Services Marketing for MM2

8/2/2019 Services Marketing for MM2

1/46

11

Introductionntroduction

Services Marketing became a newServices Marketing became a new

academic field in 1970.academic field in 1970.

This is not just a buzzword.This is not just a buzzword.


2/46

22

IntroductionntroductionServices are intangible because theyServices are intangible because they

are performances rather than objects.are performances rather than objects.

Hence, they present problems andHence, they present problems and

opportunities which are different fromopportunities which are different from

those for tangible goods.those for tangible goods.


3/46

Perishability

Service Characteristics

Variability

Inseparability

Intangibility

SERVICES

2012 Pearson Education


4/46

44

Problems Due to Intangibil ityroblems Due to Intangibil ity Cannot be stored (inventoried) andCannot be stored (inventoried) and

therefore creates problems fortherefore creates problems for

uneven demand (perishable).uneven demand (perishable).


5/46

55

Inseparabil itynseparabil ity the service providers physicalthe service providers physical

connection to the service beingconnection to the service being

providedprovided


6/46

66

Inseparabil itynseparabil ity the customers involvement in thethe customers involvement in the

service production processservice production process


7/46

InternalMarketing



8/46

88

Inseparabil itynseparabil itythe involvement of other customers inthe involvement of other customers in

the service production processthe service production process


9/46

99

Marketing Problemsarketing ProblemsCaused by Inseparabil ityaused by Inseparabil ity

The Customer is Involved in theThe Customer is Involved in the

Production ProcessProduction Process

Presence is necessary. This ranges fromPresence is necessary. This ranges fromphysical presence (e.g. haircut) to virtualphysical presence (e.g. haircut) to virtual

presence (e.g. Amazon)presence (e.g. Amazon)

The production process in services mustThe production process in services mustalways take the customer intoalways take the customer into

consideration because of simultaneousconsideration because of simultaneous

production and consumption.production and consumption.


10/46

1010

Marketing Problemsarketing ProblemsCaused by Inseparabil ityaused by Inseparabil ity There is an inverse relationshipThere is an inverse relationship

between the level of customer contactbetween the level of customer contact

and the efficiency of operation.and the efficiency of operation. This is due to uncertainty in theThis is due to uncertainty in the

scheduling of production and thescheduling of production and the

standardization of the service delivery;standardization of the service delivery;the more the customer provides inputthe more the customer provides input

into the process, the more it affectsinto the process, the more it affects

the service delivery.the service delivery.


11/46

1111

Marketing Problemsarketing ProblemsCaused by Inseparabil ityaused by Inseparabil ity Involvement of Other Customers inInvolvement of Other Customers in

the Production Processthe Production Process


12/46

1212

Marketing Problemsarketing ProblemsCaused by Inseparabil ityaused by Inseparabil ity Several customers share a commonSeveral customers share a common

service experience.service experience.

noisenoise Behavior (can create delays)Behavior (can create delays)

presence or absence of customerspresence or absence of customers

provide a marketing cue such asprovide a marketing cue such as

Chinese customers in a ChineseChinese customers in a Chinese

restaurantrestaurant


13/46

1313

Solutions to theolutions to theInseparabil ity Problemsnseparabil ity Problems1.1. Proper selection of Contact personnelProper selection of Contact personnel

- They must have the right attitude.- They must have the right attitude.

