Service Mktg-Students Copy

7/27/2019 Service Mktg-Students Copy

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Services Marketing


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SM

Chapter 1

INTRODUCTION

TO

SERVICES MARKETING


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Defining Services

Services Are economic activities offered by one party to another

Most commonly employ time-based performances tobring about desired results in:

Recipients themselves

Objects or other assets for which purchasers have responsibility

In exchange for their money, time, and effort,

service customers expect to obtain value from Access to goods, labor, facilities, environments,professional skills, networks, and systems;

But they do not normally take ownership of any of thephysical elements involved.


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Challenges for Services

Defining and improving quality

Communicating and testing new services

Communicating and maintaining a consistentimage

Motivating and sustaining employee commitment

Coordinating marketing, operations and humanresource efforts

Setting prices

Standardization versus personalization


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Examples of Service

Industries

Health Care hospital, medical practice, dentistry, eye care

Professional Services

accounting, legal, architectural Financial Services banking, investment advising, insurance

Hospitality restaurant, hotel/motel, bed & breakfast,

ski resort, rafting Travel

airlines, travel agencies, theme park

Others: hair styling, pest control, plumbing, lawn

maintenance, counseling services, health club


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Figure 1-1

Tangibility Spectrum

TangibleDominant

Intangible

Dominant

SaltSoft Drinks

Detergents

Automobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

Management

ConsultingTeaching

Fast-foodOutlets

Fast-foodOutlets


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Value Added by Physical, Intangible Elements

Helps Distinguish Goods and Services (Fig 1.16)


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Differences Between

Goods and Services

Intangibility

Perishability

SimultaneousProduction

andConsumption

Heterogeneity


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Implications of Intangibility

Services cannot be inventoried

Services cannot be patented

Services cannot be readily displayed

or communicated

Pricing is difficult


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Implications of Heterogeneity

Service delivery and customer satisfaction

depend on employee actions

Service quality depends on many

uncontrollable factors

There is no sure knowledge that the service

delivered matches what was planned andpromoted


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Implications of Simultaneous

Production and Consumption

Customers participate in and affect the

transactionCustomers affect each other

Employees affect the service outcome

Decentralization may be essentialMass production is difficult


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Implications of Perishability

It is difficult to synchronize supply and

demand with services

Services cannot be returned or resold


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Government

Policies

Business

Trends

Social

Changes

Advances

in IT

Globalization

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:

Understanding customers and competitors

Viable business models

Creation of value for customers and firm

New markets and product categories

Increase in demand for services

More intense competition

Forces Transforming the Service

Economy

F T f i th S i


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Government

Policies

Business

Trends

Social

Changes

Advances

in IT

Globalization

Changes in regulations

Privatization

New rules to protect customers,

employees, and the environment

New agreement on trade in services


Economy (1)

F T f i th S i


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Government

Policies

Business

Trends

Social

Changes

Advances

in IT

Globalization

Rising consumer expectations

More affluence

Personal Outsourcing

Increased desire for buying experiences vs.things

Rising consumer ownership of high tech

equipment

Easier access to more information

Growing but aging population


Economy (2)

Forces Transforming the Ser ice


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Government

Policies

Business

Trends

Social

Changes

Advances

in IT

Globalization

Push to increase shareholder value

Emphasis on productivity and cost savings

Manufacturers add value through service and

sell services

More strategic alliances

Focus on quality and customer satisfaction

Growth of franchising

Marketing emphasis by nonprofits


Economy (3)

F T f i th S i


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Government

Policies

Business

Trends

Social

Changes

Advances

in IT

Globalization

Growth of Internet

Greater bandwidth

Compact mobile equipment

Wireless networking

Faster, more powerful software

Digitization of text, graphics, audio, video


Economy (4)

F T f i th S i


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Government

Policies

Business

Trends

Social

Changes

Advances

in IT

Globalization

More companies operating on transnational

basis

Increased international travel

International mergers and alliances

Off-shoring of customer service

Foreign competitors invade domestic markets


Economy (5)


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The 7 Ps of Services Marketing

Product elements

Place and time

Price and other user outlays

Promotion and education

Process

Physical environment

People

Productivity and Quality


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Traditional 4 Ps Applied to

Services (1)

Product elementsService products are at the heart of services

marketing strategy

Marketing mix begins with creating serviceconcept that offers value

Service product consists of core andsupplementary elements

Core products meet primary needs

Supplementary elements are value-added enhancements


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Services (3)

Price and other user outlays Marketers must recognize that customer costs involve more than price

paid to seller

Identify and minimize non-monetary costs incurred by users: Additional monetary costs associated with service usage (e.g., travel to service

location, parking, phone, babysitting, etc.)

