Download KK_13_2010_fall

MARKETING MANAGEMENT BY KOTLER AND KELLER (12TH ED.)
LECTURE NOTES
Chapter 13. DESIGNING AND MANAGING SERVICES
Çetin Yurt
A service is any act or performance that one party can offer to 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.
Manufacturers, distributors, and retailers can provide value-added services or simply excellent customer
service to differentiate themselves.
NATURE OF SERVICES
The Bureau of Labor Statistics reports that the service-producing sector will continue to be the
dominant employment generator in the economy, adding 20.5 million jobs by 2010. Employment in the
service-producing sector is expected to increase by 19 percent over the 2000-2010 period, whereas
manufacturing employment is expected to increase by only 3 percent. In fact, manufacturing's share of total
jobs is expected to decline from 13 percent in 2000 to 11 percent in 2010. These numbers and others have
led to a growing interest in the special problems of marketing services.
 It is everywhere when you come to think about it





Government sector; hospitals, military service, police and fire departments, postal service….
Private nonprofits sector; Museum, colleges, foundations, charities,
Business sector; Airlines, banks, hotels, insurance companies, law firms, plumbing repair
companies….
Manufacturing sector; computer operators, accountants and legal staff
Retail sector; cashiers, clerks, salespeople, customer service representatives…
 Categories of service mix:
A company's offerings often include some services. The service component can be a minor or a
major part of the total offering. Five categories of offerings can be distinguished:





Pure tangible goods: The offering consists primarily of a tangible good such as soap, toothpaste,
or salt. No services accompany the product.
Tangible good with accompanying service: The offering consists of a tangible good
accompanied by one or more services.
Hybrid: The offering consists of equal parts of goods and services. For example, people
patronize restaurants for both food and service
Major good with accompanying services: The offering consists of a major service along with
additional services or supporting goods. For example, airline passengers buy transportation.
Pure service: The offering consists primarily of a service. Examples include baby-sitting,
psychotherapy, and massage.
 Distinctive Characteristics of Services: Services have four distinctive characteristics that greatly
affect the design of marketing programs: intangibility, inseparability, variability, and perishability.
Intangibility; Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before
they are bought. The person getting a face-lift cannot see the results before the purchase, and the
patient in the psychiatrist's office cannot know the exact outcome.
1. Place - The 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. People- Personnel should be busy. There should be a sufficient number of employees to manage the
workload.
3. Equipment- Computers, copying machines, desks should be and look "state of the art."
4. Communication material - Printed materials—text and photos—should suggest efficiency and speed.
5. Symbols - The name and symbol should suggest fast service.
6. Price - The bank could advertise that it will deposit $5 in the account of any customer who waits in line
for more than five minutes.
Inseparability; Services are typically produced and consumed simultaneously. This is not true of physical
goods, which are manufactured, put into inventory, distributed through multiple resellers, and consumed
later. If a person renders the service, then the provider is part of the service. Because the client is also
present as the service is produced, provider-client interaction is a special feature of services marketing.
Variability; Because services depend on who provides them and when and where they are provided,
they are highly variable. Some doctors have an excellent bedside manner; others are less patient with
their patients. Here 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.
3. Monitor customer satisfaction.
Perishability; Services cannot be stored. Perish ability is not a problem when demand is steady. When
demand fluctuates, service firms have problems. For example, public transportation companies have to
own much more equipment because of rush-hour demand than if demand were even throughout the day.
Some doctors charge patients for missed appointments because the service value exists only at that
point. Several strategies can produce a better match between demand and supply in a service business.
On the demand side:




