Services Marketing 2011 [Week1]

8/3/2019 Services Marketing 2011 [Week1]

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Services MarketingServices Marketing

Module 1Marketing in the service economy

Engineering customer satisfaction

History tells us that

In addition to reading the textstudents must devote

no less than 150 hours

to successfully complete this

unit and assignments

Unit Description

This unit recognises the services sector as the major source of

employment growth and as the dominant force in the economies of

developed and developing countries. The broad service sectors

include education and health, finance, government, information,

tourism, leisure and hospitality, professional and business,transportation and utilities, wholesale and retail.

Services are also an important component of most goods dominant

products.

This unit will sensitise students to the unique characteristics ofservices, the behaviour of consumers in a service setting and the

distinctive management approach needed to establish a competitive

advantage.

Unit Description

This unit recognises the services sector as the major source of

employment growth and as the dominant force in the economies of

developed and developing countries. The broad service sectors

include education and health, finance, government, information,

tourism, leisure and hospitality, professional and business,transportation and utilities, wholesale and retail.

Services are also an important component of most goods dominant

products.

This unit will sensitise students to the unique characteristics ofservices, the behaviour of consumers in a service setting and the

distinctive management approach needed to establish a competitive

advantage.

Overall objective

In this week students should gain an overall sense

that marketing is more than the marketing of fast

moving consumer goods. In addition, students

should start to sense that services shape oureconomies to a greater extent than most realise.

This is due to the hidden services that bring goods

to market and generally make society function.

Today we will discuss [ch.1]

How services are defined.

How services contribute to a countrys economy.

The forces that are transforming service markets.

The key characteristics that distinguish services from goods.

How services create value for consumers.

The ways of categorising services.

The key components of a service operations system.

The expanded marketing mix for services.


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Lovelock et al textbook

Preferred text

Alternative texts

Please note: the slides have been prepared to work in harmony with the preferred text

Defining services

Services areacts, performances, deeds, efforts thatare directed towards the production & delivery of aproduct6.

Services are activities that facilitate and support anexchange, they:

add value for the customer

cannot be dropped on your foot cannot be unbundled & resold

Services are an important part of our lives

Services are an important part of our lives

Source: Microsoft stock photographs

Services are an important part of our lives Services are an important part of our lives

Visiting a museum Services to tourists


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Ideas

Goods Services

Services

People

ExperiencesPlaces

Places

product componentsproduct components66Generally there are

There is a service component in every product6

There are broad themes

1: Marketing of services

the marketing of a service dominant product;operating within the service sector

2: Marketing through servi ceservice qualities embedded within a otherproduct6 components

2

differentiation

9 broad categories in service sector

1. Education and health2. Financial3. Government4. Information5. Tourism, leisure and hospitality

6. Professional and business7. Transportation and utilities8. Wholesale and retail9. Other.

* a number of variations

Growth in the service sector[retail for example]

1515yearsGrowth in service sector has coincided with a decline in manufacturing

Students* often think that goods

are older and more dominant

than services

Is this accurate?

Are services new?

Some academicspromote thisview

the history of the postal service

Google

How old is the postal service in Britain?


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Vignette: identify the services The growth in service sector canbe attributed to: Consumer expectations

Service quality movement

Relax. professionaladvertising

Increased competition

Globalisation

Increase in franchises

Technology

Social changes

Government regulation

Reasons for growth

Starbucks: above in Paris, Singapore, Nanging,

Growth in franchises world brands

Defining marketing

A classic marketing definition attributed to Kotleris

The human activity directed at

satisfying needs and wants

through the exchange process

We can see that marketing is a management philosophy thatpermeates all actions throughout the organisation [not just amarketing department] and is customer centric

Defining services marketing

For this unit:

all marketing activities that are directed atmarketing a service dominant product and/orall marketing activities that are directed atdifferentiating a product through the servicecomponent of the product.

