Chapter 13

Characteristics of Services

Have six basic characteristics of services Intangibility Inseparability of Production and Consumption Perishability Heterogeneity Client Based Relationships Customer Contact

Business Services

Include support and maintenance, consulting, installation, equipment leasing, marketing research, advertising, temporary office personnel, and janitorial services Expenditures for business services have risen faster than consumer services This has been attributed to increasingly complex, specialized business environment ex. IBM focusing more on consulting services and software applications than actual hardware

Charactersitis of Services: Inseparability of Production and Consumption

Inseparability: refers to the fact that the production of a service cannot be separated from its consumption by customers Ex. air passenger service is produced and consumed at the same time Services are often produced, sold, and consumed at the same time This is different from goods in which the manufacturer of goods may never see the consumer of the good Bc of inseparability customers want a specific type of and expect it to be provided in a specific way This implies a shared responsibility between a customer and the service provider

Promotion of Services

Intangibility of services results in several promotion related challenges to service marketers Its hard to explain a service to a customers Promotion, thus, typically involves tangible cues that symbolize the service e. Allstate uses hands to symbolize strength, security, and reliability Make it easier to understand the intangible attributes of the service Show pictures of equipment, facilities, and personnel to make it more tangible Also promote the service as a tangible expression of the consumer's lifestyle Service providers are more likely to promote price, guarantees, performance documentation, availabilty, and training of personnel than goods marketers Service marketers are careful to use specific, concrete language to help make services more tangible in the consumer's minds Intangibility also makes sampling a service difficult for some ex. car can be test driven but insurance or health care can't Some services can be offered on a trial basis at little or no risk to the customer but others can't Ex. insurance; quality of the coverage is based primarily on how the customer is treated and protected when a claim is made Word of mouth is very important bc of intangibility and heterogeneity. Some try stimulate positive communication by asking satisfied customers to pass on the word

What Marketers Must Decide In Regards to Price When Services Are Offered In a Bundle

Marketers must decide whether to offer the services at one price, price them separately, or use a combination of the two methods ex. hotels; some charge for a bundle, others price it separately etc.

Developing and Managing Marketing Mixes for Services

Marketers of services must consider additional issues that are involved in the marketing mix (which is the same); product, distribution, promotion, and price

Delivering Exceptional Service Quality: Analysis of Customer Expectations

Need to understand consumer expectations when designing a service Two levels of expectations: desired and acceptable Desired level: what a customer really wants. If this is provided then the customer is very satisfied Acceptable level is what the customer views as adequate The difference between these two is called the customer's zone of tolerance Surveys, focus groups, market research etc. used to discover customer needs and expectations Ask employees bc customer contact employees interact daily with the customers

Delivering Exceptional Service Quality: Service Quality Specifications

Once an org. understands its customer's needs it must establish goals to help ensure good service delivery Goals, or service specs, are typically set in terms of employee of machine performance The most important aspect of service quality specs is manager's commitment to service quality They are role models for other employees All managers should embrace this commitment; especially frontline managers who are closer to customers than higher level managers

Delivering Exceptional Service Quality: Employee Peformance

Once service standards are set and managers are committed, the firm must find ways to ensure customer contact employee perform their jobs well Contact employees are often the least trained and lowest paid members of the org (bank tellers, flight attendants etc) Service orgs must understand that contact employees are the most important link to the customer and their performance is critical to customer perceptions of service quality Many service employees are evaluated and rewarded on the basis of output measure such as sales volume or low error rate These systems overlook other major aspects such as friendliness, teamwork, effort, and customer satisfaction etc.

