ADM 2315 - CHAP 9

THE NATURE OF SERVICES

– Any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything

– The government 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.

THE SERVICE ASPECT OF AN OFFERING

5 Categories of service product offerings:

• A pure tangible good-soap/toothpaste/milk, etc

• A tangible good with accompanying

services-car/phone/computer

• A hybrid-restaurants

• A major service with accompanying minor

goods/services-air travel

• A pure service-babysitting, massage, therapy

CHRACTERISTICS OF SERVICE

1. INTANGIBILITY

2. INSEPARABILITY

3. VARIABILITY

4. PERISHABILITY

1. INTANGIBILITY

• Services cannot be seen, tasted, felt, heard, or smelled

• “Tangibilize the intangible” to reduce customer

uncertainty, customers will look for evidence of quality by

drawing inferences from

– Place

– People

– Equipment

– Communication material

– Symbols

– Price

2. INSEPARABILITY

• Services are typically produced and consumed

simultaneously

• Cannot separate the service from the provider of the

service

• Several strategies exist for getting around the limitations

of inseparability. The service provider can work with

larger groups. 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.

3. VARIABILITY

• The quality of services depends on who

provides them, when and where, and to

whom

– As such, services are highly variable

Strategies for increasing quality control

– Invest in good hiring and training procedures.

– Standardize the service-performance process

throughout the organization.

– Monitor customer satisfaction.

4. PERISHABILITY

• Services cannot be stored

• Companies have to manage demand. He right services

have to be available to the right customers at the right

places at the right times.

– Offer differential pricing, try to increase nonpeak demand, reservation systems

OVERCOME PERISHABILITY

Demand side

• Differential pricing

• Nonpeak demand

• Complementary services

• Reservation services

Supply side

• Part-time employees: 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: Peak-time efficiency routines can allow employees to perform only essential tasks during peak periods.

• Increased consumer participation: Increased consumer participation frees service providers’ time. Consumers fill out their own medical records or bag their own groceries.

• Shared services: Shared services can improve offerings. Several hospitals can share medical-equipment purchases.

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

NEW SERVICES REALITIES

Increasing role of technology

• Fundamentally changing how value is delivered to

customers

• Power to make service workers more productive

Importance of the increasingly empowered customer

• Unbundled service choices

• Social media to spread the word

Need to engage employees as well as customers

• Allow employees to:

– Pamper customers

– Read their needs

– Develop a personal

relationship with them

– Deliver high-quality

service

ACHIEVING 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

BEST PRACTICES OF TOP SERVICE COMPANIES

• Customer-centricity

– seeing the world in general, and a company’s

services in particular, from the customer’s point of

view

– ‘Customer obsessed’

• Service quality

• The best service providers set superior quality standard

• The best service providers set superior quality standards.

• The standards must be set appropriately high.

• Top firms audit their own service performance, as well as

that of competitors, on a regular basis.

• Cater to high-value customers

• Special discounts

• Promotional offers

• Special service

• Manage customer complaints

Companies that encourage disappointed customers to

complain—and also empower employees to remedy the

situation on the spot—have been shown to achieve higher

revenues and greater profits than companies without a

systematic approach for addressing service failures.

• Extra role behaviors

• Increasing quality of Call centers

• Customer service representatives

DIFFERENTIATING SERVICES

Main service differentiators are:

• Ease of ordering

• Speed and timing of delivery

• Installation, training, and consulting

• Maintenance and repair

• Returns

• When the physical product cannot easily be

differentiated, the key to competitive success may lie in

adding valued services and constantly improving their

quality.

MANAGING SERVICE QUALITY

Two important activities in managing service quality are:

• Managing customer expectations

• Incorporating self-service technologies

SERVICE QUALITY MODEL

Service Quality 5 GAPS explained

1. Gap between consumer expectation and management perception—Management does not

always correctly perceive what customers want.

2. Gap between management perception and service-quality specification—Management might

correctly perceive customers’ wants but not set a performance standard.

3. Gap between service-quality specifications and service delivery—Employees might be poorly

trained or incapable of or unwilling to meet the standard; they may be held to conflicting standards,

such as taking time to listen to customers and serving them fast.

4. Gap between service delivery and external communications—Consumer expectations are

affected by statements made by company representatives and ads.

5. Gap between perceived and expected service—The consumer may misperceive the service

quality.