MARKETING MANAGEMENT
DESIGNING AND MANAGING SERVICES
1) THE NATURE OF SERVICES:
The service accounts for more than 50% of India’s GDP. It is growing at a much faster rate than the other two sectors namely manufacturing and agriculture in highly competitive rapid globalization environment, the designing and managing of services is going to be a challenging task. Also, company’s facing parity with competitive offering on product features use service dimensions for successful differentiations. Company’s seek to develop a reputation for superior performance in delivery, a better and faster response to queries, and a quicker resolution of complaints.
Service industries are everywhere:
A service is any act or performance that one party can offer to another that is essential intangible and does not result in owner ship of anything. Its production may or may not be tied a physical product. Manufactures, distributors, and retailers can provide value added service or simply excellent customer service to differentiate themselves.
Categories of service mix:
A company’s offering often include some services: the service component can be a minor or major part of total offering. Five categories of offering can be distinguished:
1. Pure tangible good-The offering consists primarily of a tangible good such as soap,toothpaste or salt.No services accompany the product.
2. Tangible good with accompanying services-The offering consists of a tangible good accompanied by one or more services. In this sense,General Motors is probably more service intensive than manufacturing intensive.Without its services,its sales would shrivel.
3. Hybrid-the offering consists of equal parts of goods and services.For example,people patronize restaurants for both food and service.
4. Major service with accompanying minor goods and services-The offering consists of a major service along with additional services or supporting goods.For example,airline passengers buy transportation.The trip includes some tangibles,such as food and drinks,a ticket stub,and an airline magazine.The service requires a capital-intensive good-an airplane-for its realization,but the primary item is a service.
5. Pure services-The offering consists primarily of a service.Example include baby-sitting,psychotherapy,and massage.
Distinctive Characteristics of Services
1. Intangibility-Unlike physical products,services can not be seen,tasted,felt,heard or smelled before they are bought.The person getting a facelift can not see the results before the purchase and the patient in the psychiatrist’s office cannot know the exact outcome.
To reduce uncertainty,buyers will look for evidence of quality.Therefore the service provider’s task is to “manage the evidence”,to “tangibilize the intangible.”Whereas product marketers are changed to add abstract ideas,service marketers are changed to add physical evidence and imagery to abstract officers.
Place-The exterior and interior shoud have clean lines.The layout of the desks and the traffic follow should be planned carefully.Waiting lines should not get overly long.
People-Personnel should be busy.There should be a sufficient number of employees to manage the workload.
Equipment-Computers,copying machines,desks should be and looks “state of the art”.
Communication Materials-Printed materials-text and photos-should suggest efficiency and speed.
Symbols-The name and symbols should suggest fast service.
Price-The bank could advertise that it will deposite Rs.50 in the account of any customer who waits in the line for more than five minutes.
2. Inseparability-Services are typically produced and consumed simultaneously.This is not true of physical goods,which are manufactured,put into inventory,distributed through multiple resellers,and consumed later.If a person renders the service,then the provider is part of the service.Because the client is also present as the service is produced,provider-client interaction is a special future of services marketing.
a. Learn to work with larger groups.
b. Learn to work faster.
c. Train more service providers and build up client confidance.
d. Use technology to reach a larger audience without sacrificing interactivity.
3. Variability-Because services depended on who provides them and when and where they are provided,they are highly variable.Some doctors have an excellent bedside manner;others are less patient with their patients.Some surgeons are very successful in performing a certain operation;others are not .Service buyers are aware of this variability and often talk to others before selecting a service provider.Here are three steps service firms can take to increase quality control.
Invest in good hiring and training procedures-Recruting the right employees and providing them with excellent traning is crucial,regardless of whether employees are highly skilled professionals or low skilled works.Service company FedEx and Marriott empower their front-line personnel to spend up to$100 to resolve a customer problem.
Standardize the service-performance process through out the organization-This is done by preparing a service blueprint that depicts events and processes in a flowchart,with the objective of recognizing potential fail points.
Monitor Customer satisfaction-Employ suggestion and complaint systems,customer surveys,and comparison shopping.Firms can also develop customer information databases and systems to permit more personalized,customized service.
4. Perishability-Services can not be stored.Perishability is not a problem when demand is steady.When demand fluctuates,service firms have problems.For example,public transportation companies have to own much more equipment because of rush-hour demand than if demand were even throughout the day.
