Service Characteristics of Hospitality and Tourism Marketing 1

Service Service CharacteristiCharacteristi

cs of cs of Hospitality Hospitality

and Tourism and Tourism MarketingMarketing

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Key Terms• Interactive marketing• Internal marketing• Organization image• Physical evidence • Point-of-encounter• Service culture• Service intangibility • Service inseparability• Service perishability • Service-profit chain • Service variability

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“Managers do not control the quality of the product when the product is a service . . . . The quality of the service is in a precarious

(risky) state – it is in the hands of the service workers who

‘produce’ and deliver it.”- Karl Albrecht

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ChapterChapter ObjectivesObjectives

• Describe a service culture• Identify four service

characteristics that affect the marketing of a hospitality or travel product.

• Explain marketing strategies that are useful in the hospitality and travel industries

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The Service CultureThe Service Culture

• The service culture focuses on serving and satisfying the customer

• Empowers employees to solve customer problems

• Majority of many countries’ GDP is service based

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Characteristics of Service Characteristics of Service MarketingMarketing

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Characteristics of Service Characteristics of Service MarketingMarketing

IntangibilityIntangibility

– The attributes of services that cannot be grasped by any of the five sensesfive senses

– Aspects of a service that are difficult to graspgrasp prior to purchase

– Purchase is based on consumer expectationsexpectations

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Services Versus GoodsServices Versus GoodsTangibility SpectrumTangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

Airlines

InvestmentManagement

ConsultingTeaching

Fast-foodOutlets

Fast-foodOutlets

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Services Versus GoodsServices Versus Goods

• PerishabPerishabiilitylity– If not sold by a particularparticular time, the

opportunity to sell it again is gone forever

– Complicated by fixed capacityfixed capacity– UniqueUnique to the hospitality industry

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Services Versus GoodsServices Versus GoodsHeterogeneityHeterogeneity – no standardation – no standardation– Delivery of services is inconsistent due to

employee variance and varying needs of customers

– “Moment of truthMoment of truth” when the service product meetsmeets service delivery and consistency is key

– Customers are also variedvaried and have differentdifferent wantswants and needs

– The use of self-service technologies in an attempt to standardize service

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Services Versus GoodsServices Versus Goods• Simultaneous production and Simultaneous production and

consumptionconsumption– Services are consumed at the same time the same time

they are purchased– Thus management is marketingmarketing in the

hospitality and tourism industry– Always the possibility of a new

experience with each purchaseeach purchase

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Services Versus GoodsServices Versus Goods• The Hospitality ProductThe Hospitality Product

– The combination of goods, services, goods, services, environment and experience environment and experience that the consumer buys

– DifferencesDifferences between services and manufactured goods

– Defines how the service should theoretically worktheoretically work

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The Hospitality Product modelThe Hospitality Product model

The Hospitality ProductThe Hospitality Product

Physical productPhysical product–The tangibletangible component of service

Service environmentService environment–The physical environment in which the

service is delivered• Surrounding area• Layout• Signs and symbols

The Hospitality ProductThe Hospitality Product

Service ProductService Product–The core performance core performance or service

purchased by the patron

Service deliveryService delivery–What happens when the customer

actually consumes the service

The Hospitality ProductThe Hospitality Product

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Management Strategies for Service BusinessesManagement Strategies for Service Businesses

• Service companies must increase their competitive differentiationcompetitive differentiation, service qualityservice quality, and productivityproductivity

– IncreaseIncrease in competitioncompetition and costs

– DecreaseDecrease in productivityproductivity and quality

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Service-Profit Chain

Five Links:1. Healthy service profitsprofits and growthgrowth

2. Satisfied and loyalloyal customers

3. Greater service valuesvalues

4. Satisfied and productive service employeesemployees

5. Internal service qualitqualityy

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Three Types of Marketing in Service Industries

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InternalInternal and InteractiveInteractive Marketing

• Internal marketing means the service firm must effectively train and motivate customer contact employeesemployees

• Interactive marketing means the perceived service quality depends heavily upon the buyer-seller interaction buyer-seller interaction during the service encounter

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Managing DifferentiationManaging Differentiation

• Solution to priceprice competitioncompetition

• Differentiation through people, through people, physical environment, and physical environment, and processesprocesses

• Differentiation through brandingbranding

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Managing Service QualityManaging Service Quality

• Exceed customers’ serviceservice -- quality quality expectationsexpectations

• Expectations based on past past experiences, word-of-mouth, experiences, word-of-mouth, and service firm advertisingservice firm advertising

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Tangibilizing the ProductTangibilizing the Product

• Providing “evidenceevidence” of the service

– Promotional Material

– PhysicalPhysical Environment

– Employee appearanceappearance

– Why is Trade Dress Protection important?

