Qns: What are the primary differences between product and services? Give examples that highlight these differences between product and services. Give examples that highlight these differences and provide examples of hybrid offer.
Qns. Using a service example of your choice, explain how the service company can deal with intangibility, inseparability, variability and perishability.
Four Major characteristics of services:1) Intangibility
*Lack of tangible assets which can be seen, touched, smelled, heard or taste prior to purchase. E.g., education, air travel, sporting events, highly intangible
*Purchasing movie ticket, buy you an experience, services subjectively evaluated
*Own set of perceptions and expectations, opinions differ regarding value of experience
*Customer returns home with a memory of experience and obtain physical ownership
*Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need
*Tangible assets; seen, felt, tasted or touched
*E.g. shoes, objectively evaluated before actual purchase
*Take shoes home, have ownership and physical possession of a tangible object
*Offer a tangible product with their service, service is still intangible because consumer are purchasing the service, not the good
*Restaurant, consumer are paying the restaurant to prepare the food for them
*Evaluation of service is based on how well the restaurant prepared the food
*To reduce intangibility, an airline company feature tangible assets such as their airplanes, pilots, flight attendants, or other personnel in an advertisement
*Refers to the service providers physical connection to the service being provided
*Involve customers involvement in the service production process
*Service is performed and consumed at the same time, with the quality of service highly dependant on the ability of the service provider and quality of interaction between the service provider and the customer
*E.g., getting a haircut, customer will go to the hair stylist and being present while the service is being produced
*In contrast, products are produced and sold at a later time
*E.g., television is produced at the factory and sold at a later time
*Is in the case of getting medical services. Dentist is using filling to fill cavities for the customer while the customer is present
*To reduce inseparability or the dependence on the customer-employee interaction, an airline company can sell its air tickets through the internet where customers can buy air tickets directly from their website.
*Unwanted at random levels of service quality customers receive when they patronize a service
*Primarily caused by human element, although machines may malfunction causing a variation in the service
*Various employees will perform the same service differently and even the same service
*E.g, commercial window cleaning, the outcome will differ if the firm uses different employees each time a business is services
*Goods are mass-produced by factories and as such their features, ability and usage are the same
*E.g. telephone are mass-produced in the factories and sold to customers offering the same features, abilities and usage
*Fast food restaurant, the hamburgers, French fries and other food are mass produced and put in warming bins. Customers are served with hamburgers, French fries and other food when they ordered and served by service staff at the counter
*To reduce variability, the airline company can put their service staff through intensive training or customize the service based on the customers specific instructions by asking the customers to fill in details on how they expect to be treated and what they want from the service staff when they purchase the air tickets from the company
*Refers to the trait that services cannot be saved, their unused capacity cannot be reserved and they cannot be inventoried
*Most services consumed at a point of production
*E.g. Hotel rooms that go unoccupied for the evening cannot be stored and used it at a later date
*Caused the reverse to occur where the demand is greater than supply. E.g. Airline does not have enough seats for everyone
*Products can be mass produced and stored in the warehouses until consumer are ready to purchase
*The ability not creates an inventory of the good that will eventually be purchased by the consumer means that production and consumption of the good can be separated in time and space. E.g., in the case of a pair of jeans does not sell today, a retailer can store it and sell it at a later time
*In a fast food restaurant, they can inventory part of their service process example, inventory hamburgers for a limited period of time
*However, the outlet cannot inventory the entire service experience, the counter staff still need to serve the customers with the hamburgers and the hamburgers cannot be saved for the next day
*To reduce perishability, the airline must develop strategies to cope with fluctuating demand. This goal can be accomplished by making simultaneous adjustments in demand, supply and capacity
*One method of adjusting the demand is that the airline company can reduce the price or offer promotions during the low peak season to attract customer to travel and utilize the airline seats during the low peak season instead of the peak season.
*Supply can be adjusted by increasing the number of in flights departing the country during the peak season. To increase capacity, the airline company can arrange to increase the number of flights departing at the same time.
It is defined as the process of adjusting controllable marketing factors to cope with or exploit uncontrollable environment. Four strategies that are available for the service organizations are so follows:
1.Three additional Ps
2.Managing service differentiation
3.Managing Service Quality
4.Managing Service Productivity
Three Additional Ps
The traditional four Ps marketing approaches work well for goods, but additional elements require attention in service business. Three additional Ps for service marketing:
1.People Most services are provided by people. Therefore, the selection, training and motivation of employees can make a huge difference in customer satisfaction. Ideally, employees should exhibit competence, a caring attitude, responsiveness, initiative, problem-solving attitude and goodwill.
E.g. At Marriot, their front-line personnel are empowered to spend up to $100 to resolve a customer problem.
2.Physical Evidence Companies also try to demonstrate their service quality through physical and presentation. A hotel will develop a look and style of dealing with customers that realizes its intended customer value proposition, whether it is cleanliness, speed or some other benefit.
3.Process Service companies can choose among different processes to deliver their service. For example, restaurants to develop different formats such as buffet candlelight dinner and fast food.
Service marketing requires not only external marketing but also internal and interactive marketing. External marketing describes the normal work to prepare, price, distribute and promote the service to the customer.
Internal Marketing describes the work to train and motivate employees to serve customer.
