M7

Role of Marketing Communication

Pricing of services

Contents
Key reasons for GAP 4 involving communication 4 categories of strategies to match service promises with delivery

Marketing Communication
Categories of Communication

Interpersonal Communication

Mass Communication

Communications and the Services Marketing Triangle

Company

Internal Marketing
Vertical Communications Horizontal Communications

External Marketing Communication

Advertising Sales Promotion Public Relations Direct Marketing

Employees

Interactive Marketing
Personal Selling Customer Service Center Service Encounters Servicescapes

Customers

Reasons for Service Communication Problems

1. Inadequate management of service promises 2. Elevated customer expectation 3. Insufficient customer education 4. Inadequate internal communication

categories of strategies to match service promises with delivery

Manage Customer Expectations

Manage Service Promises

Goal: Delivery greater than or equal to promises

Improve Customer Education

Manage Internal Marketing Communication

Managing Service Promises

Create Coordinate Effective External Services Communication Communications

Make Realistic Promises

Offer Service Guarantees

Goal: Delivery greater than or equal to promises

1.Manage Promises
Create Effective Service Advtg. Offer Service Guarantee Make realistic promises Co-ordinate External Communications

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Managing Customer Expectations

Offer Choices

Create Tiered-Value Offerings Communicate Criteria for Service Effectiveness

Negotiate Unrealistic Expectations
Goal: Delivery greater than or equal to promises

Approaches for Managing Customer Expectations

1. Make realistic promises 2. Offer service guarantees

3. Offer choices
4. Create tiered-value service offerings

5. Communicate the criteria and levels of service effectiveness

Improving Customer Education

Goal: Delivery greater than or equal to promises

Prepare Customers for the Service Process

Confirm Performance to Standards

Clarify Expectations after the Sale

Teach Customers to Avoid Peak Demand Periods and Seek Slow Periods

Approaches for Managing Customer Education

Prepare customers for the service process Confirm performance to standards and expectations Clarify expectations after the sale

Teach customers to avoid peak demand periods and to seek slow demand periods

Managing Internal Marketing Communications

Goal: Delivery greater than or equal to promises
Create Effective Vertical Communications

Create Effective Horizontal Communications

Align Back Office Personnel w/ External Customers Create Cross-Functional Teams

Approaches for Managing Internal Marketing Communication

Sell the brand inside the company Create effective upward /horizontal communication Align back-office and support personnel with external customers through interaction or measurement Maintain a customer focus throughout all functions

DHLs Integrated Marketing Campaign

Source: http://www.newdhl.com/advertising.asp?cid=dhlbt1hmpg1

DHLs Outdoor Advertising

DHLs Print Advertising

DHLs Print Advertising Links to Employees

Pricing of services

Role of price and value in provider GAP 4 Role of non-monitory cost Price as an indicator of service quality Approaches to pricing services Pricing strategies

Figure 16-2

What Do Customers Know about the Prices of Services?

? ?

3 Basic Price Structures and Difficulties Associated with Usage for Services
PROBLEMS:
1. Small firms may charge too little to be viable 2. Heterogeneity of services limits comparability 3. Prices may not reflect customer value

PROBLEMS:
1. Costs difficult to trace 2. Labor more difficult to price than materials 3. Costs may not equal value

PROBLEMS:
1. Monetary price must be adjusted to reflect the value of non-monetary costs 2. Information on service costs less available to customers, hence price may not be a central factor

Customer Often Lack of Knowledge of Service Prices

Customers often lack reference prices for service Service variability limits knowledge Providers are unwilling to estimate prices Collection of price information by customers is difficult Prices are not visible

Role of Non-monetary Price

Time costs Search costs Convenience costs Psychological costs

Do you trade time for money?

Time costs
Most services require direct participation of the consumer and thus consume real time: time waiting as well as time when the customer interacts with the service provider.

