Ch 12 Notes Flashcards
12-1 The Difference Between Services and Goods
Services
-The service sector substantially influences the U.S. economy, accounting for nearly 80 percent of the country’s economic output.
-The service-oriented industries contributing to much of this output include scientific and technological services, health care, financial services, and administrative services
12-1 The Difference Between Services and Goods
Services have four unique characteristics that distinguish them from goods
- Intangible
- Inseperable
- Heterogeneious
- Perishable
12-1a Intangibility
-Services are intangible performances
-Evaluating the quality of services before or even after making a purchase is harder than evaluating the quality of goods because, compared to goods, services tend to exhibit fewer search qualities
*Search quality
*Experience quality
*Credence quality
-Thus, marketers often rely on tangible cues to communicate a service’s nature and quality.
-The facilities that customers visit, are a critical tangible part of the total service offering. Messages about the organization are communicated to customers through such elements as the décor, the clutter or neatness of service areas, and the staff’s manners and dress
Intangibility
12-1b Inseparability
-Services are often sold, produced, and consumed at the same time.
-Services normally cannot be produced in a centralized location and consumed in decentralized locations, as goods typically are.
-Services are also inseparable from the perspective of the service provider. Thus, the quality of service that firms are able to deliver depends on the quality of their employees.
Inseparability
12-1c Heterogenity
Ex: One great strength of Jimmy John’s is consistency. Whether customers order a Big John sub in Chicago or Seattle, they know exactly what they are going to get.
This is not the case with many service providers
Because services tend to be labor intensive and production and consumption are inseparable, consistency and quality control can be hard to achieve.
Standardization and training help increase consistency and reliability
Heterogeneity
12-1d Perishability
An empty hotel room or airplane seat produces no revenue that day. The revenue is lost.
Yet service organizations are often forced to turn away full-price customers during peak periods.
One of the most important challenges in many service industries is finding ways to synchronize supply and demand.
The philosophy that some revenue is better than none has prompted many hotels to offer deep discounts on weekends and during the offseason.
Perishability
12-2a Evaluating Service Quality
Research has shown that customers evaluate service quality by the five components:
- Reliability
- Responsiveness
- Assurance
- Empathy
- Tangibles
12-2a Evaluating Service Quality
Ability to perform the service dependably, accurately, and consistently.
Reliability is performing the service right the first time.
This component has been found to be the one most important to consumers.
Reliability
12-2a Evaluating Service Quality
-Ability to provide prompt service.
Example: calling the customer back quickly
-The ultimate in responsiveness is offering service 24 hours a day, seven days a week.
Responsiveness
12-2a Evaluating Service Quality
-Knowledge and courtesy of employees and their ability to convey trust.
-Skilled employees, who treat customers with respect and make customers feel that they can trust the firm, exemplify assurance.
Assurance
12-2a Evaluating Service Quality
Firms whose employees recognize customers and learn their specific requirements are providing empathy
Offering personalized service is important in the hospitality industry
-Employees to anticipate and meet customers’ wants and needs, which maximizes employee’s opportunities to provide great service
Empathy
12-2a Evaluating Service Quality
Physical evidence of the service.
The tangible parts of a service include the physical facilities, tools, and equipment used to provide the service, as well as the appearance of personnel
Tangibles
12-2b Gap Model of Service Quality
Five gaps that can cause problems in service delivery and influence customer evaluations of service quality
- Gap 1
- Gap 2
- Gap 3
- Gap 4
- Gap 5
12-2b The Gap Model of Service Quality
-Gap between what customers want and what management thinks customers want.
-This gap results from a lack of understanding or a misinterpretation of the customers’ needs, wants, or desires.
-A firm that does little or no customer satisfaction research is likely to experience this gap.
-To close gap 1, firms must stay attuned to customer wishes by researching customer needs and satisfaction
Gap 1
12-2b The Gap Model of Service Quality
-Gap between what management thinks customers want and the quality specifications that management develops to provide the service.
-Essentially, this gap is the result of management’s inability to translate customers’ needs into delivery systems within the firm
Gap 2
12-2b The Gap Model of Service Quality
-Gap between the service quality specifications and the service that is actually provided.
-If both gaps 1 and 2 have been closed, then gap 3 is due to the inability of management and employees to do what should be done.
-Management needs to ensure that employees have the skills and the proper tools to perform their jobs.
-Other techniques that help to close gap 3 are training employees so they know what management expects and encouraging teamwork.
Gap 3
12-2b The Gap Model of Service Quality
Gap between what the company provides and what the customer is told it provides.
