Designing And Managing

Services

Muhammad Sabir
2018-BBA 27
The Nature of Services
• Share of Services in DGP exceeds than share of manufacturing.
• In 2010 the share of service sector in DGP of India was estimated to
55.3%,
• Bangladesh 52,9%,
• Pakistan 54.6%,
• Sri Lanka 57.6%, and
• United States 76.7%.
• The service sector accounted for about 29% of the employment in
India in 2004-2005.
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Service industries are Everywhere
• The Govt. Sector, with its courts, employment services, hospitals, loan agencies, military
services, police and fire departments postal service, regulatory agencies and schools is in the
service business.
• The private nonprofit sector—museums, charities, churches, colleges, foundations, and
hospitals—is in the service business.
• A good part of the business sector, with its airlines, banks, hotels, insurance companies, law
firms, management consulting firms, medical practices, motion picture companies, plumbing
repair companies, and real estate firms, is in the service business.
• Many workers in the manufacturing sector, such as computer operators, accountants, and
legal staff, are really service providers.
• In fact, they make up a “service factory” providing services to the “goods factory.”
• And those in the retail sector, such as cashiers, clerks, salespeople, and customer service
representatives, are also providing a service.

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What is service?
• A service is any act or performance one party can offer to 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.
• Increasingly, manufacturers, distributors, and retailers are providing value-added
services, or simply excellent customer service, to differentiate themselves.
• Many pure service firms are now using the Internet to reach customers; some are purely online.

• Monster.com’s Webbyaward-winning site offers online career advice and employment recruiting.

• Done right, improvements or innovations in customer service can have a big payoff, as Zipcar found (case).

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 Categories of Service Mix
• The service component can be a minor or a major part of the total offering. We
distinguish five categories of offerings:
1. Pure tangible good—a tangible good such as soap, toothpaste, or salt with no accompanying services.
2. Tangible good with accompanying services—a tangible good, like a car, computer, or cell phone,
accompanied by one or more services. Typically, the more technologically advanced the product, the
greater the need for high-quality supporting services.
3. Hybrid—an offering, like a restaurant meal, of equal parts goods and services. People patronize restaurants
for both the food and its preparation.
4. Major service with accompanying minor goods and services—a major service, like air travel, with
additional services or supporting goods such as snacks and drinks. This offering requires a capital-intensive
good—an airplane—for its realization, but the primary item is a service.
5. Pure service—primarily an intangible service, such as babysitting, psychotherapy, or massage.

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The range of service offerings makes it difficult
to generalize without a few further distinctions.
• Services vary as to whether they are equipment based (automated car washes, vending machines) or people based (window
washing, accounting services). People-based services vary by whether unskilled, skilled, or professional workers provide them.
• Service companies can choose among different processes to deliver their service. Restaurants offer cafeteria-style, fast-food,
buffet, and candlelight service formats.
• Some services need the client’s presence. Brain surgery requires the client’s presence, a car
repair does not. If the client must be present, the service provider must be considerate of his or
her needs. Thus beauty salon operators will invest in décor, play background music, and engage in light conversation with the
client.
• Services may meet a personal need (personal services) or a business need (business services). Service providers typically
develop different marketing programs for these markets.
• Service providers differ in their objectives (profit or nonprofit) and ownership (private or
public). These two characteristics, when crossed, produce four quite different types of organizations. The marketing programs
of a private investor hospital will differ from those of a
private charity hospital or a Veterans Administration hospital.

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Continuum of Evaluation for Different Types
of Products

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Distinctive Characteristics of Services
• Four distinctive service characteristics greatly affect the design of marketing programs:
intangibility, inseparability, variability, and perishability

• INTANGIBILITY Unlike physical products, services cannot be seen, tasted, felt, heard, or
smelled before they are bought. A person getting cosmetic surgery cannot see the results before the
purchase, and the patient in the psychiatrist’s office cannot know the exact outcome of treatment.
To reduce uncertainty, buyers will look for evidence of quality by drawing inferences from the
place, people, equipment, communication material, symbols, and price. Therefore, the service provider’s task is to “manage the evidence,” to
“tangibilize the intangible.
• Service companies can try to demonstrate their service quality through physical evidence and
presentation.11 Suppose a bank wants to position itself as the “fast” bank. It could make this positioning strategy tangible through any number of
marketing tools:
1. Place—The exterior and interior should have clean lines. The layout of the desks and the traffic flow should be planned carefully. Waiting lines
should not get overly long.

