized attention to

customers.
TangiblesThe appearance of physical facilities, equipment,

personnel, and communication materials.
12-17

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12

Superior service providers consciously strive to create a

They go beyond efficient and effective service design and

Services Are Everywhere

The government sector, with its courts, employment services,

Categories of Service Mix

The service component can be a minor or a major part of the total

Equipment-based or people-based (automated

Distinctive Characteristics of Services

Variability: services tend to vary from experience to experience

Perishability: we cannot inventory services

Matching Demand and Supply

Differential pricing will shift

Peak-time efficiency routines

Nonpeak demand can be

during peak periods.

Shared services can improve

Facilities for future expansion

Physical Evidence and Presentation

Figure 12.3 Root Causes of

Source: Stephen Tax, Mark Colgate, and David

Solutions to Customer Failures

Redesign processes and redefine customer

Figure 12.4 Types of Marketing in

External marketing describes the normal work of preparing,

Table 12.3 Factors Leading to

Improving Service Quality

Figure 12.6 Service-Quality Model

Sources: A. Parasuraman, Valarie A. Zeithaml, and

Determinants of Service Quality

ReliabilityThe ability to perform the promised service

ResponsivenessWillingness to help customers and provide

AssuranceThe knowledge and courtesy of employees and their

EmpathyThe provision of caring, individualized attention to

TangiblesThe appearance of physical facilities, equipment,

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