Marketing of Services Notes

7/28/2019 Marketing of Services Notes

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2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Part 1

FOUNDATIONS

FOR SERVICESMARKETING


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1

Chapter

Introduction to Services

What are services?

Why services marketing?

Characteristics of Services Compared to Goods

Services Marketing Mix


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What are services?

All economic activities whose output is not a physical

product, is generally consumed at the time it is produced

and provides added value in forms (such as convenience,

amusement, timeliness, comfort or health) that are

essentially intangible concerns of its first purchaser


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Examples of Service Industries

Health Care hospital, medical practice, dentistry, eye care

Professional Services accounting, legal, architectural

Financial Services banking, investment advising, insurance

Hospitality restaurant, hotel/motel, bed & breakfast

ski resort, rafting

Travel airline, travel agency, theme park

Others hair styling, pest control, plumbing, lawn maintenance, counseling

services, health club, interior design


5/27 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Figure 1.2

Tangibility Spectrum

Tangible

Dominant

Intangible

Dominant

Salt

Soft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-food

Outlets



Why Services Marketing

Services based economies

United States 80%

India 48%

Traditional marketing course has more focus on

manufacturing and packaged goods (like P&G, Unilever,

General Foods)

There is a need for Marketing concepts specifically for

Services

Service initiatives and promoting service quality leads to

competitive advantage and so to profits

Customer satisfaction index for services is declining



Figure 1.1

Contributions of Service Industries to

U.A.E. Gross Domestic Product

Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.



Employment in Dubai - 2005



Table 1.2

Goods versus Services

Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, A Conceptual Model of Service Quality and Its Implications for Future Research, Journal ofMarketing49 (Fall 1985), pp. 4150.



Characteristics of Services

Compared to Goods

Intangibility

Perishability

Simultaneous

ProductionandConsumption

Heterogeneity



Implications of Intangibility

Services cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult



Implications of Heterogeneity

Service delivery and customer satisfaction depend on

employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered

matches what was planned and promoted



Implications of Simultaneous Production

and Consumption

Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult



Implications of Perishability

It is difficult to synchronize supply and demand with

services

Services cannot be returned or resold


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Traditional Marketing Mix

All elements within the control of the firm that

communicate the firms capabilities and image tocustomers or that influence customer satisfaction with the

firms product and services:

Product

Price

Place

Promotion


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Expanded Mix for Services --

The 7 Ps

Product

Price

Place

Promotion

People

All human actors who play a part in service delivery and thus influence thebuyers perceptions: namely, the firms personnel, the customer, and othercustomers in the service environment.

Physical Evidence

The environment in which the service is delivered and where the firm andcustomer interact, and any tangible components that facilitate performanceor communication of the service.

Process

The actual procedures, mechanisms, and flow of activities by which theservice is deliveredthe service delivery and operating systems.


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Table 1.3

Expanded Marketing Mix for Services


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2Chapter

The Gaps Model of Service Quality

The Customer Gap

The Provider Gaps:

Gap 1 not knowing what customers expect

Gap 2 not having the right service designs andstandards

Gap 3 not delivering to service standards

Gap 4 not matching performance to promises Putting It All Together: Closing the Gaps


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Expectedservice

Perceived

service

Customer Gap

Figure 2.1

The Customer Gap


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Gaps Model of Service Quality

Customer Gap:

difference between customer expectations and perceptions

Provider Gap 1 (The Knowledge Gap):

not knowing what customers expect

Provider Gap 2 (The Service Design & Standards Gap):

not having the right service designs and standards

Provider Gap 3 (The Service Performance Gap):

not delivering to service standards

Provider Gap 4 (The Communication Gap):

not matching performance to promises

K F t L di


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Provider Gap 1: Not knowing what customers expect

Provider Gap 2: Not selecting the right service designs and standards

Provider Gap 3: Not delivering to service standards

Provider Gap 4: Not matching performance to promises

Customer

Expectations

CustomerPerceptions

Key Factors Leading

to the Customer Gap

Customer

Gap


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Customer Expectations

Company Perceptions ofCustomer Expectations

Inadequate marketing research orientationInsufficient marketing researchResearch not focused on service qualityInadequate use of market research

Lack of upward communicationLack of interaction between management and customersInsufficient communication between contact employees and managersToo many layers between contact personnel and top management

Insufficient relationship focusLack of market segmentationFocus on transactions rather than relationshipsFocus on new customers rather than relationship customers

Inadequate service recoveryLack of encouragement to listen to customer complaintsFailure to make amends when things go wrongNo appropriate recovery mechanisms in place for service failures

Figure 2.2

Not knowing what customers expect

Gap

1

gure .

