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Designing & Managing Services
Chapter # 8
Chapter Outline
 Definition
of Service
 Categories of Service Mix
 Nature of services
 Marketing strategies for services firms
 Managing product support services
What is a Service?
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“A form of product that consists of activities, benefits or
satisfactions offered for sale that are essentially intangible
and do not result in the ownership of anything.”
“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.”
Service Sectors
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Government
Private Non Profit
Business
Manufacturing
Retail
Categories of Service Mix
Pure
Tangible
Good
Tangible
Good
w/
Services
Hybrid
Major
Pure
Service Service
w/ Goods
Categories of Service Mix
A company’s offering to the market often includes some
products and some services. The service components can be a
minor or major part of the total offering. There are 5
categories of offerings;
1- Pure Tangible Goods:
The offering which consists primarily of a tangible good with
no services accompany the product. For example: Soap, salt,
paper etc
2- Tangible with Accompanying Services:
The offering which consists of a tangible good with one or
more services. For example: Nokia with warranty
Categories of Service Mix Cont...
3- Hybrid:
The offering which consists of equal part of good & services. For
example: Restaurants provide both food & service.
4- Major Service with Accompanying Minor Goods/Service
The offering which consists of major services along with additional
services or supporting goods. For example: Air travel is a major
service of travelling along with food, shopping on airport etc is the
accompanying minor goods.
5- Pure Services:
The offering consist primarily of a service. For example: a hair cut,
tailoring a suit etc.
Marketing Strategies for Service Firms
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The traditional four P’s of marketing approach work well for
goods and services, but additional some elements require attention
in services businesses especially. Three more elements of marketing
mix are suggested for services along with 4 P’s which are as
follows:
 Product/ Service
 Price
 Place
 Promotion
 People
 Process
 Physical evidence
Marketing Strategies for Service Firms
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Price Strategy
Prices must be more flexible for services
 Service demand is highly volatile/ unpredictable
 Use price to shift demand away from peak periods
 Offer more negotiated prices for your service
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Place Strategy
 Location/convenience are critical
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Cannot store or ship
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Cannot postpone, substitute
 Short, Direct Channels
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Intermediaries are agents or brokers
Marketing Strategies for Service Firms
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Promotion Strategy
 Must promote the benefits of the service
 Build a tangible image of the service & Personalize the firm
 Personal selling is very critical for the professional service
provider.
People Strategy
 An essential ingredient to any service provision is the use
of appropriate staff and people.
 Recruiting the right staff and training them appropriately in
the delivery of their service is essential if the organization
wants to obtain a form of competitive advantage.
 Consumers make judgments and deliver perceptions of the
service based on the employees they interact with.
Marketing Strategies for Service Firms
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Process Strategy
 Process refers to the systems used to assist the
organization in delivering the service.
 For Example: 1) If you order a burger in a Burger
King and you get it delivered within 2 minutes, so this
is the process. 2)If the Bank send you the new Credit
Cards automatically when their customers old one
has expired again it requires an efficient process.
Marketing Strategies for Service Firms
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Physical Evidence Strategy
 Physical evidence means that where is the service
being delivered?
 Physical Evidence is the element of the service mix
which allows the consumer again to make judgments
on the organization.
 For Example: If you walk into a restaurant your
expectations are of a clean, friendly environment. On
an aircraft if you travel first class you expect enough
room to be able to lay down.
Intangibility
Services cannot
be seen, tasted,
felt, heard, or
smelled before
purchase
Inseparability
Services cannot
be separated
from their
providers
Services
Variability
Quality of
services depends
on who provides
them and when,
where, and how
Perishability
Services cannot
be stored for
later sale or use
Inseparability
Increase
productivity of
providers
Intangibility
Use cues to
make it tangible
Services
Variability
Standardize
service
production
& delivery
Perishability
Match supply
and demand
Three Types of Marketing
in Service Industries
Company
Internal
marketing
Cleaning/
maintenance
services
Employees
External
marketing
Financial/
banking
services
Interactive
marketing
Restaurant
industry
Customers
Three Types of Marketing
in Service Industries
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Service marketing require not only external marketing but internal
and interactive marketing.
External Marketing describe the normal work of preparing pricing
distributing and promoting the services to customer.
Internal Marketing describe the work to train and motivate
employees to serve customer.
Interactive Marketing describes the employees skill in serving the
clients because the client judges services not only by technical
quality but also its functional quality.
For Example: In hospital a successful operation is the technical
quality from the doctors, but the way the doctors show their concerns
and giving confidence to the patients is the interactive marketing
Managing Service Quality
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The service quality of a firm is tested at each service encounter. If service
personnel are bored, cannot answer simple questions, or visiting with
each other while customers are waiting, customers will think twice about
doing business again with that seller.
Customer Expectations:
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Customers form service expectations from many sources, such as past
experiences, word of mouth, and advertising. 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
suitable to use the provider again. Successful companies add benefits to
their offering that not only satisfy customers but surprise and delight
them.
Improving Service Quality
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Service quality can be improved by all these
following steps taken in favor of your customers to
make them more delighted & satisfied.
Listening
 Fair play
Reliability
 Teamwork
Basic service
 Employee research
Service design
 Servant leadership
Recovery
 Surprising customers
How to Increase Quality Control for Service
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Invest money in good hiring and training procedures
of your employees.
Standardize the service-performance processes for
all of your services to reduce variability in your
services.
Monitor customer satisfaction by different ways of
ensuring their maximum satisfaction.
Solutions to Customer Failures
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Redesign processes and redefine customer roles to
simplify service benefits for them.
Provide the right technology to help both employees
and customers for better service delivery.
Create high-performance customers by enhancing their
roles clarity, motivation, and ability to gain.
Encourage customer citizenship where customers help
other customers in service motivation and provision.
Customer Complaint Resolution
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Hiring Criteria & Training for Employees
Develop Guidelines for Fairness
Remove Complaint Barriers
Analyze Types & Sources of Complaints
END OF CHAPTER