Unit II: Applying 4Ps of Marketing to Services PDF

UNIT II. APPLYING 4PS OF MARKETING TO SERVICES Welcome to Unit II, where we'll explore essential service concepts and strategies. This unit covers meaningful service concepts, branding, distribution channels, pricing strategies, communication, and promotion in the world of services. We'll l...

UNIT II. APPLYING 4PS OF MARKETING TO SERVICES Welcome to Unit II, where we'll explore essential service concepts and strategies. This unit covers meaningful service concepts, branding, distribution channels, pricing strategies, communication, and promotion in the world of services. We'll learn about the core and supplementary elements of service, how time and place affect service delivery, the importance of pricing from both the firm's and customer's perspectives, and how effective communication is crucial in services marketing. Thus, this module will primarily teach you how to become an effective marketer by understanding service markets, products, and customers. Learning outcomes: 1) Described how firms can achieve success in new service development; 2) Described the flower of service model; 3) Explained the determinants of customers’ channel preferences 4) Recognize the importance of integrated marketing communications to deliver a strong brand equity.  CHAPTER 1. DEVELOPING SERVICE PRODUCTS AND BRANDS Lesson 1. Creating Service Products What do we mean by a service “product”? Service performances are experienced rather than owned. Even when there are physical elements to which the customer takes a title of ownership — such as a meal (which is promptly consumed), a surgically implanted pacemaker, or a replacement part for a car — a significant portion of the price paid by customers is for the value added by the service elements, including expert labor and the use of specialized equipment. Moreover, it comprises of all the elements of the service performance, both physical and intangible, that create value for customers that consists of core product, supplementary services, and delivery process. 1. Core Product Core Product refers to the fundamental benefit or value that a product or service provides to its customers or what the customer is actually buying. It represents the primary reason why customers are interested in the product or service in the first place. 2. Supplementary Services (also known as augmented services) Supplementary services are the additional elements or offerings that accompany a core product or service that enhance the overall customer experience, add value, and differentiate a company's offering from competitors. These elements are confined in what we call the Flower of Service. Flower of Service - represents a holistic view of services and outlines various dimensions that contribute to a comprehensive service experience. The framework is depicted as a flower to symbolize the interrelated nature of these facets, with the core service being surrounded by petals representing supplementary services. The model helps organizations design and deliver a well-rounded and customer-centric service offering. Facilitating Supplementary Elements - services that support the core product or service by making it easier for customers to access or utilize the core offering. It includes: 1. Information - Providing relevant and accurate information to customers, both before and during their interaction with the service. Information includes the following:  Direction to service site  Schedules/service hours  Price information  Terms and conditions of sale/service  Advice on how to get the most value from a service  Warnings and advice on how to avoid problems  Confirmation of reservation  Receipts and tickets  Notification of change  Summaries of account activities 2. Order-Taking - Efficiently processing customer requests and orders, ensuring accuracy and reliability. It includes:  Order entry (On-site order entry/Mail/telephone/email/online/mobile app order)  Reservations or check-ins (Seats/tables/rooms/ Vehicles or equipment rental)  Applications (Membership/ Subscription) 3. Billing - The most common to almost all types of service. It manages transparent and straightforward billing processes that are accurate, eligible, and complete. It includes:  Periodic statements  Invoices for transaction  Verbal statements of amount due  Machine display of amount due 4. Payment - The action or process of paying. It is the activity if providing convenient and secure payment methods for customers.  Self-service – E-payment (Fund transfer)  Direct to Payee or Intermediary – Cash  Automatic deduction from financial deposit control and verification Enhancing Supplementary Elements - elements go beyond facilitating the core service and focus on providing additional value and enriching the overall customer experience. These elements are meant to exceed customer expectations and create a more memorable and differentiated service encounter. It includes: 1. Consultation - Offering expert advice, guidance, and personalized recommendations to customers based on their individual needs. 2. Hospitality - Creating a welcoming and friendly environment for customers, often associated with the physical facilities and interactions. For example: greetings, giving food and beverage for customers who are waiting, providing lounges such waiting areas, seating, magazines, entertainment, and security. It can also be caring for possessions customers bring with them such as childcare, pet care, parking facilities for vehicles, baggage handling, storage space, safe deposit boxes, and security personnel. 3. Safekeeping - Ensuring the security, protection, and proper handling of customer belongings or data. For example: Caring for goods purchased (or rented) by customers such as packaging, pic-up, transportation delivery, installation, cleaning, and repairs and renovation. 4. Exceptions - Handling unexpected situations, exceptions, and customer complaints effectively and empathetically. An example for this would be special request in advance of service delivery such as religious observance, children’s need, medical or disability needs. 3. Delivery Processes Delivery processes concerns the processes used to deliver both the core product and each of the supplementary services. The design of the service offering must address the following issues: 1. Component Delivery: Plan how each service component, including the core product and supplementary services, will be delivered to customers. This involves defining specific steps and procedures for a seamless experience. 