Distributing Services Through Physical and Electronic Channels PDF

 Distributing Services Though Physical and Electronic Channels 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved 5  Chapter 5 Outline 5.1 Distribution in a Services Context 5.2...

 Distributing Services Though Physical and Electronic Channels 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved 5  Chapter 5 Outline 5.1 Distribution in a Services Context 5.2 Distribution Options for Serving Customers: Determining the Type of Contact 5.3 Place and Time Decisions 5.4 Delivering Services in Cyberspace 5.5 The Role of Intermediaries 5.6 Distributing Services Internationally 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.1 Distribution in a Services Context 0 5.1 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.1 Distribution in a Services Context In a services context, we often move nothing Experiences, performances and solutions are not being physically shipped and stored More and more informational transactions are conducted through electronic and not physical channels 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.2 Distribution Options for Serving Customers: Determining the Type of Contact 0 5.2 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.2 Distribution Options for Serving Customers: Determining the Type of Contact Customers visit service site – Convenience of service factory locations and operational schedules important when customer has to be physically present Service providers go to customers – Unavoidable when object of service is immovable – Needed for remote areas – Greater likelihood of visiting corporate customers than individuals Service transaction is conducted remotely – Achieved with help of logistics and telecommunications 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.2 Distribution Options for Serving Customers: Determining the Type of Contact Six Options For Service Delivery (Table 5.1) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.2 Distribution Options for Serving Customers: Determining the Type of Contact Channel Preferences Vary Among Customers For complex and high-perceived risk services, people tend to rely on personal channels. Individuals with greater confidence and knowledge about a service/channel tend to use impersonal and self-service channels Customers who are more technology savvy Customers with social motives tend to use personal channels Convenience is a key driver of channel choice 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.3 Place and Time Decisions 0 5.3 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.3 Place and Time Decisions Places Of Service Delivery (1) Ministores – Creating many small service factories to maximize geographic coverage ○ Automated kiosks – Separating front and back stages of operation ○ Taco Bell – Purchasing space from another provider in complementary field ○ Dunkin Donuts with Burger King Locating in Multipurpose Facilities – Proximity to where customers live or work ○ Service Stations 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.3 Place and Time Decisions Places Of Service Delivery (2) Cost, productivity and access to labor are key determinants to locating a service facility Locational constraints – Operational requirements ○ Airports – Geographic factors ○ Ski Resorts – Need for economies of scale ○ Hospitals 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.3 Place and Time Decisions Time of Service Delivery Traditionally, schedules were restricted – Service availability limited to daytime, 40-50 hours a week Today – For flexible, responsive service operations: ○ 24/7 service – 24 hours a day, 7 days a week, around the world (Service Insights 5.2) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.4 Delivering Services in Cyberspace 0 5.4 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.4 Delivering Services in Cyberspace Distribution of Supplementary Services in Cyberspace Five of the supplementary services are information-based These services can all be distributed electronically. They are: – Information – Consultation – Order-taking – Billing – Payment Distribution of information, consultation and order-taking has reached very sophisticated levels in global service industries (e.g., hotels, airlines, car rental companies) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.4 Delivering Services in Cyberspace Information and Physical Processes of Augmented Service Product (Fig 5.14) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.4 Delivering Services in Cyberspace Service Delivery Innovations Facilitated by Technology Technological Innovations – Development of “smart” mobile telephones and PDAs, and Wi-Fi high- speed Internet technology that links users to Internet from almost anywhere – Voice-recognition technology – Smart cards ○ store detailed information about customer ○ Act as electronic purse containing digital money Electronic channels can be offered together with physical channels, or take the place of physical channels 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.4 Delivering Services in Cyberspace e-Commerce: Move to Cyberspace Among the factors luring customers to virtual stores are: – Convenience – Ease of search – Broader selection – Potential for better prices – 24-hour service with prompt delivery Recent Developments link websites, customer management (CRM) systems, and mobile telephony Integrating mobile devices into the service delivery infrastructure can be used as means to: – Access services – Alert customers to opportunities/problems – Update information in real time 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.5 The Role of Intermediaries 0 5.5 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.5 The Role of Intermediaries