MARKETING MANAGEMENT

12th edition

11
Designing and Managing Services

Kotler

Keller

Chapter Questions
How are service defined and classified? How are service marketed, and how can service quality be improved? How do service marketers create strong brands? How can goods marketers improve customer support service?

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The Nature of Service

Service Industries Are Everywhere
Government sector. (courts, employment service, post office, schools) Private nonprofit sector. (museums, hospitals, churches, mosques) Business sector. (airlines, banks, hotels, insurance, law firms, consulting firms) Manufacturing sector. (computer operators, accountants, legal staff) Retail sector. (cashiers, clerks, salespeople, customer service representatives)
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Service Sectors
Private nonprofit

Government

Business

Retail

Manufacturing

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Service

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, and some service firms are purely online.

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Categories of Service Mix

A company offerings include some services. Five categories of offerings are:
1. 2. Pure tangible good. The offering is a tangible good such as soap, not accompanied by services Tangible good with accompanying services. The offering consists of a tangible good accompanied by one or more service. Toyota for example, offers repairs, warranty fulfillment, and other services along with its vehicles. Hybrid. The offering consists of equal parts of goods and services. For example, people patronize restaurants for both food and service. Major service with accompanying for both food and services. The offering consists of a major service along with additional service or supporting goods. For example, airline passengers are buying transportation service, although they get snacks and drinks as well. Pure service. The offering consists primarily of service, examples include babysitting and psychotherapy.
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3. 4.

5.

Categories of Service Mix

Pure tangible good
Good w/ accompanying services Hybrid Service w/ accompanying goods Pure service
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Categories of Service Mix

Service consumers generally rely on word of mouth rather than on advertising. They also rely heavily on price, and personnel to judge quality, and are highly loyal to service providers who satisfy them.

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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. Therefore, the service providers task is to manage the evidence, to tangibilize the intangible. c) Service companies can try to demonstrate their service quality through physical evidence and presentation. d) Service marketers must be able to transform intangible services into concrete benefits.
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Distinctive Characteristics of Services

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. 2. Work faster. 3. Train more service providers .

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Distinctive Characteristics of Services

Variability
a) Because they depend on who provides them and when and where they are provided, services are highly variable. b) There are three steps service firms can take to increase quality control:
1. Invest in good hiring and training procedures. 2. Standardize the service-performance process throughout the organization.
Prepare a service blueprint that depicts events and processes in a flowchart, with the objective of recognizing potential fail points.

3. Monitor customer satisfaction.

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Distinctive Characteristics of Services

Perishability
a) b) c) d) Services cannot be stored. Perishability is not a problem when demand is steady. When demand fluctuates service firms have problems. Several strategies can produce a better match between supply and demand. On the demand side:
1. 2. 3. 4. Differential pricing. Non-peak demand. Complementary services. Reservation systems.
Part-time employees. Increased consumer participation. Shared services. Facilities for future expansion.
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e)

On the supply side:

1. 2. 3. 4.

Distinctive Characteristics of Services

Intangibility
Inseparability Variability Perishability
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Managing Service Quality

The service quality of a firm is tested at each service encounter. If service personnel are bored, uninformed, or too busy to wait on customer, customer will think twice about doing business again with that seller.
Customer Expectations a) Customers form service expectations from many sources:
1. 2. 3. Past experiences. Word-of-mouth. Advertising.

b)

In general, customers compare the perceived service with the expected service.
1. 2. If the perceived service falls below the expected service customers are disappointed. 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.
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Managing Service Quality

Customer Expectations (Contd)
A service-quality model that highlights the main requirements for delivering high service quality that identifies five gaps that cause unsuccessful delivery:
1. Gap between consumer expectations and management perception.
(Management does not always correctly perceive what customers want. Hospital administrators may think that patients want better food, but patients may be more concerned with nurse responsiveness)

2. Gap between management perception and service-quality specification.

(Management might correctly perceive the customers wants but not set a performance standard. Hospital administrators may tell the nurses to give fast service without specifying it quantitatively)

3. Gap between service-quality specifications and service delivery. (Personnel

might be poorly trained, or incapable or unwilling to meet the standard; or they may be held to conflicting standards, such as taking time to listen to customers and serving them fast.)

