© 2000 South-Western College Publishing1 CHAPTER TWELVE SERVICES AND NONPROFIT ORGANIZATION MARKETING Prepared by Jack Gifford Miami University (Ohio)

© 2000 South-Western College

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CHAPTER TWELVE

SERVICES AND NONPROFIT ORGANIZATION MARKETING

Prepared by Jack Gifford

Miami University (Ohio)


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IMPORTANCE OF SERVICES

A service is the result of applying human or mechanical efforts to people or objects

Services involve a deed, a performance, or an effort that cannot be physically possessed


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IMPORTANCE OF SERVICES

ServiceSector

Non-serviceWorkers

0%

10%

20%

30%

40%

50%

60%

70%

80%

Service Product

GDP

SERVICEWORKERS

More than 8 of 10 workers currently labor to produce services

The service sector accounts for 74% of the U.S. Gross Domestic Product


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HOW SERVICES DIFFER FROM GOODS

Intangibility

Inseparability

Heterogeneity

Perishability

They cannot be touched, seen, tasted, heard, or felt or stored.

Few search qualities (characteristics that can be easily assessed before purchase)

More experience quality (can be assessed only after use)

Credence quality (difficult to assess even after purchase; i.e. medical services)


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Intangibility

Inseparability

Heterogeneity

Perishability

Production and consumption activities are inseparable Airline and flight from A to B Surgeon and patient

Services cannot normally be produced in a centralized location and consumed in decentralized locations Your hotel room and you must

be in the same physical location Service quality is largely

dependent upon the quality of employees


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Intangibility

Inseparability

Heterogeneity

Perishability

Services tend to be less standardized and uniform than products due to their dependence upon the performance of individual employees/individuals

Some level of consistency is gained through training, standard operating procedures, and mechanization of support areas Airport X-ray surveillance Automatic coin receptacles on

toll roads


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Intangibility

Inseparability

Heterogeneity

Perishability

Services cannot be stored, warehoused or inventoried An empty seat in a theatre

cannot produce revenue later

A car not rented results in no revenue for that day

This condition of perishability results in discount pricing of services at almost any price greater than their variable cost.


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SERVICE QUALITY

Business executives and consumer rank the improvement of service quality as one of the most critical challenges facing them today.

Quality is normally judged on the basis of…

•Reliability

•Responsiveness

•Knowledge, courtesy and trust (Assurance)

•Empathy

•Tangibles (physical evidence of the service, such as uniforms, diplomas, office ambiance, etc.)


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Managing service quality

The effective marketing of services requires that managers learn what customers want and expect in their interaction with the service provider (service encounter). If expectations do not equal experience, a gap exists.

EXPECTED SERVICE-PERCEIVED SERVICE GAP ANALYSIS


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GAP ANALYSIS

Customerexpectations

Mgt. expectations of customer expectations

Standards specifying services to be

delivered

Actual services delivered

Retail communications about services

Customer perception of service

Knowledge gap

Standards gap

Delivery gap

Communications gap

Service gap

DISCUSS


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MARKETING MIXES FOR SERVICES

Elements of the marketing mix (product, distribution, promotion, and pricing) need to be adjusted to meet the special needs created by the unique characteristics of services just discussed

Two hour repair service guarantee for business computers by...


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MARKETING MIXES FOR SERVICES: Product

Product (Service Strategy) People processing (transportation services,

health clubs) Possession processing (lawn or car repairs) Information processing (accounting, training,

financial services) Core and supplementary services

Core Federal Express services = overnight delivery Supplementary services = package tracking and

capturing the signature of the recipient


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CORE AND SUPPLEMENTARY SERVICES

Clean clothes •On hangers or folded

•Level of starch

•Bagged in plastic or boxed

•Drive-through pick and drop off


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MARKETING MIXES FOR SERVICES: Product

Product (Service Strategy) - continued Customized services vs standardized services

Standardized Economies of scale Lower cost More efficient

Customized May better satisfy the needs of the customer Higher cost and less efficient

Mass customization The use of technology to deliver customized services on a mass

basis. Major direction of the future of service marketing!


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CONCEPT OF MASS CUSTOMIZATION

Relates to the ability of marketing service organizations to offer “packages” of services individually adjusted for each customer to a large target market. Medical benefit packages Travel and vacation packages Airline service (time, food, music)


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MARKETING MIXES FOR SERVICES: Service and Distribution

The Service Mix Service organizations offer multiple services.

Designing a service strategy means deciding what new services to introduce to which target markets, what existing services to maintain, and what services to eliminate.

Distribution Strategy Number of outlets Direct vs indirect distribution Location(s) Scheduling


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MARKETING MIXES FOR SERVICES: Promotion

Promotion Strategy Stressing tangible clues (You’re in

good hands... with Allstate) Using personal information sources

(celebrity endorsements) Create a strong organizational image

(McDonald’s Golden Arches) Engage in post purchase

communication (call to make sure your car service repair experience was satisfactory)


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MARKETING MIXES FOR SERVICES: Price

Price Strategy Pricing may be based

upon a specific task accomplished, time consumed by the task, the consumption of goods, or the expertise of the service provider

Prices are sometimes bundled and other times a la carte.

•Pricing strategies might include:

•Revenue-oriented pricing

•Operations-oriented pricing

•Patronage-oriented pricing

•A combination of the above


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MARKETING MIXES FOR SERVICES: Relationship Marketing

Involves ongoing interaction between the service organization and the customer.

Desire to create loyalty, mutually beneficial transactions, and a win-win environment

•Pricing incentives, like frequent flier programs

•Social incentives, like an online reminder to renew ones driver license (AAA)

•A combination of the above, such as the no hassle Hertz rental program for frequent users.


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INTERNAL MARKETING ENHANCES RELATIONSHIP BUILDING

Public relations efforts to own employees

Employee empowerment

Participative management

“We love to fly and it shows!

Delta Airlines


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NONPROFIT MARKETING

A nonprofit organization is an organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment.

Account for over 20% of the economic activity in the united States. The largest nonprofit entity by far in the United States includes federal, state and local government expenditures and purchases.


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WHAT IS NONPROFIT ORGANIZATION MARKETING?

Is the effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets through the following marketing activities: Identify customers they

wish to serve or attract Specify objectives Develop and manage

programs and services

Decide on prices to charge (fees, donations, tuition, fares, fines, rates, etc.)

Schedule events or programs and determine where they will be held or where services will be offered

Communicate through signs, brochures, advertisement, or public service announcements


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Objectives are very different Target marketing differences Product and Service decisions Distribution decisions Promotional decisions Pricing decisions Measures of success

UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES

•Change opinions

•Correct social problems

•Provide ideas and beliefs

•Target individuals that may not desire their services or are not adequately provided for from other sources


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•Market complex behaviors or ideas

•Sometimes weak benefits perceived

•May involve low or high involvement messages

•Often marketed where and when the target market dictates


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•Volunteers

•Sales promotion activities

•Public service advertising

•Licensing agreements

•Prices to support costs

•Indirect payment through taxes

•Payment through contributions

•Below cost pricing

•Number of persons helped

•Attitudes changed or converted

Documents

© 2000 South-Western College Publishing1 CHAPTER TWELVE SERVICES AND NONPROFIT ORGANIZATION MARKETING Prepared by Jack Gifford Miami University (Ohio)