Management and Marketing of Services

310 Pages·1999·1.822 MB·English

by  Peter Mudie and Angela Cottam (Auth.)

Butterworth-Heinemann
Linacre House, Jordan Hill, Oxford OX2 8DP
225 Wildwood Avenue, Woburn, MA 01801–2041
A division of Reed Educational and Professional Publishing Ltd
A member of the Reed Elsevier plc group
First published 1993
Reprinted 1993, 1994, 1995, 1998
Second edition 1999
© Peter Mudie and Angela Cottam, 1999
All rights reserved. No part of this publication may be reproduced in
any material form (including photocopying or storing in any medium by
electronic means and whether or not transiently or incidentally to some
other use of this publication) without the written permission of the
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Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London,
England W1P 9HE. Applications for the copyright holder’s written
permission to reproduce any part of this publication should be addressed
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British Library Cataloguing in Publication Data
Mudie, Peter
The Management and Marketing of Services. – 2nd ed.
1. Service industries – Marketing 2. Service industries –
Management
I. Title II. Cottam, Angela
658.8
ISBN 0 7506 3594 0
Composition by Genesis Typesetting, Laser Quay, Rochester, Kent
Printed and bound in Great Britain
Preface to the
second edition
For the second edition we have retained the structure of the book as we
believe in its continuing appeal and representativeness of service industry
issues. However, significant sections of the first edition have been
reviewed and updated as evidenced by the inclusion or expansion of
topics such as blueprinting, quality control, pricing, yield management,
customer retention, lifetime value and employee loyalty.
Peter Mudie
Angela Cottam
Preface to the
first edition
We live in a service society. An increasing proportion of GNP comes from
our consumption of services. An increasing number of the workforce are
employed in this sector. The management literature and training,
however, have continued to be dominated by product management and
marketing techniques.
The distinctive characteristics of services merit their own management
framework. Service management is more complex. Consumers buy
something that is intangible. In most cases they are not entirely certain
what they will receive in exchange for their money. The service provider
is often none the wiser. The interactive roles played by the server and the
served mean that service provision and consumption vary enormously.
This in turn changes the role of marketing. It must embrace functions
traditionally regarded as the responsibility of operations or human
resource management. For example, in services the traditional function of
promotion must embrace such issues as the design of the physical
environment and the motivation and appearance of personnel.
We believe that the best way to manage a service company is to develop
a corporate culture, the management structures and the operations
systems that recognize the sector’s uniqueness.
In writing this book our aims were as follows:
(cid:2) To provide a comprehensive treatment of the subject matter.
(cid:2) To highlight the problems that service providers are likely to
confront.
(cid:2) To demonstrate a range of concepts and techniques for solving these
problems.
(cid:2) To present the solutions within a theoretical and practical framework to
facilitate their application to a variety of service industries.
Peter Mudie
Angela Cottam
Acknowledgements
Invaluable contributions to the text were made by Les Mitchell of
Edinburgh College of Art (Chapter 4 on the service setting), and David
Windle, Department of Mathematics, Napier University.
Invaluable contributions were made to the presentation of the book by
those organizations that kindly gave us permission to reproduce artwork
or illustrations. In this context we would like to mention: Avis, British
Airways, British Gas, Kwik-Fit, Legal and General, Life Association of
Scotland, Prudential, Reed Employment and Toys ‘R’ Us. We would also
like to thank Marketing Magazine for allowing us to reproduce Peter Plant’s
cartoon.
For granting copyright clearance we are grateful to the following:
Bowling Green State University for Figure 2 from R. Larsson and D. E.
Bowen, ‘Organisation and Customer: Managing Design and Coordination
of Services’, Academy of Management Review, vol. 14, no. 2, 1989, © Bowling
Green State University 1989; Harvard Business School Press for Exhibit 1
from G. Lynn Shostack, ‘Designing Services that Deliver’, Harvard Business
Review, Jan–Feb 1984, © President and Fellows of Harvard College, 1984;
Sage Publications Inc for Figure 3 from M. Levine, ‘Placement and
Misplacement of You-are-here Maps’, Environment and Behaviour, vol. 16,
no. 2, 1984, © Sage Publications Inc 1984; Cornell HRA Quarterly for Exhibit
3 from W. B. Martin, ‘Measuring and Improving Your Service Quality’,
Cornell HRA Quarterly, May 1986, © Cornell HRA Quarterly 1986; Gower
Publishing Company Ltd for Figure 15.6 from T. Gillen, Twenty Training
Workshops for Customer Care, 1990, © Gower Publishing Company 1990;
Academic Press Inc (London) for Table 2 from G. H. Bower, J. B. Glack and
T. J. Turner, Scripts in Memory for Text, Cognitive Psychology II, 1979, ©
Academic Press Inc (London) 1979; Pergamon Journals Ltd for Table 1
from S. D. Ball, K. Johnson and P. Slattery, ‘Labour Productivity in Hotels:
An Empirical Analysis’, International Journal of Hospitality Management, vol.
