Session 3-4
Designing and
Managing Services
Differentiation by Service
• As companies find it harder to
differentiate their physical products,
they turn to service differentiation.
• Companies are providing value-
added services, or simply excellent
customer service, to differentiate
themselves.
• On-time delivery, better and faster
response to inquiries, or quick
resolutions of complaints
What is Service?
Any ACT or PERFORMANCE
one party can offer to another
that is essentially
INTANGIBLE and does not
result in the OWNERSHIP of
anything.
The Service Aspect of an Offering
Product Vs. Service Characteristics
• Search benefits are characteristics that can be verified before purchase
• Experience benefits are characteristics that can be verified only after
purchase and consumption
• Credence benefits are characteristics that can not be verified even after
purchase and consumption
Selling a Service Vs. Product
• Rely on WOM rather than advertising
• Rely on Price, providers and Physical evidence
• Highly loyal to the service providers who satisfy
them
• Switching cost are high, customer inertia can
make it challenging to service company to take
customers away from competitors
Characteristics of Services
• Intangibility
• Inseparability
• Heterogeneity
• Perishability
Intangibility
Services cannot be seen, tasted, felt, heard,
or smelled
“Tangibilize the intangible”
• Tangible Cues
• People
• Organization Image
• Post-Purchase Communication
Inseparability
Services are typically produced and consumed simultaneously
Physical goods are manufactured, then Appointment followed by real time patient doctor
inventoried, then distributed check-up
Heterogeneity/Variability
Three steps service firms
can take to create
uniformity in delivering the
services
Services are highly variable
[Link] in good hiring
and training
2. Standardize the
service-performance
process
3. Monitor customer
satisfaction
Perishability
• Services last for a specific time and cannot be stored
• Services cannot be stored.
• Right services must be available to the right customers at
the right places at the right times and right prices to
maximize profitability (Yield/Demand Management)
Perishability
Demand side Supply side
• Differential pricing • Part-time employees
(Ola) (Guest faculties in teaching)
• Nonpeak demand can be • Peak-time efficiency routines
cultivated (Hyatt buffet) (Healthcare assistance)
• Complementary services • Increased consumer
(Vistara onboard meal) participation (Self-kiosk
machines)
• Reservation systems
(student discount in flights) • Shared services (ola)
Service Blueprint
• 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.
• Helpful in identifying potential “pain points” for customers, developing new services, supporting a
zero-defects culture, and devising service recovery strategies.
1. Increasing role of Technology
• Fundamentally changing how value is delivered
to customers
• Power to make service workers more productive
2. Customer Empowerment
• The digital era has clearly altered customer
relationships.
• Unbundled service and the right to select the
elements they want.
• Social media have empowered customers by
letting them send their comments around the world
with a mouse click
3. Customer Coproduction
Customers do not merely purchase and use a service; they play
an active role in its delivery.
Coproduction can put stress on
One-third of all
employees, however, and reduce their
satisfaction, especially if they do not share service problems
are caused by the
the same values, interests, or knowledge
customer
with their customers.
Managing Self-Service
• Person to person service interactions are being replaced
by self-service technologies
3. Customer Coproduction
• Redesign processes and redefine customer roles to
simplify service encounters
• Incorporate the right technology to aid employees and
customers.
• Encourage “customer citizenship” so customers will
help one another.
4. Satisfying Employees and Customers
• Allow employees to:
– Pamper customers
– Read their needs
– Develop a personal
relationship with them
– Deliver high-quality service
Achieving Service Excellence
• External marketing
– Preparing, pricing,
distributing, and
promoting the service to
customers
• Internal marketing
– Training and motivating
employees to serve
customers well
• Interactive marketing
– Employees’ skill in
serving the client
Customer-Centricity
• Customer-centricity
– seeing the world in general, and a company’s
services in particular, from the customer’s point of
view
Service Quality
• The best service providers set superior quality standards
– Voice of the customer measurements
– Importance–performance analysis
Managing Service Quality
• Managing customer expectations
• Incorporating self-service technologies
Service-Quality Model
Catering to High-Value Customers
• Special discounts
• Promotional offers
• Special service
Managing Complaints
• On average, 40 percent of customers who suffer through
a bad service experience with a company stop doing
business with it.
• Extra role behaviours of employees could advocate the
interests and enhance the image of the firm to consumers
• Customer service representatives and Call centres
Innovation with Services
• Online travel
• Retail health clinics
Differentiating Services
• Ease of ordering
• Speed and timing of delivery
• Installation, training, and consulting
• Maintenance and repair
• Returns
Managing Product-Service Bundles
• Key service differentiators
– Ordering
– Delivery
– Installation
– Customer training
– Customer consulting
– Maintenance
– Repair
