Designing and managing Services
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
Product Continuum – Categories of Service Mix
Pure
Pure service
service
Service
Service w/
w/ accompanying
accompanying goods
goods
Hybrid
Hybrid
Good
Good w/
w/ accompanying
accompanying services
services
Pure
Pure tangible
tangible good
good
Distinctive Characteristics of Services
Intangibility
Intangibility Inseparability
Inseparability
Servicescannot
Services cannot Servicescannot
cannot
beseen,
be seen,tasted,
tasted, Services
felt,heard,
heard,or
or beseparated
be separated
felt, fromtheir
from their
smelledbefore
smelled before providers
purchase
purchase providers
Services
Services
Variability
Variability Perishability
Perishability
Qualityof
Quality of Servicescannot
cannot
servicesdepends
depends Services
services bestored
be storedfor
for
onwho
on whoprovides
provides latersale
saleor
oruse
use
themand
andwhen,
when, later
them
where,and
where, andhow
how
What are the implications?
How do we overcome Challenges?
Implications
Service Resulting Implication
Characteristic
•Services cannot be inventoried
Intangibility •Services cannot be easily patented
•Services cannot be easily displayed or
communicated
•Pricing is difficult
Variability •Service delivery depends on employee and
customer actions
•No certainty of service delivered matching
what was promised
Implications
Service Resulting Implication
Characteristic
Inseparability •Customer participate in and affect the
transaction
•Customer affect each other
•Employees affect the service outcome
•Decentralization may be essential
•Difficult to synchronize supply and demand
Perishable •Services cannot be returned or resold
Overcoming Challenges
Services
Services
Tangibalizing the Intangible
Expanded Mix for Services
• People: All human actors who play in service delivery and thus
influence the buyer’s perceptions
• Physical evidence: Environment in which service is delivered and
where the firm and customer interact
• Process: The actual procedures, mechanisms, and flow of activities by
which the service is delivered – the service delivery and operating
systems
Trying to overcome service variability
Invest in good hiring and
training procedures
Standardize the
service-performance process
Monitor customer satisfaction
Overcoming Service Perishability
Matching Demand and Supply
Demand side Supply side
• Differential pricing • Part-time employees
• Nonpeak demand • Peak-time efficiency
• Complementary routines
services • Increased consumer
• Reservation systems participation
• Shared services
• Facilities for future
expansion
Marketing Strategies for Service Firms
• A shift in customer • Holistic marketing for
relationship services (the service
– Profit tiers marketing triangle)
– Customer – Requires external,
empowerment internal, and interactive
– Customer coproduction marketing
The Services Marketing Triangle
Holistic Marketing
Company
(Management)
Internal marketing External marketing
“Enabling the promise” “Making the promise”
Employees Customers
Interactive marketing
“Delivering the promise”
Managing Service Quality
• Service quality of a firm is tested at each service encounter
• Customers form service expectations from many sources
(past experiences, WOM)
• In general customers compare the perceived service with the
expected service
• The GAPS model for service quality
Managing Customer Expectations - The Gaps
Model of Service Quality
The Gaps Model of Service Quality
• Customer Gap: Difference between customer expectations
and perceptions
• Provider Gap 1: The knowledge gap
• Provider Gap 2: The service design and standards gap
• Provider Gap 3: The service performance gap
• Provider Gap 4: The communication gap
Note: To close the customer gap the provider gaps need to be
closed
Determinants of Service Quality
• Based on service-quality model, researchers identified the
following five determinants of service quality:
1. Reliability: Ability to perform the promised service dependably and
accurately
2. Responsiveness: The willingness to help customers and provide prompt
service
3. Assurance: The knowledge and courtesy of employees and their ability to
convey trust and confidence
4. Empathy: The provision of caring, individualized attention to customers.
5. Tangibles: The appearance of physical facilities, equipment, personnel,
and communication materials
Best Practices of Service-Quality Management
• Strategic Concept
• Top-Management Commitment
• High Standards
• Self-Service Technologies (SSTs)
• Monitoring Systems
• Satisfying Customer Complaints
• Satisfying Employees
Thank You