5, no. 3, 1986, © Pergamon Journals Ltd 1986; The Marketing Journal and
Publishing Company for Table 1 from G. H. G. McDougall and D. W.
x Acknowledgements
Snetsinger, ‘Items, Products and Services, and Scenarios’, Journal of Services
Marketing, vol. 4, no. 4, Fall 1990, © The Marketing Journal and Publishing
Company 1990; Chartered Institute of Marketing for Figure 5 from R.
Brown, ‘Marketing – a Function and a Philosophy’, The Quarterly Review of
Marketing, vol. 12, nos 3 and 4, 1987, © Chartered Institute of Marketing
1987; MCB University Press Ltd for Figure 2 from G. L. Shostack, ‘How to
Design a Service’, European Journal of Marketing, vol. 16, no. 1, 1982, © MCB
University Press Ltd 1982; The American Marketing Association for Figure
1 from A. Parasuraman, V. A. Zeithaml and L. Berry, ‘A Conceptual Model
of Service Quality and its Implications for Future Research’, Journal of
Marketing, vol. 49, Fall 1985, © The American Marketing Association 1985;
MCB University Press Ltd for Table 1 from D. A. Tansik and W. L. Smith,
‘Dimensions of Job Scripting in Service Operations’, International Journal of
Service Industry Management, vol. 2, no. 1 1991, © MCB University Press
Ltd 1991.
Chapter 1
Introducing
services
Introduction
There are particular problems and challenges for those managing an
organization whose major activity is providing some type of service. For the
customer there may be little evidence, in advance, of what to expect. The
service provider has often to produce the service under the watchful gaze of
customers. Finally, both parties may fail to agree on what constitutes quality
service.
To produce and deliver a service, management needs to recognize what
that means in practice (see Figure 1.1). First an appropriate foundation must
be laid through which the service will be channelled. If these ‘bottom line’
conditions of design, structure and setting are not properly thought out the
prospect of providing a quality service is reduced.
The next stage involves the actual delivery of the service. People, materials
and equipment must be deployed and managed to attract and serve customers
in accordance with their needs and preferences. It is essentially a process in
which customer and service interact in a variety of ways. Throughout that
process the organization needs to demonstrate a commitment to service
quality by setting appropriate standards and ensuring their implementation.
Finally, to test the success of that commitment, service performance must
be monitored and evaluated. This must be an ongoing process that enables
management to detect and rectify any deficiencies.
The goods–services continuum
In 1966 John Rathmell1 observed that most marketers have some idea of
the meaning of the term ‘goods’; they are tangible economic products that
are capable of being seen and touched and may or may not be tasted,
2 The Management and Marketing of Services
Serviceconstruction(Chapters2–4)
Service Organization Service
design structure setting
Servicedelivery(Chapters5–9)
Service Service Service Demand Service
quality encounter employees andsupply communications
Servicemonitoringandevaluation(Chapters10–12)
Service Customer Monitoring
performance satisfaction andevaluation
Figure 1.1 The service management framework
heard, or smelled. As for services, Rathmell asserted that there was no
clear understanding. He sought to change this by defining a good as a
thing and a service as an act; the former being an object, an article, a device
or a material and the latter a deed, a performance, or an effort.
Another distinction between a good and a service, according to
Rathmell, lay in the nature of the product’s utility. Does the utility for the
consumer lie in the physical characteristics of the product, or in the nature
of the action or performance? From such tests Rathmell concluded that
there were very few pure products and pure services. Economic products
were to be regarded as lying along a goods–services continuum with pure
goods at one extreme and pure services at the other, but with most of them
falling between these two extremes (see Figure 1.2). Rathmell stated that
some are primarily goods with service support, whereas others are
primarily services with goods support. Most goods are a complex of goods
Introducing services 3
y
er
Foodandtobacco Clothing,accessoriesandjewell Transportation Recreation Householdoperation Personalcare Foreigntravel Medicalcareandexpenses HousingPersonalbusinessPrivateeducationandresearchReligiousandwelfareactivities
0 10 20 30 40 50 60 70 80 90 100
Figure 1.2 Personal consumption expenditure related to services. Source:
Rathmell (1966)1
and facilitating services; most services are a complex of services and
facilitating goods. He applied the measuring rod of personal consumption
to distinguish between goods and services. For the food and tobacco
category, percentage personal consumption expenditure on the services
was nil. For recreation it was 33 per cent and for religious and welfare
activities, 100 per cent.
