Designing and Managing Services

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. Service industries are everywhere.

Categories of Service Mix

The service component can be a major or minor part of the total offering. Five categories of offerings are:

1. Pure tangible good - a tangible good such as toothpaste, with no accompanying services.
2. Tangible good with accompanying services - a tangible good, like a cell phone, accompanied by one or more services.
3. Hybrid - an offering, like a restaurant meal, of equal parts goods and services.
4. Major service with accompanying minor goods and services - a major service, like air travel with additional services or supporting goods such as drinks.
5. Pure service - primarily an intangible service, such as babysitting or psychotherapy.

Distinctive Characteristics of Services

Four distinctive service characteristics greatly affect the design of marketing programs:

Intangibility - Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are bought.

Inseparability - Services are typically produced and consumed simultaneously.

Variability - Services are highly variable because the quality depends on who provides them, when and where, and to whom.

Perishability - Services cannot be stored, so their perishability can be a problem when demand fluctuates.

The New Services Realities
A Shifting Customer Relationships

Savvy services marketers must recognize three new services realities: the newly empowered customer, customer coproduction, and the need to engage employees as well as customers.

Customer Empowerment - customers are more sophisticated about buying support services and are pressing for "unbundled services" so they can select the elements they want.

Customer Coproduction - the reality is that customers do not merely purchase and use a service: they play an active role in its delivery. Their words and actions affect the quality of their service experiences and those of others, and the productivity of frontline employees.

Satisfying Employees as Well as Customers - Excellent service companies know that positive employee attitudes will promote stronger customer loyalty. Employees thrive in customer-contact positions when they have an internal drive to (1) pamper customers, (2) accurately read customer needs, (3) develop a personal relationship with customers, and (4) deliver quality service to solve customers' problems.

Managing Service Quality

Service quality is tested at each service encounter. Two important considerations in delivering service quality are managing customer expectations and incorporation self-service technologies.

Managing Customer Expectations

Customers form service expectations from many sources, such as past experiences, word of mouth, and advertising. In general, customers compare the perceived service with the expected service. If the perceived service falls below the expected service, customers are disappointed. Successful companies add benefits to their offering that not only satisfy customers but surprise and delight them. The service-quality model in the following figure highlights five gaps that can cause unsuccessful service delivery.

Fig. Service-Quality Model

Managing Product-Support Services

Manufacturers of equipment - small appliances, office machines, tractors, mainframes, airplanes - all must provide product-support services, making this a battleground for competitive advantage. Some equipment companies such as Caterpillar and John Deere, make a significant percentage of their profits from product-support services. In the global marketplace, companies that make a good product but provide poor local service support are seriously disadvantaged.

Identifying and Satisfying Customer Needs

In general, customers have three worries about product service. First, they worry about reliability and failure frequency. The second issue is downtime. The third issue is out-of-pocket costs. A buyer considers all these factors and 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. Product companies must understand their strategic intent and competitive advantage in developing services. To offer the best support, a manufacturer must identify the services customers value most and their relative importance. It should also plan for delivering service after the purchase.

Personal Point of View

It is a very hard subject for most companies to approach these days because the consumers are getting greedier and causing all the root problems related to services. Companies need to be more creative in ways to handle the consumers' needs as well as making profits. I personally think, United States consumers are really hard to handle when it comes down to services. They demand more and complain more with hardly satisfying desires.