Chapter 12 Managing Services Ruby Tuesday Blows up Wrong Restaurant Introduction The Point of sameness In SERVICES marketing the casual dining segment HAS become a sea The industry is not longer providing customers with Value I Services are a Major Factor in the U S economy in dollars and in jobs Over 5 5 Trillion and 116 million jobs Casual dining 75 billion See Figure 12 1 page 298 II SERVICES Defined a Services are the intangible activities or benefits that an organization provides to consumers in exchange money or something else of value III Increase in Services Influenced by a Organizations focus on productivity and profits i Casual dining segment s same store sales down 1 8 and same store traffic down 4 3 January to Aug 2008 b Consumers poverty of time i Personal Shoppers ii Take out food iii House and lawn care IV Affecting virtually all industries a Location ATMs branch outlets branch warehouses JIT delivery 116 b Longer Business Hours c Better trained sales and service people d One stop shopping walmart e Improved customer service systems personal phone on line f More information available before during and after the sale g ADDS VALUE beyond issues of price and product quality V THE UNIQUENESS OF SERVICES a Four I s of Services i Intangibility 1 Services cannot be seen touched tasted felt etc 2 SO it is harder to communicate service features and quality 3 Communications must make these tangible by relating to familiar siruations 4 Setting Price can be hard ii Inconsistency 1 Lack of standardization 2 inconsistent delivery and quality depending on the person performing the job 117 3 Minimize by employee selection training and 4 service performance standards iii Inseparability 1 Simultaneous production and consumption means a consumers are a part of the service process b We must manage the interaction for customer satisfaction c educate consumers about the service process and their role in it iv Perishability Inventory 1 Services cannot be inventoried so it is hard to balance capacity 2 cannot return service for credit or exchange 3 need to manage demand in peak periods use capacity in off and demand periods 4 Idle production capacity occurs when the service provider is available but there is no demand VI Inventory carrying costs of services depend on the cost of employees and equipment 118 VII Levels of Service a Core Primary Services i The major activity of a business or nonprofit organization 1 Example Investment Services provide the use of a brokerage account to buy and sell stocks a Charles SCHWAB professional traditional b E Trade etrade baby b Ancillary Services i Expected or optional supplements to the primary purchase 1 Supermarket Carryout 2 Convenient free parking ii Ancillary Services expected in B2B marketing 1 Prompt delivery 2 Favorable credit terms 3 Responsive 24 7 customer service VIII Service as Value a Consumers Organizational Buyers want i Quality products ii Right price 119 iii Qualified Sales Service personnel iv Maximum benefits v Minimum effort vi Low wait times vii They demand VALUE longer 1 Example The Casual Dining Industry is NOT providing value any a Casual Dining restaurants provide full service alcoholic beverages and CHECK AVERAGES from 10 to 23 per b COMPETITION from fast casual chains are stealing c Fast casual chains have no waiters and higher quality food than person customers fast food chains i Panera ii Chipotle IX VALUE a an intangible concept often defined in terms of i exceptional customer service ii exceptional product quality 120 iii value based prices proposition six months 1 Example Some casual chains are returning to a value service a MOST casual dining chains raise menu prices 1 to 3 every i To keep up with rising commodity and labor costs b SOME try temporary discounts i 9 99 dinner deals and 5 99 lunch specials c Others are making it a new marketing tactic i TGI Friday s Right Portion Right Price dinner menu with smaller entrees starting at 6 99 ii Cheesecake Factory rolled back cheese cake prices to 1 50 and had LONG lines They are now rolling out a customer loyalty card with incentives to return X Competitive Positioning a Service Image is conveyed by the firm s service products i The dimensions used should be those valued by the customers 1 Example What DO consumers want in Casual Dining a Stand for something UNIQUE i Cheesecake Factory 121 1 Big portions ii Outback 1 High quality steak iii Olive Garden 1 Tuscan like ambience b Lower Prices c BETTER FOOD i Casual dining was initially successful because it provided better food quality than fast food at a very reasonable price ii Recently fast food s quality has gone UP with prices rising only slowly iii BUT casual dining s price have risen while food quality and innovation has stagnated iv RUBY TUESDAY is upgrading its food but it prices are still pretty high d IMPROVED SERVICE 1 Slow service 2 Discourteous staff 3 Are NOT what consumers are looking for 122 a Chili s is trying to cut 15 minutes from its 45 minute lunch by testing BlackBerry s that connect directly from the server to the kitchen b Chili s is also improving its employee hiring practices c And the staff is wearing more professional looking aprons e Better looking stores 1 Most stores are 20 years old a Ruby Tuesday has redesigned all of its company owned stores with contemporary designs and lighter b Lone Star is replacing concrete floor with wood and is installing oak tables 2 Get kid friendly colors market a Families are a big part of the casual dining industry s b Could restaurants have kid playgrounds Loaner hand held video games 123 XI Service Leadership or Follow the Leader a Will you set the service standard or wait for competitors to set the standard and then follow their lead i Example Who is more innovative in their services Apple vs Microsoft XII Benefits of Exceptional Customer Service a Exceptional Customer Service can Differentiate you from Competitors i Services attract keep customers ii Services and recover lost sales send coupon when they mess up iii Service quality is related to customer satisfaction iv Customer Service usually leads to a profitable ROI in the long term XIII HOW CONSUMERS PURCHASE EVALUATE SERVICES a The Purchase Process i Search Properties 1 What consumers can judge prior to the purchase a Price location appearance of physical facilities paperwork interactions with the service provider s staff ii Experience Properties 1 Attributes discernable only during or after the