Differential pricing
Nonpeak demand
Complementary
Reservation systems
THE MARKETING INTELLIGENCE SYSTEM (MIS)
At one time, service firms lagged behind manufacturing firms in their use of marketing because they
were small, or they were professional businesses that did not use marketing, or they faced large demand or
little competition.
A Shifting Customer Relationship
Holistic Marketing for Services
Because service encounters are complex interactions affected by multiple elements, adopting a holistic
marketing perspective is especially important. The service outcome, and whether or not people will remain
loyal to a service provider, is influenced by a host of variables. Keaveney identified more than 800 critical
behaviors that cause customers to switch services. These behaviors can be placed into one of eight
categories.
Holistic marketing for services requires external, internal, and interactive marketing. 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.
MANAGING SERVICE QUALITY
The service quality of a firm is tested at each service encounter. If retail clerks are bored, cannot
answer simple questions, or are visiting with each other while customers are waiting, customers will think
twice about doing business again with that seller.
Customer Expectations
Customers form service expectations from many sources, such as past experiences, word of mouth, and
advertising. In general, customers compare the perceived service with the expected service. 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. Successful companies add benefits to
their offering that not only satisfy customers but surprise and delight Them. Delighting customers is a matter
of exceeding expectations.
Parasuraman, Zeithaml, and Berry formulated a service-quality model that highlights the main requirements
for delivering high service quality. The model, shown in Figure identifies five gaps that cause unsuccessful
delivery:
1.
2.
3.
4.
5.
Gap between consumer expectation and management perception
Gap between management perception and service-quality specification
Gap between service-quality specifications and service delivery
Gap between service delivery and external communications
Gap between perceived service and expected service
Based on this service-quality model, these researchers identified the following five determinants of
service quality, in order of importance.
1. Reliability -The ability to perform the promised service dependably and accurately.
2. Responsiveness -The willingness to help customers and to 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
Various studies have shown that well-managed service companies share the following common practices: a
strategic concept, a history of top-management commitment to quality, high standards, self-service
technologies, systems for monitoring service performance and customer complaints, and an emphasis on
employee satisfaction.
MANAGING SERVICE BRANDS
Differentiating Services
Service marketers frequently complain about the difficulty of differentiating their services. The deregulation of
several major service industries—communications, transportation, energy, banking—has resulted in intense
price competition. To the extent that customers view a service as fairly homogeneous, they care less about
the provider than the price.
Primary service package
Secondary service features
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
Establishing image dimensions
Devising branding strategy
MANAGING PRODUCT SUPPORT SERVICES
Thus far we have focused on service industries. No less important are product-based industries that
must provide a service bundle. Manufacturers of equipment—small appliances, office machines, tractors,
mainframes, airplanes—all have to provide product support services.
Identifying and Satisfying Customer Needs
The company must define customer needs carefully in designing a service support program. Customers
have three specific worries
-
-
They worry about reliability and failure frequency. A farmer may tolerate a combine that will break
down once a year, but not two or three times a year.
They worry about downtime. The longer the downtime, the higher the cost. The customer counts on
the seller's service dependability—the seller's ability to fix the machine quickly, or at least provide a
loaner.
They worry about out-of-pocket costs. How much does the customer have to spend on regular
maintenance and repair costs?
Postsale Service Strategy
The quality of customer service departments varies greatly. At one extreme are departments that simply
transfer customer calls to the appropriate person or department for action, with little follow-up. At the other
extreme are departments eager to receive customer requests, suggestions, and even complaints and handle
them expeditiously.
SUMMARY
 To carry out their analysis, planning, implementation, and control responsibilities, marketing
managers need a marketing information system (MIS)
 An MIS has three components: (a) an internal records system, which includes information on the
order-to-payment cycle and sales reporting systems; (b) a marketing intelligence system, a set of
procedures and sources used by managers to obtain everyday information about pertinent
developments in the marketing environment; and (c) a marketing research system that allows for the
systematic design, collection, analysis, and reporting of data and findings relevant to a specific
marketing situation.
 Many opportunities are found by identifying trends (directions or sequences of events that have
some momentum and durability) and megatrends (major social, economic, political, and
technological changes that have long-lasting influence).
 Within the rapidly changing global picture, marketers must monitor six major environmental forces:
demographic, economic, social-cultural, natural, technological, and political-legal.
 In the demographic environment, marketers must be aware of worldwide population growth;
changing mixes of age, ethnic composition, and educational levels; the rise of nontraditional families;





large geographic shifts in population; and the move to micromarketing and away from mass
marketing.
In the economic arena, marketers need to focus on income distribution and levels of savings, debt,
and credit availability.
In the social-cultural arena, marketers must understand people's views of themselves, others,
organizations, society, nature, and the universe. They must market products that correspond to
society's core and secondary values, and address the needs of different subcultures within a society.
In the natural environment, marketers need to be aware of raw materials shortages, increased
energy costs and pollution levels, and the changing role of governments in environmental protection.
In the technological arena, marketers should take account of the accelerating pace of technological
change, opportunities for innovation, varying R&D budgets, and the increased governmental
regulation brought about by technological change.
In the political-legal environment, marketers must work within the many laws regulating business
practices and with various special-interest groups.
DEBATE
One of the widely debated issues in developing marketing programs that target certain age groups is
how much consumers change over time. Some marketers maintain that age differences are critical and
that the needs and wants of a 25-year-old in 2002 are not that different from those of a 25-year-old in
1972. Others dispute that contention and argue that cohort and generation effects are critical and that
marketing programs must therefore suit the times.
Take a position: Age differences are fundamentally more important than cohort effects versus Cohort
effects can dominate age differences.