Introduction

Services

Marketing became a new academic field in 1970.

This

is not just a buzzword.

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Introduction
Services

are intangible because they are performances rather than objects.

Hence,

they present problems and opportunities which are different from those for tangible goods.

Service Characteristics
Intangibilit Inseparabil y ity SERVICES Variability Perishabilit y
2012 Pearson Education

Problems Due to Intangibility

Cannot be stored (inventoried) and therefore creates problems for uneven demand (perishable).

Inseparability

the service providers physical connection to the service being provided

Inseparability

the customers involvement in the service production process

Internal Marketing

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Inseparability
the

involvement of other customers in the service production process

Marketing Problems Caused by Inseparability

The Customer is Involved in the Production Process Presence is necessary. This ranges from physical presence (e.g. haircut) to virtual presence (e.g. Amazon) The production process in services must always take the customer into consideration because of simultaneous production and consumption.
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Marketing Problems Caused by Inseparability

There is an inverse relationship between the level of customer contact and the efficiency of operation. This is due to uncertainty in the scheduling of production and the standardization of the service delivery; the more the customer provides input into the process, the more it affects the service delivery.

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Marketing Problems Caused by Inseparability

Involvement of Other Customers in the Production Process

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Marketing Problems Caused by Inseparability

Several customers share a common service experience. noise Behavior (can create delays) presence or absence of customers provide a marketing cue such as Chinese customers in a Chinese restaurant
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Solutions to the Inseparability Problems

1.

Proper selection of Contact personnel

- They must have the right attitude. (e.g. good people skills) - the nicest people are usually the ones in the reception desk
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Solutions to the Inseparability Problems

2. Proper training of contact personnel

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Solutions to the Inseparability Problems

3. Customer Management
a. Inform/educate the customers on their role (e.g. bank lines) b. Separate the customers into groups (smokers vs. non-smokers, couples vs. families, first-class vs. tourist class)

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Interactive Marketing

2012 Pearson Education

Solutions to the Inseparability Problems

4. Use of Multisite Locations to reduce the travel required of customers to allow customization of services

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Problems Due to Intangibility

Cannot be patented (easier to copy compared to goods)

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Problems Due to Intangibility

More difficult to market because it is intangible

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Problems Due to Intangibility

More difficult to price Compared to tangible goods, customers cannot easily comprehend why a service deserves the price that it commands.

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Solutions to Intangibility Problems

Use tangible clues or symbols just like in poetry Provide the appropriate ambience. e.g. Fast Food versus Fine Dining

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Perishability
demand is more difficult to meet for services because they cannot be inventoried

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Perishability
the opportunity cost is higher because they cease to exist when they are not sold even though they are available (e.g. empty airline seat) Creates marketing problems as well as opportunities

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Signaling Effect of Price

The price is an indicator of service quality.

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Price Sensitivity

Demand for services tends to be more inelastic. The differences between services are not as obvious compared to goods.

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Price Sensitivity Decreases as:

the difficulty in comparing substitutes increases e.g. Generic Drugs Perfume

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Price Sensitivity Decreases as:

the extent to which price is used as a quality cue increases e.g. High-priced resorts.

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Criteria for Effective Price Segmentation

Price segmentation can be easily understood by consumers to avoid dissatisfaction. e.g. Airline tickets

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Competitive Considerations

Comparative shopping is sometimes more difficult for services compared to goods - because different goods are displayed together in the same store. This is now easier due to the internet.
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Inadequate Management of Customer Expectations

Marketing must accurately (if compellingly) reflect what happens in actual service encounters; operations must deliver what is promised in communications.

Inadequate Management of Customer Expectations

In promoting and differentiating the service, the company cannot afford to raise expectations above the level at which its consultants can consistently perform.

Inadequate Management of Customer Expectations

The customer expects the kind of service and service personnel that are shown in advertising. (N.B. flight attendants)

Inadequate Customer Education

Differences between service delivery and promises also occur when companies do not sufficiently educate their customers.

Inadequate Customer Education

Research has shown that one-third of all customer complaints are caused by customers themselves.

Inadequate Customer Education

Inexperienced customers may not understand how to use the services correctly.

Variability
Because: company communications about services promise what people do, and because peoples behavior cannot be standardized like physical goods produced by machines, the potential for mismatch between customer expectations and perceptions of service delivery is high.

Inadequate Internal Marketing Communications

If company advertising and other promises are delivered without input from operations, contact personnel may not be able to deliver service that matches the image portrayed in marketing efforts.

Manage Service Promises

Successful services advertising and personal selling become the responsibility of both marketing and operations.

How to Create Effective Services Advertising

Use narrative to demonstrate the service experience many services are experiential; use storybased appeals

How to Create Effective Services Advertising

Present vivid information - use information which creates a strong or clear impression on the senses and produces a distinct mental picture; evoke a strong emotion

How to Create Effective Services Advertising

Encourage Word-of-Mouth Communication people often turn to others for information rather than to traditional marketing channels

Coordinate External Communication

Service brands are not created solely in advertising. Much of a brands equity comes from the direct consumer experiences with the brand.

Improve Customer Education

Prepare customers for the service process through education and constant reminders.

Improve Customer Education

Teach customers to avoid peak demand via information, pricing incentives

Guidelines About Exceeding Expectations

Understand:
what customer group or segment is to be targeted

Under-promise and Over-deliver

e.g. the queuing times at Disney rides