Splitting Responsibilities For Supplementary Service Elements (Fig. 5.19) Challenges for original supplier Act as guardian of overall process Ensure that each element offered by intermediaries fits overall service concept 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.5 The Role of Intermediaries Franchising (1) Popular way to expand delivery of effective service concept, without a high level of monetary investments compared to rapid expansion of company-owned and -managed sites Franchisor provides training, equipment and support marketing activities. Franchisees invest time and finance, and follow copy and media guidelines of franchisor Growth-oriented firms like franchising because franchisees are motivated to ensure good customer service and high-quality service operations 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.5 The Role of Intermediaries Franchising (2) Study shows significant attrition rate among franchisors in the early years of a new franchise system – One third of all systems fail within first four years – Three fourths of all franchisors cease to exist after 12 years Disadvantages of franchising – Some loss of control over delivery system and, thereby, over how customers experience actual service – Effective quality control is important but yet difficult – Conflict between franchisees may arise especially as they gain experience Alternative: license another supplier to act on the original supplier’s behalf to deliver core product, e.g. – Trucking companies – Banks selling insurance products 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.6 Distributing Services Internationally 0 5.6 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  5.6 Distributing Services Internationally How to Enter International Markets? 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 5: Distributing Services Distribution in services often involve moving nothing and many information-based services can be distributed electronically Options for service delivery include: – Customers visit the service site – Service providers go to their customers – Service transaction is conducted remotely Channel preferences vary among customers Place and time decisions include where services should be delivered in bricks-and-mortar context, when it should be delivered 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 5: Distributing Services Delivery in cyberspace is facilitated by technology and e-commerce allows 24-hour delivery, saving time and effort Intermediaries play roles in distributing services – Franchising brings both advantages and disadvantages to the firm The mode of entering international markets depends on the control of IP and sources of value creation 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved Thank you Essentials of Services Marketing, 2nd Edition Instructor Supplements  Developing Service Product: Setting Prices and Implementing Revenue Management 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved 6  Chapter 6 Outline 6.1 Effective Pricing is Central to Financial Success 6.2 Pricing Strategy Stands on Three Legs 6.3 Revenue Management: What it is and How it Works 6.4 Ethical Concerns in Service Pricing 6.5 Putting Service Pricing into Practice 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.1 Effective Pricing is Central to Financial Success 0 6.1 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.1 Effective Pricing is Central to Financial Success What Makes Service Pricing Strategy Different and Difficult? Harder to calculate financial costs of creating a service process or performance than a manufactured good Variability of inputs and outputs: How can firms define a “unit of service” and establish basis for pricing? Importance of time factor – same service may have more value to customers when delivered faster Customers find service pricing difficult to understand, risky and sometimes even unethical 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.1 Effective Pricing is Central to Financial Success Objectives for Pricing of Services (Table 6.1) Revenue and Profit Objectives – Seek profit – Cover costs Patronage and User-Based Objectives – Build demand ○ Demand maximization ○ Full capacity utilization – Build a user base ○ Stimulate trial and adoption of new service ○ Build market share/large user base 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs 0 6.2 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs The Pricing Tripod (Fig. 6.3) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Three Main Approaches to Pricing Cost-Based Pricing – Set prices relative to financial costs (problem: defining costs) – Activity-Based Costing – Pricing implications of cost analysis Value-Based Pricing – Relate price to value perceived by customer Competition-Based Pricing – Monitor competitors’ pricing strategy (especially if service lacks differentiation) – Who is the price leader - does one firm set the pace? 