Chapter 13. Designing and Managing Services
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Achieving Excellence in Services Marketing
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Chapter 13. Designing and Managing Services
- 1. Chapter 13: DESIGNING and MANAGING SERVICES Genellie Rose “Gen” Antonio Aggressive Business Developer Ateneo Graduate School of Business Achieving Excellence in Services Marketing https://www.linkedin.com/in/genellieroseantonio/
- 2. https://www.linkedin.com/in/genellieroseantonio/ Learning Objectives 1. How do we define and classify services and how do they differ from goods? 2. What are the new services realities? 3. How can we achieve excellence in services marketing?
- 3. https://www.linkedin.com/in/genellieroseantonio/ 1.a How do we define services A service is any act of performance that one party can offer another that is essentially intangible and does not result in the ownership of anything; its production may or may not be tied to a physical product.
- 4. https://www.linkedin.com/in/genellieroseantonio/ 1.b How do we classify services? Categories of Service Mix 1. Pure tangible good 2. Good with services 3. Hybrid 4. Service with good 5. Pure Service
- 5. https://www.linkedin.com/in/genellieroseantonio/ 1.c How do we they differ from good? Distinctive Characteristics of Services i. Intangibility Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are bought. Buyers look for “evidence” of quality
- 6. https://www.linkedin.com/in/genellieroseantonio/ 1.c How do we they differ from good? Distinctive Characteristics of Services ii. Inseparability Provider-Client interaction is a special feature and provider is part of the service
- 7. https://www.linkedin.com/in/genellieroseantonio/ 1.c How do we they differ from good? Distinctive Characteristics of Services iii. Variability Quality of services depends on who provides them, making it highly variable.
- 8. https://www.linkedin.com/in/genellieroseantonio/ 1.c How do we they differ from good? Distinctive Characteristics of Services iv. Perishability Services can’t be stored; There will be problem when demand fluctuates.
- 9. https://www.linkedin.com/in/genellieroseantonio/ 2. What are the new services realities? Services Marketing is significantly evolving.. i. Customer Empowerment Customers are becoming more refined with their terms and conditions in business dealings.
- 10. https://www.linkedin.com/in/genellieroseantonio/ 2. What are the new services realities? Services Marketing is significantly evolving.. ii. Customer Co-production Customers do not merely purchase a service and use them as they are actively involve in the service delivery process.
- 11. https://www.linkedin.com/in/genellieroseantonio/ 2. What are the new services realities? Services Marketing is significantly evolving.. iii. Satisfying employees as well as customers Excellent service companies know that positive employee attitude will promote stronger customer loyalty.
- 12. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? 3 Service Triangle and Gap Model
- 13. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? 3 Broad Areas of Consideration i. External marketing - normal work of preparing, pricing, distributing & promoting the service. ii. Internal marketing - “getting everyone else in the organization to practice marketing” iii. Interactive marketing - employees’ client service skill is judge not only by its technical quality but also by its functional quality.
- 14. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? Service Quality Model manages Customer Expectation It provides a comprehensive and integrating framework for delivering service excellence and customer-driven service innovation.
- 15. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? Service Quality Model manages Customer Expectation Five Determinants of Service Quality 1. Reliability 2. Responsiveness 3. Assurance 4. Empathy 5. Tangibles
- 16. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? TRACTEBEL in the Philippines experience
- 17. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? TRACTEBEL in the Philippines experience
- 18. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? Best Practices of Top Service Companies Strategic Concept Top Management Commitment High Standards Profit Tiers Monitoring System Satisfying Customer Complaints
- 19. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? Solar Philippines Experience
- 20. https://www.linkedin.com/in/genellieroseantonio/ 2. How to achieve excellence in services marketing? Solar Philippines Experience
- 21. https://www.linkedin.com/in/genellieroseantonio/ Questions and Objectives 1. How do we define and classify services and how do they differ from goods? 2. What are the new services realities? 3. How can we achieve excellence in services marketing?
- 22. https://www.linkedin.com/in/genellieroseantonio/ Summary 1. Services are intangible, inseparable, variable and perishable. 2. New services realities : customer empowerment, customer co- production and satisfying employee. 3. Excellence in services marketing can be achieved by following the service triangle model and aligning with the service quality model.