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Managing the Physical SurroundingsManaging the Physical Surroundings

• Improperly managed physical evidence can hurthurt a business

• Surroundings should reinforce company positioning in customer’s mind

• Organizational ImageImage is how customers perceive your organization

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Stress Advantages of NonStress Advantages of Non--ownershipownership

• The customer does not have ownership of service product

• Stress as a benefitStress as a benefit–Rather than own and staff

corporate lodging, negotiate a rate with a hotel and pay for only what you use

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Managing Employees as Part of the ProductManaging Employees as Part of the Product

• EmployeesEmployees are critical

• Training and motivating Training and motivating employees to provide good customer service is internal marketing

• A point-of-encounter is any point at which the employee encountersencounters the customer

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Managing Perceived RiskManaging Perceived Risk

• Alleviate(reduce) customer anxietyanxiety due to inability to experience the product beforehand

• FamiliarizationFamiliarization trips encourage clients to experience the enterprise in a low-risk situation

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Managing Capacity and DemandManaging Capacity and Demand

• Due to perishabilityperishability, managers must maximize service capacity and quality during times of high and low demandhigh and low demand

• Customer complaints increaseincrease when service firms operate above 80above 80 % % capacitycapacity

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Managing ConsistencyManaging Consistency

• No surprises!• Not only should services be

provided correctly, but they should also be done the same way same way every timeevery time

• Beware of fluctuatingfluctuating demand and unintentional company policies that may affect consistency

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Managing the Customer Relationship – CRM

• Combines marketing, business strategy and information technology to better understandunderstand the customers

• Develop unique, lasting relationshipsrelationships with customers

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Service Quality and Service GapsService Quality and Service Gaps

Premise: • The customer’s evaluation of a service

purchasepurchase (e.g., their satisfaction) is determined by how well how well the purchase experience compares to their expectationsexpectations of the purchase experience

• Zone of tolerance Zone of tolerance is the range where customers are still satisfied

• Can use the SERVQUALSERVQUAL model

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Gap Model of Service QualityGap Model of Service Quality

PerformancePerformance > ExpectationExpectation PerformancePerformance = ExpectationExpectation PerformancePerformance < ExpectationExpectation

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Possible Levels of Customer ExpectationsPossible Levels of Customer Expectations

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Service Quality and Service GapsService Quality and Service Gaps

Gap 1Gap 1Gap between services expectedexpected by the customer and management’s perceptionsperceptions of customers’ expectations

Gap 2Gap 2Gap between management’s perceptionsperceptions of customer expectationsexpectations and service quality specifications

Gap 3Gap 3Gap between service qualityquality specifications and service deliverydelivery

Gap 4Gap 4Gap between the service delivereddelivered and the service promisedpromised

Gap 5Gap 5Gap between the perceivedperceived service and the actualactual service

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Service FailureService Failure

• Problems will inevitablyinevitably occur

• Keep the customer informedinformed

• Provide service recoveryrecovery options

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Overview of Service Characteristics: The Servuction ModelOverview of Service Characteristics: The Servuction Model

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Interaction Between Customer A Interaction Between Customer A and Customer B Customer B

• Contact between customers can be be positive or negativepositive or negative

• In some cases interactioninteraction between customers can be managedmanaged

• Customers can significantly impactimpact all around them

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Contact Personnel

• ContactContact personnel have a direct impact on the satisfaction of customers

• Characteristic of inseparabilityinseparability of customer and employee during service delivery system

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Best Practices

• Ritz-Carlton Leadership Center offers innovative ways to:– Increase employee retention and loyaltyemployee retention and loyalty– Increase customer retention and loyaltycustomer retention and loyalty– Achieve service excellence service excellence in your industry– Effectively drive your organization’s culture, culture,

philosophy, vision, and missionphilosophy, vision, and mission

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Discussion QuestionsDiscussion QuestionsA. Visit the web site of a hotel chaina hotel chain. What does the web

site do to make the product tangibletangible for the customer? Is there anything in the site that deals with the characteristiccharacteristic of perishables.

B. Visit the web site of a tourism destinationdestination; it can be either a citycity or a countrycountry. Explain how the site provides tangibletangible evidence relating to the experiences a visitor to the destination can expert.

C. Who are the basic contacs persons at the three different tourism operations; hotel, restaurant and hotel, restaurant and airline airline company. What are their roles as contact person

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