Time expenditures, especially waiting

Unwanted mental and physical effort

Negative sensory experiences

Revenue management is an important part of pricing


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Services (4)

Promotion and EducationPlays three vital roles:

Provide information and advice

Persuades the target customers of merit of service product or brand

Encourages customer to take action at specific time

Customers may be involved in co-production so:

Teach customer how to move effectively through the service process

Shape customers roles and manage their behavior


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Extended Mix for Managing

the Customer Interface (1) Process

How firm does things may be as important as whatit does

Customers often actively involved in processes, especially when acting as co-producers of service

Operational inputs and outputs vary more widely Quality and content varies among employees, between employees

Variations can be with different customers

Variations from time of the day

Variability can be reduced by:

Standardized procedures

Implementing rigorous management of service quality

Training employees more carefully

Automating tasks

Train employees in service recovery procedures

Manage process design and flow of customers


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Extended Mix for Managing the

Customer Interface (3)

People

Interactions between customers and contact

personnel strongly influence customer perceptions

of service quality

Well-managed firms devote special care toselecting, training and motivating serviceemployees

Other customers can also affect ones satisfactionwith a service

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Chapter 2

Customer Behaviour in Service Encounters

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A Framework for Developing Effective

Service Marketing Strategies

1) Differences among Services A ffectCustomer Behavior

2) Three-Stage Model of Service Consum ptio n

Prepurc hase Stage:Search, evaluation ofalternatives, decision

Service Enco un ter Stage:Role in high-contact vs.

low-contact delivery

Post-Encounter Stage:Evaluation againstexpectations, future

intentions

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How Differences among

Services Affect Customer

Behaviour

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Differences among Services

Affect Customer Behaviour

Consumers often involved in service productionand may have preferences for service delivery

Service marketers need to understand howcustomers interact with service operations

Based on differences in nature of service act(tangible/intangible) and who or what is direct

recipient of service (people/possessions), thereare four categories of services: People processing

Possession processing

Mental stimulus processing

Information processing

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Four Categories of

Services (Fig 2.1)

Inform at ion processing

(services directed at

intangible assets):

Accounting

Banking

Nature of the Service Ac t People Possessions

Tangible Actions People proc essing


peoples bodies):

Barbers

Health care

Who or What Is the Direct Recipient of th e Servic e?

Possess ion process ing


physical possessions):

Refueling

Disposal/recycling

Mental st imu lus

process ing

(services directed atpeoples minds):

Education

Advertising/PR

Intangible Actions

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People Processing Customers must:

Physically enter the service

factory

Co-operate actively with the

service operation

Managers should think about

process and output from

customers perspective To identify benefits created and

non-financial costs:

Time, mental, physical

effort

Four Categories Of

Services

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Possession Processing

Possession Processing

Customers are less

physically involved

compared to peopleprocessing services

Involvement is limited

Production andconsumption are

separable

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Mental Stimulus

Processing

Mental Stimulus Processing

Ethical standards required

when customers who

depend on such servicescan potentially be

manipulated by suppliers

Physical presence of

recipients not required

Core content of services is

information-based

Can be inventoried

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Information Processing

Information Processing

Information is the most

intangible form of service

output

But may be transformed

into enduring forms of

service output

Line between information

processing and mental

stimulus processing may

be blurred.


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The Purchase Process

for Services

Prepurchase Stage

Service EncounterStage

Post-Encounter Stage

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Prepurchase Stage

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Prepurchase Stage



Prepurchase Stage:

Overview

Customers seek solutions toaroused needs

Evaluating a service may bedifficult

Uncertainty about outcomesincreases perceived risk

What risk reductionstrategies can servicesuppliers develop?