Satisfaction CustomerneedsOrganisationneeds

Exchange process

Marketing philosophy

Marketing is about satisfaction


5/17

Google: Grove & Fisk (1992) Services as theater a classic article

It is said services are like theatre

With services there are the:

actors - [service personnel] [boundaryspanners]

audience - [customers]

servicescape - [venue] [retail environment]

performance - [actions, deeds, efforts] backstage [support staff] [equipment]

The metaphor of theatre The metaphor of theatre

Key considerations: What

audience are we trying to attract is the profile of participants

is the role of participants actor audience interaction

are the scripts

are the roles of backstage

props are necessary costumes are necessary

are the scenes or acts is the nature of intermissions

?

Vignette: are we selling goods or services?

What product components does a car retailer compete on?

Activity

Business to Consumer [B2C]

Lawn care, hairdresser, baby sitting,

travel agency, airline, hotel, doctor,

dentist, health, movies, theatre,education, insurance, banking,

communications, photographicdevelopment, hiring a movie.

Business to Business [B2B]

Management consulting, secretarialservices, advertising agent, office

equipment, accountancy,

maintenance, office cleaning,

stationary supplies, logistics,

communications

Service Dominant Products [B2C or B2B]


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Facilitating and enabling services

are embedded in the product and

cannot be separated from the

outcome.

Services create value

Services are a means to an end

Services provide outcomes[services can result in a physical object ]

[services can enable the production of a physical object]

design & construct finance

Services are about outcomes

[identify the services performed in the above examples]

Services provide outcomes[sometimes with nothing physical to show from the exchange]

Services provide outcomes[deliver goods to market]

Services provide outcomes[deliver goods to consumers]

Coffee shop Vienna


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Services provide outcomes[sometimes services are directed towards possessions]

Restoring antique prints

Products6 have tangible and non-tangible qualitiesServices: are a composite of tangible & intangible qualities

Le Bouchonrestaurant Caen, France

Tangible an intangible qualities

*DiagramsuppliedbyPearson Education

It is easier to try on jeansthan a haircut

Most Goods Most Services

Ability toEvaluation

Easy Difficult

Adapted fromHofmanand Bateson (2001, p.5) &Lovelocket al . (2011);

Tangible

dominantproduct

Intangible

dominantproduct

*Intangible dominant products are those that lack physical properties that can be

sensed by consumers prior to the purchase decision

Intangible*

Inseparable

Variable

Perishable

Products6 have characteristics

* intangible is often referred to non-material


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All products have characteristics4

Mental properties

Production & consumption

Ability to warehouse

Ability to maintain quality

Physical properties

General properties

[intangible]

[intangible]

[intangible]

[tangible]

[tangible]

[tangible]

[simultaneous] [separate]

[difficult]

[difficult]

[less difficult]

[less difficult]

A different view of intangibility, inseparability, variability, perishability

Services Goods The service component of a product6 requires

different marketing strategies than the goods

component of the product .

Special Characteristics4

[Mother characteristic]

Intangible

Variable

Intangibility

The primary [mother] characteristic:

Services are a performance rather than possessed [verb rather

than a noun] - cannot be as easily evaluated pre-purchase and are more subjective post-purchase Services:

Cannot be stored, re-boxed or returned [warranty]

Are more difficult to promote Are considered as higher in risk

Are difficult to patent,

Intangibility

For example:

the service cannot

be sensedprior

to purchase

Life Assurance is a service that began in the churches of Scotland

Managing intangibility

Strategies/tactics include:

Provide physical evidence of qualityCreate an appropriate servicescape

Provide benefit statements to position the service

Clearly identify the target market

Observational learning - reward punishment

Create a strongbrand identity

Allow personalisation/interaction

Provide warranties

Enlist ERM, PRM & CRM tactics

Inseparability

The most elusiveof the characteristics4

There are four elements:1. Production and consumption happen simultaneously2. Presence of the service provider

Physically and/or mentally Service provider often has to visit the service recipient [factory in the field]

Service recipient must visit service provider [multi-site]

Arms length/remote

3. The service recipient/service provider are moreinvolved in the service delivery/encounter

4. Service recipients often share the servicescape [positiveand negative effects]


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Inseparability

For example:

the producer and

the customer must

come together

Inseparability [2]

For example:

the customer must

come together

with other

customers

Variability

The characteristic that requiresconstant attention

Quality is harder to manage due to intangibility,inseparability; this is compounded by variability. Services are real time social interactions and people

vary both day to day and from each other

People tend to make conclusions [Gestalt]

Therefore, consistent service quality is harder to achieve[especially factory in the field or multi-site]

Zero defects is replaced with a zero defections strategy

Variability

For example:

people vary both

in skills, &

fromday to day

Perishability

The oftenoverlookedcharacteristic

The intangible and inseparability of services means

that services cannot be produced in bulk and stored

Unsold services cannot be resold [temporal nature] Demand can be higher/lower than optimal supply

Pricing strategies may influence demand

Perishability

For example:

the unsold seats

on an aircraft

cannot be resold

at a later date.


