Summary Services Marketing PDF

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Summary of the entire module "Services Marketing" (MRKT 7003)...

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Summary Services Marketing (MRKT 7003)

ANIKA OCHEL

CONTENT Foundations of Services Marketing ......................................................................................................................... 4 Definition and Meaning of Services Marketing ................................................................................................... 4 Services ........................................................................................................................................................... 4 Service Industries ............................................................................................................................................ 4 How Marketing of Services differs from Goods .................................................................................................. 4 Difference between Services and Good .......................................................................................................... 4 Scale of Market Entities .................................................................................................................................. 5 Servuction Model .................................................................................................................................................... 6 Triangle of Services Marketing ................................................................................................................................ 7 Distinctive Characteristics of Services ..................................................................................................................... 8 Intangibility ......................................................................................................................................................... 8 Inseparability (of Production and Consumption) ................................................................................................ 8 Heterogeneity / Variability .................................................................................................................................. 9 Perishability ......................................................................................................................................................... 9 Non-Ownership ................................................................................................................................................. 10 Extended Marketing Mix – 7Ps ............................................................................................................................. 11 Product .............................................................................................................................................................. 11 Price .................................................................................................................................................................. 11 Place .................................................................................................................................................................. 11 Promotion ......................................................................................................................................................... 11 People ............................................................................................................................................................... 12 Process .............................................................................................................................................................. 12 Physical Evidence .............................................................................................................................................. 12 Consumer Behaviour in a Services Context .......................................................................................................... 13 Categories of Service ......................................................................................................................................... 13 Three-Stage Model of Services Consumer Behaviour ....................................................................................... 13 Pre-Purchase Stage ....................................................................................................................................... 13 Service Encounter Stage ................................................................................................................................ 15

Summary Services Marketing – Anika Ochel 1

Post-Encounter Stage .................................................................................................................................... 16 Service Perception ............................................................................................................................................ 16 Compatibility Management .......................................................................................................................... 16 Service Quality .............................................................................................................................................. 17 ServQual Survey ............................................................................................................................................ 17 Moments of Truth ......................................................................................................................................... 17 Critical Incident Technique............................................................................................................................ 18 The Service Product .............................................................................................................................................. 19 Core Product ..................................................................................................................................................... 19 Supplementary Services .................................................................................................................................... 19 Distributing Services .............................................................................................................................................. 20 Distribution in a Service Context ....................................................................................................................... 20 Distribution Options for Serving Customers ..................................................................................................... 20 E-Commerce and Online Services ..................................................................................................................... 20 Franchising ........................................................................................................................................................ 21 Company-Owned Channels ........................................................................................................................... 21 Service Intermediaries .................................................................................................................................. 21 Service Pricing ....................................................................................................................................................... 22 Factors in Service Price Setting ......................................................................................................................... 22 Internal Factors Affecting Pricing .................................................................................................................. 22 External Factors Affecting Pricing ................................................................................................................. 23 Foundations Underlying Pricing Strategy ...................................................................................................... 23 Pricing Strategy ................................................................................................................................................. 23 Cost-Based Pricing Strategy .......................................................................................................................... 23 Value-Based Pricing Strategy ........................................................................................................................ 23 Competition-Based Pricing Strategy ............................................................................................................. 24 New-Service Pricing Strategy ........................................................................................................................ 24 Prestige Pricing Strategy ............................................................................................................................... 24 Price Adjustment Strategies .......................................................................................................................... 25 Time-Dependent Capacity and its Impact on Pricing ........................................................................................ 25 Summary Services Marketing – Anika Ochel 2

Price Discrimination .......................................................................................................................................... 25 Multiple Services and Price Bundling ................................................................................................................ 25 Revenue Management ...................................................................................................................................... 26 Essential Conditions for Revenue Management ........................................................................................... 26 Price Discrimination ...................................................................................................................................... 26 Demand Forecasting ..................................................................................................................................... 26 Inventory Allocation ...................................................................................................................................... 27 Overbooking .................................................................................................................................................. 27 Price Customisation ...................................................................................................................................... 27 Marketing Communications for Services .............................................................................................................. 28 Differences between Marketing Communications of Products and Services ................................................... 28 Uses of Marketing Communications in the Service Industry ............................................................................ 28 Marketing Communications Planning ............................................................................................................... 28 Good To Know ....................................................................................................................................................... 30 Revision Questions ................................................................................................................................................ 36

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FOUNDATIONS OF SERVI CES MARKETING DEFINITION AND MEANING OF SERVICES MARKETING SERVICES deeds, processes and performances involve a form of rental, offering benefits without transfer of ownership customers obtain benefits by renting the right to use a physical object (e.g. car hire) hiring the labour/expertise of personnel (e.g. architect) paying for access to facilities and networks (e.g. electricity, telecommunication) value is created when customers benefit from the experience service = experience e.g. travel, dentist, church service, meal at restaurant, day at college, hair styling, pest control, plumbing, counselling services

SERVICE INDUSTRIES services dominate the industry, most new jobs are in the service industry service industries and companies: sell services as their core offering services as products: sold by service and non-service companies customer service: service provided in support of the core product examples of service industries health care (e.g. hospitals, medical practice, dentist, eye care) professional services (e.g. accounting, legal, architect) financial services (e.g. banking, investment advice, insurance) hospitality (e.g. restaurant, hotel) travel (e.g. airlines, travel agencies, theme parks)

HOW MARKETING OF SERVICES DIFFERS FROM G OODS DIFFERENCE BETWEEN SERVICES AND GOOD Berry (1980): “Goods can be described as physical objects or devices while services are actions or performances.” primary difference between goods and services: intangibility (intangible products lack physical substance) Schorr: “A product is something a consumer purchases and takes away with him or consumes or uses. If it is not physical, not something that they can take away or consume, we call it a service.”