2. Customer Role: Determine the extent of customer involvement in the processes. Recognize that customer roles can vary widely, from active participation to passive reliance on service providers. 3. Duration: Define how long each delivery process should last. Tailor this to meet customer expectations and the nature of the service, whether quick and transactional or prolonged and immersive. 4. Service Level and Style: Specify the level and style of service to be offered. Consider factors like personalization, attentiveness, and alignment with the target market and brand identity. Lesson 2. New Service Development After crafting service products, companies frequently encounter an environment marked by intense competition and growing consumer demands. Consequently, renowned brands consistently enhance their performance by embracing innovation and devising fresh service strategies. There are many ways for service providers to foster innovation. Below, we identify six categories of new services, ranging from simple style changes to major innovations.  1. Style Changes: This category represents the simplest form of innovation, typically involving changes in appearance without altering processes or performance. Though they may not impact functionality, style changes often generate excitement, boost employee morale, and enhance visibility. Examples include redesigning retail branches, websites, or introducing new uniforms for service staff. 2. Service Improvements: Among the most common innovations, service improvements entail minor enhancements to existing products. These refinements can target either the core product or existing supplementary services. Small adjustments can significantly enhance customer experiences, such as the Lydmar hotel's music selection buttons in Stockholm, which add a unique and delightful touch. 3. Supplementary Service Innovations: This category involves introducing new elements to support or enhance an existing core service. It could also entail substantial upgrades to existing supplementary services. Even low-tech innovations, like adding parking facilities at a retail site or enabling smartphone payments, can have a substantial impact. 4. Product Line Extensions: Companies expand their product offerings with these additions to their current lines. Often, the first company to introduce such products is seen as an innovator, prompting others to follow suit to stay competitive. These extensions serve diverse customer needs, potentially attracting new customer segments. For example, a restaurant may extend its product line to include a dog-friendly menu, catering to both pet owners and their furry companions. 5. Major Process Innovations: This category involves utilizing new processes to deliver existing core products with added benefits. For instance, online courses revolutionize higher education by leveraging cutting-edge technology, the Internet, and smart devices. 6. Major Service Innovations: These innovations introduce entirely new core products to markets that were previously undefined. They encompass not only new service characteristics but also radical new processes. Amazon, for example, ventured into on- demand computing power and emerged as a leader in cloud computing services. Thus, to achieve success in establishing or creating a New Service Development, below are the three ways that resonates with customers and outshines competitors. 1. Market Synergy: Ensure that the new service seamlessly aligns with your organization's existing brand, expertise, and available resources. Strive to make it better than competing products in meeting customer needs. Additionally, provide strong support during and after the launch from your organization and its branches to reinforce the service's success. For example, Starbucks excelled in mobile ordering, aligning with their brand of convenience. 2. Organizational Factors: Foster strong inter-functional cooperation and coordination within your organization. Ensure that development personnel fully comprehend their  roles and understand the importance of new products to the company's growth. Prior to launch, equip your staff with a comprehensive understanding of the new service and its underlying processes. Also, educate them about details concerning direct competitors to enhance your competitive edge. For example, Toyota's triumph in creating hybrid cars like the Prius stemmed from robust organizational factors. They facilitated cross- functional collaboration among engineers, marketers, and production teams and invested in staff training. Prior to the Prius launch, Toyota conducted a comprehensive competitor analysis to bolster their competitive edge. 3. Market Research Factors: Conduct detailed and scientifically designed market research studies early in the development process. Clearly define the type of information you aim to obtain. Develop a well-defined product concept before embarking on field surveys. This approach will provide valuable insights and a solid foundation for creating a successful new service. For example, Amazon Prime Video's success resulted from data-driven content choices.  CHAPTER 2: DISTRIBUTING SERVICES THROUGH PHYSICAL AND ELECTRONIC CHANNELS "What? How? Where? When?" These are the pivotal questions that underpin every service distribution strategy. They determine the customer's experience and reflects how the various aspects of the Flower of Service are disseminated and provided through both physical and digital channels. WHAT service should be delivered? When we think of distribution, we often associate it with physically moving goods like boxes to distributors and retailers. However, in the realm of services, there's often nothing physical to transport. Experiences, performances, and solutions are not tangible and don't need to be shipped or stored. Moreover, informational transactions are increasingly conducted through electronic channels. So, how does distribution work in the context of services? In a typical service sales cycle, distribution encompasses three interconnected streams that partly address the question of what is being distributed: 1. Information and Promotion Flow: This involves disseminating information and promotional materials related to the service offer with the aim of piquing the customer's interest in making a purchase. For instance, airlines distribute information and promotion materials through various channels, such as their websites, social media, travel agencies, and advertising that may include details about flight schedules, fares, special offers, and in-flight services, all designed to attract customers and generate interest in their services. 