DESIGNING AND MANAGING SERVICES

The Nature of Services

In 2004, the share of the service sector in the GDP of India was 52%. A service is any act or performance one party can offer to another that is essentially intangible and does not result in ownership of anything. Its production may or may not be tied to a physical product. Service Industries are Everywhere: The government sector: Courts, employment services, hospitals, loan agencies, military services, police and fire departments, postal service, regulatory agencies and school.

The Nature of Services

The Private nonprofit sector: Museums, charities, churches, colleges, foundations and hospitals. The Business sector: Airlines, banks, hotels, insurance companies, law firms, management consulting firms, medical practices, motion picture companies, plumbing repair companies, and real estate firms. The Manufacturing sector: Computer operators, accountants and legal staff. The Retail sector: Cashiers, clerks, salespeople and customer-service reps.

The Nature of Services

Monster.com has a webby award-winning Web site to support its online career advice and employment recruiting efforts. Categories of Service Mix: The service component can be a minor or a major part of the total offering: 1. Pure tangible good 2. Tangible good with accompanying services 3. Hybrid 4. Major service with accompanying minor goods and services 5. Pure service

The Nature of Services

Apart from the foregoing distinct categories: o Services vary as to whether they are equipment based or people based (unskilled, skilled or professional workers) o Process based service formats. o Service based on clients presence. o Difference in objectives and ownership Distinctive Characteristics of Services: Services have four distinctive characteristics that greatly affect the design of marketing programs: I. Intangibility II. Inseparability III. Variability IV. Perishability

The Nature of Services

INTANGIBILITY: Unlike physical products, service cannot be seen, tasted, felt, heard or smelled. Therefore, the service providers task is to manage the evidence, to tangibilize the intangible. It is achieved through physical evidence and presentation. The luxury tourist train Palace on Wheels, a joint venture of Rajasthan Tourism and Indian Railways, is highly successful due to the careful design and execution of various service elements.

The Nature of Services

INSEPARABILITY: Services are typically produced and consumed simultaneously. A barber cant give a hair cut without being present. The provider is part of the service. Provider-client interaction is a special feature of services marketing. VARIABILITY: Because the quality of services depends on who provides them, when, where and to whom, services are highly variable.

The Nature of Services

Three steps which service firms take to reduce variability are: 1. Invest in good hiring and training procedure 2. Standardize the service-performance process throughout the organization 3. Monitor customer satisfaction PERISHABILITY: Services cannot be stored. Some doctors charge patients for missed appointments because of the same.

The Nature of Services

PERISHABILITY: Demand or yield management of services is critical. Today the mantra is the right services must be available to the right customers at the right places at the right time and right prices. Several strategies can produce a better match between demand and supply in a service business. On the demand side:
i. ii. iii. iv. Differential pricing Nonpeak demand Complementary services Reservation systems

The Nature of Services

PERISHABILITY: On the supply side: Part-time employees can serve peak demand. Peak-time efficiency routines can enable employees to prioritize tasks. Increased consumer participation can be encouraged. Shared services can improve offerings. Facilities for future expansion can be a good investment.

Holistic Marketing for Services

The service outcome and customer loyalty is influenced by a host of variables. One study identified more than 800 critical behaviors that cause customers to switch services. These behaviors fall into eight categories: 1. Pricing 2. Inconvenience 3. Core service failure 4. Service encounter failures 5. Response to service failures 6. Competition 7. Ethical problems 8. Involuntary switching

Holistic Marketing for Services

Holistic marketing for services require external, internal and interactive marketing. External marketing describes the normal work of preparing, pricing and promoting the service. Internal marketing describes training and motivating employees to serve customers well. Interactive marketing describes the employees skill in serving the client. .because clients judge service not only by its technical quality but also by its functional quality.

Managing Service Quality

The service quality of a firm is tested at each service encounter. Customer Expectations: Customers form service expectations from many sources. They compare perceived service with the expected service. Five gaps that cause unsuccessful delivery are: 1. Gap between consumer expectation and management perception 2. Gap between management perception and servicequality specification 3. Gap between service-quality specifications and service delivery 4. Gap between service delivery and external communications 5. Gap between perceived service and expected service

Managing Service Quality

Based on this service-quality model, researchers identified the following five determinants of service quality, in order of importance. 1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles Best Practices of service-quality management Various studies have shown that well-managed service companies share the following common practices:

Managing Service Quality

1. A strategic concept. 2. A history of top-management commitment to quality. 3. High standards. 4. Self-service technologies. 5. Systems for monitoring service performance and customer complaints. 6. Emphasis on customer as well as employee satisfaction.