1. ©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

2. ©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.

3. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 2 in Chapter 12 Nature of Services  The Service Industry includes the: –Government sector –Private nonprofit sector –Business sector –Manufacturing sector

4. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 3 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

5. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 4 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”

6. ©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  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

7. ©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  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

8. ©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  Services can not be inventoried or otherwise stored  Capacity / demand management is critical: –Demand side strategies –Supply side strategies

9. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 8 in Chapter 12 Nature of Services  Demand-side strategies –Use differential pricing –Cultivate nonpeak demand –Develop complementary services –Install reservation systems  Supply-side strategies –Hire part-time employees –Introduce peak-time efficiency routines –Increase consumer participation –Plan facilities for future expansion –Share services

10. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 9 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.

11. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 10 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.

12. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 11 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

13. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 12 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

14. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 13 in Chapter 12 Marketing Strategies  Consumer expectations and management perceptions  Management perception and service-quality specification  Service-quality specifications and service delivery  Service delivery and external communications Service Delivery Failure Results from Gaps Between:  Service-quality specifications and service delivery

15. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 14 in Chapter 12 Marketing Strategies  A strategic concept  Commitment from top-management  High standards  Firm and customer monitoring systems Well-Managed Service Firms Share These Characteristics  Satisfaction of employees and customers

16. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 15 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

17. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 16 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

18. ©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 17 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