2. Negotiation Flow: This step entails reaching an agreement on the service's features, configuration, and terms to close a purchase contract. The objective is often to sell the right to use a service, such as a reservation or ticket. For example, once a potential customer decides to book a flight, they engage in the negotiation flow. This involves selecting flight options, seat preferences, and any additional services like in-flight meals or extra baggage and includes agreeing to the terms and conditions, making payment, and receiving a booking confirmation. 3. Product Flow: For many services, particularly those involving people processing or possession processing, physical facilities are required for delivery. In such cases, the distribution strategy involves establishing a network of local sites. However, for information-processing services like Internet banking and distance learning, the product flow can occur through electronic channels, utilizing one or more centralized sites. For airlines, the product flow involves the physical aspect of service delivery. Passengers need a means to board the aircraft and travel to their destination. Airlines maintain physical facilities, including airports and aircraft, to facilitate this. Passengers physically move through airports, check-in at counters, pass through security, and eventually board the aircraft. HOW should service be delivered? When deciding how to deliver services, a crucial factor to consider is whether the company's service or positioning strategy requires in-person interaction with customers, personnel, equipment, and facilities, or if it can be adapted for remote transactions through telecommunications or physical distribution channels. Additionally, it's important to consider the availability of service outlets that can easily reach customers. Below are the three natures of interactions between customer and service organizations. 1. Customers Visit the Service Site For some types of services, a physical service visit from the customer to successfully deliver their service. For example, medical check-up, haircut, car service workshop, or visiting café. On the side note, we need to consider critical factors such as cost (rental, electricity), facility (lounges, receiving area), and outlet location for customer’s convenience. 2. Service Providers Go to Their Customers For some types of services, the service provider visits the customer. Rather than customers painting their own houses, washing their own car, getting their mail from post office, service provider visits the customer to deliver the service. 3. The Service Transaction Is Conducted Remotely In response to advances in technology and logistics, service providers have adopted innovative digital delivery methods. For certain services, customers may never need to visit physical locations or meet personnel; interactions occur through channels like contact centers, email, and chat. This shift applies to various service types, including information-based services and physical product delivery, where logistics providers offer efficient solutions. The growth of digital service delivery is driven by convenience, a wide range of choices, cost savings, and 24/7 availability with swift delivery. Service providers offer customers the freedom to select their preferred service channels, a choice influenced by several key factors: 1. Complex Services - The complexity of the service plays a significant role. Customers tend to opt for personal interactions when dealing with services they perceive as complex, such as mortgage or retirement planning. 2. Confidence and knowledge - Individual confidence and knowledge about a service or channel affect preferences. Those comfortable with technology often choose impersonal self-service channels for routine transactions through mobile apps or websites. 3. Convenience - Convenience is another crucial factor. Customers invariably favor channels that save them time, energy, money, and effort, providing quick access to services.  4. Electronic Channel - the availability of electronic options has expanded with the rise of digital banking. Customers seek channels that offer electronic solutions for tasks like cash withdrawals, customer service inquiries, or account-related assistance. 5. Pricing Strategy - pricing strategies can significantly impact choices. Awareness of pricing differences among banking channels may lead customers to adapt their channel usage to minimize costs. For example, they might withdraw larger sums of cash less frequently to avoid ATM fees. These factors collectively shape customers' channel preferences, reflecting their evolving needs and expectations in service delivery. WHERE should services be delivered? The decision on where a service should be delivered involves considering both strategic and tactical locations. Here's an explanation of each: 1. Strategic Location:  A "strategic location" typically refers to a broader, long-term perspective in service delivery. It involves selecting a central or key location that aligns with the overall business strategy.  Strategic locations are chosen based on factors like market reach, customer accessibility, and competition. They often serve as flagship or primary service centers.  For example, a company might strategically place its headquarters or flagship store in a major city to access a large customer base and build brand presence. 2. Tactical Location  A "tactical location" refers to specific, short-term decisions regarding service delivery. It focuses on practical and immediate considerations.  Tactical locations may involve setting up temporary service points, pop-up stores, or mobile service centers to respond to specific customer needs or market dynamics.  