Understanding customersservice expectations

Components of customerexpectations

Making a service purchase

decision

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Service Encounter Stage

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Prepurchase Stage



Service Encounter Stage:

Overview

Service encounters range from

high- to low-contact

Understanding the servuction

system

Service marketing systems: high-contact and low-contact

Role and script theories

Theatre as a metaphor for service

delivery: An integrative

perspective

Implications for customer

participation in service creation

and delivery

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High Versus Low Contact

Services

Service marketers must manage the ways customersencounter the service organization

Each element they encounter must be consistent or theorganizations credibility is weakened

High contact services present marketing challenges

More contact points, more moments of truth

Requires consistent messaging at each contact point

Low contact services have less contact points with higher

importance Customer more reliant on the contact point chosen

Importance of self service technology (SST) that works

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Prepurchase Stage



Post-Encounter Stage:

Overview

Evaluation of serviceperformance

Future intentions

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Summary Chapter 2

People, Possession, Mental Stimulus and Information

processing are the 4 Categories of Services

Services can be difficult to evaluate and customers will use

search, experience and credence attributes to do so

Service marketers need to manage at least 6 key variables

during the service encounter stage

Long term customer relationships are built on satisfying

customer expectations

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PerceivedService

Expected

ServiceCUSTOMER

COMPANY

Customer

Gap

GAP 1

GAP 2

Gaps Model of Service Quality

GAP 3

ExternalCommunications

to CustomersGAP 4Service Delivery

Customer-Driven ServiceDesigns and Standards

Company Perceptions ofConsumer Expectations

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Gaps Model of Service

Quality

Customer Gap:

difference between expectations andperceptions

Provider Gap 1: not knowing what customers expect

Provider Gap 2:

not having the right service designs and

standards Provider Gap 3:

not delivering to service standards

Provider Gap 4:

not matching performance to promisesPart 1 Opener

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The Customer Gap

Expected

Service

PerceivedService

GAP

Part 1 Opener

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PositioningServicesin

Competitive Markets

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Overview of Chapter 3

Achieve Competitive Advantage throughFocus

Market Segmentation Forms the Basis for

Focused Strategies Service Attributes and Levels

Developing an Effective PositioningStrategy

Using Positioning Maps to AnalyzeCompetitive Strategy

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Ach ieve Competi t ive

Advantage Through Focus

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Focus Underlies the Search for

Competitive Advantage

Intensifying competition makes it important todifferentiate products

In mature markets, only way to grow may be to takeshare from competitors

Brand positioning helps create awareness, generateinterest and desire among potential customers andincrease adoption of service products

Emphasize competitive advantage on those attributes

that will be valued by customers in target segment(s)

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Basic Focus Strategies for Services


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Basic Focus Strategies for Services

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C id ti f U i th


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Fully focused

Limited range of services to narrow and specific market

Opportunities Developing recognized expertise in a well-defined niche

may provide protection against would-be competitors Allows firms to charge premium prices

Risks Market may be too small to generate needed volume of

business Demand for a service may be displaced by generic

competition from alternative products

Purchasers in chosen segment may be susceptible toeconomic downturn

Considerations for Using the

Focus Strategies

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C id ti f U i th


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Market focusedNarrow market segment with wide range of services

Need to make sure firms have operational capability todeliver each of the different services selected

Need to understand customer purchasing practices andpreferences

Service focusedNarrow range of services to fairly broad market

As new segments are added, firm needs to developknowledge and skills in serving each segment


Focus Strategies

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C

id ti f U i th


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Unfocused Broad markets with wide range of services

Many service providers fall into this category

Dangerbecome a jack of all trades and master ofnone


Focus Strategies

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Market Segmentat ion Form s

the basis for Focused

Strategies

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Market Segmentation

Firms vary widely in ability to serve different types ofcustomers

Adopt strategy of market segmentation, identifying thoseparts of market can serve best

A market segment is composed of a group of buyerssharing common:

Characteristics

Needs

Purchasing behavior

Consumption patterns

Within segments, they are as similar as possible.

