Examples of Service Industries

Health Care
hospital, medical practice, dentistry, eye care

Professional Services
accounting, legal, architectural

Financial Services
banking, investment advising, insurance

Hospitality
restaurant, hotel/motel, bed & breakfast ski resort, rafting

Travel
airline, travel agency, theme park

Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

Challenges for Services

Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image Motivating and sustaining employee commitment Coordinating marketing, operations and human resource efforts Setting prices

Competitive Service Strategies (Overall Cost Leadership)

Seeking Out Low-cost Customers Standardizing a Custom Service Reducing the Personal Element in Service Delivery (promote self-service) Reducing Network Costs (hub and spoke) Taking Service Operations Off-line

Competitive Service Strategies (Differentiation)

Making the Intangible Tangible (memorable) Customizing the Standard Product Reducing Perceived Risk Giving Attention to Personnel Training Controlling Quality
Note: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.

Competitive Service Strategies (Focus)

Buyer Group: (e.g. USAA insurance and military officers) Service Offered: (e.g. Shouldice Hospital and hernia patients) Geographic Region: (e.g. Austin Cable Vision and TV watchers)

Implications of Intangibility
Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult

Implications of Heterogeneity
Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted

Implications of Simultaneous Production and Consumption

Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult

Implications of Perishability
It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Figure 5-1

Criteria for An Effective Services Research Program

Occurs with Appropriate Frequency

Includes Perceptions and Expectations of Customers

Research Objectives

Measures Priorities or Importance

Includes Statistical Validity When Necessary

Includes Measures of Loyalty or Behavioral Intentions

New Service Development Process

Business Strategy Development or Review New Service Strategy Development

Front End Planning

Idea Generation Screen ideas against new service strategy Concept Development and Evaluation Test concept with customers and employees Business Analysis Test for profitability and feasibility Service Development and Testing Conduct service prototype test

Implementation

Market Testing
Test service and other marketing-mix elements Commercialization Postintroduction Evaluation

Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

Service Strategy has four activities

Define the Market Develop the Offerings

Develop Strategic Assets

Prepare for Execution

Service Design
Major factors in design strategy
Cost Quality Time-to-market Customer satisfaction Competitive advantage
service design or redesign should be closely tied to an organizations strategy

4-14

Service Design Activities

1. Translate customer wants and needs into product and service requirements 2. Refine existing products and services 3. Develop new products and services 4. Formulate quality goals 5. Formulate cost targets 6. Construct and test prototypes 7. Document specifications

4-15

Reasons for Service Design

Economic
Social and demographic Political, liability, or legal Competitive Cost or availability Technological
4-16

Objectives of Service Design

Main focus
Customer satisfaction Understand what the customer wants

Secondary focus
Function of product/service Cost/profit Quality Appearance Ease of production/assembly Ease of maintenance/service
4-17