Week 7 Services Marketing PDF

Week 7 Services Marketing (Chapter 7)  LEARNING OBJECTIVES 1) Understand the nature and importance of services 2) Identify the characteristics of services that differentiate them from physical goods. 3) Analyze how the characteristics of services influence the development...

Week 7 Services Marketing (Chapter 7)  LEARNING OBJECTIVES 1) Understand the nature and importance of services 2) Identify the characteristics of services that differentiate them from physical goods. 3) Analyze how the characteristics of services influence the development of the marketing mix for services. THE NATURE OF SERVICES All products contain both tangible and intangible elements. Thus, products should be marketed with such combination in mind. However, services are dominated by the intangible elements of the total product. Services are ubiquitous. What is a service? A service is the result of the application of human and/or mechanical efforts to people or objects (e.g. entertainment, education or a medical examination). Any act, performance or experience that one party can offer to another that is mainly intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. provided through the application of intellectual or physical efforts to a person or physical object Examples of Service Industries Child care Air travel Legal advice Insurance Taxis/Uber/Ubereats Accounting Repairs Banking Security Doctor Electricity Cleaning Consulting Hairdresser Education Phone services Four service characteristics Intangibility Intangibility – a service is not physical and cannot be perceived by the senses Is the major characteristic that distinguishes a service from a good Services cannot be physically possessed The level of intangibility of a service increases the overall importance of the brand image when a consumer is deciding which to purchase Intangibility creates feelings of uncertainty or anxiety on part of consumer To reduce this anxiety: Use tangible cues (logos, uniforms) Use guarantees, testimonials and word-of-mouth (e.g., tripadvisor) Servicescape The décor at a restaurant The Tangibility Continuum Pride/Ferrell, Marketing 2020, 20th Edition. © 2020 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Inseparability of Production and Consumption Inseparability – The quality of being produced and consumed at the same time Production of a service cannot be separated from its consumption by customers Customers must be present at the consumption of the service and cannot take the service home Implies a shared responsibility between the customer and service provider (co-created) Implications: Direct sale only channel Limits scale of operation (can we automate?) Can customise.  Perishability Perishability – The inability of unused service capacity to be stored for future use Service marketers face several hurdles in trying to balance supply and demand Goods marketers can handle the supply–demand problem through production scheduling and inventory techniques Supply and demand can be balanced by: stimulating demand (e.g. cheaper movie tickets on Tuesdays) restricting demand increasing or decreasing supply capacity Special product offerings Reservation systems Flexible pricing can be used. (yield management)  Heterogeneity (Variability) Heterogeneity – Variation in quality Because of the nature of human behavior, it is very difficult for service providers to maintain a consistent quality of service delivery Although many service problems are one-time events that cannot be predicted or controlled ahead of time, employee training and the establishment of standard procedures can help increase consistency and reliability Heterogeneity usually increases as the degree of labor intensiveness increases Equipment-based services have greater homogeneity than people-based services Key strategies to overcome heterogeneity include: develop service delivery systems (e.g. McDonald’s) or automate manage customer expectations invest heavily in staff training/reward systems Quality control (e.g., mystery shoppers) Service Characteristics and Marketing Challenges Service Characteristics Resulting Marketing Challenges Intangibility Difficult for customer to evaluate. Customer does not take physical possession. Difficult to advertise and display. Difficult to set and justify prices. Service process is usually not protectable by patents. Inseparability of production and Service provider cannot mass-produce services. consumption Customer must participate in production. Other consumers affect service outcomes. Services are difficult to distribute. Perishability Services cannot be stored. Balancing supply and demand is very difficult. Unused capacity is lost forever. Demand may be very time sensitive. Heterogeneity Service quality is difficult to control. Service delivery is difficult to standardize. THE TRADITIONAL MARKETING MIX The controllable variables used in strategic marketing planning to respond to changing market conditions.  Creating Marketing Mixes for Services Development of services (service product) Services are offered as a bundle consisting of core service and supplementary service Services are offered as a standardised package ‘Tangibilising’ the intangible component of services Pricing of services Prices are set based on different variables the performance of specific tasks time level of demand Price is often used as indicator of quality  Creating Marketing Mixes for Services (CoNT.) Distribution of services Short and direct marketing channels (inseparability) Many firms have changed a high-contact service into a low-contact one (e.g., banking) Changing the delivery of services has created some problems with customer attitudes and perceptions Promotion of services Typically includes tangible cues that symbolise the service (brand names, logos) Promotional Strategies to Suggest Benefits of Services (make more tangible) Visualisation Association Physical Representation Documentation THE EXPANDED MARKETING MIX Also known as the extended marketing mix, the expanded marketing mix, or 7Ps, comprises the traditional 4Ps PLUS – People – Physical evidence – Processes THE PEOPLE VARIABLE The actors involved with the process/experience when it takes place. Also known as participants = the ‘human’ aspect of products, services or experiences ME AND PERSONNEL OTHER CUSTOMERS Passers-by Aesthetic labour Emotional labour Co-creation C2C interaction CO-CREATION Occurs when the customer takes an active role in the experience and drives the experience according to their own preferences or values There is no experience without customer participation in the planned processes! PERSONNEL Employees are the ‘face of the company’. The right staff, suitably trained and in a functional work environment can enhance the customer’s overall impression of a company. Staff/customer interaction is ‘the moment of truth’. Each interaction tests the employer’s skills and training around customer service processes. It is central to the customer’s degree of satisfaction with the goods and services purchased. A disastrous service experience can be ‘rescued’ by a sympathetic staff member. Aesthetic Labour/Emotional Labour Customer-to-customer (C2C) INTERACTION Services and experiences are consumed in the presence of other customers Occurs when two or more customers share the consumption experience The evaluation of the service or experience is influenced by the presence of these other customers – Direct versus indirect impact – Positive versus negative impact Minimising Negative Interactions: - Position - Use layout and staff training - Establish minimum standards - Empower staff to monitor PHYSICAL EVIDENCE The tangible and intangible clues the customer may observe (e.g. maintaining tidy gardens outside the factory) Important for validation of the quality of services or experiences, and positioning Buildings, grounds and other physical assets – in services context, known as the servicescape  ATMOSPHERICS Atmospherics – a compelling and engaging atmosphere can communicate a company’s image. Current trends includes the use of music, scent, and lighting to control and influence customers’ perception. COMMON ATMOSPHERIC VARIABLES PROCESSES The flow and progress of the customers when they engage with the product or the company. The process should result in a performance that exceeds expectations (Functional expectations & customer service expectations) Queuing is very important, as is the impartial control of waiting times (fair procedures) Sensitivity, privacy and confidentiality of customer– company interactions Digital technology and the service process Consider whether we can make the service process steps faster, cheaper or more efficient MAPPING THE CUSTOMER EXPERIENCE Customer journey – total product/service experience visual tool that helps businesses understand what a customer goes through when buying a product or service Touch points – when and how customers interact with the company or staff members (buying the product, waiting for delivery) Each touch point is an opportunity for the customer to form opinions and attitudes about a company’s products or services Managers plan the total customer experience around these touch points