Products vs. Services: Key Differences

• The difference between a product and a service
• A product is a tangible item that can be sold or bought
• A service is an intangible offering involving a deed, performance, or effort like consulting, cleaning, or education
• Companies are shifting from tangible goods to exceptional customer service for a competitive edge.

Growth of Services

• Traditional goods producers in manufacturing integrate service aspects into their operations.
• This shift helps in seeking differential advantages in the marketplace and generating additional revenue through enhanced customer service.

Characteristics of Service

• Intangible aspects of a product are becoming key differentiators.
• There is more customer involvement in strategic business decisions.
• Products are increasingly market-focused and responsive to changing needs.
• Technology assists both customers and employees in service provision.

Emergence of Services

• E-Services: Digital services delivered via the internet, such as online banking and streaming.
• Self-Service Technologies: Technologies enabling customers to perform services independently, like ATMs and self-checkout systems.
• AI: Technology that simulates human intelligence for various tasks, offering personalized recommendations.

The Scale of Market Entities

• Anatomy of service displays products based on their tangibility.
• Tangible Dominant: Goods with physical properties that can be felt, tasted, and seen before purchase.
• Intangible Dominant: Services lacking physical properties that can be sensed before purchase.

The Anatomy of Service

• The molecular model of service is a conceptual model of the relationship between tangible and intangible components of a firm's operations as experienced by a consumer
• This helps service marketers dissect products into tangible and intangible components.

Explanation of Service Anatomy

• The anatomy of service can be broken down during a "study session"
• Core Service: The main reason for being there such as getting a cup of coffee.
• Facilitating Services: Services that help deliver the core service like the barista and the payment system.
• Enhancing Services: Services that improve the overall experience like comfy seating or free Wi-Fi.
• All these elements work together creating a cohesive experience.

The Molecular Model of Service

• It imagines service as a molecule with "atoms" as tangible and intangible elements.
• Tangible components include the coffee, cup, chair, and menu.
• Intangible components consist of the barista, atmosphere, and overall feel.

Importance for Marketers

• Marketers can use this model to understand and improve service experiences.
• Tangible elements (e.g., comfy chairs) and intangible ones (e.g., friendly baristas) can be adjusted to improve customer satisfaction.

Intangibility

• It distinguishes that a product is unable to be touched or sensed like physical goods.
• Think of a Spotify subscription. You can listen to music, but you can't physically "own" it like a CD.
• Services lack patent protection, are difficult to display, and have complicated pricing.

Inseparability

• It implies that you You can't separate the service from the person providing it.
• Getting a haircut is an example where it happens solely with the hairdresser at that point.
• Mass production of services is hard.

Heterogeneity

• There is the variance in consistency from one service transaction to the next.
• Uber rides differ based on drivers.
• Service standardization and quality control can be difficult to achieve

Perishability

• Services cannot be saved, unused capacity cannot be reserved, and they can't be inventoried.
• Airline tickets are cheaper last minute due to unused seats.
• There are many challenges for services whether it is being saved, unused or inventoried.

Implications of Gen Z

Digital First Approach

• Gen Z prefers services accessible online.
• Netflix offers a personalized, on-demand streaming experience with an intuitive interface.

Personalization and Customization

• Gen Z loves services that cater to individual needs.
• Spotify's Discover Weekly is a service marketing strategy that appeals to Gen Z's love for individuality.

Experience-Driven Services

• Experiences are valued over material goods.
• Airbnb emphasizes unique stays to appeal to Gen Z's desire for authentic travel experiences.

Social Media Integration & Influencer Partnerships

• Gen Z trusts word-of-mouth recommendations over direct advertising.
• Skillshare partners with influencers to offer free trial memberships, driving organic, influencer-driven engagement.

Subscription Models and Flexible Payment Options

• Gen Z prefer access over ownership and like having control over how/when they pay.
• Apple Music allows freedom to pick the subscription plan, and enjoy entertainment without long term committments.

Convenience and On-Demand Services

• Gen Z expects instant gratification and easy service access.
• TaskRabbit markets its home service platform by simplifying daily tasks via a smartphone.

Gamification and Interactive Marketing

• Service providers add gamification, to engage gen z, into their marketing strategies.
• Duolingo uses badges, levels, and rewards to make learning fun.

Self-Service and Automation

• Gen Z values efficiency and the ability to manage things on their own terms.
• Amazon Prime combines convenience, fast delivery, and self-service features for easy management from their devices.

Service Quality

• Overall firm performance can be evaluated and have an attitude that is formed by a long term
• Establishing service quality may be the only way of differentiating oneself therefore this can result in success or failure.
• By doing this you ensure your business is unique

The Gaps Model of Service Quality

• Highlights differences between customer expectations and service delivery.