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SCALE OF MARKET ENTITIES physical elements

intangible elements

tangible dominant product typically involves a physical possession that contains service elements to a lesser degree e.g. car (tangible) provides transportation (service) the more tangible dominant, the lower the service aspect intangible dominant product don’t involve physical possession, can only be experienced e.g. airline (intangible) provides transportation (service) the more intangible dominant, the higher the service aspect goods and service components the middle of the continuum e.g. fast food companies provide products and services there may be no such thing as a pure product or pure service tangible aspects of intangible products and intangible aspects of tangible products are important sources of product differentiation and new revenue streams Levitt (1960): “By defining their business too narrowly, firms have developed classic cases of marketing myopia” (short-sighted view) adding service aspects to a product can increase revenue (e.g. Starbucks coffee costs more than raw materials and labour would justify)

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SERVUCT ION MODEL

service + production = servuction developed by Langeard in 1981 emphasises experiential aspects of service consumption based on the idea of organisations providing consumers with complex bundles of benefits a service is an experience parts of service features: visible physical environment within which service experience occurs supported by the invisible part, enables visible parts to function e.g. airplane, seat, food) invisible (e.g. system, pilot) everyone and everything coming into contact with consumer is effectively delivering the service benefits received by customer A are from interaction with the visible environment, the service providers and other customers (B)

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TRIANGLE OF SERVICES MARKETING

three groups work together to develop, provide and deliver services all 3 sides are essential to complete the whole all 3 sides of the triangle are critical to success

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DI STINCTIVE CHARACTERISTICS OF SERVICES INTANGIBILITY services are performances or actions rather than objects can’t be seen, tasted or touched can’t be tested before purchase  consumers rely on physical evidence to make purchasing decision  can be done though metaphors and vivid images in advertising and branding (e.g. mascot of an insurance company) cannot be inventoried  fluctuations in demand are difficult to manage  marketing task: to smooth demand through promotions, dynamic pricing, reservations and work with operations to adjust capacity services cannot be patented legally, can be copied easily intangible elements dominate value creation (e.g. friendliness of staff) services tend to be abstract (e.g. insurance) and difficult for the consumer to understand  provide tangible clues (e.g. mission statement, slogan) marketers need to reduce the element of risk in consumer minds  showcasing talent, publishing testimonials (have to be credible), offering guarantees, free trials cost of a service is hard to determine, price-quantity relationship is complex, pricing is difficult

INSEPARABILITY (OF PRODUCTION AND CONSUMPTION) tangible goods production and consumptions are separate manufacturing companies can achieve economies of scale through centralisation of production and quality control manufacturer is able to make goods and sell them at convenient times intangible services: consumption of a service is inseparable from its means of production consumer = external customer service firms must manage and shape consumer behaviour co-production of services: consumer must interact with service providers, equipment, facilities and systems  service marketers must develop user-friendly equipment, facilities and systems, train customers to perform effectively and provide customer support customer may have to be present during entire production process (e.g. getting a haircut), real time factor employees = internal customer the greatest asset of a service company is its staff, they are the service in the consumers eyes service staff must be trained in soft skills like reliability, responsiveness, empathy, assurance and managing intangibles task of service marketer: to recruit, train and reward service employees to reinforce the planned service concept when you hire in the service industry, you are competing for talent service providers are evaluated according to their use of language, clothing, personal hygiene and interpersonal communication skills (tangible clues) many service firms require employees to wear uniforms to reflect professionalism employee satisfaction and customer satisfaction are directly related (dissatisfied employees will translate into lower consumer perception)

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shared environment people: appearance, attitude and behaviour of service personnel and other customers can shape the experience and affect satisfaction compatibility management: firms must target the right customer at the right times and shape behaviour (ensure that other customers are not negatively affected) physical evidence acts as a proxy or a measure of service quality, the service provider becomes a tangible clue

HETEROGENEITY / VARIABILITY because services are performances, no two services will be the same service staff’s performance may differ from day to day, customers are also different services are heterogeneous/variable across time, organisation and people  challenging to ensure consistent service quality service quality cannot be fully controlled and depends on: consumers ability to express their needs personnel ability and willingness to satisfy needs presence/absence of other customers level of demand for service in services failure is inevitable (difficult to shield customer from service failure)  marketers task: fail proof service, set quality standards based on customer expectations, implement strong recovery strategy customisation of services: services can be customised to meet specific needs (e.g. putting someone’s name on a cup)

PERISHABILITY services cannot be stored (e.g. airline that doesn’t sell all its seats on a plane cannot safe them for a later time) few services face constant demand through time types of demand variations: daily (e.g. city centre sandwich bar at lunch time) weekly (e.g. Friday evening peak for railway travel) seasonal (e.g. hotels, stores at Christmas time) cyclical (e.g. mortgage) unpredictable demand (e.g. accident, emergency) perishability results in greater attention to managemen...