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Chapter 12
Designing and Managing
Services
PowerPoint by Karen E. James
Louisiana State University - Shreveport
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 0 in Chapter 12
Objectives
 Learn how services are defined and
classified.
 Understand how service firms improve
their competitive differentiation,
service quality, and productivity.
 Identify how goods-producing
companies can improve their customer
support services.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 1 in Chapter 12
Nature of Services
 The Service Industry includes the:
– Government sector
– Private nonprofit sector
– Business sector
– Manufacturing sector
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 2 in Chapter 12
Nature of Services
 Service Mix Categories:
– Pure tangible good: no services
– Tangible good with accompanying
services
– Hybrid: equal parts service and goods
– Major service with accompanying minor
goods and services
– Pure service
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 3 in Chapter 12
Nature of Services
Characteristics
 Cannot be touched,
seen, tasted, heard, or
smelled before purchase
 Intangibility
 Lack of trial means
higher consumer risk
 Inseparability
 Consumers rely on cues
to draw quality
inferences
 Variability
 Perishability
©2003 Prentice Hall, Inc.
 Marketers must try to
“tangibilize the
intangible”
To accompany A Framework for Marketing Management, 2nd Edition
Slide 4 in Chapter 12
Nature of Services
Characteristics
 Intangibility
 Inseparability
 Variability
 Perishability
©2003 Prentice Hall, Inc.
 Services are produced
and consumed at the
same time (air travel)
 Service providers and
sometimes other
customers become part
of the service
(restaurant)
 Strong preferences for
service providers exist
To accompany A Framework for Marketing Management, 2nd Edition
Slide 5 in Chapter 12
Nature of Services
Characteristics
 Intangibility
 Inseparability
 Variability
 Perishability
©2003 Prentice Hall, Inc.
 Service providers vary
with respect to attitudes,
skills, mood, etc. Even
the same provider may
give different service on
a different day.
 Quality control is critical:
– Hiring the right people
– Standardizing service
– Monitoring satisfaction
To accompany A Framework for Marketing Management, 2nd Edition
Slide 6 in Chapter 12
Nature of Services
Characteristics
 Intangibility
 Inseparability
 Variability
 Perishability
©2003 Prentice Hall, Inc.
 Services can not be
inventoried or
otherwise stored
 Capacity / demand
management is
critical:
– Demand side
strategies
– Supply side strategies
To accompany A Framework for Marketing Management, 2nd Edition
Slide 7 in Chapter 12
Nature of Services
 Demand-side
strategies
– Use differential
pricing
– Cultivate nonpeak
demand
– Develop
complementary
services
– Install reservation
systems
©2003 Prentice Hall, Inc.
 Supply-side
strategies
– Hire part-time
employees
– Introduce peak-time
efficiency routines
– Increase consumer
participation
– Plan facilities for
future expansion
– Share services
To accompany A Framework for Marketing Management, 2nd Edition
Slide 8 in Chapter 12
Marketing Strategies
 People, physical evidence, and
process must be considered in
addition to the 4 “P’s” when creating
external marketing plans.
 Successfully delivering a service
often depends on staff being trained
via internal marketing efforts.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 9 in Chapter 12
Marketing Strategies
 Interactive marketing refers to the
employees’ skill in serving the client.
 Customers judge a service by its:
– Technical quality
– Functional quality
 Search qualities, experience qualities
and credence qualities are evaluated
by customers.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 10 in Chapter 12
Marketing Strategies
Marketing Tasks
 Managing
differentiation
 Managing service
quality
 Managing
productivity
©2003 Prentice Hall, Inc.
 Can not differentiate
on price alone
 Innovative features
 Delivery system
– Reliability
– Resilience
– Innovativeness
 Image and branding
To accompany A Framework for Marketing Management, 2nd Edition
Slide 11 in Chapter 12
Marketing Strategies
Marketing Tasks
 Managing
differentiation
 Managing service
quality
 Managing
productivity
©2003 Prentice Hall, Inc.
 The service quality
model identifies
five gaps that can
cause service
delivery failure
 Service companies
that successfully
address these gaps
follow common
practices
To accompany A Framework for Marketing Management, 2nd Edition
Slide 12 in Chapter 12
Marketing Strategies
Service Delivery Failure Results
from Gaps Between:
 Consumer expectations and
management perceptions
 Service-quality specifications
and service delivery
 Management perception and  Service delivery and external
service-quality specification
communications
 Service-quality specifications and service delivery
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 13 in Chapter 12
Marketing Strategies
Well-Managed Service Firms
Share These Characteristics
 A strategic concept
 High standards
 Commitment from
top-management
 Firm and customer
monitoring systems
 Satisfaction of employees
and customers
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 14 in Chapter 12
Marketing Strategies
Marketing Tasks
 Managing
differentiation
 Managing service
quality
 Managing
productivity
©2003 Prentice Hall, Inc.
 Have service providers
work more skillfully
 Decrease service quality,
increase service quantity
 Industrialize the service
 Reduce need for service
 Design a more effective
service
 Give customers incentives
to serve themselves
 Use technology
To accompany A Framework for Marketing Management, 2nd Edition
Slide 15 in Chapter 12
Managing Product Support
Services
 Product support services are often
sources of competitive advantage
 When designing service support
programs, marketers must consider
key customer concerns:
– Failure frequency
– Downtime duration
– Out-of-pocket expenses
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 16 in Chapter 12
Managing Product Support
Services
 Marketers must design appealing
and competitive service offerings
that will attract customers. Service
offerings should include:
– Facilitating services
– Value-augmenting services
– Optional service contracts
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 17 in Chapter 12