For instance, a food delivery service may set up a temporary location near a popular event venue to cater to event attendees. WHEN should services be delivered? Determining the timing of service delivery, or when services should be provided, is a crucial decision influenced by various factors. These factors encompass customer preferences, the specific nature of the service, and the dynamics of the market. Here are some key aspects to consider when deciding when services should be offered: 1. Customer Convenience: It is essential to align service hours with the convenience of customers, considering their daily routines and availability. For instance, businesses may  extend their operating hours on weekends to accommodate customers with weekday commitments. 2. Peak Demand: Recognizing peak demand periods is critical. Many services experiences heightened demand at certain times of the day, week, or year. For instance, restaurants often schedule service hours during peak mealtimes. 3. 24/7 Accessibility: In the era of advancing technology and online services, there is a growing expectation for services to be accessible around the clock. Some services, especially those that are information-based or automated, are expected to be available 24/7. 4. Regulatory Requirements: In certain industries, regulatory mandates dictate when services can be offered. For instance, pharmacies may be subject to restrictions on their operating hours. 5. Cost-Benefit Analysis: Extending service hours can impact operating costs. Businesses must evaluate whether the potential increase in revenue or enhanced customer satisfaction justifies the additional operational expenses. 6. Service Type: The type of service plays a significant role. Emergency services, healthcare, and certain customer support functions may necessitate 24/7 availability to address urgent needs. Conversely, services like retail shopping may have more flexible operating hours. 7. Competitive Landscape: Consideration of competitors' operating hours is common. Offering extended or unique service hours can serve as a competitive advantage.  CHAPTER 3 SERVICE PRICING AND REVENUE MANAGEMENT Lesson 1: Objectives for Establishing Prices Any pricing strategy must be based on a clear understanding of a company’s pricing objectives. 1. Revenue and Profit Objectives – Gain Profit Make the largest possible long-term contribution or profit. Achieve a specific target level, but do not seek to maximize profits. Maximize revenue from a fixed capacity by varying prices and target segments over time. This is done typically using revenue management systems 2. Patronage and User Base-Related Objectives – Build Demand Maximize demand (when capacity is not a restriction), provided a certain minimum level of revenue is achieved (e.g., many non-profit organizations are focused on encouraging usage rather than revenue, but they still have to cover costs). Achieve full capacity utilization, especially when high capacity utilization adds to the value created for all customers (e.g., a “full house” adds excitement to a theater play or basketball game). 3. Strategy-Related Objectives - Support Positioning Strategy Help and support the firm’s overall positioning and differentiation strategy (e.g., as a price leader, or portrait a premium image with premium pricing). Promote a “We-will-not-be-undersold” positioning, whereby a firm promises the best possible service at the best possible price. That is, the firm wants to communicate that the offered quality of service products cannot be bought at a lower cost elsewhere. The pricing tripod 1. Cost-based pricing This dimension involves understanding and analyzing the costs associated with providing the service. Businesses need to ensure that their prices cover all relevant costs, including both variable costs (those that vary with the level of service provided, such as labor and materials) and fixed costs (those that remain constant regardless of service volume, such as rent and equipment depreciation). Pricing below total costs can lead to financial losses, while pricing significantly above costs can result in customer resistance. 2. Value based pricing Customer considerations involve understanding the perceived value of the service from the customer's perspective. Businesses need to assess how much value their service delivers to customers and what customers are willing to pay for that value. This often involves market research, customer surveys, and competitive analysis to determine pricing expectations and sensitivity to price changes. Customer segmentation is also important, as different customer segments may have varying price sensitivity and willingness to pay. Since customer defines value differently, Valarie Zeithaml proposes four broad expressions of value:  Value is a low price.  Value is whatever I want in a product.  Value is the quality I get for the price I pay.  Value is what I get for what I give Customer net value is calculated as perceived benefits minus perceived costs. These costs, from the customer's perspective, include:  Monetary Costs: Beyond the service's price, customers often face additional financial expenses, such as babysitting, travel, parking, and food, which can significantly increase the overall cost of using the service.  Non-monetary Costs: Non-monetary costs encompass the time, effort, and discomfort involved in searching for, purchasing, and using a service. Customers often refer to these collectively as "effort" or "hassle." These costs can be higher when customers are actively involved in the service process, need to travel to the service location, or experience psychological costs like anxiety. Non-monetary costs are categorized into four types: time, physical, psychological, and sensory costs. a) Time Costs: Customers dislike wasting time on activities like traveling to government offices and waiting in queues. Time spent represents an opportunity cost that could be used more enjoyably or profitably. Internet users also get frustrated with time- consuming website searches. b) Physical Costs: These involve effort, fatigue, and discomfort, especially when customers must visit service locations, face long queues, or undergo body treatments (e.g., medical procedures or waxing). c) Psychological Costs: Mental effort, perceived risk, anxiety, cognitive dissonance, feelings of inadequacy, and fear can be linked to service purchases, like choosing a treatment, a surgeon, or a mortgage. d) Sensory Costs: Unpleasant sensations impacting the senses, including crowding, noise, smells, drafts, extreme temperatures, uncomfortable seating, and unattractive environments, can deter customers in service settings. 