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Cost-Based Pricing: Traditional vs. Activity-Based Costing Traditional costing approach – Emphasizes expense categories ABC management systems – Link resource expenses to variety and complexity of goods/services produced – Yields accurate cost information When looking at prices, customers care about value to themselves, not what service production costs the firm 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Value-Based Pricing Understanding Net Value (Fig. 6.7) Value exchange will not take place unless customer sees positive net value in transaction Net Value = Perceived Benefits to Customer (Gross Value) minus All Perceived Outlays (Money, Time, Mental/Physical Effort) Monetary price is not only perceived outlay in purchasing, using a service When looking at competing services, customers are mainly comparing relative net values 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Value-Based Pricing: Managing Perception of Value Need effective communication and personal explanations to explain value Reduce related-monetary costs – Cut time spent searching for, purchasing and using service Reduce non-monetary costs – Time Costs – Physical Costs – Psychological (Mental) Costs – Sensory Costs (unpleasant sights, sounds, feel, tastes, smells) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Defining Total User Costs (Fig. 6.11) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Value-Based Pricing: Approaches to Reducing Non- monetary and Related-monetary Costs Reduce time costs of service at each stage Minimize unwanted psychological costs of service – e.g. eliminate/redesign unpleasant/ inconvenient procedures Eliminate unwanted physical costs of service Decrease unpleasant sensory costs of service – Unpleasant sights, sounds, smells, feel, tastes Suggest ways for customers to reduce other monetary costs 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Trading Off Monetary and Non-Monetary Costs (Fig. 6.12) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.2 Pricing Strategy Stands on Three Legs Competition-Based Pricing: When Price Competition is Reduced Non-price-related costs of using competing alternatives are high Personal relationships matter Switching costs are high Time and location specificity reduces choice Managers should not only look at competitor’s prices dollar for dollar, but should examine all related financial and non-monetary costs 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works 0 6.3 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Maximizing Revenue from Available Capacity at a Given Time (1) Most effective when: – Relatively high fixed capacity – High fixed cost structure – Perishable inventory – Variable and uncertain demand – Varying customer price sensitivity Revenue management is price customization – Charge different value segments different prices for same product based on price sensitivity 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Maximizing Revenue from Available Capacity at a Given Time (2) Revenue management uses mathematical models to examine historical data and real time information to determine – What prices to charge within each price bucket – How many service units to allocate to each bucket Rate fences deter customers willing to pay more from trading down to lower prices (minimize consumer surplus) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Price Elasticity (Fig. 6.15) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Key Categories of Rate Fences: Physical (Table 6.2) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Key Categories of Rate Fences: Non-Physical (1) (Table 6.2) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Key Categories of Rate Fences: Non-Physical (2) (Table 6.2) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Key Categories of Rate Fences: Non-Physical (3) (Table 6.2) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.3 Revenue Management: What it is and How it Works Relating Price Buckets and Fences to Demand Curve (Fig. 6.17) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.4 Ethical Concerns in Service Pricing 0 6.4 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.4 Ethical Concerns in Service Pricing Ethical Concerns in Pricing Customers are vulnerable when service is hard to evaluate as they assume that higher price indicates better quality Many services have complex pricing schedules – Hard to understand – Difficult to calculate full costs in advance of service Quoted prices not the only prices – Hidden charges – Many kinds of fees Too many rules and regulations – Customers feel constrained, exploited – Customers face unfair fines and penalties 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.4 Ethical Concerns in Service Pricing Designing Fairness into Revenue Management Design clear, logical and fair price schedules and fences Use high published prices and present fences as opportunities for discounts (rather than quoting lower prices and using fence as basis to impose surcharges Communicate consumer benefits of revenue management Use bundling to “hide” discounts Take care of loyal customers Use service recovery to compensate for overbooking 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice 0 6.5 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice Pricing Issues: Putting Strategy into Practice (Table 5.3) How much to charge? What basis for pricing? Who should collect payment? Where should payment be made? When should payment be made? How should payment be made? How to communicate prices? 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice Putting Service Pricing into Practice (1) How much to charge? – Pricing tripod model is a useful to use for costs, price sensitivity of customers and competitors – Depends on whether discounts are offered – Any psychological pricing points used? 