Interactive marketing describes the employees skills in serving the client. Client judges service not only by technical quality but also by its functional quality, therefore service providers must deliver high touch as well as High tech.
Managing Service Differentiation
In these days of intense price competition, service marketers often complain about the difficulty of differentiating their services from those of competitors. If customers view the services of different providers as similar, they care less about the provider than the price.
The solution to price competition is to develop a differentiated offer, delivery and image. The offer can include innovative features that set one companys offer apart from their competitors offers. What the customer expects is called primary service package; the provider can add secondary service features. E.g. airlines have introduced innovation such as advance seating, sleeping compartment, hot showers to differentiate their offers. The major challenge is that most service offerings and innovations are easily copied. However, the company that regularly introduces innovations will gain a succession of temporary advantages over competitors.
Service companies can differentiate itself by designing a better and faster delivery system. There are three levels of differentiation. The first is reliability: Some suppliers are more reliable in their on-time delivery, order completeness and order cycle time. Second is resilience: some suppliers are better at handling emergencies, product recalls and answering inquiries. The third is innovativeness; some suppliers create better information systems, introduce bar coding and mixed pallets and in other ways to help the customer. An example is banking system, a bank might offer its customers electronic home banking as a better way to deliver banking services thank having to drive, park and wait in line. Service companies can work on differentiating their images through symbols and branding. E.g. Merill Lynchs bill.
Managing Service Quality
One of the ways that a service firm can differentiate itself is by delivering consistently higher quality than its competitors do and meets or exceed customer expectations. Customers form service expectations from past experiences, word of mouth and advertising. Customers compare the perceived service with expected service. If the perceived service falls below the expected service, customers are disappointed. If the perceived service e meets or exceeds their expectations, they are apt to use the provider again.
Service provider need to identify the expectations of target customers concerning service qualities. Although greater service quality results in greater customer satisfaction, it also results in high costs. Still, investments in service usually pay off through increased customer retention and sales.
5 determinants of service quality:
1. Reliability The ability to perform the promised service dependably and accurately.
2. Responsiveness The willingness to help customers and to provide prompt service
3. Assurance The knowledge and courtesy of employees and their ability to convey trust and confidence
4. Empathy The provision of caring, individualized attention to the customer.
5. Tangibles The appearance of physical facilities, equipment, personnel and communication materials.
Even though the companies have invested heavily to develop streamlined and efficient service-delivery systems, problems will inevitably occur. However, even though the company cannot always prevent service problems, it can learn to recover from them and good service recovery can turn angry customers into loyal ones. In fact, good recovery can win more customers purchasing and loyal than if things had gone well in the first place. Therefore, companies should take steps not only to provide good service every time but also to recover from service mistakes when they do occur.
The first step is to empower front-line service employees where authority, responsibility and incentives are given to the employees that they need to recognize, care about and tend to customer needs.
Studies of well-managed service companies show that they share a number of common virtues regarding service quality. First they are customer obsessed. They have a distinctive strategy for satisfying customer needs that wins enduring customer loyalty. Second, they have top management commitment to quality. Management such as Ritz-Carlton looks not only at financial performance but also at service performance. Third, the best service providers set high service quality standards. They dont settle for good service, they aim at 100% defect-free service. Forth, the top service firms watch service performance closely. Both their own and competitors.
They use methods such as comparison-shopping, complaints from and etc. Fifth, the service companies replaced person-to-person service interactions to self-service technologies, e.g. self-pumping at gas stations. Even though not all self-service technologies improve service quality, they have the potential of making service transactions more accurate, convenient and faster. Every company needs to think about how it might improve its services using SSTs,
Sixth, excellent service companies know that positive employee attitudes will promote stronger customer loyalty. Service companies must attract the best employees they can find; they need to market a career rather than just a job. They must design a sound training program and provide support and rewards for good performance. They can use intranet, internal newsletter, daily reminders and employee roundtables to reinforce customer-centered attitudes. It is important to audit employee job-satisfaction regularly. However, a company must be careful in training its employees to be friendly.
In additional, good service companies should communicate their concerns about service quality to employees and provide performance feedback.
Managing Service Productivity
With the rising costs, service firms are under pressure to increase productivity. They can do so in several ways.
First the company can hire and foster more skilful workers through better selection and training.
Second the service firms can also increase the quantity of their service by giving up some quality, e.g. doctors working fro some HMOs have moved towards handling more patients and giving less time to each patient.
Third Industrialize the Service by adding equipment and standardizing production. E.g. Macdonalds assembly-line approaches to fast food retailing, culminating in the technological hamburger.
Fourth reduce or make obsolete the need for service by inventing a product solution. E.g. the wash-and-wear shirt reduced the need commercial laundries.
Fifth the company can design a more effective service. E.g. The hiring of paralegal workers reduces the need for more expensive legal professionals.
Sixth the company can present customers with incentives to substitute their own labor for company labor, E.g. banks have turned their customers into tellers
Seventh the service provider can harness the power of technology. E.g. therapists can call up the information on hand-held computers, which pluck the data from a central computer. As a result, they can spend more time
working directly with patients.
However, companies must avoid pushing productivity so hard that quality is reduced. Some productivity steps help standardizes quality, increasing customer satisfaction but others might lead to over-standardization and can diminish customized service.
Companies should also try to enhance the quality.