3. Competition The competitive dimension involves evaluating the pricing strategies of competitors offering similar services. Businesses must understand the pricing landscape in their industry, including both direct competitors and indirect substitutes. Analyzing competitor pricing can help determine whether a business should position itself as a price leader, follower, or differentiator. It can also provide insights into pricing strategies that may be effective in capturing market share. Price Competition Intensifiers:  Increasing Number of Competitors: When more businesses enter a market, competition tends to intensify. A higher number of competitors vying for the same customer base often leads to price wars as companies try to gain a competitive edge.  Increasing Number of Substituting Offers: The presence of numerous substitute products or services provides consumers with more choices. As the number of substitutes grows, businesses may lower prices to attract customers away from competitors offering similar alternatives.  Wider Distribution of Competitor and/or Substitution Offers: Broader market coverage by competitors and substitute providers means that customers have easier access to various options. This accessibility can lead to increased price sensitivity, pushing businesses to compete on price.  Increasing Surplus Capacity in the Industry: When industries experience excess production capacity, businesses may reduce prices to fill that capacity and generate revenue. This often occurs in cyclical industries where demand fluctuates. Price Competition Reducers:  High Nonprice Related Costs of Competing Alternatives: Customers consider not only the price but also the additional costs associated with using competing alternatives. If these non-price costs, such as maintenance, quality, or convenience, are high, customers may be less price-sensitive.  Personal Relationships Are Important: In some industries, personal relationships and trust play a significant role. Customers may be willing to pay more for services from businesses they trust or have a strong relationship with, reducing the emphasis on price.  High Switching Costs: If switching from one provider to another involves substantial costs or inconvenience, customers are less likely to engage in price-based switching. Examples of switching costs include contract termination fees or the time required to adapt to a new service provider.  Time and Location Specific Service Consumption: Some services are inherently tied to specific times and locations, making it challenging for customers to switch based on price alone. For example, a person seeking emergency medical care is unlikely to make decisions solely based on price. To effectively set prices for services, businesses need to consider and balance these three dimensions. Here's how they interact:  Costs vs. Customers: Businesses must ensure that prices cover costs while aligning with customers' perceived value. If customers perceive the service as highly valuable, businesses may have more pricing flexibility and can potentially charge a premium. However, if costs are significantly higher than customers' willingness to pay, it may be necessary to reevaluate the cost structure or target a different customer segment.  Customers vs. Competition: Understanding customer preferences and price sensitivity relative to competitors is crucial. Businesses need to position their prices competitively while also differentiating their services to create a unique value proposition that resonates with customers.  Competition vs. Costs: Cost structures can impact a business's ability to compete on price. If a business has a cost advantage, it may be able to offer lower prices and gain a competitive edge. Conversely, if costs are high, the business may need to focus on other differentiators, such as service quality or features, to justify higher prices. Balancing these three dimensions is a dynamic process that requires ongoing analysis and adjustment, especially as market conditions change and customer preferences evolve. Successful pricing strategies in service marketing involve finding the right equilibrium between costs, customers, and competition to maximize profitability and market share while delivering value to customers. Lesson 2: What is Revenue Management? Revenue Management is a disciplined analytics technique used to predict consumer behavior at the micro-level, which is used to optimize product availability and pricing and maximize revenue growth. In other words, the primary objective is to sell the right product at the right price to the right customer at the right time. Revenue management techniques: 1) Dynamic Pricing: Dynamic pricing involves adjusting prices in real-time based on factors such as demand, time of booking, remaining inventory, competitor pricing, and customer segmentation. An example of dynamic pricing is ride-sharing companies like Uber and Lyft, which use dynamic pricing during peak demand times (e.g., rush hour or bad weather) to increase fares, encouraging more drivers to be available and ensuring prompt service. 2) Demand Forecasting: Demand forecasting utilizes historical data, statistical models, and market trends to forecast future demand accurately. This helps businesses anticipate fluctuations in demand and adjust pricing and inventory accordingly. An example is hotels using demand forecasting tazo adjust room rates for specific dates or events, such as  offering higher rates during major conferences or holiday seasons due to anticipated high demand. 3) Yield Management: Yield management focuses on allocating limited resources (e.g., hotel rooms, airline seats) to maximize revenue. It involves varying prices based on demand, time, and customer segments. An example of yield management is airlines offering different prices for seats in the same cabin class, with early bookings often getting lower fares while last-minute travelers may pay a premium. 4) Segmentation: Segmentation categorizes customers into different segments based on factors like demographics, behavior, and willingness to pay. Tailoring pricing and marketing strategies to each segment helps maximize revenue. An example is streaming services like Netflix, which segment customers with different pricing tiers, offering basic, standard, and premium plans catering to various customer segments with varying needs and budgets. 