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice Putting Service Pricing into Practice (2) What basis for pricing? – Completing a task – Admission to a service performance – Time based – Monetary value of service delivered (e.g., commission) – Consumption of physical resources (e.g, food and beverages) – Distance-based (e.g., transportation) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice Putting Service Pricing into Practice (3) Who should collect payment? – Service provider or specialist intermediaries – Direct or non-direct channels Where should payment be made? – Conveniently-located intermediaries – Mail/bank transfer – Credit card payment through internet, phone, fax 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice Putting Service Pricing into Practice (4) When should payment be made? – In advance – Once service delivery has been completed How should payment be made? – Cash – Check – Charge Card (Debit / Credit) – Tokens or vouchers – Stored value card 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  6.5 Putting Service Pricing into Practice Putting Service Pricing into Practice (5) How to communicate prices? – Relate the price to that of competing products – Use salespeople and customer service representatives – Good signage at retail points – Ensure price is accurate and intelligible 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 6: Pricing and Revenue Management (1) Pricing objectives can include – Generating revenues and profit – Building demand – Developing user base Three main foundations to pricing a service – Cost-based pricing – Value-based pricing – Competition-based pricing 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 6: Pricing and Revenue Management (2) Cost-based pricing seeks to recover costs plus a margin for profit; includes both traditional and activity-based costing Value-based pricing should reflect net benefits to customer after deducting all costs Firm must be aware of competitive pricing but may be harder to compare for services than for goods Revenue management – Maximizes revenue from a given capacity at a point in time – Helps manage demand and set prices for each segment closer to perceived value – Involves use of rate fences to deter segments willing to pay more from trading down to lower prices 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 6: Pricing and Revenue Management (3) Ethical issues in pricing – Customers are vulnerable when service is hard to evaluate – Many services have deliberately complex pricing schedules – Fees and hidden charges catch customers by surprise – Too many rules and regulations Questions to ask when putting service pricing into practice – How much to charge? – What should the specified basis for pricing be? – Who should collect payment – Where should payment be made? – When should payment be made? – How should payment be made? – How should prices be communicated to the right target market? 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved Thank you Essentials of Services Marketing, 2nd Edition Instructor Supplements  Promoting Services and Educating Customers 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved 7  Chapter 7 Outline 7.1 Role of Marketing Communications 7.2 Challenges of Service Communications 7.3 Marketing Communications Planning 7.4 The Marketing Communications Mix 7.5 The Role of Corporate Design 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.1 Role of Marketing Communications 0 7.1 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.1 Role of Marketing Communications Specific Roles of Marketing Communications Position and differentiate service Promote contribution of personnel and backstage operations Add value through communication content Facilitate customer involvement in production Stimulate or dampen demand to match capacity 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.2 Challenges of Service Communications 0 7.2 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.2 Challenges of Service Communications Overcoming Problems of Intangibility (1) May be difficult to communicate service benefits to customers, especially when intangible Intangibility creates 4 problems: – Generality ○ Items that comprise a class of objects, persons, or events – Non-searchability ○ Cannot be searched or inspected before purchase – Abstractness ○ No one-to-one correspondence with physical objects – Mental impalpability ○ Customers find it hard to grasp benefits of complex, multidimensional new offerings 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.2 Challenges of Service Communications Overcoming Problems of Intangibility (2) To overcome intangibility – Use tangible cues in advertising – Use metaphors to communicate benefits of service offerings 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.2 Challenges of Service Communications Advertising Strategies for Overcoming Intangibility (Table 7.1) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.3 Marketing Communications Planning 0 7.3 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.3 Marketing Communications Planning Checklist for Marketing Communications Planning: The “5 Ws” Model Who is our target audience? What do we need to communicate and achieve? How should we communicate this? Where should we communicate this? When do communications need to take place? 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.3 Marketing Communications Planning Target Audience: 3 Broad Categories Prospects – Employ traditional communication mix because prospects are not known in advance Users – More cost effective channels Employees – Secondary audience for communication campaigns through public media – Shape employee behavior – Part of internal marketing campaign using company-specific channels 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.3 Marketing Communications Planning Common Educational and Promotional Objectives in Service Settings (1) Create memorable images of specific companies and their brands Build awareness/interest for unfamiliar service/brand Compare service favorably with competitors’ offerings Build preference by communicating brand strengths and benefits Reposition service relative to competition Reduce uncertainty/perceived risk by providing useful info and advice 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.3 Marketing Communications Planning Common Educational and Promotional Objectives in Service Settings (2) Provide reassurance (e.g., promote