Designing & Managing services

N. Banerjee
Categories of a company’s offering

Pure
Pure tangible
tangible good
good

Good
Good w/
w/ accompanying
accompanying services
services

Hybrid
Hybrid

Service
Service w/
w/ accompanying
accompanying goods
goods

Pure
Pure service
service
 What is a Service?
A service is any act of performance that
one party can offer another that is
essentially intangible and does not result
in the ownership of anything; its
production may or may not be tied to a
physical product.
Intangible
Perishable
Inseparable
Variable
 Service Distinctions
• Equipment-based (eg. ATM) or people-based.
• Service processes (restaurants have developed cafeteria-
style, fast food, buffet, and candlelight service formats)

• Client’s presence required (surgery) or not (car

repair)

• Personal needs or business needs

• Objectives (profit or nonprofit) and ownership (private
or public)
Figure: Continuum of Evaluation for Different Types of Products
Distinctive Characteristics of Services

Intangibility

Inseparability

Variability

Perishability
 Service Intangibility: A challenge for marketers
• Intangibility means ‘palpable’ intangibility & mental intangibility
(-Bateson,1977).

• Marketers try to tangibilise the intangible through any number of

marketing tools. Place, People, Equipment, Communication
material, Symbol & Price play important part.

• Because of the service intangibility a company’s promotional

program must be explicit about the benefits to be derived from the
service, rather than emphasizing the service itself .

• 4 promotional strategies may be used to suggest service benefits

and reduce the effect of intangibility
Visualization / Association / Physical Representation /
Documentation (past performance and future capability)

• Because of the intangibility factors additional P’s like People &

Physical evidence have significant roles to play
 Class Discussion Question

Q. A hospital positioning itself for

cleanliness & hygiene. How you should
attach tangibles to service intangibility to
facilitate successful positioning.
 Inseparability
• Simultaneous production and
consumption of services.
 Variability
• Services provided are highly variable as they depend on who
provide them and when & where they are provided.

• So it is imperative to take measures for maintain a standardize

quality.
• Steps for controlling quality:
 Invest in good hiring & training procedures so that sales personnel
become competent, learn to show courtesy, become trustworthy,
their communication skills improve, learn to perform the service
consistently and accurately, and become responsive.

 Standardize the service performance process throughout the

organization

 Monitor customer satisfaction

 Perishability
• Services are perishable; they can’t be stored.
• So, there should be a better match between demand
& supply.
• Related strategies:
On the demand side:
 Differential pricing
 Cultivation of non peak demand
 Complimentary services
 Reservation system

On the supply side:

 Part time employees
 Peak-time efficiency
 Increased customer participation
 Facilities for future expansion
Elements in a Service Encounter
 Service Marketing Mix
• Strategies hovers around the service
marketing mix:
Product
Place
Price
Promotion
People
Process
Physical evidence
 Holistic marketing of services

• Service marketing triangle;

 External marketing
 Internal marketing
 Interactive marketing
 Service Marketing Triangle

COMPANY

Internal Marketing External Marketing

Enabling Promises Giving Promises

Service Personnel Delivering Promises Customers

Interactive marketing

External Marketing: Contribute in Creating Expectation

Internal & interactive Marketing: Create Perception
 Key marketing issues before a service organization
• The unique characteristics of services present certain key marketing
issues before a service provider. These include

 Managing differentiation among services

 Managing productivity

 Managing Service Quality

 Differentiating from competitors
• Service Premises
Tangibles
• Packaging

• Service personnel
Intangibility
• Tools & equipment used

• Customers

• Convenience

• Name of the service establishment

 Managing Productivity
Managing productivity in service organizations is a difficult task due to
the multifunctional nature of service jobs. For example, in a fast-food
outlet, the service personnel perform various tasks which include
preparing the food (production), delivering the food to the customers
(retail service), ensuring that the have an enjoyable eating
experience (customer service), and accepting payment and
tendering the change (transaction processing). Inventory
management and routine maintenance of the premises may also be a
part of the job in some instances. The multifunctional nature of their
job makes measuring, monitoring and improving the performance of
the personnel in service organizations a complex task.
Service Quality & managing service quality
Dimensions of SEC Quality
Perceived Service Quality, Expected service and Experienced service
The GAP model of service quality (-- Parasuraman et al, 1985)
 Customer service expectations
• Sources of customer’s service expectations:
Past Exp / WOM / Advt

• Based on the GAP model Customer’s service expectations can be

measured along five dimensions of service qualities. They are:

 Assurance

 Empathy

 Reliability

 Responsiveness

 Tangibles

• Companies try not only to satisfy but to delight their customers.

 Service level expectation:
Zone of Tolerance

• Customer expectations of service can be of two types: desired and

adequate.
• Desired service can be defined as the service that a customer desires
and hopes to receive. Desired service expectations of a customer
increase when the customer is experienced and has good knowledge
of what to expect in the service.

• The desired service expectations of a customer may also depend on

the service expectations of an associated party.

• Adequate service is the minimal level of service that a customer is

willing to accept from a service provider and is based on the
customer’s perception of what level of service is acceptable to him.
Not meeting the Adequate level leads to dissatisfaction.
Zone of tolerance is the gap between a customer’s desired service expectations and the
adequate service expectations as shown in Figure 4.1. This zone varies for each
customer and for the same customer it differs in different situations. Customers view
reliability as the core dimension of any service transaction and are not ready to
compromise on reliability. Therefore, their zone of tolerance on the dimension of
reliability is narrow. It is also narrow when customers have various service alternatives
available.