- 23. DESIGNING and MANAGING SERVICES Achieving Excellence in Services Marketing Genellie Rose “Gen” Antonio Aggressive Business Developer Ateneo Graduate School of Business https://www.linkedin.com/in/genellieroseantonio/
Editor's Notes
- Services sector posted the fastest growth in the fourth quarter GDP of the Philippines last year, with 7.9 percent recorded increased compared to 2018. This sector accounts 59.97% of the Philippine economy. Like me, most of us in this class is part of the services sector. With this reality, and our organizational goal of maximizing profit, how can we then achieve excellence in services marketing? This is Gen Antonio, from the Ateneo Graduate School of Business, your aggressive business developer. and today we will discuss Chapter 13: Designing and Managing Services.
- Services marketing strategy focuses on delivering processes, experiences, and intangibles to customers rather than physical goods and transactions. Rather than the traditional goods marketing focus on transactions and exchange, services marketing strategy is centered on the customer, usage, and relationships (Vargo and Lusch, 2004a).
- The service component can be a minor or a major part of the total offering. We distinguish five categories of offerings. A pure tangible good is a tangible good with no accompanying services. Example: medicines and vitamins produced by Pascual Laboratories. A tangible good with accompanying services is a tangible good, accompanied by one or more services. One good example is Solar Philippines residential solar package which promises monthly electricity savings with accompanying services of installation, maintenance and net-metering application assistance. A hybrid is an offering, like a restaurant meal, of equal parts goods and services. Restaurants like that of Maxs from the conglomerate Jollibee Food Corporation is a representative example. A major service with accompanying minor goods and services refers to a major service, like air travel, with additional services or supporting goods such as snacks and drinks. This offering requires a capital-intensive good—an airplane—for its realization, but the primary item is a service. In the Philippines, PAL and Cebu Pacific are good examples. A pure service is primarily an intangible service. For example, Montalbo Massage Hut which offers relaxation. The range of service offerings makes it difficult to generalize without a few further distinctions. Services vary as to whether they are equipment based, People-based services vary by whether unskilled, skilled, or professional workers provide them. Some services need the client’s presence. Services may meet a personal need (personal services) or a business need (business services). Service providers differ in their objectives (profit or nonprofit) and ownership (private or public).
- Four distinctive service characteristics greatly affect the design of marketing programs. To better understand the nature of Services, we can easily characterize services from goods as their distinctive characteristics includes: first Intangibility, In the case of power and energy engineering consultants like Tractebel and Aecom, Intangibility means that it is difficult to evaluate services unless we have tangible cues and physical evidence to use. In this case, to evaluate their credibility as service provider or simply consultants, one needs to refer to their completed projects and references. Say, an existing wind farm or solar power plants that they themselves designed.
- Another characteristic is inseparability. Inseparability means that we cannot separate the service from the experience of the customer. In this sense the service provider of the consultants and engineers and project managers themselves are inseparable from the service they provide as they directly influence the delivery of service and so thus, the experience of the customer..
- In relation to the inseparability concept, another relating characteristic of service is its variability as employee/engineer’s performance is one of the gauge of the service being rendered to the client. If one engineer will be replaced in the course of the project, the work of the replacement engineer will not be the same with the resigned engineer. This is where variability comes in. Variability means that services tend to vary from experience to experience. It differs per project complexity, project nature and location, skillset of the engineer among others.
- Another important characteristic to remember is perishability. Because services are perishable and cannot be inventoried, service companies frequently face situations of over demand or under demand. Lacking inventories to handle over demand, companies lose sales when capacity is inadequate to handle customer needs. Like for example, due to COVID19 impact in the power and energy sector, most of the construction site activities were heavily affected since March 2020. With this, there has been a noticeable increase on the request for proposal for desktop studies like design services, due diligence and feasibility studies. These services can all be provided in a work-from-home arrangement. But not all consulting companies were able to adapt as most of the engineering companies have a good pool of site engineers rather than designers and inhouse engineers. With this, there’s really a disconnect when demand fluctuates. Perishability here means that we cannot inventory services. For consultants, we are limited by the skillset that we have. The same applies to other services companies in other industries or sectors.
- Aside from truly understanding the distinctive characteristics of services, to be efficient services marketer, we should also consider the new services realities that we have now, as 21st century services marketing is significantly and continuously evolving. The faster to adapt always take the lead. To completely adapt, one has to understand this changing reality. First, customer empowerment. It has been noticeably observed that customers are really the upperhand in most business dealings and negotiations. Aside from having the final say, they are always in control. As a consultant, what we experience is that whether assisting public or private clienteles, we can always be a challenge. The competition has become so stiff. Naturally, we are being invited to bid and in biddings, the terms of reference of request for proposals are written in stricter terms and conditions. For example, they can say that instead of having multiple consulting parties, they will result to hiring just one entity. It has significantly change the industry, before consulting companies are pure rivals, nowadays, they can also be cooperators as some bids will require forming consortium or joint ventures. Another significant change is Swiss Challenge instances. If a consultant will submit an unsolicited proposal or offer, it will not always lead to absolute advantage for a newly opened opportunity. Swiss challenge happens when the client can and will invite other bidders to challenge the initial offer that a previous company submitted. This will be challenged whether technically or financially. In services marketing, one should not be overly confident. As initially shared, change is constant. We will never know how things will turn around if we became reluctant. Today’s realities imply that customers are even more empowered.
