Marketing of Services. Nov 27th, 2009

This section covers:Specific characteristics of Services The Five Gap Model of Service Quality The Servuction System Model Defection Management and Customer Retention Management

Services Marketing

What is a Service vs Product?Def.: Goods are objects, devices, or things whereas services are deeds, efforts or performances. Ultimately, the primary difference between goods and services is the property of intangibility = the lacking of physical substance. Over 2/3rds of the Irish work force is employed in the services sector (67%+), compared with 26% in industry and 7% in agriculture.(2007)* (Declined overall for the 18th month until Oct 2009)

Scale of Market EntitiesThe scale of market entities displays a range of products along a continuum based on their tangibility. IntangibleTangibilityDominant

SaltTeachingSoft Drinks ConsultingDetergents InvestmentCars Airlines CosmeticsAdvertising Fast food

Search vs. Experience/Credence Attribute.All goods possess physical properties called search attributes that customers can feel, taste, and see prior to their purchase decision. Services are, in contrast, characterised by their experience and credence attributes.Experience attributes can be evaluated only during and after consumption Theatre, Beauty , hotel etcCredence attributes cannot be evaluated confidently even immediately after consumptionCar Servicing Did you get ripped off?

Differences b/w Service & ProductThe majority of differences in how to market services and goods/products are attributed to four unique characteristics:IntangibilityInseparabilityHeterogeneityPerishabilityIntangibility is the primary source from which the other three characteristics emerge. For example when purchasing a theatre ticket, you buy an experience. The play will be evaluated subjectively and compared to other peoples recommendations. Note: There may be some tangible aspects involved too.

Differences b/w Service & Product 2Inseparability is a distinguishing characteristic of service that reflects the interconnection among the service provider, the customer receiving the service, and other customers sharing the service experience, also called:Service Provider InvolvementCustomer InvolvementOther Customers Involvement, the impact here can be negative due to bad press or positive due to laughter, etc.You cant separate the service from the provider. Youre stuck with the waiter and other staff at the restaurant.

Variability is another characteristic of service that reflects the variation in consistency from one service transaction to the next. Again, why do people prefer some restaurants over others?

Differences b/w Service & Product 3Perishability is the characteristic that embodies the fact that services cannot be saved, or their unused capacity cannot be reserved, and they cannot be inventoried.Because of the effects of these 4 characteristics, marketing plays a very different role in service-oriented organisations than it does in pure goods companies. Because in a service organisation all parts of the company are interconnected by a complex network of relationships, the marketing dept. must maintain a close relationship with the rest of the service organisation!

The 3 PsAs well as Product Price Place & promotion, we have the concepts of:

1) Servicescape Physical EvidenceDue to the intangibility of services, customers often have trouble evaluating the quality of service objectively. As a result, consumers rely on the physical evidence that surrounds the service to help them form their evaluations.

Hence, the servicescape consists of ambient conditions (room temperature or music), inanimate objects (furnishings, equipment), and other physical evidence (signs, symbols, personal artifacts).

2) Service Providers - PeopleThe 2nd element of the service experience involves the personnel who provide the service.Simply, the public face of a service firm is its service providers. They have a dramatic impact on the service experienceCustomer complaints fall into 7 categories:Apathy- RobotismBrush-Off- RulebookColdness- RunaroundCondescensionNote: A Service providers personnel are the most important source of differentiation from competitors.Can I help you? Closed QAre you looking for anything in particular? - Open ended

3) Organisations & Systems (invisible)- ProcessesA firms organisation & systems refer to the technical efficiency that modern systems provide but they also involve a human component. (The staff) Example: Going on a cruise, the customer is exposed to many of the companys processes.

Conclusion:Service firms that are able to effectively mould the customers experience via the effective management of servicescape, service providers, organizations & systems have the means to develop compelling experiences which are the latest competitive weapon in the war against service commodification.

The 5 Gap Model of Service QualityThe service gap is the gap between customers expectations of service and their perception of the service actually delivered. The individual gaps that can occur are as follows:The Knowledge Gap: management thinks that customers expect less or different from their services.The Standards Gap: gap between standards set for delivery of service and what management wants to give.The Delivery Gap: actual quality of service delivery is less than expected.The Communications Gap: the difference between the delivery of service promised and that delivered.

Servuction System Model The production process of services has been called the servuction process (Eiglier and Langeard, 1977) It refers to the simultaneous production and consumption of services.The customer is present when the service is producedThe customer plays a role in the servuction and the delivery processCustomers interact with one another during the servuction process and may be affected (positively or negatively) by this interaction

Servuction Framework

Defection ManagementDefection Management refers to a systematic process which actively attempts to retain customers before they defect. It involves tracking the reasons for defection and use this information to make changes to service delivery.

Reasons for DefectionPrice defectors; switch to competitor for lower priceProduct defectors; switch to competitors who offer superior goods and servicesService defectors; switch because of poor customer serviceMarket defectors; switch because of relocation or business failureTechnological defectors; switch to products outside the industry

Customer Retention ManagementIts a hugely important aspect of any business. Studies have shown that as much as 95% of profits come from long term customers.

Who retains customers well in Ireland?

Leaky Bucket TheoryIf new customers replace disloyal customers who leave at the same rate then the company will never grow.

But if you can stem your losses of customers you will grow.

Retention StrategiesStay focused on customer kingRemember Customers between salesBuild trusting relationshipsMonitor Service Delivery ProcessStand behind the product refund if necessaryOffer Service Guarantees not happy your money backPractice the art of service recovery how do you recover from service delivery failure

Retention ManagementAlways record the figures and have them easily available

% new customers (can be derived from sales figures and from information from sales department)

% lost customers in any 12 month period

Page 306 -7 of book

Next Session - revisionJanuary 22nd ( Friday) Revision & Exam papers (Tutorials and lecture)

January 29th (Friday) 10% Multiple Choice exam at 1.00pm here. (No tutorials this day)