service guarantees) Encourage trial by offering promotional incentives Familiarize customers with service processes before use Teach customers how to use a service to best advantage Stimulate demand in off-peak, discourage during peak Recognize and reward valued customers and employees 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix 0 7.4 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Marketing Communications Mix for Services (Fig. 7.10a) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Sources of Messages Received by Target Audience (Fig. 7.10b) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Advertising Build awareness, inform, persuade, and remind Challenge: How stand out from the crowd? – Yankelovitch study shows 65% of people feel “constantly bombarded” by ad messages; 59% feel ads have little relevance – TV, radio broadcasts, newspapers, magazines, Internet, many physical facilities, transit vehicles--all cluttered with ads Effectiveness remains controversial Research suggests that less than half of all ads generate a positive return on their investment 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Public Relations PR/Publicity involves efforts to stimulate positive interest in an organization and its products through third parties – e.g., press conferences, news releases, sponsorships Corporate PR specialists teach senior managers how to present themselves well at public events, especially when faced with hostile questioning Unusual activities can present an opportunity to promote company’s expertise – e.g., FedEx – safely transported two giant pandas from Chengdu, China, to the National Zoo in Washington, D.C. in a FedEx aircraft renamed FedEx PandaOne. 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Direct Marketing (1) Mailings, recorded telephone messages, faxes, email Potential to send personalized messages to highly targeted microsegments – Need detailed database of information about customers and prospects 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Direct Marketing (2) Advance in on-demand technologies empower consumers to decide how and when they prefer to be reached, and by whom – e.g. email spam filters, pop-up blockers, podcasting Permission Marketing goal is to persuade customers to volunteer their attention – Enables firms to build strong relationships with customers – e.g., People invited to register at a firm’s website and specify what type of information they like to receive via email 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Sales Promotion Defined as “Communication that comes with an incentive” Should be specific to a time period, price, or customer group Motivates customers to use a specific service sooner, in greater volume with each purchase, or more frequently Interesting sales promotions can generate attention and put firm in favorable light (especially if interesting results publicized) – e.g. SAS International Hotels – If a hotel had vacant rooms, guests over 65 years old could get a discount equivalent to their years – When a guest announced his age as 102 and asked to be paid 2% of the room rate in return for staying the night, he received it— and got a game of tennis with the general manager! 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Personal Selling Interpersonal encounters educate customers and promote preferences for particular brand or product Common in b2b and infrequently purchased services Many b2b firms have dedicated salesforce to do personal selling – Customer assigned to a designated account manager For services that are bought less often, firm’s representative acts as consultant to help buyers make selection Face-to-face selling of new products is expensive—telemarketing is lower cost alternative 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Marketing Channels: Trade Shows Popular in b2b marketplace Stimulate extensive media coverage Many prospective buyers come to shows Opportunity to learn about latest offerings from wide variety of suppliers Sales rep who usually reaches four to five potential customer per day may be able to get five qualified leads per hour at a show 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Internet: Company’s Website The web is used for a variety of communication tasks – Creating consumer awareness and interest – Providing information and consultation – Allowing two-way communication with customers through email and chat rooms – Encouraging product trial – Allowing customers to place orders – Measuring effectiveness of advertising or promotional campaigns Innovative companies look for ways to improve the appeal and usefulness of their sites 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Internet: Online Advertising (1) Banner advertising – Placing advertising banners and buttons on portals such as Yahoo, Netscape and other firms’ websites – Draw online traffic to the advertiser’s own site – Web sites often include advertisements of other related, but non competing services. E.g, ○ Advertisements for financial service providers on Yahoo’s stock quotes page 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Internet: Online Advertising (2) Search engine advertising – Reverse broadcast network: search engines let advertisers know exactly what consumer wants through their keyword search – Can target relevant messages directly to desired consumers – Several advertising options: ○ Pay for targeted placement of ads to relevant keyword searches ○ Sponsor a short text message with a click-through link ○ Buy top rankings in the display of search results 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Moving from Impersonal to Personal Communications There used to be a difference between personal and impersonal communication