Between segments, they are as dissimilar as possible

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Id tif i d S l ti


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Identifying and Selecting

Target Segments

A target segment is one that a firm has selected from amongthose in the broader market and may be defined on the basis ofmultiple variables

Must analyze market to determine which segments offer betteropportunities

Target segments should be selected with reference to

Firms ability to match or exceed competing offeringsdirected at the same segment

Not just sales potential

Some underserved segments can be huge, especially poorconsumers in emerging economies, e.g. low-income group inPhilippines

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Serv ice A ttr ibu tes

and Levels

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D l i Ri ht S i C t


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Developing Right Service Concept

for a specific Segment

Use research to identify and prioritize which attributes

of a given service are important to specific market

segments

Individuals may set different priorities according to: Purpose of using the service

Who makes decision

Timing of use

Whether service is used alone or with a group Composition of that group

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Important vs Determinant


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Important vs. Determinant

Attributes

Consumers usually choose between alternativeservice offerings based on perceived differences

between them

Attributes that distinguish competing servicesfrom one another are not necessarily the mostimportant ones

Determinant attributes determine buyers choicesbetween competing alternatives

Service characteristics that are important to purchasers

Customers see significant differences between competingalternatives on these attributes

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Establishing Service Levels

Need to make decisions on service levelslevel ofperformance firm plans to offer on each attribute Easily quantified attributes are easier to understand and

generalizablee.g. vehicle speed, physical dimensions

Qualitative attributes are ambiguous and subject toindividual interpretatione.g. physical comfort, noiselevels

Can often segment customers according towillingness to give up some level of service for a

lower price Price-insensitive customers willing to pay relatively high

price for high levels of service on each important attribute

Price-sensitive customers look for inexpensive service withrelatively low performance on many key attributes.

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Develop ing an Effect ive

Posi t ion ing Strategy

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Positioning needs to keep competitors out,

not draw them in

Why Positioning?.........

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Four Principles of Positioning Strategy

Must establish position for firm or product inminds of target customers

Position should provide one simple, consistent

message Position must set firm/product apart from

competitors

A company cannot be all things to all people -must focus its efforts

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Si Q ti f Eff ti


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Six Questions for Effective

Positioning Strategy

Avoid trap of investing too heavily in points ofdifferences that are easily copied

What customers do we serve now, and which ones would welike to target in future?

What does our firm currently stand for in the minds of currentand potential customers?

What is value proposition for each of our current serviceproducts, and what market segments is each one targeted at?

How well do customers in chosen target segments perceive ourservice products as meeting their needs relative to competitors?

What changes must we make to our offerings to strengthen ourcompetitive position?

In each case, how do our service offerings differ from those ofour competitors?

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D l i Eff ti


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Developing an Effective

Positioning Strategy

Positioning links market analysis and competitive analysis to internalcorporate analysis

MarketAnalysis

Focus on overall level and trend of demand and geographic locations of demand

Look into size and potential of different market segments

Understand customer needs and preferences and how they perceive the competition

InternalCorporateAnalysis

Identify organizations resources, limitations, goals, and values

Select limited number of target segments to serve

CompetitorAnalysis

Understand competitors strengths and weaknesses

Anticipate responses to potential positioning strategies

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Market Internal and Competitive Analyses


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Market, Internal and Competitive Analyses

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DEFINITIONS

Desired servicecustomer hopes to receive

Adequate servicethe level of service the

customer may accept

Zone of tolerance- The extent to which customers

are willing to accept this variation

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The Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance

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Factors influencing Customer


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Factors influencing Customer

Expectations of service

Personal Needs

Beliefs about what is possible

Competition

Price OR

Importance of Specific service attribute

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Designing a

Service Product

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Service product


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A service product comprises all elements ofservice performance, both tangible andintangible, that create value for customers.

