Download Chapter 12a - Managing Services

McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 12, YOU SHOULD BE ABLE TO:
LO1
Describe four unique elements of
services.
LO2
Recognize how services differ and how
they can be classified.
LO3
Explain how consumers purchase and
evaluate services.
LO4
Develop a customer contact audit to
identify service advantages.
12-2
LEARNING OBJECTIVES (LO)
AFTER READING CHAPTER 12, YOU SHOULD BE ABLE TO:
LO5
LO6
Discuss the important roles of internal
marketing and customer experience
management.
Explain the role of the four Ps in the
services marketing mix.
12-3
FIGURE 12-1 Services are now a larger part
of the U.S. gross domestic product (GDP)
12-5
THE UNIQUENESS OF SERVICES
Slide 12-6
LO1

THE UNIQENESS OF SERVICES
THE FOUR I’S OF SERVICES
Four I’s of Services
• Intangibility
• Inseparability
• Inconsistency
• Inventory
 Idle Production
Capacity
12-7
THE UNIQUENESS OF SERVICES
• The Four I’s of Services
1. Intangibility
• They cannot be held, touched, or
seen before the purchase decision
• Difficult for consumers to evaluate as
they tend to be a performance rather
than an object
• Marketers need to make services
tangible or show their benefits
Slide 12-6
THE UNIQUENESS OF SERVICES
• The Four I’s of Services
2. Inconsistency
• Services depend on the people who
provide them – their quality varies
with each person's capabilities and
day-to-day performance
• More of a problem with services than
with tangible goods – problems can
be reduced through standardization
and training
Slide 12-6
THE UNIQUENESS OF SERVICES
• The Four I’s of Services
3. Inseparability
• Consumers cannot (and do not) separate
the deliverer of the service from the service
itself
• The amount of interaction between the
consumer and the service provider depends
on the extent to which the consumer must
be present to receive the service
• Some services, such as banking, can now
be delivered electronically, often requiring
no face-to-face consumer interaction and
therefore a more consistent experience
Slide 12-6
THE UNIQUENESS OF SERVICES
• The Four I’s of Services
4. Inventory
• Inventory problems exist with goods
because many items are perishable and
there are costs associated with its handling
• With services, inventory costs are more
subjective and are related to idle production
capacity (the service provider is available
but there is no demand)
Slide 12-6
THE UNIQUENESS OF SERVICES
• The Four I’s of Services
4. Inventory, cont.
• The inventory cost of a service is the cost of
the person used to provide the service
along with any needed equipment
– Inventory costs can be low or nonexistent
because idle production capacity can be cut back
through reducing hours or paying by
commission
– Inventory carrying costs of service vary widely,
from the high-end airlines and hospitals with
highly trained, salaried specialists to the low-end
of real estate agencies and hair salons with
employees working on commission and needing
little expensive equipment
Slide 12-6
FIGURE 12-2 Inventory carrying costs of
services depend on the cost of employees
and equipment
12-14
LO2
THE UNIQENESS OF SERVICES
THE CONTINUUM & CLASSIFICATION OF SERVICES
Service Continuum
12-16
THE UNIQUENESS OF SERVICES
• The Service Continuum – range
from the tangible to the intangible
– Tangible, good-dominant offerings, four I’s
are not relevant
– Intangible, service-dominated offerings:
four I’s are major marketing concerns
– Some businesses are a mix of intangible
service and tangible good factors
Slide 12-12
THE UNIQUENESS OF SERVICES
• The Service Continuum
– For businesses today, it is useful to
distinguish between core product and
supplementary services
– Supplementary services allow service
providers to differentiate their offering from
competitors – add value
– Key categories include; information
delivery, consultation, order taking, billing
procedures, and payment options
Slide 12-12
FIGURE 12-3 Service continuum
Slide 12-13
LO2
THE UNIQENESS OF SERVICES
THE CONTINUUM & CLASSIFICATION OF SERVICES
Classifying Services
• Delivery by People or Equipment
• Profit or Nonprofit Organizations
• Government Sponsored
12-20
THE UNIQUENESS OF SERVICES
Classifying Services
– Delivery by People or Equipment
• Professional to unskilled labor
• Equipment-based services do not have
inconsistency concerns
– Profit or Not-for-profit
• Not-for-profit organizations net profits are not
taxed or distributed to shareholders
• 1.1 million generate 7 percent of GDP
– Government Sponsored
• Federal, state, and municipal/local levels
Slide 12-12
FIGURE 12-4 Services can be classified as
equipment-based or people-based
12-22
Concept Check
1. What are the four I’s of service?
A: intangibility, inconsistency,
inseparability, and inventory
Slide 12-20
Concept Check
2. Would inventory carrying costs
for an accounting firm with
certified public accountants be
(a) high, (b) low, or (c)
nonexistent?
A: (a) high because the inventory
cost of a service is the cost of
paying the person used to
provide the service: the salary
of the accountant.
Slide 12-21
Concept Check
3. To eliminate service
inconsistencies, companies
standardization and
rely on _____________
training
_______.
Slide 12-22
LO3