N t l ti th i ht i


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Customer-Driven ServiceDesigns and Standards

Management Perceptions ofCustomer Expectations

Poor service designUnsystematic new service development processVague, undefined service designsFailure to connect service design to service positioning

Absence of customer-driven standardsLack of customer-driven service standardsAbsence of process management to focus on customer

requirementsAbsence of formal process for setting service quality goals

Inappropriate physical evidence and servicescapeFailure to develop tangibles in line with customer expectationsServicescape design that does not meet customer and

employee needsInadequate maintenance and updating of the servicescape

Not selecting the right service

designs and standards

Gap

2


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Service Delivery

Customer-Driven Service

Designs and Standards

Deficiencies in human resource policiesIneffective recruitmentRole ambiguity and role conflictPoor employee-technology job fitInappropriate evaluation and compensation systemsLack of empowerment, perceived control, and teamwork

Customers who do not fulfill rolesCustomers who lack knowledge of their roles and responsibilitiesCustomers who negatively impact each other

Problems with service intermediariesChannel conflict over objectives and performanceDifficulty controlling quality and consistency

Tension between empowerment and control Failure to match supply and demand

Failure to smooth peaks and valleys of demandInappropriate customer mixOverreliance on price to smooth demand

Figure 2.4

Not delivering to service standards

Gap

3


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Service Delivery

Lack of integrated services marketing communicationsTendency to view each external communication as independentNot including interactive marketing in communications plan

Absence of strong internal marketing program Ineffective management of customer expectations

Absence of customer expectation management through all forms ofcommunicationLack of adequate education for customers

OverpromisingOverpromising in advertisingOverpromising in personal sellingOverpromising through physical evidence cues

Inadequate horizontal communications

Insufficient communication between sales and operationsInsufficient communication between advertising and operationsDifferences in policies and procedures across branches or units

External Communications to

Customers

Figure 2.5

Not matching the performance to promises

Gap

4

Fi 2 6


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Perceived

Service

ExpectedService

CUSTOMER

COMPANY

Customer

Gap

Gap 1

Gap 2

Gap 3

ExternalCommunications

to CustomersGap 4Service

Delivery

Customer-Driven

Service Designs andStandards

Company Perceptionsof ConsumerExpectations

Figure 2.6

Gaps Model of Service Quality


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2006 The McGraw-Hill Companies, Inc All rights reservedMcGraw-Hill/Irwin

The Customer Gap Chapter 3 Consumer Behavior in Services Chapter 4 Customer Expectations of Service Chapter 5 Customer Perceptions of Service Gap 1 Not Knowing What Customers Expect (The Knowledge Gap)

Chapter 6 Listening to Customers through Research Chapter 7 Building Customer Relationships Chapter 8 Service Recovery Gap 2 Not Having the Right Service Quality Designs and Standards (The Service Design and

Standards Gap)

Chapter 9 Service Development and Design Chapter 10 Customer-Defined Service Standards Chapter 11 Physical Evidence and the Servicescape Gap 3 Not Delivering to Service Standards (The Service Performance Gap) Chapter 12Employees Roles in Service Delivery

Chapter 13Customers Roles in Service Delivery Chapter 14 Delivering Service through Intermediaries and Electronic Channels Chapter 15 Managing Demand and Capacity Gap 4 Not Matching Performance to Promises (The Communication Gap) Chapter 16 Integrated Services Marketing Communications Chapter 17 Pricing of Services

Marketing of Services Notes

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