The service concept is represented by:A core product,Accompanied by supplementary services

Service product

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D i i i C t 1


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Core ProductCentral component that supplies the principal,

problem-solving benefits customers seek

Supplementary ServicesAugment the core product, facilitating its use and

enhancing its value and appeal

Delivery Processes

Used to deliver both the core product and each ofthe supplementary services

Designing a service Concept-1

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Service concept design must address thefollowing issues:How the different service components are delivered

to the customer The nature of the customers role in those processes

How long delivery lasts

The recommended level and style of service to be

offered

Designing a service Concept-2

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Integration


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Integration

Reservation

Parking

Check in / Out

Porter

Meal

Pay for Extra Services

Room Service

Use Phone

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Chapter 10:

Crafting the Service Environment

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What is Servicescape ?...

The design of any physical location where

customers come to place orders and obtain

service delivery.

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Environments

Helps firm to create distinctive image and

unique positioning

Service environment affects buyer

behavior in three ways: Message-creating medium: Symbolic cues to communicate the

distinctive nature and quality of the service experience

Attention-creating medium: Make servicescape stand out from

competition and attract customers from target segments

Effect-creating medium: Use colors, textures, sounds, scents and

design to enhance desired service experience

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Image Positioning &


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Image, Positioning &

differentiation

Reception areas of successful Professional

firms

In retailingthe store environment

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Comparison of Hotel Lobb

ies


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Comparison of Hotel Lobbies

Four Seasons Hotel- a more mature,

Affluent & prestigious clientele that

includes upscale Business travelers.

Orbit Hotel and Hostel caters to younger

Guests Who love fun but have low budgets

Each servicescape clearly communicates and reinforces its hotelsrespective positioning and sets service expectations as guests arrive

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Servicescape as Part of


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Physical surroundings help shape appropriate

feelings and reactions in customers and employees

For example: Disneyland, Taj Holiday Villages

Servicescapes form a core part of the valueproposition

For example: Las Vegas, Florida-based Muvico

- Las Vegas: Repositioned itself to a somewhat more

wholesome fun resort, visually striking entertainment center

- Florida-based Muvico: Builds extravagant movie theatres and

offers plush amenities. What sets you apart is how you

package it..

Servicescape as Part of

Value Proposition

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Bitners Servicescape Model

Identifies the main dimensions in a serviceenvironment and views them holistically

Internal customer and employee responses can becategorized into emotional, and psychologicalresponses, which lead to evident behavioralresponses towards the environment

Key to effective design is how well each individualdimension fits together with everything else

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Main Dimensions in Servicescapes Model


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Main Dimensions in Servicescapes Model

Ambient Conditions - Characteristics of environmentpertaining to our five senses

Exterior Facilities General Interior Store layout Interior Displays

Social Dimensions Spatial Layout and Functionality - Spatial layout:

- Floorplan

- Size and shape of furnishings, counters, machinery,equipment, andhow they are arranged

Functionality: Ability of those items to facilitate performance Signs, Symbols, and Artifacts- Explicit or implicit signals

to:- Communicate firms image

- Help consumers find their way

- Convey rules of behavior

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Impact

of Signs Symbols and Artifacts


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Impact of Signs, Symbols, and Artifacts

Guide customers clearly through process of

service delivery

Customers will automatically try to draw

meaning from the signs, symbols, and artifacts

Unclear signals from a servicescape can result

in anxiety and uncertainty about how to proceed

and obtain the desired serviceFor instance, signs can be used to reinforce

behavioral rules (see picture on next slide)

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S S


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Rules in Service Settings

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People Are Part of the Service


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Environment

Distinctive Servicescapes Create Customer Expectations

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Selection of Environmental


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Selection of Environmental

Design Elements

Consumers perceive service environments

holistically

Design with a holistic view

Servicescapes have to be seen holistically: No

dimension of design can be optimized in

isolation, because everything depends on

everything else

Holistic characteristic of environments makes

designing service environment an art

Must design from a customers perspective

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Tools to Guide Servicescape


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Tools to Guide Servicescape

Design

Keen observation of customers behavior and responses to

the service environment by management, supervisors,

branch managers, and frontline staff

Feedback and ideas from frontline staff and customers,

using a broad array of research tools from suggestion

boxes to focus groups and surveys.

Field experiments can be used to manipulate specific

dimensions in an environment and the effects observed.

Blueprinting or service mappingextended to include

physical evidence in the environment.

Documents

Service Mktg-Students Copy