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The 4 characteristics

PLUS+

The real time performance

nature of services

The inability to own a service

The inability to store a service

for a future delivery

Further challenges for marketersFurther challenges for marketers 8 generic differencesgoods V services

1. Customers do not obtain ownership of services2. Intangible elements dominate value creation3. Greater involvement of customers in producing4. More difficult to maintain quality5. Often difficult to evaluate

6. Services cannot be warehoused[unused capacity cannot be stored]

7. Importance of temporal factors8. Transactions may be face to face or arms length

8 The degree of tangibility/intangibilityWho or what is the direct recipient

The place of service delivery

Degree of customisation/standardisation

Relationships with customers

Discrete V continuous services

Degree of contact [low2high]

Service product considerations

Tangible actions to peoples bodies

people processing

Tangible actions to goods and other physical

possessionspossession processing

Intangible actions directed at peoples minds

mental-stimulus processing

Intangible actions directed at intangible assets

information processing)


Tangible actions to peoples bodies

people processing

Tangible actions to goods and other physical

possessionspossession processing

Intangible actions directed at peoples minds

mental-stimulus processing

Intangible actions directed at intangible assets

information processing)


On the degree of contact

High-contact services

Think -dentist

Medium-contact services

Think -electrician

Low-contact services

Think credit card



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Type of contact

High contact service

Low contact service

Encounterwithpeople

Encounterwithequipment

The temporal nature of services

The three time zones are:

Pre-purchase; Service delivery; Post-purchase

Three service qualities are:

Services are low in search qualities; high in experience

qualities; & often high in credence qualities

Hidden services in manufactured goods

Initial; enabling; & peripheral services elements


Who or What is recipient of:

Business to Business Business to Consumer non-financial-profit

People - possessions - mental stimulus information

How is value created

Customer expectations

Degree of:

Risk [types of risk, management challenges]


The product

goods-service-ideas-experience-people-place components

Core Supplementary

Core - expected - augmented potential components

Degree of:

Intangibility, Perishability, Variability, Inseparability

Facilitating supporting services

Product differentiation

Segment, target, positioning strategies

Convenience, shopping, specialty, degree of unsought


Service delivery methods

Provided by people provided by equipment

Degree of customers presence & participation

Contact ... Low Medium High

The place of the service

marketplace [face2face] or marketspace[remote/arms length]

The servicescape

Duration and relationship frequency [casual-membership]

Critical incidents that need to be blueprinted

Front stage activities Backstage activities


Levels of complexity & divergence

Degree of customisation standardisation

Labour intensity

Ability to personalise

Levels of service provider empowerment



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Pricing decisions

Low cost or differentiation

Degree of price elasticity

Managing Demand/Capacity/Fluctuations

Causes & patterns

Service quality

Expectations Vs performance

5 gaps

SERVQUAL

Tangibles, Reliability, Responsiveness, Assurance, Empathy

Role, script & controls in place


Internal marketing procedures

Dovetailing with HR and operations

Service recovery procedures Mindset Complaintmanagement

Hidden services in manufactured goods

Initial services elements

Enabling services elements

Peripheral services elements


Service marketing communication system:all the

different ways in which the customer may encounter orlearn about the service organisation.


Theexpanded services marketing mix

Promotion

Product

Price Place

PeopleProcesses

Physical evidence

Customer

Marketingmanagement

Operations &IT

management

HRmanagement

cooperation between departmentsSome products6 require greater

Recognised in

the business plan

Own a phys ical good Rent the use of a phys ical good

Perform the task oneself

Hire someone to performthe task

Purchase a car and drive it Hire a car and drive it

Purchase a car and employ aChauffer to drive it

Hire a limousine or taxi

Alternatives methods to owning


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Often it is more

economical to

hire than to own

Often it is more

economical to

hire than to own


?