2. People—Employees should be busy, but there should be a sufficient number to manage the workload.

3. Equipment—Computers, copy machines, desks, and ATMs should look like, and be, state of the art.

4. Communication material—Printed materials—text and photos—should suggest efficiency and speed

5. Symbols—The bank’s name and symbol could suggest fast service.

6. Price—The bank could advertise that it will deposit $5 in the account of any customer who
waits in line more than five minutes.
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• Service marketers must be able to transform intangible services into concrete benefits and a well-defined experience.12 Disney
is a master at “tangibilizing the intangible” and creating magical fantasies in its theme parks; so are companies such as Jamba
Juice and Barnes & Noble in their respective retail stores.

• INSEPARABILITY Whereas physical goods are manufactured, then inventoried, then distributed, and later consumed,
services are typically produced and consumed simultaneously.
• A haircut can’t be stored—or produced without the barber. The provider is part of the service. Because the client is also often
present, provider–client interaction is a special feature of services marketing.
• Several strategies exist for getting around the limitations of inseparability. The service provider
can work with larger groups.
• Some psychotherapists have moved from one-on-one therapy to small-group therapy to groups of over 300 people in a large
hotel ballroom. The service provider can work faster—the psychotherapist can spend 30 more efficient minutes with each
patient instead of 50 less-structured minutes and thus see more patients.
• The service organization can train more service providers and build up client confidence, as H&R Block has done with its
national network of trained tax consultants.

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VARIABILITY
• Because the quality of services depends on who provides them, when and where, and to whom, services are highly
variable.
• Some doctors have an excellent bedside manner; others are less empathic.
• Service buyers are aware of this variability and often talk to others before selecting a service provider.
• To reassure customers, some firms offer service guarantees that may reduce consumer perceptions of risk.

Here are three steps service firms can take to increase quality control.

1. Invest in good hiring and training procedures.

Recruiting the right employees and providing them with excellent training is crucial, regardless of whether employees
are highly skilled professionals or low-skilled workers. Better-trained personnel exhibit six characteristics:
Competence, courtesy, credibility, reliability, responsiveness, and communication.

2. Standardize the service-performance process throughout the organization.

A service blueprint can map out the service process, the points of customer contact, and the evidence of service from
the customer’s point of view.

Below Figure shows a service blueprint for a guest spending a night at a hotel.
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3. Monitor customer satisfaction.
Employ suggestion and complaint systems, customer surveys, and comparison shopping.
Customer needs may vary in different areas, allowing firms to develop region-specific customer satisfaction
programs.
Firms can also develop customer information databases and systems for more personalized service,
especially online.
PERISHABILITY
Services cannot be stored, so their perishability can be a problem when demand fluctuates. Public
transportation companies must own much more equipment because of rush-hour demand than if demand
were even throughout the day.
• Some doctors charge patients for missed appointments because the service value (the doctor’s availability)
exists only at the time of the appointment.
• Demand or yield management is critical—the right services must be available to the right customers at the
right places at the right times and right prices to maximize profitability.

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• Several strategies can produce a better match between service demand and supply.
• On the demand side:
• Differential pricing will shift some demand from peak to off-peak periods. Examples include low matinee movie prices and weekend
discounts for car rentals.
• Nonpeak demand can be cultivated. McDonald’s pushes breakfast service, and hotels promote minivacation weekends.
• Complementary services can provide alternatives to waiting customers, such as cocktail lounges in restaurants and automated teller
machines in banks.
• Reservation systems are a way to manage the demand level. Airlines, hotels, and physicians employ them extensively.
• On the supply side:

• Part-time employees can serve peak demand. Colleges add part-time teachers when enrollment goes up; stores hire
extra clerks during holiday periods.
• Peak-time efficiency routines can allow employees to perform only essential tasks during peak periods. Paramedics assist
physicians during busy periods
• Increased consumer participation frees service providers’ time. Consumers fill out their own medical records or bag their own
groceries.
• Shared services can improve offerings. Several hospitals can share medical-equipment purchases.

• Facilities for future expansion can be a good investment. An amusement park buys surrounding land for later development.
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