(e.g. good people skills)(e.g. good people skills)

- the nicest people are usually the ones- the nicest people are usually the ones

in the reception deskin the reception desk


14/46

1414

Solutions to theolutions to theInseparabil ity Problemsnseparabil ity Problems2. Proper training of contact personnel2. Proper training of contact personnel


15/46

1515

Solutions to theolutions to theInseparabil ity Problemsnseparabil ity Problems3. Customer Management3. Customer Management

a.a. Inform/educate the customers on theirInform/educate the customers on their

role (e.g. bank lines)role (e.g. bank lines)b.b. Separate the customers into groupsSeparate the customers into groups

(smokers vs. non-smokers, couples vs.(smokers vs. non-smokers, couples vs.

families, first-class vs. tourist class)families, first-class vs. tourist class)


16/46

InteractiveMarketing



17/46

1717

Solutions to theolutions to theInseparabil ity Problemsnseparabil ity Problems4. Use of Multisite Locations4. Use of Multisite Locations

to reduce the travel required ofto reduce the travel required of

customerscustomers to allow customization of servicesto allow customization of services


18/46

1818

Problems Due toroblems Due toIntangibil ityntangibil ity Cannot be patented (easier to copyCannot be patented (easier to copy

compared to goods)compared to goods)


19/46

1919

Problems Due toroblems Due toIntangibil ityntangibil ity More difficult to market because it isMore difficult to market because it is

intangibleintangible


20/46

2020

Problems Due toroblems Due toIntangibil ityntangibil ity More difficult to priceMore difficult to price

Compared to tangible goods,Compared to tangible goods,

customers cannot easily comprehendcustomers cannot easily comprehendwhy a service deserves the price thatwhy a service deserves the price that

it commands.it commands.


21/46

2121

Solutions to Intangibil ityolutions to Intangibil ityProblemsroblems Use tangible clues or symbols just likeUse tangible clues or symbols just like

in poetryin poetry

Provide the appropriate ambience.Provide the appropriate ambience.

e.g. Fast Food versus Fine Dininge.g. Fast Food versus Fine Dining


22/46

2222

Perishabil ityerishabil ity demand is more difficult to meet fordemand is more difficult to meet for

services because they cannot beservices because they cannot be

inventoriedinventoried


23/46

2323

Perishabil ityerishabil ity the opportunity cost is higher becausethe opportunity cost is higher because

they cease to exist when they are notthey cease to exist when they are not

sold even though they are availablesold even though they are available (e.g. empty airline seat)(e.g. empty airline seat)

Creates marketing problems as well asCreates marketing problems as well as

opportunitiesopportunities


24/46

2424

Signaling Effect of Priceignaling Effect of Price The price is an indicator of serviceThe price is an indicator of service

quality.quality.


25/46

2525

Price Sensit ivityrice Sensit ivity Demand for services tends to beDemand for services tends to be

more inelastic.more inelastic.

The differences between services areThe differences between services arenot as obvious compared to goods.not as obvious compared to goods.


26/46

2626

Price Sensitivity Decreasesrice Sensitivity Decreasesas:s: the difficulty in comparing substitutesthe difficulty in comparing substitutes

increasesincreases

e.g.e.g. Generic DrugsGeneric Drugs

PerfumePerfume


27/46

2727

Price Sensitivity Decreasesrice Sensitivity Decreasesas:s: the extent to which price is used as athe extent to which price is used as a

quality cue increasesquality cue increases

e.g.e.g. High-priced resorts.High-priced resorts.


28/46

2828

Criteria for Effectiveriteria for EffectivePrice Segmentationrice Segmentation Price segmentation can be easilyPrice segmentation can be easily

understood by consumers to avoidunderstood by consumers to avoid

dissatisfaction.dissatisfaction. e.g. Airline ticketse.g. Airline tickets


29/46

2929

Competitive Considerationsompetitive Considerations Comparative shopping is sometimesComparative shopping is sometimes

more difficult for services compared tomore difficult for services compared to

goodsgoods- because different goods are- because different goods are

displayed together in the same store.displayed together in the same store.

This is now easier due to the internet.This is now easier due to the internet.


30/46

Inadequate Management ofnadequate Management ofCustomer Expectationsustomer Expectations Marketing must accurately (ifMarketing must accurately (if

compellingly) reflect what happens incompellingly) reflect what happens in

actual service encounters; operationsactual service encounters; operationsmust deliver what is promised inmust deliver what is promised in

communications.communications.


