Summary
Service is an act or performance that one party can offer to another that is essentially intangible. Service may be the product or it may be offered with a product or after the product is sold. Services are intangible, inseparable, variable, and perishable, and each characteristic poses marketing challenges. There’s customer empowerment, coproduction and the need to satisfy employee so they will want to offer great customer service. Many firms also offer postsale service in the form of service departments for routine maintenance and equipment repairs.
A. The Nature of Services
1. A service is any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything.
2. There are many examples of services – hotels, medical centers, banks, airlines, consulting, plumbing and real estate. These are only a few in the vast service industry.
3. Service industries are everywhere and the production of service may or may not be tied to a physical product. Service can be the product or just be a part of the overall product package. Five categories of offerings are: 1) pure tangible good - with only the product, 2) tangible good with accompanying services - with the product and service that goes along with it, 3) hybrid – equal parts goods and services, 4) major service with accompanying minor goods and services – air travel with service and drink, 5) pure service – primarily intangible service. Customers cannot always judge the technical quality of some services. Search qualities are characteristics the buyer can evaluate before purchase and cadence qualities are characteristics the buyer finds hard to evaluate after purchase. Services have four distinct characteristics: 1) intangibility – cannot be seen, tasted, felt, heard or smelled, 2) inseparability – produced and consumed simultaneously, 3) variability – quality depends on who provides the service, 4) perishability – services can’t be stored when demand fluctuates.
B. The New Services Realities
1. Service firms are now among the most skilled marketers yet customer service satisfaction is low and declining in many service areas.
2. Airlines, banks, stores and hotels are all areas where customer satisfaction levels are dropping.
3. The relationship between service providers and their customers is shifting and savvy service marketers must recognize three new service realities: 1) customer empowerment – through internet use, customers have many means to complain or praise a company’s service or product, 2) customer coproduction – customers play an active role in its delivery, 3) satisfying employees as well as customers – positive employee attitudes will promote stronger customer loyalty. Marketing requires excellence in three broad areas: external marketing – the normal work of preparing, pricing, distributing, and promoting service to customers, internal – training and motivating employees to serve customers well, and interactive marketing – employees’ skill at service the customer. Differentiating service offerings can be done in many ways. What the customer expects is called the primary service package and what the provider adds on top of that is called the secondary service features.
C. Managing Service Quality
1. The factors that cause customers to switch services fall into eight categories: pricing, inconvenience, core service failure, service encounter failures, response to service failure, competition, ethical problems, and involuntary switching.
2. One example of customer service not meeting expectations is given by the merged Sprint Nextel. After the merger, their call centers were treated like cost centers and more attention and focus was on getting calls completed quickly instead of fulfilling customer needs. As a result, customer service quality went down and customers left.
3. Customers compare the perceived service with the expected service and are disappointed when the perceived service falls short of the expected service. There are five gaps that can cause unsuccessful service delivery: 1) the gap between consumer expectation and management perception, 2) gap between management exception and service-quality specification, 3) gap between service-quality specifications and service delivery, 4) gap between service delivery and external communications, and 5) gap between perceived service and expected service. There is also a zone of tolerance, which is a range in which customers are willing to accept the quality of service they are getting. Finally, many person-to-person service interactions are being replaced by automated self-service technologies. Customers can use an ATM, pump their own gas, use the self-service line at the store or process their own returns online. A successful self-service technology can save the company a huge amount of money.
D. Managing Product-Support Services
1. Equipment manufacturers must offer service support for their equipment. This is a large percentage of profits for some companies and competition is high, so firms must be responsive to customer needs.
2. John Deere and Caterpillar are two equipment manufacturers that realize huge profits from the service side of their business
3. Firms should seek to identify and satisfy customer needs. Customers usually have three worries about product service: 1) reliability and failure frequency, 2) downtime, and 3) out-of-pocket costs. Sometimes the service may be training on how to use a piece of equipment or technical advice. Some companies will offer service through extended warranties or service agreements on their equipment for a stated price. Product companies must understand their strategic intent and competitive advantage when developing services. Some firms run their own postsale service strategy by offering parts and service departments of their own. Just about every new car dealership has a service department in which customers can get regular and routine maintenance on their new cars and repairs to their older cars.
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