Meaning of Service; Characteristics of Services; Classification of Services; Marketing mix of services; Customer involvement in services; Building customer loyalty; GAP model; Balancing demand & capacity.

1. UNIT 4
SERVICE MANAGEMENT
MR.T.SOMASUNDARAM
ASSISTANT PROFESSOR
DEPARTMENT OF MANAGEMENT
KRISTU JAYANTI COLLEGE (AUTONOMOUS)
BENGALURU
1

2. UNIT 4: SERVICE
MANAGEMENT
Meaning of Service; Characteristics of
Services; Classification of Services;
Marketing mix of services; Customer
involvement in services; Building
customer loyalty; GAP model; Balancing
demand & capacity.
2

3. WHAT IS SERVICE?
“It is the part of the product or the full
product for which the customer is
willing to see value and pay for it”.
3

4. DEFINITION OF SERVICE
Definition:
“Services are activities, benefits or satisfaction which
are offered for sale or provided in connection with the sale
of goods”.
- American Marketing Association
“A Service is an act or performance that one party
offers to another that is essentially intangible and doesn’t
result in the ownership of anything. It production may or
may not be tied to the physical product”.
- Philip Kotler
(E.g.) Transportation, Electricity, Hospital, etc.
4

5.  It is intangible
 Its doesn’t results in ownership
 It may or may not be attached with a physical product
“There are no such thing as service industries. There are only
industries whose service components are greater or less than those of
other industries. Everybody is in service.”
- Theodore Levitt
Services Could meet:
 Personal needs – haircuts, tution, massage parlours.
 Business needs – courier services, office cleaning services, delivering
fresh flowers
Most products have a service components
They could be
 Equipment based
 People based – varying skill levels
SERVICE
5

6. SERVICES ARE DIFFERENT
Goods Services Resulting Implications
Tangible Intangible Services can’t be inventoried.
Services can’t be displayed,
communicated.
Standardized Heterogeneous Each time experience differs.
Service quality depends on
many uncontrollable factors
Production
separate from
consumption
Simultaneous
production and
consumption
Customer participate in and
effect the transaction.
Mass production is difficult.
Non perishable Perishable Services can’t be returned,
resold or stored.
Right of
ownership
No Ownership Can’t be owned
7

7. SIZE OF SERVICE SECTOR
 The Services sector contributes over two-third of GDP in developed
countries while it contributes over 40% in most developing countries.
 Service sector covers a major area of finance, insurance,
transportation, public utilities, health care, trade, personal services
and so on.
 The following are the service sectors of Indian economy that grown
fasters than the economy;
* IT * Telecommunication
* ITES * Hotels & Restaurants
* Financial Services * Community Services
Some of the important forces that shape the service market –
a) Government policies b) Social Change
c) Business Trends d) Advances in IT
e) Internationalization 8

8. Nature of Services:
 One of the most important aspect of services is intangibility.
 Services cannot be separated from provider.
 Their Production and Consumption is often not separated in time and
place.
 Services output tends to be variable.
 Services suffer from lack of standardization.
 Services are perishable in nature.
 Services cannot be transported from one place to another.
Scope of Services:
Some of the important scope of services are –
 Service as an Organization
 Service as core product
 Service as Product Augmentation
 Service as Product support
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9. FUTURE OF SERVICE SECTOR
 Nowadays demand is fairly close to trend of output and
income in overall economy in different service sectors like
health, education, tourism, etc.
 Industry body CII projects the growth rate for Indian
insurance industry around 5% and non insurance industry
with 60% to record average growth.
 Indian Banking system has become modernized with
comprised of Information Technology (IT) products and
services.
 Indian banking and securities companies spends more on IT
products and services to ensure that IT services providers lay
on strong focus on financial services sector.
12

10. ECONOMIC ROLE OF SERVICE
INDUSTRIES
1. Employment. (Knowledge based services)
2. Trade.
Some of the factors that expands trade in services are –
- Globalization of service industry.
- International operations (export services).
- Technological advances & Service oriented products.
3. Urbanization.
Benefits of Service:
a) Profiting from the characteristics of intangibility.
b) Profiting from the customer Co – production.
c) Profiting from the pace – based services.
d) Profiting from the Cyber Services.
e) Profiting from the mass – customized services. 13

11. SERVICE MANAGEMENT
Capabilities Resources
* organization’s ability to * used to deliver IT services.
to coordinate, control. * easier to acquire than
and deploy resources to capabilities.
produce value. * IT infrastructure, people,
* take form of processes and financial capital, application
functions. and information.
* organization, process, people.
“Service Management is a set of specialized
organizational capabilities for providing
value to customers in the form of services.”
15

