©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 0 in Chapter 12 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, 2 nd Edition Slide 1 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, 2 nd Edition Slide 2 in Chapter 12 Nature of Services Government Sector Business Sector Private Nonprofit Sector Manufacturing Sector Service Industry Sectors

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 3 in Chapter 12 Nature of Services eLibrary.com is an example of a service in which industry sector?

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 4 in Chapter 12 Nature of Services Service Mix Categories Pure tangible good; no service Tangible goods with some services Hybrid: equal part goods and service Major service with minor good Pure service; no tangible good Milk Computer & Warranty Meal at Restaurant Legal Advice Hair Styling

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 5 in Chapter 12 Nature of Services Characteristics  Intangibility  Inseparability  Variability  Perishability  Cannot be touched, seen, tasted, heard, or smelled before purchase  Lack of trial means higher consumer risk  Consumers rely on cues to draw quality inferences  Marketers must try to “tangibilize the intangible”

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 6 in Chapter 12 Nature of Services Characteristics  Intangibility  Inseparability  Variability  Perishability  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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 7 in Chapter 12 Nature of Services Characteristics  Intangibility  Inseparability  Variability  Perishability  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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 8 in Chapter 12 Nature of Services Characteristics  Intangibility  Inseparability  Variability  Perishability  Services can not be inventoried or otherwise stored  Capacity / demand management is critical: –Demand side strategies –Supply side strategies

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 9 in Chapter 12 Nature of Services Develop Complimentary Services Cultivate Nonpeak Demand Use Differential Pricing Install Reservation System Demand-Side Strategies

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 10 in Chapter 12 Nature of Services Supply-Side Strategies Introduce peak-time efficiency routines Plan facilities for future expansion Hire part-time employees Increase consumer participation Share services Important Characteristics

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 11 in Chapter 12 Discussion Scenario Susie Campbell offers “pet-sitting” services to people in the local area. Susie often turns away business during holidays, while other times of the year find her with little work to do. Suggest specific demand-side and supply side strategies that may help Susie to increase business and stabilize revenue throughout the year.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 12 in Chapter 12 Marketing Strategies Figure 12-1: Elements in a Service Encounter

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 13 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, 2 nd Edition Slide 14 in Chapter 12 Marketing Strategies Figure 12-2: Three Types of Marketing in Service Industries

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 15 in Chapter 12 Marketing Strategies Figure 12-3: Continuum of Evaluation for Different Types of Products

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 16 in Chapter 12 Marketing Strategies Marketing Tasks  Managing differentiation  Managing service quality  Managing productivity  Can not differentiate on price alone  Innovative features  Delivery system –Reliability –Resilience –Innovativeness  Image and branding

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 17 in Chapter 12 Marketing Strategies Marketing Tasks  Managing differentiation  Managing service quality  Managing productivity  The service quality model identifies five gaps that can cause service delivery failure  Service companies that successfully address these gaps follow common practices

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 18 in Chapter 12 Marketing Strategies Figure 12-4: Service Quality Model

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 19 in Chapter 12 Marketing Strategies Mystery shoppers can be used to ID service quality gaps. Which one(s)?

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 20 in Chapter 12 Discussion Scenario Universities – whether private or non-profit institutions – provide services to various publics. What “consumer” groups do Universities serve? Using the Service Quality Model as your guide, discuss specific examples of different service gaps for a particular type of consumer.

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 21 in Chapter 12 Marketing Strategies Characteristics of Well-Managed Service Firms Firm and customer monitoring system Commitment from top management A strategic concept Satisfaction of employees and customers High standards Important Characteristics

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 22 in Chapter 12 Marketing Strategies Marketing Tasks  Managing differentiation  Managing service quality  Managing productivity  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

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 23 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, 2 nd Edition Slide 24 in Chapter 12 Managing Product Support Services Facilitating Services Designing Service Offerings Optional Service Contracts Value-Augmenting Services Components

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 25 in Chapter 12 Discussion Scenario Hotels catering to a business clientele often maintain a business center for the convenience of their guests. Assume that your copier company is targeting hotels with business centers. What service offerings would best minimize key customer concerns and facilitate copier sales?