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onsider the investment you make to exercise, see a physician, or get through the crowds to watch a concert or baseball game. Not only are you paying money to receive these services; youre also expending time. Time becomes a sacrifice made to receive service in multiple ways. First, because service providers cannot completely control the number of customers or the length of time it will take for each customer to be served, customers are likely to expend time waiting to receive the service. Waiting time for a service is virtually always longer and less predictable than waiting time to buy goods

Search costs

17-32

Search coststhe effort invested to identify and select among ser vices you desireare also higher for services than for physical goods. Prices for services are rarely displayed on shelves of service establishments for customers to examine as they shop, so these prices are often known only when a customer has decided to experience the service

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Another factor that increases search costs is that each ser vice establishment typically offers only one brand of a service (with the exception of brokers in insurance or financial services), so a customer must initiate contact with several different companies to get information across sellers.

Convenience costs

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There are also convenience (or perhaps more accurately inconvenience) costs of services. If customers have to travel to a service, they incur a cost, and the cost becomes greater when travel is difficult, as it is for elderly persons.

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Further, if service hours do not coincide with the customers available time, they must arrange their schedules to correspond to the companys schedule. And if consumers have to expend effort and time to prepare to receive a service (such as removing all food from kitchen cabinets in preparation for an exterminators spraying), they make additional sacrifices.

Psychological costs

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Often the most painful nonmonetary costs are the psychological costs incurred in receiving some services. Fear of not understanding (insurance), fear of rejection (bank loans), fear of uncertainty (including fear of high cost) all of these, constitute psychological costs that customers experience as sacrifices when purchasing and using services. All change, even positive change, brings about psychological costs that consumers factor into the purchase of services.

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When banks first introduced ATMs, customer resistance was significant, particularly to the idea of put ting money into a machine: customers felt uncomfortable with the idea of letting go of their checks and bank cards. Direct deposit, a clear improvement in banking service for the elderly with limited mobility, was looked on with suspicion until the level of comfort improved.

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Price as an indicator of Service Quality

Price as an indicator of Service Quality

One of the intriguing aspects of pricing is that buyers are likely to use price as an indicator of both service costs and service qualityprice is at once an attraction variable and a repellent. Customers use of price as an indicator of quality depends on several factors, one of which is the other information available to them.

 When service cues to quality are readily accessible, when brand names provide evidence of a companys reputation, or when level of advertising communicates the companys belief in the brand, customers may prefer to use those cues instead of price.

 In other situations, however, such as when quality is hard to detect or when quality or price varies a great deal within a class of services, consumers may believe that price is the best indicator of quality.

 Many of these conditions typify situations that face consumers when purchasing services. Another factor that increases the dependence on price as a quality indicator is the risk associated with the service purchase. In high-risk situations, many of which involve credence services such as medical treatment or management consulting, the customer will look to price as a surrogate for quality.

A Customer-Focused Approach to The Pricing Process

Understand Customer Value
Determine Demand based on Competition and Offering Estimate Cost, Revenues and LTV Establish a Pricing Structure and Level Set Final Price

4 Customer Definitions of Value

Value is Low Price

Value is Everything I Want in a Service

Value is the Quality I Get for the Price I Pay

Value is All that I Get for All that I Give

Pricing Strategies When the Customer Defines Value as Low Price

Value is Low Price

Discounting Odd Pricing Synchro-pricing Penetration Pricing

Pricing Strategies When the Customer Defines Value as Everything Wanted in a Service

Value

is Everything I Want in a Service

Prestige Pricing Skimming Pricing

Pricing Strategies When the Customer Defines Value as Quality for the Price Paid

is the Quality I Get for the Price I Pay

Value Pricing Market Segmentation

Value

Pricing

Pricing Strategies When the Customer Defines Value as All that is Received for All that is Given

Value is All that I Get for All that I Give

Price Framing Price Bundling Complementary Pricing Results-based Pricing

Summary of Service Pricing Strategies for Four Customer Definitions of Value

Value is Low Price

Value is Everything I Want in a Service

Prestige Pricing Skimming Pricing

Discounting Odd Pricing Synchro-pricing Penetration Pricing

Value is the Quality I Get for the Price I Pay

Value Pricing Market Segmentation

Value is All that I Get for All that I Give

Price Framing Price Bundling Complementary

Pricing

Pricing
Results-based Pricing