12. CHARACTERISTICS OF SERVICES
1. Intangibility:
Marketing issues in Intangibility are – services can’t stored as buffers,
fluctuations in demand, services can’t be patented, different service over
competitors. & service can’t realized in future time.
2. Heterogeneity:
Marketing issues in Heterogeneity are – different to different customers,
services need to be customized, quality of service may not be fully controlled
by service provider.
3. Inseparability:
Marketing issues in Inseparability are – minimize or remove the gaps
between service promised & provided, services are sold, produced and then
used, behave professionally, physically present.
4. Perishability:
Marketing issues in Perishability are – services can’t be returned or resold,
unused services are loss to service providers, pricing strategies targeted on
specific groups, complimentary services stimulate demand in off-seasons.
16

13. CLASSIFICATION (TYPES) OF SERVICES
SECTORS
Types of
Services
Education
Service
Consultancy
Services
Financial
Services
Advertising
Services
MICE
Services
Healthcare
Services
Tourism
Service
Distribution
Services
Communication
Services
IT
Services
Legal
Services
Real
estate
Services
Strategic
Business
Services
20

14. CLASSIFICATION OF SERVICES
The following are important methods of classification:
1. Classification based on ultimate User:
a) Consumer – services are directly provided to consumer such as
hair dressing, package tour, personal finance, etc.
b) Business to Business – it is provided by one business to another
business like advertising agency, consultancy, legal advice, etc.
c) Industry – it includes repairs and maintenance of plant and
machinery, service installation like intercom facility, etc.
2. Classification based on level of tangibility:
a) Highly tangible – services like car rentals, ATM, etc.
b) Services linked to tangible goods – like car servicing, repairs of
domestic appliances, etc.
c) Highly intangible – like legal services lecturing, medical
advice, etc. 35

15. 3. Classification based on Customer – Employee presence:
a) Self – Service – services like ATM, Self service fast food
restaurants, etc.
b) Inter-personal service – it involves presence of both customer
and employee. (E.g.) Educational institutions.
c) Remote service – there will be only presence of employees.
(E.g.) Insurance company.
4. Classification based on Specialization or Expertise:
a) Professional Service – like medical services, legal service,
security services, etc.
b) Non-professional service – like house hold help, casual labour,
etc.
5. Classification based on service options-people based or
machine based:
a) People-based services – people have high contact with service
providers like education, dental care, tourism, etc. 36

16. b) Equipment based service – people will have less contact
with the service provider like Vending machine, internet, etc.
6. Classification based on Profit orientation:
a) Non-profit orientation – like government educational
institutions, cultural organizations, religious institutions, old
age home, red cross, NCC, WHO, etc.
b) Commercial or profit orientation – like banks & financial
institutions, tour operator, real estate, etc.
7. Classification based on external-internal services to
manufacturer:
a) External services – services concerned with distributions,
installation, maintenance, etc.
b) Internal Services – payroll, administration, etc.
37

17. Marketing Mix of Service (Services Marketing Mix):
Services
Marketing
Mix
Product
Place
Promotion
Price
Physical
Environment
Process
People
40

18. SERVICE DELIVERY PROCESS
Service Distribution:
The distribution of services done through three elements:
1. Information and Promotion Flow.
2. Negotiation Flow.
3. Product Flow.
Determining type of contact with customer:
Option 1: The Customers visit service site physically.
Option 2: The Service providers go to customers themselves.
Option 3: The Service transaction is conducted remotely.
Another way to look at it –
- add or change the service outlet to increase the sales or add
convenience of service to the customer. 50

19. Places of Service Delivery:
1. Location Constraints.
2. Geographic factor / constraints.
3. Need for economies of scale.
4. Mini stores.
5. Separating front and back stages of operation.
6. Locating in multipurpose facilities.
7. Time of service delivery.
Service Provider Participants:
a) Service Principal (originator of the service).
b) Service Intermediary or deliverer.
51

20. Different delivery channels:
1. Direct or Company owned channels.
2. Service delivery through Intermediaries.
i) Franchisee.
It is fast growth strategy, when –
- resources are limited.
- long term commitment of store managers.
- local knowledge is important.
ii) Agents and Brokers.
iii) Electronic Channels
52