HOW CONSUMERS
PURCHASE SERVICES
The Purchase Process
• Search Properties
• Experience Properties
• Credence Properties
12-27
HOW CONSUMERS
PURCHASE SERVICES
• The Purchase Process
– Service organizations must understand how
consumer makes service purchase decision
– Services cannot be displayed, or
demonstrated – consumers cannot make
prepurchase evaluation of all characteristics
– Evaluation of a service may change with
each purchase
Slide 12-23
FIGURE 12-5 How consumers evaluate
goods and services
Slide 12-24
HOW CONSUMERS
PURCHASE SERVICES
• The Purchase Process
– To reduce uncertainty created by these
properties, consumers turn to personal
sources of information – early adopters,
opinion leaders, and reference groups
during the purchase decision process
Slide 12-23
LO3

HOW CONSUMERS
PURCHASE SERVICES
Assessing Service Quality
• Gap Analysis
• Monitoring Service Failure
12-31
HOW CONSUMERS
PURCHASE SERVICES
• Assessing Service Quality
– Gap Analysis – differences between consumer
expectations and experiences on dimensions of
service quality
– Expectations are influenced by: word-of-mouth,
personal needs, past experiences, and
promotional activities
– Actual experiences are determined by the way an
organization delivers its service
– Relative importance of various dimensions of
service quality varies by type of service
Slide 12-25
What if Someone Complains?
How Services Can Recover From Failure to
Satisfy a Customer
Many service companies have developed strategies to
encourage customer satisfaction and loyalty. However,
every company has some service failures that lead to
customer complaints. How can services recover from these
situations? Professors Stephen Tax and Stephen Brown
suggest four steps:
1. Identify service failures. Only 5 to 10 percent of
dissatisfied customers actually complain—the rest switch
firms or make negative comments. Firms must encourage
customer feedback.
2. Resolve customer problems. A key to resolving
complaints is training employees, especially those on the
front line, to handle likely situations and giving them
authority to solve problems.
Slide 12-27
What if Someone Complains?
How Services Can Recover From Failure to
Satisfy a Customer
3. Communicate and classify service failures. This step
reflects the concept of organizational learning, or the
capacity to improve performance based on experience.
4. Integrate data and improve overall service. Ongoing
customer research must be integrated with complaint
information to identify areas for service quality
improvement.
Many firms are improving their methods of dealing with
complaints.
In virtually every company, the goal of a complaint process
is to obtain customer satisfaction, maintain loyalty, and learn
from failure
Slide 12-27
FIGURE 12-6 The five dimensions of service
quality
12-35
LO4

HOW CONSUMERS
PURCHASE SERVICES
Customer Contact and
Relationship Marketing
• Service Encounters
• Customer Contact Audit
• A Customer’s Car Rental Activities
• Relationship Marketing
12-36
HOW CONSUMERS
PURCHASE SERVICES
• Customer Contact and Relationship Marketing customers judge services on “service encounters”
– Customer Contact Audit – flow chart of the
points of interaction between customer and
service provider
– Serve as basis for developing relationships with
customers
– There are points where customer sees tangible
and intangible aspects of the service that are
essential but do not involve points of customer
interaction
Slide 12-28
FIGURE 12-7 Customer contact audit for a
car rental agency (green boxes = customer
activity; orange boxes = employee activity)
12-38
LO5
MANAGING THE MARKETING
OF SERVICES

