Designing

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CHAPTER 15

• Designing Managing Services

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NOTION OF A PRODUCT

• What is a product?
• A product is that which is offered to the market
  (consumer) to meet an identified need.
• Products can be classified as
• Goods (tangibles)
• Services (intangibles)

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OTHER WAYS OF CLASSIFYING PRODUCTS

• Convenience goods
• Shopping goods
• Specialty
• Unsought goods
• Consumer Goods
• Industrial Goods
• Type I versus Type II Products

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WHY CLASSIFY GOODS

• Why do marketers classify goods?

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DEFINING SERVICES

• What is a service?
• An act or performance offered by one person to
  another. It tends to be intangible and does not
  result in ownership of any of the factors of
  production (Lovelock 2001)
• Economic activities that create value and provide
  benefits. Services can be bought and sold but
  cannot be held.

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DIFFERENCE BETWEEN GOODS AND SERVICES

•         Nature of the Product
• 1.      Goods are tangible things ownership
  possible
• 2.      Services are intangible performances and
  represent an effort no customer ownership
  possible.
•         Customer Involvement in Production
• 1.      Goods can be produced and stored
• 2.      Services are time bound, experiential
  with lasting consequences
• 3. Benefits come from nature of performance
  (cannot be touched, wrapped or taken away).

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DISTINCTIVE ASPECT OF SERVICES

• To distinguish between goods and services use
  scale from Tangible Dominant to
  Intangible-Dominant.
• Pure Tangible goods (soap)
• Tangible good with some services (cars)
• Hybrid combination of equal parts (restaurant)
• Major Service with minor aspects of goods (air
  travel)
• Pure service (baby sitting)

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GOODS vs SERVICES (Contd)

•         Quality Control Problems
• 1.      Goods are produces before they are
  consumer and quality can be checked
• 2.      Services produced as they are being
  consumed -- in real-time.
• 3. Service personnel and customer interact in
  the product therefore quality is difficult to
  control. Training is therefore essential.

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GOODS vs SERVICES (Contd)

•         Inventory Issues
• 1.      Goods, because they are tangible, can be
  produced, moved and stored until needed.
• 2.      Services produced in real-time. Because
  they are intangible, services cannot be moved or
  stored. Service personnel may be hard to keep
  marketer must set-up facilities and hold labor in
  readiness to create service (just like in a
  production facility). This produces waste if
  there is no demand for the service. To overcome
  this firms use cross training so that personnel
  can do something else if demand is low e.g., the
  person stocking the grocery shelves may be
  trained to also work at the checkout register.

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GOODS vs SERVICES (Contd)

•         Distribution Channels
• 1.      Goods distributed through identified
  channels determined by the market coverage the
  marketer desires. Hence in distributing goods,
  marketers often make use of middlemen.
• 2.      Service firms tend to depend on
  electronic rather than physical distribution
  channels.
• 3. Service firms also combine service factory
  and point of consumption into one to manage
  customer and personnel contact. There is little
  on no use of intermediaries (middlemen) in
  service industries. The major task is managing
  customers consumption behavior.

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CHARACTERISTICS OF SERVICES

•         Intangibility
•         Inseparability
•         Variability
•         Perishability (Time Factor)

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CHARACTERISTICS OF SERVICES (Contd)

• Services tend to be (a) more intangible than
  tangible consumed not possessed, (b)
  simultaneously produced and consumed, (c) be less
  standardized and uniform than goods.

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CHARACTERISTICS OF SERVICES (Contd)

• Personnel is key in marketing services.
• Marketer must do a good job of marketing to the
  internal customers (the employees).
• The quality of the service is inseparable from
  the quality of the service provider.
• Performance shapes the service and becomes part
  of the service.
• There is much room for customization, because
  production and consumption tends to be
  simultaneous.

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CHARACTERISTICS OF SERVICES (Contd)

• Goods are easier to evaluate than services.
  Because consumers cannot assess the quality of an
  intangible, they look at and for tangible cues.
• In producing services, pay attention to those
  aspects of the service that are tangible
  (equipment and surroundings for example).
  Marketers can manage the tangibles to convey
  quality signals. View such things as physical
  environment, appearance of service providers,
  pricing, and goods that go with the services.
  This tends to make the service tangible and helps
  the customers perceived judgment of the service.

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CHARACTERISTICS OF SERVICES (Contd)

• Since services cannot be inventories, marketers
  must synchronize supply and demand. This can be
  done by reshaping supply (e.g. use part-time
  employees, cross train employees, have employees
  on call) or reshaping demand (e.g. use of
  differential pricing, pricing incentives).

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SERVICES MARKETING MIX

• When marketing goods marketers focus on the 4Ps
  Product, Price, Place, Promotion.
• Distinctive nature of services (intangibility,
  customer involvement, perishability) require
  other strategic elements
• Hence the Integrated Services Management Model
  8 Ps

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Integrated Services Management Model 8 Ps

• Product core features of goods services
• Place Time delivery method channel
• Process effective design implementation
• Productivity Quality transformation of inputs
  satisfaction derived by customer. This is a
  key differentiation factor
• People personal interactions affect perceived
  quality hence attention to recruit, train
  motivate personnel
• Promotion Education effective communication
  (info, advice, and persuasion)
• Physical Evidence appearance/atmosphere
• Price Other User Costs time, effort, sensory
  experiences