Knowledge Gap

• Arises when management doesn't understand what customers expect.
• Addressing this, the firm can learn more about needs and wants of customers by; research, upward communication, and management engagement Levels of management - high levels tend to become more distant from customers

Standards Gap

• Relates to when management's perception of customer expectations doesn't align with the service quality specifications set. Factors of this include not knowing what the customers really want, cutting corners on quality, and poor communication and training

Delivery Gap

• Difference between quality specifications set for service delivery and the actual quality delivered. Factors influencing the delivery gap include willingness to perform, employee-job fit, and role ambiguity

Communication Gap

• The difference between the actual quality of service delivered and the quality described in external communications. Factors influencing the communication gap include overpromise and horizontal communication

SERVQUAL

• A diagnostic tool that uncovers a firm's broad weaknesses and strengths in the area of service quality
• Measurement scale is based on five service quality including tangibles, reliability, responsiveness, assurance and empathy to find out the basis framework
• Tanglbles: assessment of a firm's ability to manage it's tangibles including equipment, facilities, personnel and communication materials
• Reliability: assessment of a firm's consistency and dependability in service performance
• Responsiveness: assessment of a firm's commitment to providing its services in a timely manner
• Assurance: assessment of a firm's competence, courtesy to it's customers and security of it's operations
• Empathy: assessment of a firm's ability to put itself in its customers' place.

Simple Explanation of Gaps

Knowledge gap

• The business doesn't know what you want and therefore this happens when a company thinks it knows, but is wrong.
• An example is assuming everyone likes mild ones.
• It is due to the business not doing enough consumer research and or there is poor managerial oversite

Standards Gap

• Definition: Company sets the wrong rules, and doesn't set the right service standards to meet those expectations.
• A manager knows customers want extra spicy fries, but the kitchen policy says only mild is available.

Delivery Gap

• The company misunderstands customer expectations and it cuts costs instead of focusing on quality.
• Employees aren't trained well and don't understand the expected service level.
• Employees Don't Deliver as Expected
• Definition: This happens when there's a difference between what the company says it will do and what employees actually do.
• Example: The menu promises crispy, spicy fries, but the chef serves soggy, bland ones.
• This happens when the delivery employees don't feel motivated to do a good job OR they don't understand their role clearly.

Communication Gap

• The Company Overpromises - This happens when a company advertises something that it doesn't actually deliver.
• This could be a business overhyping its service to attract customers.
• There's bad internal communication between headquarters and employees.

Consumer Decision Process Model

• Encompasses stages from pre-purchase to post-purchase, guiding consumer decisions in services.

Pre-Purchase Stage

• Begins with a stimulus triggering the idea of buying a service.
• The phase includes problem awareness, information search, and evaluation of alternatives to resolve the unfulfilled need and/or need

Consumption Stage

• Service is selected through in-store, online, booking app, catalog, or provider options.
• The service is then consumed (e.g., getting a massage).

Post-Purchase Stage

• After consumption, an evaluation takes place, which can lead to different levels of satisfaction or doubt about the correctness of the purchase.

Emotions and Perceptions

• Cultural Context: Expectations vary across cultures regarding service quality and interactions.
• Emotional States: Current emotions influence expectations, with positive emotions raising them and negative emotions lowering them.
• Past Experiences: Previous interactions shape future expectations, with positive experiences leading to higher expectations, and negative ones creating skepticism.

Strategies for Enhancing Connection

Social Influences

• Recommendations from friends, family, or online reviews can alter expectations.

Personalization

• Tailoring services to individual needs strengthens emotional bonds.

Empathy and Active Listening

• Training staff to be empathetic and actively listen can foster trust and connections

Storytelling

• Sharing stories can create a shared emotional experience

Follow-Up & Feedback

• Follow-ups show that customers' opinions matter.

Behavioral Economics & Neuroscience in Services

• Anchoring:
• The initial price can influence customer perception of value, making higher prices increase lower priced attractiveness
• Framing:
• The way information is presented impacts decision-making
• Avoid negative frames and use positive framing to make "Save $40" sounds better than "Spend $60,” even though they mean the same thing.

Nudge Theory

• Utilizes positive reinforcement or indirect suggestion.

Handling Customer Complaints

• Focuses on clear communication and solutions.
• Involves providing clear, easy solutions, giving full attention, apologizing sincerely, and asking clarifying questions.

Service Recovery Strategies

• Addresses service failures to regain customer satisfaction.
• Guarantees satisfaction, offers compensation, empowers employees, personalizes recovery, builds relationships, provides training, encourages feedback, and drives continuous improvement.