MARKETING II

Chapter 2. Designing and Managing Services

CONTENTS

• Part I – Value creation

• Chapter 2. Designing and Managing Services

• Bibliography
• Chapter 13 - Kotler & Keller (2012)

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WHY STUDY SERVICES?…

• Most new jobs are generated by services

• Fastest growth expected in knowledge-based industries

• Significant training and educational qualifications required,

but employees will be more highly compensated

• Will service jobs be lost to lower-cost countries? Yes, some

service jobs can be exported

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 WHY STUDY SERVICES?

4 000,0

3 500,0

3 000,0

2 500,0

2 000,0

1 500,0

1 000,0

500,0

0,0
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Primário Secundário Terciário

Source: Portada, [Link] Accessed 30th March 2020

WHAT SECTORS ARE IN THE SERVICE ECONOMY?

Education &
Health
Government
Other services
Financial
activities
Wholesale &
Private retail Service
Nonprofit Government
Economy
Transport
& utilities Information

Business
Tourism &
Business services
hospitality

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 WHY STUDY SERVICES?

2008 – 2018
a loss of 1.2 million jobs

2008 – 2018
14.6 millions new jobs

NEW JOBS IN SERVICES

(LAST 20 YEARS)

 Casinos & Hotels  Private medical centers

 Continuous and geriatric  Industrial Design

treatment services  Investment Banking
 Diagnostic Imaging Centers  Wealth consultants
 Nutrition and Dietetics Centers  Satellite Telecommunications
engineering
 Environmental Analyst
 Telemarketing centers
 Golf Courses and Country Clubs
 Temporary help services
 Treatment of hazardous waste
 Apps Design

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 WHAT ARE SERVICES?

• The historical view

• Smith (1776): Services are different from goods because

they are perishable

• Say (1803): As services are immaterial, consumption

cannot be separated from production

WHAT ARE SERVICES?

• Services

• are economic activities offered by one party to another

• most commonly employ time-based performances to

bring about desired results

Good Object • In exchange for their money, time, and effort, service
customers expect to obtain value from

Service Process • access to goods, labor, facilities, environments,

professional skills, networks, and systems;

• normally do not take ownership of any of the physical

elements involved.

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 CATEGORIES OF SERVICE MIX
Pure Service

High

Sal
Detergentes
Hybrid
Leitor de CD
Vinho
Tangibles elements

Clube de Golf
Automóvel Pure Tangible Good
Reparação de canalizações
Roupa
Health Club/ Ginásio
Restaurante Fast-Food
Viagem aérea

Manutenção de jardins

Consultadoria
Seguro de vida

Internet Banking

Low
Intangibles elements High

Source: Adapted from Lynn Shostack

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BUYING DECISION PROCESS

01 03

02

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 PRE-PURCHASE STAGE - OVERVIEW

• Customers seek solutions to aroused

needs
01 • Evaluating a service may be difficult
• Uncertainty about outcomes Increases
perceived risk
• What risk reduction strategies can
service suppliers develop?
• Understanding customers’ service
expectations
• Components of customer
expectations
• Making a service purchase decision

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Continuum of Evaluation for Products

Source: Adapted from Zeithaml

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 SERVICE CHARACTERISTICS

Intangibility

Variability

Perishability

Inseparability

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SERVICE CHARACTERISTICS

Main Characteristics
• Services cannot be seen, tasted, felt,
heard, or smelled before they are
bought. • Intangibility
• To reduce uncertainty among buyers, • Inseparability
firms must “Manage the evidence,” to
“tangibilize the intangible.” • Variability
• Buyers will look for evidence of quality
• Perishability
based on numerous cues such as the
place, people, equipment,
communication materials, symbols, and
price.

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8
 INTANGIBILITY

Physical Evidence & Presentation

• Place
• People
• Equipment
• Communication material
• Symbols
• Price

• Some companies communicate a lot through their physical evidence.

• Example: Retailers know that consumers are influenced by: Store layout,
odors, decor and music
• Other companies have reduced physical evidence
• Examples: Laundry

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SERVICE CHARACTERISTICS

Main Characteristics • services are typically produced and

consumed simultaneously
• Intangibility • Service providers and other
consumers are part of the service
• Inseparability
• There is a strong preference for
• Variability
existing services
• Perishability

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 INSEPARABILITY

Work Faster
Manage Demand Peaks

Work with Larger Groups

Add More Foster non-
Service traditional
Providers demands
periods

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SERVICE CHARACTERISTICS

Main Characteristics • Companies can take steps to

increase quality control.
• They can invest in good hiring and
training procedures;
• Intangibility • Standardize the service-
performance process throughout
• Inseparability the organization

• Variability

• Perishability

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 VARIABILITY

Good Hiring and Training

Offer Guarantees

Minimize human
interactions
Monitor Satisfaction

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SERVICE CHARACTERISTICS

Main Characteristics
• Services can not be stored. For example,
a flight departing with empty seats can
• Intangibility never be recovered.