4. Gap between service delivery and external communications. (Statements made

by company representatives and ads affect customer expectations. If a hospital brochure shows an attractive room, but the patient finds an unappealing room, communications have distorted the customers expectations)

5. Gap between perceived service and expected service. (This gap occurs when the
consumer misperceives the service quality. The physician may keep visiting the patient to show care, but the patient may interpret this as an indication that something really is wrong)
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Service-Quality Model

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Managing Service Quality

Best Practices of Service Quality Management well-managed service companies share the following common practices: a strategic concept, a history of top-management commitment to quality, high standards, selfservice technologies, systems for monitoring service performance and customer complaints, and an emphasis on employee satisfaction.
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Managing Service Quality

Strategic Concept
Top service companies are customer obsessed. There is a clear sense of target customers and their needs.

Top-Management Commitment
Companies such as Marriott, commitment to service quality. Disney, have a thorough

High Standards
The best service providers set high service-quality standards.
a) The standards must be set appropriately high. b) A service company can differentiate itself by designing a better and faster delivery system.

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Managing Service Quality

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. b) Not all SSTs improve service quality, but they have the potential of making service transactions more accurate, convenient, and faster for the consumer. c) While initiating self-service technologies, some companies have found that the biggest obstacle is not the technology itself, but convincing customers to use it.

Monitoring Systems
Top firms audit service performance, both its own and competitors, on a regular basis.
a) It collects voice of the customer (VOC) measurements to probe customer satisfiers and dissatisfiers. b) They uses a number of measurement devices:
1. 2. 3. 4. 5. 6. Comparison shopping. Ghost shopping. Customer surveys. Suggestion and complaint forms. Service-audit teams. Letters to the president.

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Managing Service Quality

Satisfying Customer Complaints
Studies of customer dissatisfaction show that customers are dissatisfied with their purchases about 25 percent of the time but that only about 5 percent complain.
a) Of the 5 percent who complain, only about 50 percent report a satisfactory problem resolution. b) Yet the need to resolve a customer problem in a satisfactory manner is critical:
1. 2. On average a satisfied customer tells three people The average dissatisfied customer gripes to 11 people!

c) Customers whose complaints are satisfactorily resolved often become more company-loyal than customers who were never dissatisfied. d) Every complaint is a gift if handled well. e) Companies that encourage disappointed customers to complain, and also empower employees to remedy the situation on the spot, have been shown to achieve higher revenues and greater profits than companies that do not have a systematic approach for addressing service failures.

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Managing Service Quality

Satisfying Employees as Well as Customers
Excellent service companies know that positive employee attitudes will promote stronger customer loyalty. The product-line manager must review how the line is positioned against competitors lines.
a) Give the importance of positive employee attitudes, service companies must attract the best employees they can find. The need is to market a career rather than a job. It is important to audit employee job satisfaction regularly.

b)

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Managing Service Brands

Some of the worlds strongest brands are services. As with any brands, service brands must be skillful at differentiating themselves and developing appropriate brand strategies.
Differentiating Services
Service marketers frequently complain about the difficulty of differentiating their services. To the extent that customers view a service as fairly homogeneous, they care less about the provider than the price.
a) Service offerings, however, can be differentiated in many ways. The offering can include innovative features. b) What the customer expects is called the primary service package. c) The provider can add secondary service features to the package. d) Service providers can add a human element to their operations. e) Sometimes the company achieves differentiation through the sheer range of its service offering and the success of its cross-selling efforts.
1. The major challenge is that most service offerings and innovations are easily copied. 2. Still, the company that regularly introduces innovations will gain a succession of temporary advantages over competitors.
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Managing Service Brands

Developing Brand Strategies for Services
Developing brand strategies for a service brand requires special attention to choosing brand elements, establishing image dimensions, and devising the branding strategy.
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.
a) Other brand elementslogos, symbols, characters, and sloganscan also pick up the slack and complement the brand name to build awareness and brand image.
1. These other brand elements often attempt to make the service and some of its key benefits more tangible, concrete, and real.

b) 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. c) All aspects of the service delivery process can be branded.

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Managing Service Brands

Establishing Image Dimensions. Organizational associationssuch as perceptions about the people who make up the organization and who provides the service are likely to be particularly important brand associations that may affect evaluations of service quality directly or indirectly.
a) One particularly important association is company credibility and perceived:
1. 2. 3. Expertise. Trustworthiness. Likeability.

b)

c)

Service firms must therefore design marketing communication and information programs so that consumers can learn more about the brand than the information it gets from service encounters alone. These programs may involve marketing communications that may be particularly effective at helping the firm to develop the proper brand personality.

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Managing Service Brands

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.

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Developing Brand Strategies for Services

Choosing Brand Elements Establishing Image Dimensions Devising Branding Strategy

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Thank You Any Questions?

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