CH 13 - Services: The Intangible Product

Service

Intangible offering that involves a deed, performance, or effort that cannot be physically possessed 

Customer Service

Specifically refers to human or mechanical activities firms undertake to help satisfy their customers’ needs and wants.

Factors Differentiating Services From Goods

• Inseparable

• Intangible

• Heterogenous

• Perishable

Credence

Credence - goods whose qualities cannot be ascertained by consumers even after purchase 

• Walk away from the counter and really don’t know if you received the best possible service 

Intangible

Can not be seen, touched, tasted, felt, or stored 

Requires using cues to make more tangible 

• Atmosphere 

• Images 

Inseperable

Production and consumption are simultaneous 

• Cannot inspect out defects ahead of time 

• Consumer is part of service 

• Lower risk by offering warranties and guarantees 

Heterogeneity

• Different from time to time 

• Service will always be different since we use human inputs 

• Can cut down on variation based on technology/automation and by increasing use of training and scripts 

Perishable

• Services cannot be produced ahead of time and stored 

• If not consumed, revenue potential is lost 

• Must carefully manage supply and demand through yield management systems

Yield Management System

method of adjusting price to maximize revenue during off peak times 

5 Servqual Dimensions

• Reliability – The ability to perform the service dependably and accurately (performed correctly) 

• Responsiveness – the willingness to help customers and provide prompt service (performed on time) 

• Assurance – the ability of employees to convey trust and confidence (performed like you know what you are doing) 

• Empathy – the caring individualized attention provided to customers (performed with caring) 

• Tangibles – The appearance of physical facilities, equipment, personnel, and communication materials (performed in a nice environment, atmospherics) 

Service Gap

Results when a service fails to meet the expectations that customers have about how it should be delivered.

Knowledge Gap

Difference between customer expectations for service quality and management perceptions of customer expectations 

• Use research to understand consumers needs 

• Do not assume customers are happy 

• Need to understand 

Standards Gap

Difference between management perceptions of customer expectations and standards specifying service to be delivered 

• Establish policies, performance standards 

• Based upon consumer needs 

• Educate employees 

Delivery Gap

Difference between standards specifying service to be delivered and actual service delivered 

• Employees do not perform correctly 

• Hire well, train, monitor, and reward 

Communication Gap

Difference between actual service delivered and service provider communication about service quality 

• Our expectations that have been shaped by company promotions or service reps are not met 

Service Quality

Customers’ perceptions of how well a service meets or exceeds their expectations.

Voice-Of-Customer (VOC) program

An ongoing marketing research system that collects customer inputs and integrates them into managerial decisions.

Zone of Tolerance

The area between customers’ expectations regarding their desired service and the minimum level of acceptable service—that is, the difference between what the customer really wants and what they will accept before going elsewhere.

Empowerment

In the context of service delivery, means allowing employees to make decisions about how service is provided to customers.

• EX: Ritz Carlton giving employees 2K to help treat customers

Instrumental Support

Providing the equipment or systems needed to perform a task in a job setting.

Emotional Support

Concern for others’ well-being and support of their decisions in a job setting.

Product

• Emphasize the service process 

• Build brand image 

Place

• Generally no intermediaries 

• Convenience is important 

Price

• Prices are harder to set and justify to customers for many services 

• Use price to adjust demand to supply 

Promotion

Focus on making services seem tangible 

• Ex: like a good neighbor with State Farm, you’re in good hands with Allstate 

Share Good Performance Ratings

Physical Evidence (Presentation)

• The tangible part of the service 

• The “servicescape” (atmospherics) 

Processes

Activities which lead up to and are a part of the service 

• Ex: post office offering self-service areas 

People (Personnel)

• Employees 

• The customer 

• And other customers all influence quality of experience (ex: kid free zones on airlines) 

Service Recovery

• Listen to the customer 

• Resolve problems quickly 

• Provide a fair solution 

Distributive Fairness

Pertains to a customer’s perception of the benefits they received compared with the costs (inconvenience or loss) that resulted from a service failure.

Procedural Fairness

Refers to the customer’s perception of the fairness of the process used to resolve complaints about service.

Interactive Imagery

What should brand logos reflect?

Service Product Continuum

Whether an offering is more service or product based

• Most offerings lie somewhere in the middle of service and product dominant 

• Service Based - Doctor’s Office

• Product Based - Grocery Store