• Inseparability • Due to its perishability characteristic,

demand or yield management is
• Variability critical—the right services must be
available to the right customers at the
• Perishability
right places at the right times and right
prices to maximize profitability.

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 PERISHABILITY

Empty seats

Nonpeak Demand

Complementary Reservation Systems Differential Pricing

Services

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NEW SERVICES REALITIES

Customer Empowerment

Customer Coproduction
People processing

Possession processing

Mental stimulus processing

Information processing

Satisfying Employees

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 MARKETING EXCELLENCE

1
Top management

“enabling the promise”

3
“setting the promise”

Employees

2 Clients

“delivering the promise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos e Philip Kotler

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MARKETING EXCELLENCE

External Preparing, pricing, distributing,

Marketing promoting the service

Internal
Training/motivating employees
Marketing

Interactive
Serving the client
Marketing

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 SERVICES EXCELLENCE
Differentiating
Services

Marketing
Excellence Best Practices

Excellence

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DIFFERENTIATING SERVICES

Managing Service Differentiating Services

Quality

• Unresponsive • Primary and secondary

Employees service options
• Bored Employees • Innovations

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 BEST PRACTICES OF TOP SERVICE COMPANIES

Satisfy
Management Strategic Monitoring
Customer Profit Tiers High Standards
Commitment Concept Systems
complaints

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WHY CUSTOMERS SWITCH SERVICES

Pricing Ethical Issues

Mistakes

Service Failure

Competition
Response to Failure

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 Root Cause of Customer Failure

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ROOT CAUSE OF CUSTOMER FAILURE AIRLINE SERVICE

Frontdesk Processes
Equipment employees

Arrival delay Slow Check-in Late Check-in

Delay on gate /Airport security
Oversize bagage
Mechanical
Late boarding
errors
Clients
Delay crew members

Departure
Delay

Delay catering Cleanning delay

services
Other causes
Insufficient departure information
Wheather Handling delay
Air traffic
Fuel dealay

Materiais, Back office Information

fornecimentos employees

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 WHAT CUSTOMERS WANT FROM PROVIDERS

Knowledgeable employees 65%

Address needs on first contact 64%

Treat me like a valued customer 62%

Demonstrates desire to meet my needs 54%

Can quickly access information 49%

Good value for the money 49%

Courteous employees 45%

Is a company/brand I can trust 43%

Treats me fairly 38%

Provides relevant/personalized service 31%

0% 10% 20% 30% 40% 50% 60% 70%

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MANAGING CUSTOMER EXPECTATIONS

Negative Neutral Positive

• Unsatisfied • Satisfied • Delighted

• Abandon • May change • Loyal

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 SERVICE-QUALITY MODEL

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DETERMINANTS OF SERVICE QUALITY

Reliability

Tangibles Responsive

Empathy Assurance

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 MANAGING PRODUCT-SUPPORT SERVICES

Customer Worries

Manufacturer Strategies

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MARKETING CHALLENGES POSED

BY SERVICES

What are the challhenges posted by products and

services diferences?
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MARKETING CHALLENGES POSED BY SERVICES

Visualization People
Services are often difficult to visualize & People may be part of
understand service experience

Coproduction Results
Customers may be involved in co- Operational inputs and
production. outputs tend to vary
more widely

Value Time
Intangible elements usually dominate Time factor often
value creation assumes great
importance

Distribution Inventor
Distribution may take place through Most service products
nonphysical channels cannot be inventoried

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MARKETING MIX
ENHANCED

Product
Product
Price

01
Place
07 02 Time and cyberspace

Physical
evidences 06 03
Process &
05 04 Productivity
+ Quality

Promotion People

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 DISCUSSION QUESTIONS

[Link] do we define and classify services, and how do

they differ from goods?
[Link] are the new services realities?
[Link] can we achieve excellence in services marketing?
[Link] can we improve service quality?
[Link] can goods marketers improve customer-support
services?

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