1. McGraw-Hill/Irwin Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. Marketing Dhruv Grewal Michael Levy Chapter 12 Services: The Intangible Product

2. 12-2 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Peet’s Coffee and Tea Enticing consumers with premium products Well educated staff Superior customer service

3. 12-3 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Service By providing good customer service, firms add value to their products and services.customer service

4. 12-4 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Service Product Continuum Most offerings lie somewhere in the middle

5. 12-5 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Economic Importance of Service Household maintenance became more specialized High value placed on convenience and leisure Production was cheaper in other countries Developed economies are increasingly service oriented economies

6. 12-6 Test Your Knowledge Which of the following is NOT a reason for the emerging growth and dependence of service-oriented economies in developing countries? A)It is generally less expensive for firms to manufacture their products in less-developed countries. B)Household maintenance activities have become quite specialized. C)American workers are retiring at an earlier age. D)People place a high value on convenience and leisure.

7. 12-7 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Services Marketing Differs from Product Marketing

8. 12-8 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Intangible Requires using cues to aid customers Atmosphere is important to convey value Images are used to convey benefit of value

9. 12-9 Inseparable Production and Consumption Production and consumption are simultaneous Little opportunity to test a service before use Lower risk by offering guarantees or warranties

10. 12-10 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Variable Technology Training Automation

11. 12-11 Test Your Knowledge In addition to training and technology, what is another way firms can reduce service variability? A)offer better employee benefits B)standardization C)micromanaging D)hire geeks

12. 12-12 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Perishable Discussion question How are each of these perishable services?

13. 12-13 Adding Value 12.1: Adding Convenience through Self-Checkout Machines © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Increasing use of self-checkout machines Consumers enjoy faster checkout Retailers save on labor and training costs

14. 12-14 Providing Great Service: The Gaps Model © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15. 12-15 The Knowledge Gap: Knowing What Customers Want © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Knowledge Gap Understanding customer expectations Marketing research: understanding customers Evaluating service quality

16. 12-16 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Filling the Knowledge Gap How does a college increase successful outcomes for its students?

17. 12-17 Case in Point: Richland CollegeRichland College Challenge Answer Results To increase successful outcomes for its students. Richland College adopted the Baldrige Criteria framework nearly a decade ago in creating its systematic, comprehensive Performance Excellence Model and infrastructure for sustained performance improvement outcomes. Richland College in Dallas, Texas is the first community college in the nation to receive the Malcolm Baldridge National Quality Award in Education. More than 50% of Richland's students transfer to four-year colleges and universities. Twenty-two of Richland's employeesMalcolm Baldridge National Quality Award have become Presidents/CEO's of other colleges.

18. 12-18 Understanding Customer Expectations © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Expectations are based on knowledge and experience Expectations vary according to type of service Expectations vary depending on the situation

19. 12-19 Test Your Knowledge Customer expectations are mainly based on their _______________. A)age and culture B)standards gap C)four core service dimensions D)knowledge and experience

20. 12-20 Evaluating Service Quality © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

21. 12-21 Marketing Research: Understanding Customers © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Voice-of-customer program

22. 12-22 Zone of Tolerance © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What is the desired and expected level of service for each dimension? What is the importance of each service quality dimension? What are the customer’s perceptions of how well the focal service performs and how well a competitive service performs?

23. 12-23 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Customer Evaluation of Service Quality

24. 12-24 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Entrepreneurial Marketing 12.1: The Key to One’s Heart (and Stomach) is Good Food and Great Service Phil Romano restaurateur Fuddruckers attempt to find the perfect burger Use freshest ingredients, prepared in customer’s view

25. 12-25 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Standards Gap: Setting Service Standards Developing systems to ensure high-quality service Setting standards for quality

26. 12-26 Test Your Knowledge To deliver consistently high-quality service, firms must set specific, measurable goals based on _______________. A)employee input B)customers’ expectations C)management philosophy D)consultant recommendations

27. 12-27 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Delivery Gap: Delivering Service Quality

28. 12-28 Closing the Delivery Gap How can an airline be successful in a hyper- competitive industry?

29. 12-29 Case in Point: Midwest AirlinesMidwest Airlines Challenge Answer Results To become a market leader in a hyper competitive industry. Focus on customer satisfaction and customer service. “Best Care in the Air” = Two in a row leather seating, impeccable service, hot chocolate chip cookies. Customer raves resulting in intense loyalty and profitability.

30. 12-30 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Empowering Service Providers Allowing employees to make decisions about how service is provided to customers

31. 12-31 Reducing delivery gap © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Providing Support and Incentives Provide emotional support to service providers Provide support necessary to deliver service Consistent and coherent management Reward employees for excellent service

32. 12-32 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Use of Technology Web-enabled services have changed the way firms do business Web-enabled services have altered customer perceptions about services

33. 12-33 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Communications Gap: Communicating the Service Promise Manage customer expectations Promise only what you can deliver Communicate service expectations

34. 12-34 Closing the Communication Gap How can a firm recover from a reputation of providing poor customer service? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

35. 12-35 Case in Point: Dell ComputersDell Computers Challenge Answer Results Poor rankings on the American Consumer Satisfaction Index (ACSI) due to poor customer service (long wait times and low quality service) compared to other computer firms. Focus on improving customer service quality. Opening two new customer service centers and improved training. Though still lagging Apple on the ACSI Dell now scores above the industry average (77), with an improvement of 74 to 78.

36. 12-36 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Service Recovery

37. 12-37 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Listening to Customer Customers get emotional over failure Often just want someone to listen

38. 12-38 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Finding a Fair Solution Distributive fairness Procedural fairness

39. 12-39 Test Your Knowledge The key to distributive fairness is _______________. A)meeting all customer demands, no matter how unrealistic B)providing the same compensation to all customers C)listening carefully to the customer D)never offending a customer

40. 12-40 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Resolving Problems Quickly The longer it takes to resolve service failure the more irritated the customers It is in the firms best interest to solve problems quickly

41. 12-41 © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The CREST Method of Resolving Service Failures C: “Calm the Customer” R: “Repeat the Problem” E: Use “Empathy Statements” S: “Solve the Problem” T: Make a “Timely Response”

42. 12-42 Chapter 12 Glossary © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Customer service: Specifically refers to human or mechanical activities firms undertake to help satisfy their customers’ needs and wants. Distributive fairness: Pertains to a customer’s perception of the benefits he or she received compared with the costs (inconvenience or loss) that resulted from a service failure. Procedural fairness: Refers to the customer’s perception of the fairness of the process used to resolve complaints about service. Voice-of-customer (VOC) program: An ongoing marketing research system that collects customer inputs and integrates them into managerial decisions.