This is clearly a communication gap. It may include misleading or deceptive advertising campaigns promising more than the firm can deliver or doing “whatever it takes” to get the business.
To close this gap, companies need to create realistic customer expectations through honest, accurate communication about what the firms can provide.
Gap 4
12-2b The Gap Model of Service Quality
The gap between the service that customers receive and the service they want.
This gap can be positive or negative.
For example, if a patient expects to wait 20 minutes in the physician’s office before seeing the physician but actually waits only 10 minutes, the patient’s evaluation of service quality will be high.
However, a 40-minute wait would result in a lower evaluation.
Gap 5
12-2b The Gap Model of Service Quality
-When one or more of these gaps is large, service quality is perceived as low.
-As the gaps shrink, perceptions of service quality improve. Market research can help service firms close these gaps.
-Several other companies consistently get their service quality right:
These companies have three core beliefs in common:
*good service starts at the top;
*service is seen as a continual challenges
*companies work best when people want to work for them.
The Gap Model of Service Quality
12-3a Product (Service) Strategy
-A product is everything a person receives in an exchange.
-Product strategies for service offerings include:
*decisions on the type of process involved
*core and supplementary services, standardization or customization of the service product
*the service mix.
Product (Service) Strategy
12-3a Product (Service) Strategy
Two broad categories of things are processed in service organizations:
*people
*objects
Service As a Process
12-3a Product (Service) Strategy
Service processes can be placed into one of four categories:
1.People processing takes place when the service is directed at a customer.
Ex: transportation services and health care
- Possession processing occurs when the service is directed at customers’ physical possessions.
Ex: lawn care, dry cleaning, and veterinary services.
- Mental-stimulus processing refers to services directed at people’s minds.
Ex: theater performances and education.
- Information processing describes services that use technology or brainpower directed at a customer’s assets.
Ex: insurance and consulting
12-3a Product (Service) Strategy
People-processing services
Require customers to enter the service factory, which is a physical location, such as an aircraft, a physician’s office, or a hair salon.
12-3a Product (Service) Strategy
Typically do not require the presence of the customer in the service factory.
Possession-processing services
12-3a Product (Service) Strategy
-Core Service:
Ex: Providing rooms for a nightly fee, which involves people processing
-Supplementary Service:
Ex: Include food services and reservations, parking, phone, and television services
Core service becomes a commodity as competition increases.
Thus, firms often emphasize supplementary services to create a competitive advantage.
Some firms position themselves in the marketplace by greatly reducing supplementary services, which can therefore lead to a decrease in prices.
Core and Supplementary Service Products
12-3a Product (Service) Strategy
Customized services are more flexible and respond to individual customers’ needs. They also usually command a higher price.
Standardized services are more efficient and cost less.
-Mass customization
Customization/Standardization
12-3a Product (Service) Strategy
-Most service organizations market more than one service.
-Each organization’s service mix represents a set of opportunities, risks, and challenges.
-Each part of the service mix should make a different contribution to achieving the firm’s goals.
-To succeed, each service may also need a different level of financial support.
0Designing a service strategy, therefore, means deciding which new services to introduce to which target market, which existing services to maintain, and which services to eliminate.
The Service Mix
12-3b Place (Distribution) Strategy
Place (Distribution) Strategy
-Must focus on issues such as convenience, number of outlets, direct versus indirect distribution, location, and scheduling
-A key factor influencing the selection of a service provider is convenience
-“Try before you buy” option now offered by several companies. Customers select certain items to order (or personal stylist selects items for them), return what they don’t like for free, and are then charged only for what they keep
Place (Distribution) Strategy
12-3b Place (Distribution) Strategy
An important distribution objective for many service firms
The number of outlets to use or the number of outlets to open during a certain time.
Generally, the intensity of distribution should meet, but not exceed, the target market’s needs and preferences.
Having too few outlets may inconvenience customers; having too many outlets may boost costs unnecessarily.
12-3b Place (Distribution) Strategy
Whether to distribute services to end users directly or indirectly through other firms
Because of the intangible nature of services, many service firms have to use direct distribution or franchising.
The most-used form of direct distribution is the internet.
Other firms with standardized service packages have developed indirect channels using independent intermediaries.
Partnerships with technology firms also allow service firms more options for distribution
12-3b Place (Distribution) Strategy
Location of Service
Most clearly reveals the relationship between its target market strategy and distribution strategy.
For time-dependent service providers such as airlines, physicians, and dentists, scheduling is often a more important factor.