21. Distribution of Supplementary Services in Cyberspace:
1. Information.
(E.g.) directions to service site, schedule / service hours, price,
conditions of sale, instructions, FAQ, etc.
2. Consultation.
(E.g.) customized advice, counseling, conduct e-mail, etc.
3. Order taking.
(E.g.) order entry, reservation, make in confirm, check status.
4. Hospitality.
(E.g.) Greeting, facilities, food and beverages, washrooms.
5. Safekeeping. (E.g.) caring of goods, track package, repair status, etc.
6. Exceptions. (E.g.) special requests, complaints or compliments.
7. Billing. (E.g.) periodic statement of account, receive bills.
8. Payments. (E.g.) Self service, direct to payee, automatic deduction pay
by credit or debit card.
53

22. CUSTOMERS ROLE IN SERVICE
DELIVERY
Introduction:
- the role of customers in effective and successful delivery
of service will determine to continue or discontinue the
service.
Sometime there will be gap in service performance due to –
- the customers lack of knowledge of their roles and
responsibilities. (E.g.) Visiting new tourists places need help
to enjoy the service.
- customer understand their roles but unwilling or unable to
perform for some reason. (E.g.) person joins a health club to
get into shape, but doesn’t follow diet schedule.
- behaviour of customer receiving the service can negatively
impact other customer’s behaviour. 54

23. Importance of Customers in Service Co creation and Delivery:
- customers who receive services will participate in service
delivery process and contribute to service performance gap
through their behaviour in effective manner.
- since the customers are participatory in the service delivery they
are also known as Co – creators of service.
* Customers are receiving the service:
- service performance gap can be plugged with customer
participation in service delivery process with difference depend
on following situation:
i) low level of customer participation is required in some
services.
ii) moderate level of customer participation is required in other
cases.
iii) high level of customer participation is required in still other
cases. 55

24. Importance of Other Customers in Service Delivery:
- many times the customers receive the services or consume
the services with other customers. (E.g.) watching movie,
visiting health club, gym, hotels, etc.
Some customers detract others from enjoying the services in
form of –
* disruptive behaviours of rude customers.
* excessive crowding at certain places during peak hours.
* incompatible needs of individual customers.
Sometimes the fellow customers can enhance the satisfaction
in services by –
* mere presence at the venue.
* socialization / friendships.
* playing the role of supporters, assistants, etc. 56

25. Individual differences and Customer Participation:
- individual differences determines whether fellow customers
detracting or adding satisfaction to the services.
(E.g.) Classroom situation, Tourists place, cinema theatres, etc.
- individual differences bound to have effect on levels of
customer participation.
- customer participation are determined by the low end and high
end customers.
Role of culture and nature of economy in customer participation:
- it plays important role in level of customer participation in
some cases like hotels, restaurants, hospitals, etc.
Role of Customer in Service delivery:
1. Customers as productive resources:
2. Customers as Quality contributors:
3. Customers as Competitors: 57

26. Customer Participation self – Service Technologies (SSTs):
Some of the most prominent and used self service are –
 ATMs and Internet banking
 Internet Shopping and Distance Education
 Bookings for airlines and railways, e – filing of tax returns
 Online payment of fees, telephone bills and electricity bills
 Online submission of registration and forms
Some of the challenges by using SST:
- based on usage of technology.
- SSTs more prominent as compared to developing countries.
- adaption of new technology.
- time effort and energy.
- written manual on guidelines for usage of technology.
- should be trained and feel comfortable in using this technologies.
61

27. Strategies for enhancing Customer Participation:
1. Define Customer’s Job:
a) Helping one self.
b) Helping others.
c) Promoting the company.
d) Individual differences.
2. Recruit, Educate and Reward Customers:
a) Recruit the right customers.
b) Educate and Train customers to perform effectively.
c) Patients should also be trained and rewarded.
d) Avoid negative outcomes of Inappropriate Customer participation.
e) Customer fails to understand the service and perform his role.
f) Absence of positive attitude and the customers.
3. Manage the Customer Mix. (service delivery based on different
segments of customers)
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28. Guidelines to provide excellent Customer service:
1. Hiring for service.
2. Caring for customers.
a) Great customer service begins with you.
b) Culture of customer service must be codified.
c) Employees are customers too.
d) Emphasize the long term.
e) Build trust.
f) Listen.
g) Little things that matter.
h) Show you appreciation.
i) Treat your best customers better.
3. Resolving Customer Disputes.
- Five ‘A’ to solve dispute (Acknowledge, Apologize, Accept, Adjust
and Assure).
63

29. SERVICE QUALITY
Definition:
“Service Quality is defined as the service companies
which provides valuable service and that help in achieving
the higher levels of success at every point of service delivery
and increase customer satisfaction.”
Some of the components of Service Quality are:
a) Service quality is Transcendent.
b) Service quality is Product – based.
c) Service quality is User – based.
d) Service quality is Manufacturing – based.
e) Service quality is Value – based.
64