Sixteen years later Shostack2developed a refined version of the original
continuum (Figure 1.3) and it remains a valuable perspective for
understanding the nature of services. The essence of the continuum is that
tangibility (ability to see, touch, smell, hear prior to purchase) decreases as
one moves from left to right. Tangible entities are in evidence, such as the
equipment used by the nurse but, in general, they cannot be owned or
possessed like salt or dog food. Every organization on the continuum
delivers some degree of service as part of its total offer. However, it is the
organizations to the right which deliver most in the way of service and can
therefore truly bear the hallmark ‘service organizations’. It is important to
make a distinction between those for whom service is part of the overall
offer (e.g. computer manufacturer, car dealer, fashion retailer) and those
for whom service is the offer (e.g. hotels, banks, airlines, accountants), as
the latter exhibit particular characteristics that merit attention.
In addition, there is another aspect that singles out services from other
organizations. Marketing plans are usually structured around what is
commonly known as the ‘4 Ps’, namely product, price, promotion and
place. But when it is service that is being marketed three more Ps – people,
4 The Management and Marketing of Services
Teaching
Nursing
Thetheatre
Advertisingagency
Airtravel
Television
Service-
dominant
entities
Product-
dominant
entities Fastfoodshop Balancedentity
Tailoredsuit equallyweighted
Automobile betweenproduct
andservices
House
Dogfood
Necktie
Salt
Figure 1.3 A scale of elemental dominance. Source: Shostack (1982)2
physical evidence and process must be added, making 7 Ps in all. As the
additional three Ps figure prominently throughout this text, a brief
description of each will suffice at this stage:
People: Service personnel and customers, e.g. appearance, attitudes,
social skills, etc.
Physical Everything from the appearance, design, layout of service
evidence: setting to brochures, uniforms, cheque books, etc.
Process: Just as raw materials are converted through a process into
finished goods, services likewise go through a process,
converting inputs to outputs. The process will involve, among
other things, policies, procedures, mechanization, flow of
activities, employee discretion, and customer involvement.
Employment in the service sector
One measure of the size of the service sector in the economy is the number
of people employed relative to other sectors. Table 1.1 shows the number
of employees in various industries in the UK. Since 1978 there has been a
switch among both male and female employees away from manufacturing
towards the service sector: 35 per cent of men and 22 per cent of women
were employed in manufacturing in 1978 compared with only 26 per cent
and 10 per cent respectively in 1997.
Introducing services 5
Table 1.1 Employees (UK): by gender and industry (%)
Males Females
1978 1981 1991 1997 1978 1981 1991 1997
Distribution, hotels, catering and repairs 15 16 19 20 24 25 25 26
Manufacturing 35 33 26 26 22 18 12 10
Financial and business services 9 10 15 16 11 12 16 19
Transport and communication 9 9 9 9 3 3 3 3
Construction 8 8 8 7 1 1 1 1
Agriculture 2 2 2 2 1 1 1 1
Energy and water supply 5 5 3 1 1 1 1 –
Other services 16 17 19 19 38 39 41 40
All employees (= 100%) (millions) 13.4 12.6 11.5 11.5 9.4 9.3 10.7 11.3
Data are at June each year.
Source: Short-term Turnover and Employment Survey, Office for National Statistics
In addition, the European Union, in common with most other
industrialized parts of the world, has seen a long-term shift in the sectoral
distribution of employment towards services and there is little sign of any
slowdown in the trend shift to employment in services. (For further
information see The Eurostat Labour Force Survey and Employment in Europe
published by the European Commission.)
Characteristics of services
Services possess four key distinguishing characteristics:
Intangibility
Inseparability
Variability
Perishability.
Intangibility
Services cannot generally be seen, tasted, felt, heard or smelled before
being bought. The potential customer is unable to perceive the service
before (and sometimes during and after) the service delivery. For many
customers of car repair, for example the service is totally intangible – they
often cannot see what is being done and many indeed are unable to