Management and Organizational Studies 2320A/B Chapter Notes - Chapter 10: Customer Service, Intangibility, Micromarketing
1 Oct 2018
School
Department
Professor
Chapter 10: Services- the Intangible Product
Introduction
• A service is any intangible offering that cannot be physically processed
o A deed, performance, or effort that cannot be physically processed
• Customer service refers to human or mechanical activities that firms undertake to help
satisfy their customers’ needs and wants
• Firms add value to their products or services by providing good customer service
• Economies of developed countries (i.e. Canada) have become increasingly dependent on
services
• It is generally less expensive for firms to manufacture their products in less developed
countries
o Even if the goods are furnished in Canada, some of their components were likely
produced elsewhere
o In turn, the proportion of service production to goods production in Canada has
steadily increased over time
• Household maintenance activities have become quite specialized
o Food preparation, lawn maintenance, house cleaning, laundry, and car maintenance
are all performed by specialists in the modern economy
• People place a high value on convenience and leisure
o Many are willing to pay others to perform their chores
o People are demanding more specialized services—personal trainers, massage
therapists, tax specialists, travel specialists…
o As the population ages, the need for health care professionals also increases
Services Marketing Differs from Product Marketing
• The 4 I’s of services
o Intangible, Inseparable, Inconsistent, Inventory
• Significantly harder to market than products
Intangible
• Services are intangible- cannot be touched, tasted, or seen like a product can
• Intangibility is highly challenging for marketers
o Makes it difficult to convey the benefits
• Difficult to promote because it can’t be shown directly to potential customers
o Marketers must creatively employ symbols and images to promote and sell services
o I.e. Disney World uses ads to promote images of happy families
• The images marketers use reinforce the benefit or value that a service provides
Inseparable Production and Consumption
• Services are produced and consumed at the same time—service and consumption are
inseparable
• Service marketers provide opportunities for their customers to get directly involved in their
service
o I.e. health care providers have found that the more control they allow their patients
in determining the course of the treatment, the more satisfied the patients are
• Consumers rarely have the opportunity to try the service before they purchase it
• After a service has been performed, it cannot be returned
• Because the purchase risk is relatively high, services sometimes provide extended
warranties and 100% satisfaction guarantees
Inconsistent
• The more humans that are needed to provide the service, the more likely that the service’s
quality will be inconsistent
• A hair stylist may give bad haircuts in the morning because she went out before; yet she
may offer a better service than an untrained stylist working at the same salon
• A restaurant can control its food quality but not the variability in food preparation or delivery
• If a customer has a problem with a product, it can be replaced, remade, destroyed or
recalled
• Some marketers of services strive to reduce service consistency through training and
standardization
o I.e. Enterprise Rent-A-Car has worked to standardize its service delivery across
North America- provides extensive training to its associates
• Marketers can use inconsistency to their advantage
o A micromarketing segmentation strategy can customize a service to meet
customers’ needs exactly
o I.e. Nerds On Site will come to your home or office and take care of any repair or
service your computer may need
• Micromarketing can be expensive to deliver, especially for firms that offer multiple services
o Consumers may get irritated if they must pay for each little service
o I.e. a hotel that charges separately for towels, shampoo, TV use, etc.
o Instead, service providers usually bundle their services into one charge
▪ I.e. all-inclusive resorts
• Some service providers tackle the inconsistency issue by replacing people with machines
o I.e. using an ATM, self-checkout machines
• Technological delivery of services can sometimes cause additional problems
o Customers may not embrace the idea of replacing a human with a machine for
business interactions, or have trouble using the technology
o The technology may not perform adequately
• The internet has reduced service inconsistency
o Customers can purchase travel items, concert and movie tickets, insurance, etc.
Inventory
• Services are perishable because they cannot be held in inventory or stored for use in the
future
• As long as the demand for and the supply of the service match closely, there is no problem;
but, this rarely occurs
• I.e. airlines offer promotional pricing to encourage people to book flights during the off-
season
Providing Great Service: The Gaps Model
• The Gaps Model is designed to highlight those areas where customers believe they are
getting less or poorer services than they expect, and how those gaps can be closed
• Customers have certain expectations on how a service should be delivered
o When the delivery of that service fails to meet those expectations, a service gap
results
• The Gaps model is designed to encourage the systematic examination of all aspects of the
service delivery process, and prescribe the steps needed to develop an optimal service
strategy
4 Service Gaps:
1. The knowledge gap reflects the difference between customers’ expectations and the firm’s
perception of those customer expectations
o Firms can close this gap by matching customer expectations with actually service
through research
2. The standards gap pertains to the difference between the firm’s perceptions of customers’
expectations and the service standards it sets
o Firms can narrow this gap by setting appropriate standards and measuring service
performance
3. The delivery gap is the difference between the firm’s service standards and the actual
service it provides to customers
o Can be closed by getting employees to meet or exceed service standards
4. The communication gap refers to the difference between the actual service provided to
customers in and the service that the firm’s promotion program promises
o Firms can close this gap if they are more realistic about the services they can
provide and manage customer expectations effectively
The Knowledge Gap: Knowing What Customers Want
• To reduce the knowledge gap, firms must understand the customers’ expectations
o Can be accomplished through customer research and by increasing the interaction
and communication between managers and employees
Understanding Customer Expectations
• Customer’ expectations are based on their knowledge and experiences
• Expectations vary according to the type of service
o I.e. my expectations may be higher when staying at the Fairmont rather than a motel
• People’s expectations vary depending on the situation
o I.e. if I am traveling for business, I may be ok with the motel; if I am celebrating my
wedding I would probably prefer the Fairmont
Evaluating Service Quality by Using Well-Established Marketing Metrics
• To meet or exceed customers’ expectations, marketers must determine what those
expectations are
• Because of their intangibility, the service quality, or customers’ perceptions of how well a
service meets their expectations, is often difficult for customers to evaluate
• Customers generally use 5 dimensions to determine overall service quality: reliability,
responsiveness, assurance, empathy, and tangibles
• Marketing research provides a means to better understand consumers’ service
expectations and their perceptions of service quality
o Can be expensive and extensive, or can be integrated into a firm’s everyday
interactions with customers
• Today, most service firms have developed voice-of-customer programs and employ
ongoing marketing research to assess how well they are meeting their customers’
expectations