Characteristics of Services: Customer Contact

Refers to the level of interaction between provider and customer needed to deliver the service High contact services include health care, spa etc Some service oriented businesses are reducing their level of customer contact through technology Low contact services includes tax prep, dry cleaning etc. HIgh contact activities generally require that the customer be present and that the customer come to the service Employees of high contact service providers are a crucial ingredient in creating satisfied customers Satisfied employees lead to satisfied customers Employee satisfaction is the single most important factor in providing high service quality Need to adequately train, empower and reward good customer oriented behavior to meet the needs of their employees and satisfy the

How Consumers Judge Service Quality

Service quality may be the only way customers can choose one service over another So service marketers live or die by how consumer judge their service quality Five dimensions consumers use when evaluating service quality; tangibles, reliability, responsiveness, assurance, and empathy All five dimensions have links to employee performance

Characteristics of Services: Heterogeneity

Services are delivered by people so they are susceptible to heterogeneity; variations in product quality Quality of manufactured goods are easier to control with standardized processes and mistakes are easier to isolate and correct The nature of human behavior makes this more difficult with humans Variation of quality can occur between organizations and even within different reps at the same facility Training and the establishment of standard procedures can help increase consistency and reliability within service Service employees with greater sensitivity toward people of different countries and cultures are more attentive and have better interpresonal skills, etc. (research suggests this) Training that improves cultural sensitivity should improve service quality Heterogeneity usually increases as the degree of labor increases. Ex. education can vary more than telecommunications (equipment sensitive) People based services are more prone to fluctuations in quality ex. morning haircut may not be the same as the one in the evening Can occur with equipment based operations too but to a lesser degree

Distribution of Services

Services are delivered in a variety of ways Sometimes the customers go to a service provider's facility Some services are provided at the customer's home or business (lawn care) Some services are provided at arm's length meaning no face to face contact occurs between customer and service provider includes cable tv and telephone services Providing high quality customer service at arm's length is costly but is essential in satisfying customers (ex. airlines are making user friendly websites) Marketing channels for services are usually short and direct; the producer delivers the service directly to the end user Some services use intermediaries (ex. travel agents) Service marketers are very concerned about inventory management especially balancing supply and demand for services (less concerned with warehousing and transportation of than goods marketers) Inseparability and level of customer contact add challenges to demand management Reservations or appointments are often used to try control this (accountants, lawyers etc) Can also increase the number of contact service employees as well as the number of service sites (helps with demand management) Some service providers have replaced contact personnel with equipment; changed high contact service into a lower contact one to increase supply and reduce labor costs This has some problems though; automated services are less personal

Pricing of Services

Services should be priced with consumer price sensitivity, the nature of the transaction, and its costs in mind Prices can be established on several different bases Some services use demand based pricing; when demand is high the price is high. When demand is low, price is low . Some services are very time sensitive in that a significant number of customers desire the service at a particular time. This time is called peak demand ex. peak airline demand is early and late in the day Providers of time sensitive services often use demand based pricing to help manage the demand and supply Charge top prices during peak demand and so on (ex. matinee movie is much cheaper than the movie seen at night) Some companies overbook in order to maximize their capacity and revenues However, this can cause dissatisfied customer to take business elsewhere and customer who are "bumped up" or upgraded as a result do not exhibit positive responses to the upgrade

Characteristics of Services: Client Based Relationships

Success of many services depends on creating and maintaining interactions that result in satisfied customers who use a service repeatedly over time (client based relationships) Ex. lawyers etc.. must develop long term relationships with their customers/clients Only successful to the degree to which they can maintain a group of clients on an ongoing basis and who can pass on a good word for them Word of mouth is a key factor in creating and maintaining client based relationships Must take steps to build trust, demonstrate customer commitment and satisfy customers so well that they become very loyal

Theater Example of Services

The actors (service workers) create a performance (service) for the audience (customers) etc. Performances also require a script that standardize the service

US

World's first service economy Services account for about 70% of GDP in developed countries Long term economic growth has been a major catalyst of the service industry Increasing number and complexity of high tech goods have spurred demand for support services

Customer Service

involves any human, mechanical or electronic activity that adds value to the product Many service companies such as Hampton Inn also offer customer services Customer service, unlike service, is the not the core product; it simply adds value to it

Charactersitics of Services: Pershibility

is the unused service capacity f one time period cannot be stored for future use ex. empty seats on an airline cannot be stored and sold to passengers at a later date Some real goods such as milk and meat are also perishable but overall, goods are less perishable than services Service marketers do not have the advantage of production scheduling and inventory techniques as do real goods providers. They means that they must plan for demand as it fluctuates even though they face more hurdles in trying to balance supply and demand