Demand side
Differential Pricing will shift some demand from peak to off-peak periods.Example include low early evening movie prices.
Non peak Demand can be cultivated.McDonald’s pushes breakfast service.
Complementary services can be developed to provide alternatives to waiting customers, such as cocktail lounges in restaurants.
Reservation systems are a way to manage the demand level.Airlines,hotels employ them extensively.
Supply side
Part-time Employees can be hired to serve peak demand .Colleges add part-time teachers when enrollment goes up.
Peak-time efficiency routines can be introduced.Employees perform only essential tasks during peak periods.
Increased consumer Participation can be encouraged.Consumers fill out their own medical records or bag their own groceries.
Shared services can be developed.Several hospitals can share medical-equipment purchases.
Facilities for future expansion can be developed.An amusement park buys surrounding land for later development.
2) MARKETING STRATEGIES FOR SERVICE FIRMS:
At one time, service firms lagged behind manufacturing firms in their use of marketing because they were small, or they were professional businesses that did not use marketing, or they faced large demand or little competition. This has certainly changed.
A Shifting Customer Relationship
Not all companies,however,have invested in providing superior services,at least not to all customers.In former times ,service companies held out a welcoming hand to all customers,but these companies now have so much data on individuals that they are able to classify their customers into profit tiers.So service is not bad for all customers. Airlines,hotels,and banks all pamper good customers.Big spenders get special discounts,promotional offers,and lots of special service.The rest of their customers get higher fees,stripped-down service,and at best a voice message to answer inquiries.
Companies that provide differentiated levels of service,however,must be careful about claiming superior service-the customers who receive poor treatment will bad-mouth the company and injure its reputation.Delivering services that maximize both customer satisfaction and company profitability can be challenging.The Kingfisher is a good example.Described as a low-cost airline with frills,Kingfisher Airlines offers a single Kingfisher-class service at Janta-class fares.Its brand new aircraft offer individual TV sets and a choice of six channels,apart from the efficient service of young,caringand enthusiastic hostesses.Passengers are addressed and treated as guests.
Holistic Marketing for Services
It requires external,internal and interactive marketing.External marketing describes the normal work of preparing,pricing,distributing and promoting the service to customers.Internal marketing describes training and motivating employees to serve customers well.Interactive marketing describes the employees’ skill in serving the client.Clients judge service not only by its technical quality,but also by its functional quality.Technology has great power to make service workers more productive.
Companies must avoid pushing productivity so hard,however,that they reduce perceived quality.Some methods lead to too much standardization.Service providers must deliver “high-touch” as well as “high-tech”.Arvind Eye Hospital,Madurai is example of it.
3) MANAGING SERVICE QUALITY:
The service quality of a firm is tested at each service encounter.If retail clerks are bored,can not answer simple questions,or are visiting with each other while customers are waiting,customers will think twice about doing business again with that seller.
Customer Expectations
Customer form service expectations from many sources,such as past experiences,word of mouth and advertising.Customer compare the perceived service with the expected service.If the perceived service meets or exceeds their expectations,they are apt to use the provider again.Successful companies add benefits to their offering that not only satisfy customers but surprise and delight them.Delighting customers is a matter of exceeding expectations.
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1. Gap between consumer expectation and management perception-Management does not always correctly perceive what customers want.
2. Gap between management perception and service-quality specification-Management might correctly perceive customers’ wants but not set a performance standard.
3. Gap between service-quality specifications and service delivery-Personnel might be poorly trained or incapable of or unwilling to meet the standard or they may be held to conflicting standards.
4. Gap between service delivery and external communications-Consumer expectations are affected by statements made by company representatives and ads.
5. Gap between perceived service and expected service-This gap occurs when the consumer misperceives the service quality.
Based on this service-quality model, these researchers identified the following five determinants of service quality, in order of importance.
1. Reliability-The ability to perform the promised service dependably and accurately.
2. Responsiveness-The willingness to help customers and to provide prompt service.
3. Assurance-The knowledge and courtesy of employees and their ability to convey trust and confidence.
4. Empathy-The provision of caring,individualized attention customers.
5. Tangibles-The appearance of physical facilities,equipment,personneland communication materials.
Best practices of Service-Quality Management
1. Strategic concept-Top service companies have a clear sense of their customers and their needs.They have developed a distinctive strategy for satisfying these needs.
