212 CHAPTER11 DESIGNING ANDMANAGINGSERVICES
- Customers are becoming more sophisticated about buying product support services
and are pressing for “services unbundling.” They want separate prices for each service
element and the right to select just the elements they want. - Customers increasingly dislike having to deal with a multitude of service providers
that handle different types of equipment. In response, some third-party service orga-
nizations have begun servicing a greater range of equipment.^36 - Service contracts(also called extended warranties), in which sellers agree to provide free
maintenance and repair services for a specified period of time at a specified contract
price, may diminish in importance. Some new car warranties now cover 100,000 miles
before servicing. The increase in disposable or never-fail equipment makes customers
less inclined to pay from 2 percent to 10 percent of the purchase price every year for
a service. - Customer service choices are increasing rapidly, and this is holding down prices and
profits on service. Equipment manufacturers increasingly have to figure out how to
make money on their equipment independent of service contracts.
Add to these trends the now commonplace use of the Internet to deliver ser-
vice, advice, and maintenance or repair information at any hour to any customer at
any location—and it is clear that the most successful companies will be those that
marry high-tech capabilities with customizable, high-touch customer service. Such
top-quality customer service comes at a price, of course; pricing strategies and pro-
grams for goods and services will be discussed in the next chapter.
EXECUTIVE SUMMARY
A service is any act or performance that one party offers to another that is essentially
intangible and does not result in the ownership of anything. Its production may or
may not be tied to a tangible product. As the United States has moved increasingly
toward a service economy, marketers have become more interested in the special chal-
lenges involved in marketing services.
Services are intangible, inseparable, variable, and perishable. Each characteristic
poses challenges and requires certain strategies. Marketers must find ways to give tan-
gibility to intangibles, to increase the productivity of service providers, to increase and
standardize the quality of the service provided, and to match the supply of services
during peak and nonpeak periods with market demand.
Service marketing strategy covers three additional Ps: people, physical evidence,
and process. Successful services marketing calls not only for external marketing, but
also for internal marketing to motivate employees and interactive marketing to
emphasize both “high-tech” and “high-touch” elements.
Because services are generally high in experience and credence qualities, there
is more risk in their purchase. The service organization therefore faces three tasks in
marketing: (1) It must differentiate its offer, delivery, or image; (2) it must manage ser-
vice quality in order to meet or exceed customers’ expectations; and (3) it must man-
age worker productivity by getting its employees to work more skillfully, increasing the
quantity of service by surrendering some quality, industrializing the service, inventing
new product solutions, designing more effective services, presenting customers with
incentives to substitute their own labor for company labor, or using technology to save
time and money.
Even product-based companies must provide support services for their cus-
tomers. To provide the best support, a manufacturer must identify and prioritize the
services that customers value most. The service mix includes both presale services