5) Price Optimization: Price optimization involves analyzing data on costs, competitor pricing, and customer willingness to pay to set optimal prices that balance profit and market share. An example is retailers frequently optimizing prices based on competitor pricing, adjusting product prices to remain competitive without sacrificing profitability. 6) Overbooking Management: Overbooking management involves routinely overbooking services to compensate for no-shows. Airlines use historical data and algorithms to predict the likelihood of no-shows and adjust seat availability accordingly. 7) Distribution Channel Management: Distribution channel management involves allocating inventory across various sales channels, with prices varying to maximize revenue. An example is hotels allocating room inventory to their website, online travel agencies (OTAs), and direct sales, with different prices on these channels. 8) Promotion and Discount Management: Promotion and discount management entail planning and executing promotions, discounts, and offers to boost sales and revenue without eroding profitability. An example is a clothing retailer offering discounts on select items during a seasonal sale to attract more customers while maintaining regular prices for the rest of their merchandise. 9) Bundle and Package Pricing: Bundle and package pricing involve offering bundled products or services at a lower price compared to individual purchases. A common example is fast-food chains offering value meals that bundle a burger, fries, and a drink at a discounted price. 10) Contract and Subscription Management: Contract and subscription management entail optimizing pricing and terms for long-term contracts, subscriptions, and recurring revenue models. An example is streaming music services offering premium subscriptions with ad-free listening and offline downloads, enticing users to upgrade from the free tier. 11) Event-Based Pricing: Event-based pricing involves charging higher prices for tickets, concessions, or merchandise for highly anticipated events, such as sports playoffs or rival matchups. 12) Loyalty Programs: Loyalty programs reward customers for repeat business. Airlines often offer tiered loyalty programs with benefits like lounge access, priority boarding, and bonus miles for higher-tier members. 13) Dynamic Inventory Management: Dynamic inventory management involves adjusting inventory levels and pricing to maximize freshness and minimize waste. An example is restaurants offering daily specials based on seasonal ingredients. 14) Data Analytics: Data analytics involves analyzing customer behavior, identifying trends, and recommending personalized products and prices. E-commerce companies use data analytics to offer personalized product recommendations and pricing. 15) Rate Fences: Rate fences involve charging different rates for services based on factors like advanced booking, cancellation policies, or room types, commonly used by hotels.  Chapter 4. SERVICE MARKETING COMMUNICATION Service marketing communication refers to the strategies and activities that service providers use to promote their services, engage with customers, and create a positive brand image. In this chapter it addresses the 5 Ws of the Integrated Service Communications Model, that is, Who, What, How, Where, and When. WHO is our target audience? The target audience refers to the specific group of people or businesses that a service provider aims to reach and engage with through its marketing efforts. Identifying the target audience helps in tailoring messages, channels, and strategies to best resonate with and appeal to the intended recipients. WHAT do we need to communicate and achieve? What to Communicate: 1. Service Value Proposition: Communicate the unique value that the service offers to customers. Highlight what sets it apart from competitors and how it addresses the specific needs or problems of the target audience. 2. Service Features and Benefits: Clearly explain the features and benefits of the service. Describe how it works, what customers can expect, and how it will improve their lives or businesses. 3. Pricing and Value: Communicate pricing information transparently and justify it by emphasizing the value customers will receive in return. Explain any pricing tiers, packages, or discounts available. 4. Trust and Credibility: Build trust and credibility by sharing information about the company's history, expertise, certifications, awards, and customer testimonials. Show why customers can rely on the service. 5. Call to Action: Encourage the target audience to take specific actions, such as signing up for a newsletter, requesting a demo, making a purchase, or scheduling an appointment. Use clear and persuasive calls to action (CTAs). What to Achieve: 1. Awareness: Create awareness about the service among the target audience. Ensure that potential customers know that the service exists and understand its basic features. 2. Interest: Generate interest and curiosity about the service. Convince potential customers that the service is worth exploring further.  3. Desire: Foster a desire for the service by highlighting its benefits, solving pain points, and demonstrating its value. Encourage potential customers to see the service as a solution to their needs. 4. Action: Drive specific actions from the target audience, such as making a purchase, signing up for a free trial, or contacting the company for more information. Once the customer had their action, the next to achieve are; 1. Customer Loyalty: Nurture existing customer relationships through ongoing communication. Encourage repeat business, referrals, and positive reviews. 2. Brand Equity: Enhance the overall perception of the brand by consistently delivering valuable and relevant content. Strengthen the brand's position in the market. 3. Market Positioning: Establish the service as a leader, innovator, or specialist in its industry or niche. Differentiate the service from competitors. 