2. Top Management commitment-Organizations such as Marriot,Disney,Xerox’s senior and top management look not only at financial performance but also at service performance.
3. High Standards-A service company can differentiate itself by designing a better and faster delievery system.There are three levels of differentiation:reliability,resilience and innovativeness.
4. Self-Service technologies (SSTs)-Many person to person service interactions are being replaced by self service technologies. To the traditional vending machines,
we can add automatic teller machines, self ticket purchase on the internet.
5. Monitoring Systems-Top firms audit service performance, both their own and competitiors’,on a regular basis. Services can be judged on customer importance and company performance.
6. Satisfying customer complaints-Customers whose complaints are satisfactory resolved often become more company loyal than customers who were never dissatisfied.Every complaint is a gift if handled well.
7. Satisfying employees as well as customers-Given the importance of positive employee attitudes,service companies must attract the best employees they can find.Employees should not be stressed in order to please the customers.
4) MANAGING SERVICES BRANDS
Some of the world’s strongest brands are services – consider financial service leaders such as Citibank, American Express, JP Morgan, HSBS, and goldman Sachs. Several hospitals have attained “megabrand” reputations for being the best in their field.
Differentiating Services
To the exetent that customers view a service as fairly homogeneous,they care less about the provider than the price.The offering can include innovative features.What the customer expects is called the primary service package.Vanguard ,the second largest no-load mutual fund company,has a unique client ownership structure thet lowers costs and permits better fund returns.
The provider can add secondary service features to the package.In the airline industry,various carriers have introduced such secondary service features as movies,merchandise for sale,air-to-ground telephone service and frequent –flier award programs.
Developing Brand Strategies for Services
1. Choosing brand elements-The intangibility of services has implications for the choice of brand elements.Service companies can also differentiate through symbols and branding.The famous ITC Welcome group logo ;Taj Hotels targeting different customer groups with different brands.
2. Establishing Image dimensions-One particularly important association is company credibility and perceived expertise,truthworthinessand likability.Service firms must design marketing communication and information programs.These programsmay be particularly effective at helping the firm to develop the proper brand personality.ICICI Prudential build image through marketing campaign.
3. Devising branding strategy-Services also must consider developing a brand hierarchy and brand portfolio that permits positioning and targeting of different market segments.classes of service can be branded vertically on the basis of price and quality.In the hotel and airline industries,brand lines and portfolios have been created by brand extension and introductions.
5) MANAGING PRODUCT SUPPORT SERVICES
Thus far we have focused on service industries. No less important are product-based industries that must provide a service bundle. Manufacturers of equipment – small appliances, office machines, tractors, mainframes, airplanes – all have to provide product support services. Product support service is becoming a major battleground for competitive advantage.
Identifying and satisfying Customer Needs
1. They worry about reliability and failure frequency.
2. They worry about downtime
3. They worry about out-of-pocket costs
A buyer takes all these factors into consideration in choosing a vendor. The buyer tries to estimate the life-cycle cost, which is the product’s purchase cost plus the discounted cost of maintenance and repair less the discounted salvage value. Buyers ask for hard data in choosing amount vendors.
To provide the best support ,a manufacturer must identify the services customers value most and their relative importance.Herman Miller promise to buyers
1)five year product warranties;(2)quality audits after project installation;(3)guaranteed move-in dates;(4)trade-in allowances on system products.
Postsale Service Strategy
The quality of customer service departments varies greatly.At one extreme are departments that simply transfer customer calls to the appropriate person or department for action,with little follw up.At the other extreme are departments eager to receive customer requests ,suggestions and even complaints and handle them expeditiously.
Manufacturers usually start out by running their own parts and service departments.They want to stay close to the equipment and know its problems.They also find it expensive and time consuming to train others and discover that they can make good money running the parts-and-service business.As long as they are the only supplier of the needed parts,they can charge a premium price.
Overtime manufacturers switch more maintenance and repair service to authorized distributors and dealers.These intermediaries are closer to customers,operate in more locations and can offer quicker service.Manufacturers leave the servicing profit on intermediaries.Later independent service firms emerge.They typically offer a lower price or faster service than the manufacturer or authorized intermedediaries.
DESIGNING AND MANAGING SERVICES -
January 4th, 2008
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