Why has the service sector grown inimportance in recent years


?

How has the internet changed the waysome services are delivered


?

What are the four special characteristicsof services

Which are essential to know to pass this unit


?

Can something be intangible beforepurchase but be tangible during service

delivery


14/17


Module 1(b)Quality, value, satisfaction,

cumulative satisfaction & trust

Customer satisfaction & quality

The significance of customer satisfaction in achieving a

competitive advantage

Models of satisfaction and service quality

The relationship with customer perceived value, service

quality, satisfaction and loyalty.

The determinants of satisfaction and quality in services. How to measure and monitor satisfaction.

Today we will discuss [ch.11]

Satisfaction CustomerneedsOrganisationneeds

Exchange process

Marketing philosophy

Marketing is about satisfaction

Customer satisfaction is a personal post-purchase evaluation of a

consumption activity; it is an affective (emotional) state & considers

the pre-purchase situation, motives and expectations the qualities

received and the costs incurred.

Satisfaction occurs when pre-purchase expectations are exceeded.

Cumulative customer satisfaction is applicable to durable or ongoing

products6 where multiple transactions have taken place.

What is customer satisfaction?

Fanning (2011) Adapted fromLovelock et al. (2011)

QualityQuality

ValueValue

Transactional

satisfaction

Transactional

satisfaction

Cumulative

satisfaction

Cumulative

satisfaction

TrustTrust

Loyal

behaviour

Loyal

behaviour

Competitive

advantage

Competitive

advantage

Increased

profitability

Increased

profitability

Organisational

satisfaction

Total quality is the sum of allmaterial & non-material

product qualities[Quality is what you get in an exchange]


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A product6 can be perceived as being of quality but not value Dimensions of service quality

1. Tangibles (appearance of physical elements)

2. Reliability (dependable, accurate performance)

3. Responsiveness (promptness and helpfulness)

4. Assurance (competence, courtesy, credibility

and security)

5. Empathy (easy access, good communications

and customer understanding)

Expanded dimensions of service quality

Adapted fromParasuraman, Zeithaml &Berry(1985); Chen (1998); Lovelock(2001)

Reliability consistency of performances and dependability

Responsiveness willingness/readiness to provide service

Competence possession of required skills and knowledge to perform

Accessibility approachability, contact ability

Courtesy politeness, respect, consideration, friendliness

Communications understand, be understood, confirm understandingCredibility trustworthiness, believability, honesty

Security the freedom from danger, risk or doubt

Understandinga conscious effort to assist

Tangibles the presence of physical evidence of quality of quality

Modelling customer satisfaction processes


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Outcome evaluated

Multiple transactions

Outcome evaluated

Outcome evaluated

Outcome evaluated

Outcome evaluated

Multiple episodes of satisfaction

lead to the building of trust.

Trust leads to loyal behaviour.

Loyal behaviour fromcustomer and organisation

Repeat purchasing

Positive WOMA

Communication mix costs

Tolerant customers

Recovery costs

Insulated customers

Considered set

Benefits

Internal

service quality

Internal

service quality

Employee

satisfaction

Employee

satisfaction

Employee

retention

Employee

retention

Externalservice quality

Externalservice quality

Customer

satisfaction

Customer

satisfaction

CustomerretentionCustomerretention

1

The non linear effects of customer satisfaction on custo mer loyalty

Adapted from Lovelock, Patterson & Walker (2004), Heskett, Sasser & Schlesinger, (1997)

Satisfaction, loyalty and retention


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Cost cutting programs [operational efficiency

program should always be considered relative

to product quality and the effect on customer

satisfaction.

What is our present level of customer satisfaction?

What will our level of customer satisfaction be in the future?

Warning Big and small step improvements

Cost

Quality

[-]

[+]

Big steps: Large improvement

relative to investment

Small steps: Littleimprovement relative to

investment

Diminishing returns


Question Time


?

Would you classify Starbucks as goods

dominant or services dominant

Documents

Services Marketing 2011 [Week1]