Technology has created a gray area between the two Direct mail and email can be personalized Electronic recommendation agents can also personalize communications With advances of on-demand technologies, consumer are increasingly empowered to decide how and when they like to be reached (see Service Insights 7.4) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages through Service Delivery Channels Service outlets – Can be through banners, posters, signage, brochures, video screens, audio etc. Frontline employees – Communication from frontline staff can be for the core service or supplementary elements – New customers in particular need help from service personnel Self-service delivery points – ATMs, vending machines and websites are examples 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages Originating from Outside the Organization (1) Word of Mouth (WOM) – Recommendations from other customers viewed as more credible – Strategies to stimulate positive WOM: ○ Having satisfied customers providing comments ○ Using other purchasers and knowledgeable individuals as reference ○ Creating exciting promotions that get people talking ○ Offering promotions that encourage customers to persuade their friend to purchase ○ Developing referral incentive schemes 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Messages Originating from Outside the Organization (2) Blogs – A new type of online WOM – Communications about customer experiences influence opinions of brands and products – Some firm have started to monitor blogs as form of market research and feedback Twitter – Becoming increasingly popular – fastest-growing social networking service Media Coverage – Compares, contrasts service offerings from competing organizations – Advice on “best buys” 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.4 The Marketing Communications Mix Ethical Issues in Communication Advertising, selling, and sales promotion all lend themselves easily to misuse Communication messages often include promises about benefits and quality of service delivery. Customers are sometimes disappointed Why were their expectations not met? – Poor internal communications between operations and marketing personnel concerning level of service performance – Over promise to get sales – Deceptive promotions Unwanted intrusion by aggressive marketers into people’s personal lives 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.5 The Role of Corporate Design 0 7.5 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.5 The Role of Corporate Design Strategies for Corporate Design (1) Many service firms employ a unified and distinctive visual appearance for all tangible elements – e.g. Logos, uniforms, physical facilities Provide recognition and strengthen brand image – e.g., BP’s bright green-and yellow service stations Especially useful in competitive markets to stand out from the crowd and be instantly recognizable in different locations – e.g. Shell’s yellow scallop shell on a red background – MacDonald’s “Golden Arches” 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  7.5 The Role of Corporate Design Strategies for Corporate Design (2) How to stand out and be different? – Use colors in corporate design – Use names as central element in their corporate designs – Use trademarked symbol rather than name as primary logo – Create tangible recognizable symbols to connect with corporate brand names 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 7 ― Promoting Services and Educating Customers (1) Marketing communications has specific roles – Position and differentiate service – Help customer evaluate offerings and highlight differences that matter – Promote contribution of personnel and backstage operations – Add value through communication content – Facilitate customer involvement in production – Stimulate or dampen demand to match capacity Communicating services presents both challenges and opportunities – Overcome problems of intangibility--use metaphors to communicate value proposition 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 7 ― Promoting Services and Educating Customers (2) Communication planning involves knowing (5Ws) – Who is our target audience? – What do we need to communicate and achieve? – How should we communicate this? – Where should we communicate this? – When do communications need to take place? Marketing communications originate from within the organization through marketing and production channels 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 7 ― Promoting Services and Educating Customers (3) Marketing channels include – Advertising – Public relations – Direct marketing – Sales promotion – Personal selling – Tradeshows – Internet 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary of Chapter 7 ― Promoting Services and Educating Customers (4) Production channels include – Front-line employees and call center staff – Service outlets – Self-service delivery points Marketing communications originating from outside organization include – Word of mouth – Blogs and online ratings – Twitter – Media editorial Corporate design strategies are part and parcel of communication mix 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved Thank you Essentials of Services Marketing, 2nd Edition Instructor Supplement  Designing and Managing Service Processes 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved 8  Chapter 8 Outline 8.1 Flowcharting Service Delivery 8.2 Use Blueprinting to Document and Manage Service Processes 8.3 Service Process Redesign 8.4 The Customer as Co-Creators 8.5 Self-Service Technologies 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.1 Flowcharting Service Delivery 0 8.1 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.1 Flowcharting Service Delivery