- Another service reality is customer co-production. The reality is that customers do not merely purchase and use a service; they play an active role in its delivery.33 As shared earlier, their words and actions affect the quality of their service experiences. It also affects the productivity of frontline employees and those of others involve in the service network. 21st century work is about collaboration. Customers nowadays, often feel they derive more value, and feel a stronger connection to the service provider, if they are actively involved in the service process. With this, rather merely the end-user or recipient, the customers are already involved in the service network in an end-to-end manner.
- Aside from evolution of the customer’s nature, another service reality is the evolution of the employees role. As a significant factor in service production, satisfying the employees is also as important as satisfying the customers. Excellent service companies know that positive employee attitude will promote stronger customer loyalty which means repeat sales. As the cliché implies, if the company will take care of its employees, the employees will take care of the customers.
- With the new service realities, Executives of services organizations have long struggled with how to approach service design and delivery in an organized manner. The widely used approach is viewing the delivery of service quality in a structured and integrated way, we refer to as the gaps model of service quality. Here the service triangle is presented which shows the customers at the center of the company, systems and employees. The triangle shows the three interlinked groups that work together to develop, promote, and deliver services. The gaps model positions the key concepts, strategies, and decisions in delivering quality service. This model is particularly relevant in service strategy because it captures the cross functionality inherent in service management in a manner that begins with the customer and builds the organization’s tasks around what is needed to close the gap between customer expectations and perceptions. Here we can see that Marketing excellence with services, requires excellence in three broad areas: external, internal, and interactive marketing as these 3 broad areas close the gaps in the service triangle.
- On the left side of the triangle is the external-marketing that the firm engages in to set up its customers’ expectations and make promises to customers regarding what is to be. It includes activities like preparing, distributing and promoting the service. Services marketing is about promises made and promises kept to customers. External marketing refers to the promise-keeping arm of service marketing. On the right side of the triangle is internal marketing. Management engages in these activities to aid the providers in their ability to deliver on the service promise: recruiting, training, motivating, rewarding, and providing equipment and technology. As described, it is getting everyone else in the organization to practice marketing, It is engaging and empowering employees, when they are actively engaged and empowered, they will be able and willing to deliver on the promises made. An organization that hires the right people and trains and develops them to deliver service quality must also work to retain them. If a company wants the strongest service performers to stay with the organization, it must reward and promote them. Otherwise, the firm will not be successful, and the services triangle will collapse. On the bottom of the triangle is what has been termed interactive marketing or real-time marketing. This is where promises are kept or broken by the firm’s employees, subcontractors, or agents. Interactive marketing describes the employees’ skill in serving the client. Clients judge service not only by its technical quality (Was the surgery successful?), but also by its functional quality.People are critical at this juncture. If promises are not kept, customers become dissatisfied and eventually leave. We began with External marketing earlier as just the beginning for services marketers, promises made must be kept. It should be fulfilled and delivered as promise. Repeat sales and referrals are products of a well-kept promise. All three sides of the triangle are essential to complete the whole, and the sides of the triangle should be aligned – that is, what is promised through external marketing should be the same as what is delivered; and the enabling activities inside the organization should be aligned with what is expected of service providers.
- Customers form service expectations from many sources, such as past experiences, word of mouth, and advertising. In general, customers compare the perceived service with the expected service.67 If the perceived service falls below the expected service, customers are disappointed. Successful companies add benefits to their offering that not only satisfy customers but surprise and delight them. Delighting customers is a matter of exceeding expectations. The Service Quality model is particularly relevant in service strategy because it captures the cross functionality inherent in service management. The central focus of the model is the customer gap – the difference between customer expectations of what will be delivered and perceptions of the service as it is actually delivered. The other four gaps in the model are known as the provider gaps and each represents a potential cause behind a firm’s failure to meet customer expectations. Closing the customer gap – delivering quality service – at the top of the model is a complex undertaking involving many different organizational and employee skills and tasks. These tasks can be sorted into four other gaps – the provider gaps which includes listen gap, performance gap, communication ap and service design and standards gap– each of which needs to be closed in order to close the customer gap. At its most basic level, the logic of the model suggests that the customer gap is a function of any one or all of the four provider gaps.