30. Components of Quality in Service Quality:
1. Manufacturing – based components of Quality:
- this is applicable to service products like mobiles,
electronics equipment, automobiles, FMCG, etc.
a) Performance b) Features
c) Reliability d) Conformance
e) Durability f) Serviceability
g) Esthetics h) Perceived quality
2. Service – based Components of Quality:
a) Tangibles b) Reliability
c) Responsiveness d) Assurance
e) Empathy
65

31. Instruments for measuring Service Quality:
- there are different research instruments which can be used
to measure customer perspectives on service quality which is
called “SERVQUAL”
1. Capturing the Customer’s Perspective of Service Quality
through SERVQUAL (1):
If quality is poor, perceived performance ratings <
expectations.
If quality is good, perceived performance ratings >
expectations.
2. Capturing the Customer’s Perspective of Service Quality
through SERVQUAL (2):
- it contains 22 items reflecting five dimensions of service
quality like Tangibility, Reliability, Responsiveness,
Assurance and Empathy. 66

32. 3. Capturing the Customer’s Perspective of Service Quality
to evaluate online businesses through Seven dimensions of
SERVQUAL:
* Accessibility: Is it found easily?
* Navigation: How easy to move in and around?
* Design and presentation: Image projected.
* Content and Purpose: substance and accuracy.
* Responsiveness: firm’s respond strategy.
* Interactivity: customization and personalization.
67

33. GAPS Model:
Customer Needs and
Expectations
Management
definition of these
needs
Translation into
design / delivery
Execution of design /
delivery
Customer perception
of service execution
Customer experience
relative to
Advertising and sales
promises
Customer
interpretation of
communication
Customer
Management
1. Knowledge Gap
2. Standards Gap
3. Delivery Gap
4. Internal
Communications gap
5. Perceptions Gap 6. Interpretation Gap
7. Service Gap
68

34. Measures of Service Quality:
a) Soft measures:
 this is collected by talking to customers, not easily observed.
 provide guidance, direction, feedback to employees to
achieve customer satisfaction.
 quantified by measuring customer perception and beliefs.
b) Hard Measures:
 these can be counted, timed or measured through adults.
 these are typically operational processes or outcomes.
 standards are often set with reference to percentage of
occasions.
 control charts are useful for displaying performance over
time.
72

35. Tools to Analyze and Address Service Quality Problems;
1. Fishbone diagram. (Cause and effect diagram to identify the causes of
problems)
2. Pareto Chart. (majority of problems is caused by a minority of
causes) (i.e.) 80/20 rule.
3. Blueprinting. (visualization of service delivery, identifying points
where failures are most likely to occur)
4. TQM. (top management commitment, HRM, technical system,
service, benchmarking, customer focus, continuous improvement,
employee satisfaction, TQM practices)
5. ISO 9000. (companies requirements, guidelines, and other standards to
provide assessment and certification for a firm)
6. Malcolm Baldrige model. (to promote best practices in quality
management and quality achievements among U.S. firms.
7. Six Sigma. (statistically, only 3.4 defects per million opportunities) (it
has ‘DMAIC’ methodology) (i.e.) Define, Measure, Analyze, Improve
and Control. 74

36. BALANCING DEMAND AND CAPACITY
Managing Demand and Capacity is a challenge because –
* no buffer for services from demand can be created.
* demand is volatile in nature and keep fluctuating during
peak seasons and different times of the day.
Changes in demand results in number of outcomes like:
a) Excess demand:
b) Demand exceeds optimum capacity:
c) Demand and Supply are balanced:
d) Excess capacity:
75

37. Understanding Capacity Constraints and Demand Patterns:
1. Capacity Constraints – services in form of time, labour, resources, human
capital, infrastructure on effective functioning and servicing the customers.
a) Time Constraint b) Labour Constraint
c) Equipment Constraint d) Facilities Constraint
2. Demand Patterns – it is to better serve the customer.
a) Charting demand patterns b) Predictable cycles.
c) Random demand fluctuations. d) Demand patterns by market.
Strategies for matching capacity and demand:
1. Shifting demand to match capacity / supply managing demand:
a) Decreasing demand during peak demand periods, when demand is too
high:
b) Stimulating demand during low demand periods.
2. Strategies for Adjusting Capacity / Supply to Match demand:
Elements:
a) Facilities. b) Equipment.
c) Labour. d) Time. 78

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