Insights from Flowcharting Technique for displaying the nature and sequence of the different steps in delivery service to customers Offers way to understand total customer service experience Shows how nature of customer involvement with service organizations varies by type of service: – People processing – Possession processing – Mental Stimulus processing – Information processing 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.1 Flowcharting Service Delivery Simple Flowchart for Delivery of a People-Processing Service (Fig. 8.1a) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.1 Flowcharting Service Delivery Simple Flowchart for Delivery of a Possession-Processing Service (Fig. 8.1b) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.1 Flowcharting Service Delivery Simple Flowchart for Delivery of a Information-Processing Service (Fig. 8.1d) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.2 Use Blueprinting to Document and Manage Service Processes 0 8.2 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.2 Use Blueprinting to Document and Manage Service Processes Blueprinting Developing a Blueprint - Identify key activities in creating and delivering service - Define “big picture” before “drilling down” to obtain a higher level of detail Advantages of Blueprinting - Distinguish between “frontstage” and “backstage” - Clarify interactions between customers and staff, and support by backstage activities and systems - Identify potential fail points; take preventive measures; prepare contingency - Pinpoint stages in the process where customer commonly have to wait 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.2 Use Blueprinting to Document and Manage Service Processes Key Components of a Service Blueprint 1. Define standards for front-stage activities 2. Specify physical evidence 3. Identify main customer actions 4. Line of interaction (customers and front-stage personnel) 5. Frontstage actions by customer-contact personnel 6. Line of visibility (between front stage and backstage) 7. Backstage actions by customer contact personnel 8. Support processes involving other service personnel 9. Support processes involving IT - Identify fail points and risks of excessive waits - Set service standards and do failure-proofing 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.2 Use Blueprinting to Document and Manage Service Processes Blueprinting the Restaurant Experience: Act 1 (Fig. 8.5) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.2 Use Blueprinting to Document and Manage Service Processes Blueprinting The Restaurant Experience: A Three-Act Performance Act 1: Introductory Scenes Act 2: Delivery of Core Product – Cocktails, seating, order food – Potential fail points: Menu information complete? Menu intelligible? Everything on the menu actually available? – Mistakes in transmitting information a common cause of quality failure – e.g. bad handwriting; poor verbal communication – Customers may not only evaluate quality of food and drink, but how promptly it is served, serving staff attitudes, or style of service Act 3: The Drama Concludes – Remaining actions should move quickly and smoothly, with no surprises at the end – Customer expectations: accurate, intelligible and prompt bill, payment handled politely, guests are thanked for their patronage 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.2 Use Blueprinting to Document and Manage Service Processes Improving Reliability of Processes by Failure Proofing Identify fail points Analysis of reasons for failure often reveals opportunities for failure proofing to reduce/eliminate future risk of errors Need fail-safe methods for both employees and customers Have poka-yokes to ensure service staff do things correctly, as requested, or at the right speed Customer poka-yokes focus on preparing the customer for: – The encounter – Understanding and anticipating their roles – Selecting the correct service or transaction See Service Insights 8.1 – Framework to prevent customer failures 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.3 Service Process Redesign 0 8.3 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.3 Service Process Redesign Why Redesign? (1) “Institutions are like steel beams—they tend to rust. What was once smooth and shiny and nice tends to become rusty.” Mitchell T. Rabkin MD, formerly president of Boston’s Beth Israel Hospital 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.3 Service Process Redesign Why Redesign? (2) Revitalizes process that has become outdated Changes in external environment make existing practices obsolete and require redesign of underlying processes – Creation of brand-new processes to stay relevant 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.3 Service Process Redesign Why Redesign? (3) Rusting occurs internally – Natural deterioration of internal processes; creeping bureaucracy; evolution of spurious, unofficial standards – Symptoms: ○ Extensive information exchange ○ Data that is not useful ○ High ratio of checking or control activities to value-adding activities ○ Increased exception processing ○ Customer complaints about inconvenient and unnecessary procedures 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.3 Service Process Redesign Process Redesign: Approaches and Potential Benefits Examining service blueprint with key stakeholders Eliminating non-value-adding steps – Simplify front-end and back-end processes with goal of focusing on benefit-producing part of service encounter – Get rid of non-value adding steps – Improve productivity and customer satisfaction Shifting to self-service – Increase in productivity and service quality – Lower costs – Enhance technology reputation – Differentiates company 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.4 