31/46

Inadequate Management ofnadequate Management ofCustomer Expectationsustomer Expectations

In promoting and differentiating theIn promoting and differentiating the

service, the company cannot afford toservice, the company cannot afford to

raise expectations above the level atraise expectations above the level atwhich its consultants can consistentlywhich its consultants can consistently

perform.perform.


32/46

Inadequate Management ofnadequate Management ofCustomer Expectationsustomer Expectations The customer expects the kind ofThe customer expects the kind of

service and service personnel that areservice and service personnel that are

shown in advertising. (N.B. flightshown in advertising. (N.B. flightattendants)attendants)


33/46

Inadequate Customernadequate CustomerEducationducation

Differences between service deliveryDifferences between service delivery

and promises also occur whenand promises also occur when

companies do not sufficiently educatecompanies do not sufficiently educatetheir customers.their customers.


34/46


Research has shown that one-third ofResearch has shown that one-third of

all customer complaints are caused byall customer complaints are caused by

customers themselves.customers themselves.


35/46


Inexperienced customers may notInexperienced customers may not

understand how to use the servicesunderstand how to use the services

correctly.correctly.


36/46

Variabil ityariabil ityBecause:Because:

company communications aboutcompany communications about

services promise what people do, andservices promise what people do, and because peoples behavior cannot bebecause peoples behavior cannot be

standardized like physical goodsstandardized like physical goods

produced by machines,produced by machines, the potential for mismatch betweenthe potential for mismatch between

customer expectations andcustomer expectations and

perceptions of service delivery is high.perceptions of service delivery is high.


37/46

Inadequate Internalnadequate InternalMarketing Communicationsarketing Communications If company advertising and otherIf company advertising and other

promises are delivered without inputpromises are delivered without inputfrom operations, contact personnelfrom operations, contact personnel

may not be able to deliver service thatmay not be able to deliver service that

matches the image portrayed inmatches the image portrayed inmarketing efforts.marketing efforts.


38/46

Manage Service Promisesanage Service Promises Successful services advertising andSuccessful services advertising and

personal selling become thepersonal selling become theresponsibility of bothresponsibility of both marketing andarketing andoperations.perations.


39/46

How to Createow to CreateEffective Services Advertisingffective Services Advertising

Use narrative to demonstrate the serviceUse narrative to demonstrate the service

experienceexperience

many services are experiential; use story-many services are experiential; use story-

based appealsbased appeals


40/46


Present vivid informationPresent vivid information

- use information which creates a strong- use information which creates a strongor clear impression on the senses andor clear impression on the senses and

produces a distinct mental picture; evokeproduces a distinct mental picture; evoke

a strong emotiona strong emotion


41/46


Encourage Word-of-MouthEncourage Word-of-Mouth

CommunicationCommunication

people often turn to others forpeople often turn to others forinformation rather than to traditionalinformation rather than to traditional

marketing channelsmarketing channels


42/46

Coordinate Externaloordinate ExternalCommunicationommunication Service brands are not created solelyService brands are not created solely

in advertising. Much of a brandsin advertising. Much of a brands

equity comes from the directequity comes from the directconsumer experiences with the brand.consumer experiences with the brand.


43/46

Improve Customermprove CustomerEducationducation

Prepare customers for the servicePrepare customers for the service

process through education andprocess through education and

constant reminders.constant reminders.


44/46

Improve Customermprove CustomerEducationducation Teach customers to avoid peakTeach customers to avoid peak

demanddemand

via information, pricing incentivesvia information, pricing incentives


45/46

Guidelines Aboutuidelines AboutExceeding Expectationsxceeding Expectations

Understand:Understand:

what customer group or segment is to bewhat customer group or segment is to betargetedtargeted


46/46

Under-promisender-promiseand Over-delivernd Over-deliver e.g. the queuing times at Disney ridese.g. the queuing times at Disney rides

Documents

Services Marketing for MM2