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Dr. S. BornaDr. S. BornaMBA 671MBA 671
Services Marketing isServices Marketing is DifferentDifferent
By: Leonard L. BerryBy: Leonard L. BerryBusinessBusiness (1980) (1980)
Breaking Free From ProductBreaking Free From ProductMarketingMarketing by G. Lynn by G. Lynn Shostack Shostack Journal of MarketingJournal of Marketing (April 1977)(April 1977)
Lecture OutlineLecture Outline
How are services defined andHow are services defined andclassified?classified?How do services differ fromHow do services differ fromgoods?goods?How can service firms improveHow can service firms improvetheir differentiation, quality, &their differentiation, quality, &Productivity?Productivity?
The Complexity of MarketedThe Complexity of MarketedEntitiesEntities
Consider the following twoConsider the following twoexamples: an automobileexamples: an automobileand airline transportation.and airline transportation.What is being marketed?What is being marketed?A tangible or an intangible A tangible or an intangible product?product?
Do “either-or” termsDo “either-or” terms(product vs. service) adequately(product vs. service) adequatelydescribe the true naturedescribe the true natureof marketed products?of marketed products?No!No!Need for a new Need for a new structuralstructuraldefinitiondefinition
A Molecular ModelA Molecular Model
pp
PricePriceDistributionDistribution
Market positioningMarket positioning(Weighted toward evidence or image(Weighted toward evidence or image
The notion of multiple elementsThe notion of multiple elementsand dominance of elementsand dominance of elementsChange in one element may Change in one element may alter the element FE3O2 FE2O3alter the element FE3O2 FE2O3
Intangible elementIntangible element
Tangible elementTangible element
Fast-food outletsFast-food outlets
saltsalt
tangibletangibledominantdominant
intangibleintangibledominantdominant
fast-foodfast-foodoutletsoutlets
teachingteaching
PurePureServiceService
Categories of Service MixCategories of Service MixCategories of Service MixCategories of Service Mix
TangibleTangibleGoodGood
w/w/ServicesServices
MajorMajorServiceService
w/ Goodsw/ GoodsHybridHybrid
PurePureTangibleTangible
GoodGood
Unique Characteristics of Unique Characteristics of ServicesServices
More Intangible Than TangibleMore Intangible Than Tangible
Services are consumed notServices are consumed notpossessed.possessed.
The essence of what is being The essence of what is being bought is intangible.bought is intangible.Note: Services usually come withNote: Services usually come withtangible products.tangible products.
The concept of intangibilityThe concept of intangibilityhas two meanings, both ofhas two meanings, both ofwhich present challenges forwhich present challenges formarketing:marketing:
That which cannot be touched,That which cannot be touched, impalpable (impalpable (Not perceptible to touchNot perceptible to touch))That which cannot be easilyThat which cannot be easily defined, formulated, or defined, formulated, or grasped mentally.grasped mentally.
Simultaneous ProductionSimultaneous Productionand Consumptionand Consumption
Goods: produced sold Goods: produced sold consumedconsumed
Services: sold produced Services: sold produced consumedconsumedProducer of service must beProducer of service must bepresent (in most cases)present (in most cases)
Less StandardizedLess Standardized
Human based services areHuman based services aredifficult to standardize.difficult to standardize.
CLASSIFICATION OF SERVICESCLASSIFICATION OF SERVICES
EQUIPMENT BASEDEQUIPMENT BASEDPEOPLE BASEDPEOPLE BASED
CUSTOMER CONTACTCUSTOMER CONTACT::
HIGH CONTACT SERVICESHIGH CONTACT SERVICESLOW CONTACT SERVICESLOW CONTACT SERVICES
PROVIDED BY PUBLICPROVIDED BY PUBLIC
PROVIDED BY PRIVATE SECTORPROVIDED BY PRIVATE SECTOR
PROVIDED TO THE CONSUMERSPROVIDED TO THE CONSUMERS
PROVIDED TO THE BUSINESSPROVIDED TO THE BUSINESSSECTORSECTOR
Services
Inseparability
Services cannotbe separated
from theirproviders
Inseparability
Services cannotbe separated
from theirproviders
Perishability
Services cannotbe stored for
later sale or use
Intangibility
Services cannotbe seen, tasted,
felt, heard, orsmelled before
purchase
Intangibility
Services cannotbe seen, tasted,
felt, heard, orsmelled before
purchase
Variability
Quality ofservices dependson who providesthem and when,where, and how
Variability
Quality ofservices dependson who providesthem and when,where, and how
ServicesServices
Inseparability
Increaseproductivity of
providers
Inseparability
Increaseproductivity of
providers
Perishability
Match supplyand demand
Perishability
Match supplyand demand
Intangibility
Use cues tomake it tangible
Intangibility
Use cues tomake it tangible
Variability
Standardizeservice
production& delivery
Variability
Standardizeservice
production& delivery
More on Unique characteristicsMore on Unique characteristicsof services and their marketingof services and their marketingimplicationsimplications
IntangibilityIntangibilityThe uncertainty associatedThe uncertainty associatedwith intangibility can be reducedwith intangibility can be reducedby place, people, equipment etc.by place, people, equipment etc.
