Proportion of Goods and Services in Purchase

Bundle
Goods

Services

100%
75
50
25
0
25
50
75
100%
Self-service gasoline.
Personal computer
Office copier.
Fast-food restaurant
Gourmet restaurant
Auto repair
Airline flight.
Haircut.

Service Purchase Decision

Service Qualifier: To be taken seriously a certain level must be

attained on the competitive dimension, as defined by other
market players.
Examples are cleanliness for a fast food restaurant or safe
aircraft for an airline.
Service Winner: The competitive dimension used to make the
final choice among competitors.
Example is price.

Service Purchase Decision (cont.)

Service Loser: Failure to deliver at or above the

expected level for a competitive dimension.

Examples are failure to repair auto (dependability), rude

treatment (personalization) or late delivery of package
(speed).

The Service Process Matrix

Degree
Degree of Interaction and Customization
of labor Intensity
Low
High
Low

High

Service factory:
Airlines
Trucking
Hotels
Resorts and recreation
Mass service:
Retailing
Wholesaling
Schools
Retail aspects of
commercial banking

Service shop:
Hospitals
Auto repair
Other repair services

Professional service:
Doctors
Lawyers
Accountants
Architects

The Strategic Service Concept

Structural:
Delivery system (front & back office)
Facility design (aesthetics, layout)
Location (competition, site characteristics)
Capacity planning (number of servers)
Managerial
Service encounter (culture, empowerment)
Quality (measurement, guarantee)
Managing capacity and demand (queues)
Information (data collection, resource)

Competitive Environment of Services

Relatively Low Overall Entry Barriers

Economies of Scale Limited
High Transportation Costs
No Power Dealing with Buyers or Suppliers
High Customer Loyalty
Exit Barriers

Competitive Service Strategies

(Overall Cost Leadership)

Seeking Out Low-cost Customers

Standardizing a Custom Service
Reducing the Personal Element in
Service Delivery
Reducing Network Costs
Taking Service Operations Off-line

Competitive Service Strategies

(Differentiation)
Making the Intangible Tangible
Customizing the Standard Product
Reducing Perceived Risk
Giving Attention to Personnel Training
Controlling Quality
Note: Differentiation in service means being
unique in brand image, technology use, features,
or reputation for customer service.

Customer Criteria for Selecting

a Service Provider
Availability
Convenience
Dependability
Personalization
Price
Quality
Reputation
Safety
Speed

(24 hour ATM)

(Site location)
(On-time performance)
(Know customers name)
(Quality surrogate)
(Perceptions important)
(Word-of-mouth)
(Doing things to people)
(Avoid excessive waiting)