The Customer as Co-Creators 0 8.4 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.4 The Customer as Co-Creators Levels of Customer Participation (1) Customer Participation – Actions and resources supplied by customers during service production and/or delivery – Includes mental, physical, and even emotional inputs 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.4 The Customer as Co-Creators Levels of Customer Participation (2) 3 levels – Low ― Employees and systems do all the work ○ Often involves standardized service - Medium ― Customer helps firm create and deliver service o Provide needed information and instructions o Make some personal effort; share physical possessions - High ― Customer works actively with provider to co-produce the service ○ Service cannot be created without customer’s active participation ○ Customer can jeopardize quality of service outcome (e.g. weight loss, marriage counseling) 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.4 The Customer as Co-Creators Customers as Service Co-Creators Customers can influence productivity and quality of service processes and outputs Customers not only bring expectations and needs, they also need to have relevant service production competencies Customers also need to be recruited as they are “partial employees”. Firms need to get those with the skills to do the tasks For the relationship to last, both parties need to cooperate with each other 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.5 Self-Service Technologies 0 8.5 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.5 Self-Service Technologies Self-Service Technologies (SSTs) Ultimate form of customer involvement – Customers undertake specific activities using facilities or systems provided by service supplier – Customer’s time and effort replace those of employees ○ e.g. Internet-based services, ATMs, self-service gasoline pumps Information-based services can easily be offered using SSTs – Used in both supplementary services and delivery of core product ○ e.g. eBay ― no human auctioneer needed between sellers and buyers Many companies seek to encourage customers to serve themselves using Internet-based self-service – Challenge: getting customers to try this technology 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.5 Self-Service Technologies What Aspects Of SSTs Please Or Annoy Customers? (1) People love SSTs when… – SST machines are conveniently located and accessible 24/7—often as close as nearest computer! – Obtaining detailed information and completing transactions can be done faster than through face-to-face or telephone contact – People in awe of what technology can do for them when it works well People hate SSTs when… – SSTs fail – system is down, PIN numbers not accepted, etc – Poorly designed technologies that make service processes difficult to understand and use – they mess up - forgetting passwords; failing to provide information as requested; simply hitting wrong buttons 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.5 Self-Service Technologies What Aspects Of SSTs Please Or Annoy Customers? (2) Key weakness of SSTs: Too few incorporate service recovery systems – Customers still forced to make telephone calls or personal visits 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  8.5 Self-Service Technologies Putting SSTs to Test by Asking a Few Simple Questions Does the SST work reliably? – Firms must ensure that SSTs are dependable and user-friendly Is the SST better than interpersonal alternatives? – Customers will stick to conventional methods if SST doesn’t create benefits for them If it fails, what systems are in place to recover? – Always provide systems, structures, and technologies that will enable prompt service recovery when things go wrong 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary for Chapter 8 ― Designing and Managing Service Processes (1) Flowcharting helps clarify delivery elements. It also shows how nature of customer involvement with service organizations varies by type of service 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary for Chapter 8 ― Designing and Managing Service Processes (2) Service blueprinting can be used to design a service and create a satisfying experience for customers. Key components of the blueprint include – Definition of standards for each front-stage activity – Physical and other evidence for front-stage activities – Principal customer actions – Line of interaction – Front-stage actions by customer-contact personnel – Line of visibility – Backstage actions by customer-contact personnel – Support processes involving other service personnel – Support processes involving information technology 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary for Chapter 8 ― Designing and Managing Service Processes (3) Blueprinting a restaurant (or other service) can be a three-act performance – Prologue and introductory scenes – Delivery of the core product – Conclusion of the drama Failure proofing can be designed into service processes to improve reliability Service process redesign can be categorized into five kinds – Examining the service blueprint with key stakeholders – Eliminating non-value-adding steps – Shifting to self-service 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved  Summary for Chapter 8 ― Designing and Managing Service Processes (4) When the customer is a co-producer, issues to consider are – Levels of customer participation – Customers as service co-creators When deciding to use Self-service Technologies (SSTs), firms should consider – Psychological factors related to the use of SSTs – Aspects of SSTs that please or annoy customers 0 © Pearson Education South Asia Pte Ltd 2013. All rights reserved Thank you