InIn “high-contact“high-contact” service” servicebusiness, the quality of servicebusiness, the quality of serviceis inseparable form theis inseparable form thequality of service provider.quality of service provider.Need forNeed for Internal MarketingInternal Marketing
MANAGING EVIDENCEMANAGING EVIDENCE
Making the service Making the service tangibletangible
Earlier it was mentioned that Earlier it was mentioned that intangibility has two intangibility has two meanings:meanings:
that which cannot bethat which cannot be touchedtouched;;that which cannot be easilythat which cannot be easily grasped mentallygrasped mentally..Implication: making servicesImplication: making servicestouchabletouchable
Tangible Tangible dominancedominance
Tangible Tangible evidenceevidence
fastfastfoodfoodoutletsoutlets
airlinesairlines
intangible dominanceintangible dominanceintangibleintangibleimageimage
Physical Services EnvironmentPhysical Services Environment
The physical environment in The physical environment in which services are purchasedwhich services are purchasedgenerally provides an importantgenerally provides an importantopportunity to tell the “right”opportunity to tell the “right”story about a given service.story about a given service.
TheThe AppearanceAppearance of of service provider is anotherservice provider is anothertangible that can be managedtangible that can be managed..
Service Pricing (anotherService Pricing (another tangibletangible item to be managed)item to be managed)
Tying Services MarketingTying Services MarketingToTo Goods MarketingGoods Marketing (Sears(Searsselling Insurance)selling Insurance)
Inseparability:Inseparability:
simultaneous production andsimultaneous production andconsumption of services.consumption of services.
How to solve the storage How to solve the storage problem: working with large no.problem: working with large no.of people, working efficientlyof people, working efficientlyetc.etc.
Supply and Demand:Supply and Demand:Need to SynchronizationNeed to Synchronization
Demand peaks can occurDemand peaks can occurduring certain times of dayduring certain times of day(airlines, restaurants), during(airlines, restaurants), duringcertain days of the week certain days of the week (movies, hair styling) and (movies, hair styling) and during certain month of yearduring certain month of year(income tax services)(income tax services)
Reshaping Supply:Reshaping Supply:
Using part-time employeesUsing part-time employeesTraining employees to performTraining employees to performmultiple jobs so that they canmultiple jobs so that they canswitch.switch.Substituting equipment forSubstituting equipment forhuman labor.human labor.
VariabilityVariability::
This is a limitation speciallyThis is a limitation speciallyfor people-based services:for people-based services:
How to overcome this limitation?How to overcome this limitation?
Training, StandardizationTraining, Standardization ofof proceduresprocedures
Three Types of MarketingThree Types of Marketingin Service Industriesin Service Industries
Three Types of MarketingThree Types of Marketingin Service Industriesin Service Industries
Internalmarketing
CompanyCompany
CustomersCustomers
Externalmarketing
EmployeesEmployees Interactivemarketing
Cleaning/maintenance
services
Financial/bankingservices
Restaurantindustry
ServiceService DifferentiationDifferentiationServiceService DifferentiationDifferentiation
Offer
Delivery
Image
How to differentiate or positionHow to differentiate or positionservices?services?
The notion of productThe notion of product offeringoffering::
• DeliveryDelivery• Sales personnelSales personnel• ImageImage• Customer serviceCustomer service
Managing Service QualityManaging Service Quality
1. Gap between Consumer expectation1. Gap between Consumer expectation and management perception;and management perception;2. Gap between management perception2. Gap between management perception and service-quality specification;and service-quality specification;3. Gap between service-quality3. Gap between service-quality specification and service delivery;specification and service delivery;4. Gap between service delivery4. Gap between service delivery and external communication;and external communication;5. Gap between perceived service and5. Gap between perceived service and expected service.expected service.
Complaint ResolutionComplaint Resolution
Hiring Criteria & Training for Hiring Criteria & Training for EmployeesEmployees
Develop Guidelines for FairnessDevelop Guidelines for FairnessRemove Complaint BarriersRemove Complaint BarriersAnalyze Types & Sources of Analyze Types & Sources of
ComplaintsComplaints
Managing Product SupportManaging Product SupportServicesServices
Customers’ concern:Customers’ concern:1. Frequency of Failure1. Frequency of Failure (a question of Product(a question of Product reliability)reliability)2. Downtime duration2. Downtime duration3. Out-of-pocket cost to the3. Out-of-pocket cost to the customercustomer
Postsale Service StrategyPostsale Service Strategy
Four strategies are available:Four strategies are available:1. Manufacturer provides the1. Manufacturer provides the serviceservice2. Authorized Dealers provide2. Authorized Dealers provide the service.the service.3. Independent service 3. Independent service specialist specialist 4. Customer performs the service4. Customer performs the service
ReviewReviewReviewReview
Service Definitions & ClassificationsService Definitions & Classifications How Services Differ GoodsHow Services Differ Goods Improving Service Differentiation, Improving Service Differentiation,
Quality, & ProductivityQuality, & Productivity Improving Customer Support Improving Customer Support
ServicesServices
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