Internal Marketing

Customer Experience
Management (CEM)
12-39
MANAGING THE
MARKETING OF SERVICES
• Internal Marketing – service
organizations must focus on its employees
– Ensure employees have attitudes, skills
and commitment needed to meet customer
expectations
– Employee development through
recruitment, training, communication,
coaching, management, and leadership
are critical
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
I. Product (Service) – three aspects of
the marketing mix that warrant special
attention:
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
1. Exclusivity
– Major difference is that services cannot
be patented
– Many businesses try to distinguish their
core product with new or improved
supplementary services
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
2. Branding
– Because services are intangible, the
brand name or identifying logo of the
service organization is particularly
important in consumer purchase decision
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
3.
Capacity Management
–
–
–
Most services have limited capacity due to the inseparability
of the service from the service provider and the perishable
nature of the service
Capacity management integrates the service component of
the marketing mix with efforts to influence customer demand
Service organizations must manage availability of the
offering so that:
•
•
–
Demand matches capacity over the duration of the demand
cycle (one day, week, month, year)
Organization’s assets are used in ways that will maximize the
ROI
Some providers develop differing price structures that are
assigned to each segment of consumers to help moderate
or adjust demand
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
II. Pricing plays two essential roles in
services:
1. Affect consumer perceptions – can indicate
quality
2. Be used in capacity management – many use
off-peak pricing to reflect variations in demand
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
II. Price – price is referred to in various ways
by different services:
– Hospitals – charges
– Lawyers – fees
– Airlines – fares
– Hotels - rates
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
III. Place (Distribution)
– Historically little attention has been paid
to distribution
– As competition grows, the value of
conventional distribution, or access, is
being recognized
– Availability of electronic distribution
through the internet now provides global
coverage for a variety of services
Slide 12-32
MANAGING THE
MARKETING OF SERVICES
IV. Promotion
– the value of promotion, specifically
advertising, is to show the benefits of
purchasing the service by stressing
availability, quality, location, etc.
– Publicity has played a major role in the
promotional strategy of not-for-profit
services and some professional
organizations
– Many use PSAs
Slide 12-32
SERVICES IN THE FUTURE
1. Technology
– New e-services will include voice-overInternet (telephone), home
videoconferencing, and new forms of
security and identification (e.g., fingerprint
and retinal scans)
– New Internet-based services also make it
possible to obtain videos, movies, and
textbooks electronically
Slide 12-32
SERVICES IN THE FUTURE
2. Global Economy
– Increasing attention to the cross-cultural
implications for service quality
– Shifting from the focus on goods and
tangible resources to services and
intangible attributes
Slide 12-32
Services
Services are the intangible
activities or benefits that an
organization provides to
consumers in exchange money
or something else of value.
12-51
Four I’s of Services
The four I’s of services consists
of the four unique elements to
services: intangibility,
inconsistency, inseparability,
and inventory.
12-52
Idle Production Capacity
Idle production capacity occurs
when the service provider is
available but there is no demand.
12-53
Service Continuum
The service continuum consists
of the range of offerings
companies bring to the market,
from the tangible to the intangible
or good-dominant to servicedominant offerings.
12-54
Gap Analysis
Gap analysis is a type of
analysis that identifies the
differences between a consumer’s
expectations about and
experiences with a service based
on dimensions of service quality.
12-55
Customer Contact Audit
A customer contact audit is a
flowchart of the points of
interaction between consumers
and a service provider.
12-56
Internal Marketing
Internal marketing is the notion
that a service organization must
focus on its employees, or
internal market, before successful
programs can be directed at
customers.
12-57
Customer Experience Management
(CEM)
Customer experience
management (CEM) is the
process of managing the entire
customer experience within the
company.
12-58
Capacity Management
Capacity management
integrates the service component
of the marketing mix with efforts
to influence consumer demand.
12-59
Off-Peak Pricing
Off-peak pricing involves
charging different prices during
different times of the day or days
of the week to reflect variations
in demand for the service.
12-60