4. ROI (Return on Investment): Measure the effectiveness of marketing communication efforts by tracking key performance indicators (KPIs), such as conversion rates, customer acquisition costs, and customer lifetime value. HOW should we communicate this? The marketing communication mix, also known as the promotional mix, is a set of tools and strategies that organizations use to communicate and promote their products or services to their target audience. The marketing communication mix typically includes several key elements:  Personal Communication: This involves one-on-one interactions between sales representatives or company representatives and potential customers. It's often used for consultative selling and building relationships with customers.  a. Selling: Sales representatives interact one-on-one with potential customers, guiding them through the buying process. b. Customer Service: Providing support and solutions to customer inquiries, complaints, and issues, enhancing satisfaction and loyalty. c. Training: Educating customers on how to use products or services effectively through manuals, tutorials, and workshops. d. Telemarketing: Using phone calls to introduce products or services and persuade potential customers to make a purchase. e. Word of Mouth: Satisfied customers recommending products or services to others, influencing the company's reputation, and attracting new business.  Advertising: Advertising is a paid form of communication where messages are disseminated through various media channels to reach a broad audience. It's a powerful tool for creating awareness and delivering messages consistently. a. Broadcast: TV and radio ads. b. Print: Newspaper and magazine ads. c. Internet: Online ads across websites and social media. d. Outdoor: Billboards and transit ads. e. Direct Mail: Physical promotional materials sent by mail.  Sales Promotion: Sales promotions are short-term incentives or discounts designed to encourage immediate action from customers. This includes tactics like sampling, coupons, sign up events, gifts, price promotion, contests, discounts, and loyalty programs.  Publicity and Public Relations: Publicity is the process of gaining media coverage through press releases, news stories, and other non-paid means. Public relations (PR) involves managing a company's reputation and building positive relationships with the public, which includes media relations, events, and community engagement.  Instructional Materials: These materials are designed to educate and inform customers about a product or service. They can include user manuals, guides, how-to videos, and tutorials to help customers understand and use the offering effectively.  Corporate Designs: Corporate design elements encompass the visual identity of a company, including logos, branding, typography, color schemes, and design guidelines. These elements help create a consistent and recognizable brand image. Effective service marketing communications aim to create a consistent and compelling brand image, convey the unique value of the service, and build trust with the target audience. These efforts ultimately contribute to attracting and retaining customers and driving business growth in the competitive service industry. WHERE should we communicate this? Determining where to communicate your service marketing messages involves selecting the most appropriate channels and platforms to reach your target audience effectively. The choice of communication channels should align with your service, the characteristics of your target audience, and your overall marketing objectives. 1. Website: Your website serves as a central hub for information about your service. Ensure it is well-designed, user-friendly, and optimized for search engines (SEO) to attract organic traffic. Include clear and compelling service descriptions, pricing details, contact information, and calls to action. 2. Social Media: Utilize social media platforms such as Facebook, Twitter, Instagram, LinkedIn, and others that align with your target audience. Share relevant content, engage with followers, and use paid advertising options to reach a broader audience. 3. Email Marketing: Build and maintain an email list of interested prospects and existing customers. Send regular newsletters, promotional offers, updates, and educational content to keep them informed and engaged. 4. Content Marketing: Create and share valuable content such as blog posts, videos, infographics, and eBooks on your website and through social media channels. Content marketing establishes your authority in the industry and attracts organic traffic. 5. Online Advertising: Utilize pay-per-click (PPC) advertising, display ads, and social media advertising to reach specific audiences based on demographics, interests, and behavior. Platforms like Google Ads and Facebook Ads offer powerful targeting options. 6. Public Relations (PR): Use PR to gain media coverage through press releases, news stories, and interviews. Establish relationships with industry influencers who can amplify your messages. 7. Events and Webinars: Host or participate in events, trade shows, conferences, and webinars relevant to your industry or niche. These platforms provide opportunities to showcase your service and interact with potential customers. 8. Online Reviews and Ratings: Encourage satisfied customers to leave reviews and ratings on platforms like Google Reviews, Yelp, and industry-specific review sites. Positive reviews build trust and credibility. 9. Search Engine Optimization (SEO): Optimize your online content to improve its visibility in search engine results. This ensures that potential customers can find your service when searching for related keywords. 10. Community Engagement: Engage with local or online communities, forums, and social groups where your target audience participates. Active participation and helpful contributions can boost your visibility and reputation. 11. Direct Mail: If applicable, consider direct mail marketing to reach specific demographics or geographic areas with physical promotional materials.  12. Mobile Marketing: Optimize your online presence for mobile devices to reach users on smartphones and tablets. This includes having a mobile-responsive website and possibly mobile app advertising. WHEN do the communications need to take place? The timing of service marketing communication is critical to ensure that your messages reach your audience when they are most receptive and likely to act. When planning when to communicate, consider the following key moments: 1. Pre-Launch: Prior to launching a new service, create anticipation and excitement by sharing teasers, sneak peeks, and countdowns to build interest among your audience. 