Development of Services

offered services are normally packaged, or bundled, consisting of a core service and one r more supplementary services Core service; basic service experience or commodity that a customer expects to receive Supplementary service is a supportive one related to the core service and is used to differentiate the service bundle from competitors ex. tutoring class but the supplementary is outlines etc. Heterogeneity provide one advantage to service marketers; allows them to customize their services to match specific needs of individual customers Customization plays a key role in providing competitive advantages for the service provider customized services though can be expensive for both customer and provider Face a dilemma; how to provide a service at an acceptable level of quality in an efficient and economic manner and still satisfy individual customer needs this problem is solved by providing standardized packages Intangibility makes it difficult for customers to evaluate a service prior to purchase ex. how to evaluate legal advice before receiving the service Intangibility requires marketers to make promises to customers and the customer is forced to place a degree of trust in these promises To cope with intangibility, service providers come up with tangible cues such as well groomed professional appearing customer contact employees and clean facilities ex. professionilism and cleanliness of an airline pilot's uniform Inseparability of production and consumption and level of customer contact also influence the development and management of services. Customer take part in production of services so this means that other customers can affect the outcome of the service ex. smoker in a non smoking area Can reduce these problems by encouraging customers to share responsibility of maintaining an environment that allows all participants to receive the intended benefits of the service

Service Expectations

one of the most important factors in customer judgments of service quality ads, word of mouth etc build expectations that customers expect when they finally consume a service

Delivering Exceptional Service Quality

providing high quality services on a consistent basis is very difficult Companies should consider the four factors that affect service quality: Analysis of customer expectations Service quality specifications Employee performance Management of service expectations

Search Qualities

tangible attributes that can be judged before the purchase of a product This makes evaluating goods easier Services have few search qualities ; they abound in experience and credence qualities

Characteristic of Services: Intangibility

A major characteristic that distinguishes a service from a good Means that the service is not physical and cannot be perceived by the senses ex. impossible to touch the benefit of education ; the intangible benefit is becoming more knowledgeable Pure goods (tangible) to pure services (intangible) Pure goods are rare bc practically all marketers of goods also provide customer services Knowing where the product lies on the continuum is important for creating marketing strategies for service dominant products

Experience Qualities

Attributes such as taste, satisfaction, or pleasure that can be assessed only during the purchase and consumption of the service ex. Rest, vacations

Customers Rely on Price

Because of the intangible nature of services, customers sometimes rely heavily on price as an indicator of quality if customers perceive quality as the similar, or if the quality is difficult to judge even after the purchase of the product then customer may seek out the lowest priced option If the quality of different services is likely to vary, customer rely heavily on the price-quality association. Ex. medical services Market conditions can limit how much can be charged for certain services especially if the service is perceived as generic in nature (ex. laundromat prices are limited by the going rate in the area, or the state and local govt. regulation may affect prices for some things

Customer Evaluation of Service Quality

Biggest obstacle for customers in evaluating quality is the intangible nature

Delivering Exceptional Service Quality: Management of Service Expectations

Co's must set realistic expectations of about the service they provide bc expectations are so significant in customer evaluations of service quality Ads shouldn't promise more than than the service org can deliver To deliver on promises made a company needs to have have thorough internal communication among its departments especially management, advert, and store operations Customers tell four times as many people about bad service as they do about good service

Service Quality

Customer's perception of how well a service meets or exceed their expectations Delivery of high quality services is one of the most important and difficult tasks any service org. faces Customers, not organizations evaluate service quality Forces service marketers to examine quality from the customer's viewpoint

Reliability

The most important dimension in determining customer evaluations of service quality

Services

an intangible product that involves a deed, a performance, or an effort that cannot by physically possessed Usually provided through the application of human or mechanical efforts The primary difference between a service and a good is that a service is dominated by the intangible portion of the total product Services as products shouldn't be confused with customer service Service can involve mechanical efforts directed at people such as air travel

Credence Qualities

attributes that customers may be unable to evaluate even after the purchase and consumption of the service ex. surgical operations legal rep Customers lack knowledge or skills to evaluate the quality of the service. So they must place a great deal of faith in the competence of service provider