- five determinants of service quality, 1. Reliability—The ability to perform the promised service dependably and accurately. 2. Responsiveness—Willingness to help customers and 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 customers. 5. Tangibles—The appearance of physical facilities, equipment, personnel, and communication materials.
- With COVID19, Tractebel has continue to do external marketing through virtual meetings and webinars so as to reach wider scope of the market. In this knowledge sharing activity, Tractebel is still able to pitch its consulting services aligned with the energy and urban needs of the country. Facilitating webinars has reached a wide range of key clients and those were converted into inquiries and collaboration opportunities. This specific activity is a Business Development effort and form part of the company’s marketing initiative in approaching COVID19 impacts. Aside from the external marketing done by Business Developers, our inhouse engineers are also able to highlight their skills and capabilities in such a way that benefits the company’s brand aside from of course, personal branding of the consultant capabilities. In this specific article, this one has been released for public consumption aside from a world wide circulation among Tractebel offices in Asia, Americas and Europe and African regions.
- This specific slide shows how Tractebel was able to do interactive marketing whereby the cooperators, clients and Tractebel take part in the marketing initiative. With our continued assistance with Asian Development Bank, we have been recognized again as one of the top5 Philippines-based international consulting firms. As also shown in this picture, aside from continuously doing projects with ADB, an open communication line is maintained among ADB officials and experts to keep them updated with Tractebel competence and also to check the consulting and technical needs that ADB may require for its pipeline of projects. Knowledge sharing and deep dive sessions are good initiatives whereby the client, Tractebel as the consultant and even the end user like Public and private institutions were able to participate in contribute in marketing communications.
- `Many lessons can be learned from Top service companies. They excel at the following practices: a strategic concept, a history of top-management commitment to quality, high standards, profit tiers, and systems for monitoring service performance and customer complaints. They also differentiate their brands through primary and secondary service features and continual innovation. STRATEGIC CONCEPT Top service companies are “customer obsessed.” They have a clear sense of their target customers and their needs and have developed a distinctive strategy for satisfying these needs. TOP-MANAGEMENT COMMITMENT Companies such as Disney and McDonalds have a thorough commitment to service quality. Sam Walton of Walmart required the following employee pledge: “I solemnly swear and declare that every customer that comes within 10 feet of me, I will smile, look them in the eye, and greet them, so help me Sam.” He just simply walk the talk. HIGH STANDARDS The best service providers set high quality standards. Citibank aims to answer phone calls within 10 seconds and customer letters within 2 days. The standards must be set appropriately high. Service employees need two complementary capacities: service competencies – the skills and knowledge necessary to do the job – and service inclination – an interest in doing service-related work. PROFIT TIERS Customers in high-profit tiers get special discounts, promotional offers, and lots of special service. MONITORING SYSTEMS Top firms audit service performance, both their own and competitors’, on a regular basis. They use comparison shopping, mystery or ghost shopping, customer surveys, suggestion and complaint forms, service-audit teams, SATISFYING CUSTOMER COMPLAINTS. Companies that encourage disappointed customers to complain—and also empower employees to remedy the situation on the spot—have been shown to achieve higher revenues and greater profits than companies without a systematic approach for addressing service failures
- Another experience I have with what I can regard as a tool for achieving excellence in services marketing is my previous stint as a District Manager in Solar Philippines. As part of the Rooftop Sales Business Unit, we are tasked to work in collaboration with the Marketing Department. Here, we are guided with the 360 Degree Evaluation Matrix to see how our department performs with respect to other departments and with the needs of the customers. The 360 Degree Evaluation then yield a Balance Scorecard which shows the lags and leading indicators which we plan to act on and place measures to mitigate potential business impacts. These served as a planning and evaluation tool for the managers, executives and supervisors. In the same way, rank and files and subordinates were also able to give assessment to their immediate superiors and other managers and employees with whom they have some work association.
- To continue, the lagging indicators shows the financial and customer perspective while the leading indicators show the internal process and growth perspective. This assessment has given the company the idea on time, quality cost ad performance and service that the employees are doing with each other and to the customer ultimately. After the 360 evaluation and the balance scorecard exercise, the management has then allocated the marketing expense in relation to the marketing activities expected per district manager, per territory and per salesperson. Aside from considering the sales figures, we mean efficiency and effectiveness, it also considers personnel development and customer satisfaction. The main premise is that even after sales closing, the customer should still be served and delighted in the utmost capability of the salesperson.