2. Launch: Announce the service launch with a comprehensive marketing campaign, including press releases, social media announcements, and email newsletters. Highlight the service's unique features and benefits. 3. Ongoing: Maintain a consistent presence in your chosen communication channels. Regularly share updates, educational content, and promotional offers to keep your audience engaged. 4. Seasonal and Special Occasions: Align marketing efforts with relevant holidays, seasons, or special occasions that may be relevant to your service. Create themed campaigns and promotions. 5. Customer Onboarding: Communicate with new customers to guide them through the onboarding process. Provide instructions, tutorials, and support to ensure they can effectively use the service. 6. Customer Support and Assistance: Be readily available to address customer inquiries, concerns, or issues. Prompt and helpful responses enhance the customer experience. 7. Announcements and Updates: Inform customers of any service improvements, updates, or new features. This demonstrates your commitment to enhancing their experience. 8. Special Promotions and Sales: Launch limited-time promotions, discounts, or loyalty programs to encourage repeat business and attract new customers. 9. Feedback and Reviews: Request customer feedback and encourage them to leave reviews after they have experienced the service. Positive reviews can be used for further marketing. 10. Renewals and Retention: For subscription-based services, communicate with customers before renewal dates, offering incentives or reminders to retain their subscription. 11. Reactivation Campaigns: Reach out to inactive or lapsed customers with targeted reactivation campaigns, reminding them of the value of your service. 12. Event-Based Communication: Send personalized messages for birthdays, anniversaries, or other milestones to show appreciation and build customer loyalty. 13. Crisis Communication: In the event of a service issue or crisis, communicate transparently with affected customers, providing updates and solutions.  14. Competitive Advantages: Capitalize on opportunities to communicate how your service outperforms competitors, such as awards, certifications, or unique offerings. 15. Seasonal Adjustments: Modify marketing efforts based on seasonality, trends, or changing customer needs. The Importance of Integrated Marketing Communications to Deliver A Strong Brand Identity Have you ever encountered a situation where you spotted an enticing new service promotion on a company's website, but when you visited one of their branch offices, the staff had no knowledge of the promotion and couldn't offer it to you? This issue often stems from the fact that different departments within service-oriented firms independently manage various aspects of marketing communications. For instance, the marketing department takes care of advertising, PR handles public relations, specialists manage the website and promotions, customer service oversees operations, and human resources is responsible for training. The good news is, this communication disconnect can be addressed through a concept known as Integrated Marketing Communications (IMC). IMC ensures that there's a consistent message and brand image across all communication channels. This can be achieved by centralizing IMC within a single department, like marketing, or by appointing a Marketing Communications Director who has overall responsibility for coordinating all communications efforts. It's all about making sure everyone's on the same page. Summary: Chapter 1, "Developing Service Products and Brands," introduces the concept of a service "product" as a combination of physical and intangible elements that deliver value to customers, encompassing the core product, representing the primary benefit sought by customers, supplementary services that enhance the overall experience, and the associated delivery processes. The Flower of Service framework is used to illustrate these elements. In addition, New Service Development focused its shifts to innovation in service provision, with six categories of innovation explored, ranging from simple style changes to major service innovations. Success in new service development hinges on market synergy, where the new service aligns seamlessly with the organization's brand and resources, strong organizational factors, fostering inter- functional cooperation and staff understanding, and thorough market research to inform the development process. Chapter 2, "Distributing Services through Physical and Electronic Channels," covers the core aspects of service distribution, addressing what, how, where, and when services are delivered. It delves into the significance of these factors in shaping distribution strategies for services. "What" focuses on information dissemination and service features, "how" considers in-person and remote interactions, "where" explores location decisions, and "when" analyzes timing factors. All of these elements influence customer convenience, operational efficiency, and strategy alignment with market dynamics. Chapter 3 highlights the significance of pricing objectives, which include revenue, user base expansion, and positioning strategies. It introduces the pricing tripod: cost-based, value-based, and competitive pricing. Moreover, it delves into Revenue Management, which optimizes pricing and product availability based on micro-level consumer behavior prediction. The lesson encompasses diverse revenue management techniques like dynamic pricing, demand forecasting, yield management, segmentation, price optimization, overbooking, distribution channels, promotions, bundles, contracts, event pricing, loyalty programs, inventory management, data analytics, and rate fences, all aimed at maximizing revenue by targeting the right customers with the right products at the right times. Chapter 4 explores service marketing communication, focusing on the Integrated Service Communications Model's 5 Ws: Who (target audience), What (communication content and objectives), How (communication mix), Where (communication channels), and When (timing). It underscores the significance of Integrated Marketing Communications (IMC) to ensure consistent brand messaging and unity across various departments in service-oriented firms, enabling effective promotion, customer engagement, and a positive brand image.