CHAPTER 12 MANAGING SERVICES I LEVELS OF SERVICE a CORE PRIMARY SERVICES i The major activity of a business or nonprofit ii Investment services provide the usage of a brokerage account to buy sell stock 1 Ex Charles Schwab eTrade b Ancillary Services i Expected or optional supplements to the primary purchase 1 Ex Supermarket carryout Valet Parking Free Parking ii Expected in B2B Marketing 1 Prompt delivery 2 Favorable credit terms 3 Responsive 24 7 Customer Service II SERVICES AS VALUE a Consumers and Organizational Buyers Want i Quality products ii Right price iii Qualified sales personnel iv Maximum benefits v Minimum effort vi Low wait times vii VALUE b Casual Dining Industry stopped providing value i Competition from fast casual chains are stealing customers ii Checks average from 10 23 iii Ex Panera Chipotle Panda Express Zaxby s Five Guys III VALUE a An intangible concept often defined in terms of i Exceptional customer service ii Exceptional product quality iii Value based prices IV COMPETITIVE POSITIONING a Service Image is conveyed by the firm s service products i Dimensions used should be those valued by the customers i b What DO consumers want in casual dining Stand for something unique 1 Cheesecake Factory Large Portions 2 Outback High quality grilled Steak 3 Olive Garden Tuscan like ambience ii Lower Prices iii Better Food ex Ruby Tuesday s iv Improved Service ex Chili s 1 Slow service discourteous staff professional uniforms v Better Looking Stores ex Ruby Tuesday s vi Get Kid Friendly V VI 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 BENEFITS OF EXCEPTIONAL CUSTOMER SERVICE a Exceptional customer service can differentiate you from competitors Services and recover lost sales Services attract and keep customers i ii iii iv Customer service usually leads to a profitable Return on Investment in the long run Service quality is related to customer satisfaction VII How consumers purchase evaluate services a The Purchase Process i Search Properties What consumers can judge prior to purchase Easiest to Evaluate Price Location Appearance of Physical Facility Paperwork Interactions with Staff a b c HIGH clothing jewelry furniture houses Automobiles ii Experience Properties Attributes discernable only after the service experience a Hardest to evaluate b c HIGH restaurant meals vacations haircuts childcare Physical comfort staff concern wait time iii Credence Properties Attributes inferred from a subjective evaluation of the entire process a HIGH TV repair legal services root canal auto repair medical diagnosis VIII THE SERVICE DESIGN PROCESS a Customer Targets What do they want b Nature of the Service i Complex substantial support services and highly qualified customer contact people medicine investments ii Less Complex Substantial up front design effort automated services ex ATM Pricing Who is the Target c i How much and how often do you buy ii Ex T G I Friday s Loyalty Program iii What is this type of service iv Can a fee be justified d Costs i Wages ii Physical facilities iii Technology and equipment iv Honoring warranties and guarantees e Degree of Complexity Uncertainty need 1 Extensive sales assistance i When the service product is complex or customers are uncertain about the purchase They may Smaller marketers may need to outsource some customer services to save costs i ii When to use customer service outsourcing 2 Demonstrations 3 Service guarantees 4 After sale assistance 5 Pre purchase information f Marketer s Resources Significant Growth 1 2 Save money 3 Testing Learning 4 Variable Volume 5 Business Model Shifts g Number of Services h Level of Service i Full service to self serve i Focus on services which make a difference in consumers purchase decisions ii Remember customers may be willing to pay some or all of the cost of desired services 1 What does your market target customer call for 2 What can you support IX SERVICE DELIVERY a Top Management Commitment b Treat customers as internal customers ex Disney c View service as a performance d Ensure service recovery X SUCCESSFUL SERVICE RECOVERY a Know the costs of losing a customer i For every customer that bothers to complain there are 26 others that stay silent ii The average wronged customer will tell 8 16 people iii 91 of happy customers will never purchase your services again iv It costs about 5X as much to attract a new customer than to keep an old one b Listen to the customer get them to talk c Anticipate potential failures d Act fast e Train Employees f g Close the Loop get back to the customer Empower the front line XI CHEF RAMSEY S CARDINAL RULE a Put customers first make them feel really special and build a sense of loyalty b Unhappy customers destroy reputations XII THE EVOLVING WORLD OF PRODUCT a Before 1940s A world of Commodity b 1940s 1980s A World of Product Branding c 1980s 1990s A World of Services d 1990s 2010s A World of Experiences Charismatic Experiences CHAPTER 13 BUILDING THE PRICE FOUNDATION I NATURE AND IMPORTANCE OF PRICE a b c Price the money or other considerations including other goods services exchanged for the ownership or use of a good or service Importance of Price Price is the only thing we do that isn t an expense Price is REVENUE Barter the practice of exchanging goods and services for other goods and services rather than money d Price Equation Final Price List Price Incentives Allowances Extra Fees II Price as a indicator of value a Value the ratio of perceived benefits to price b Value Perceived Benefits Price c d Value Pricing practice of simultaneously increasing product and service benefits while Price cannot exceed the perceived value of the attributes being offered maintaining or decreasing price i But what happens if when costs rise e Value Pricing is not necessarily inexpensive i PCs have seen collapsing prices as competition has become strong ii Low Prices PCs are the fastest growing segment iii Solutions adding features and services that add value III Price in the Marketing Mix a b Profit Equation Profit Total Revenue Total Cost Unit Price x Q Sold Fixed Cost Variable Cost IV Six Steps in Setting Price 1 Identify Pricing Objectives and Constraints a Pricing Objectives specify the role of price in an organization s marketing and strategic plans b Profit Objectives i Managing for Long Run Profits ii Managing for Current Profit iii Target Return Return on Investment c