Marketing Principles 2811 1
Transcript of Marketing Principles 2811 1
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Marketing of Services.
Nov 27th, 2009
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This section covers:
Specific characteristics of Services
The Five Gap Model of Service Quality
The Servuction System Model
Defection Management and Customer RetentionManagement
Services Marketing
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What is a Service vs Product?
Def.: Goods are objects, devices, or thingswhereas services are deeds, efforts orperformances. Ultimately, the primarydifference between goods and services is the
property ofintangibility= the lacking ofphysical substance.
Over 2/3rds of the Irish work force is employed in
the services sector (67%+), compared with 26% inindustry and 7% in agriculture.(2007)*(Declined overall for the 18th month until Oct 2009)
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Scale of Market Entities
The scale of market entities displays a range ofproducts along a continuum based on theirtangibility.
Intangible
Tangibility Dominant
Salt TeachingSoft Drinks Consulting
Detergents InvestmentCars Airlines
Cosmetics AdvertisingFast food
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Search vs. Experience/Credence Attribute.
All goods possess physical properties calledsearch attributes that customers can feel,taste, and see prior to their purchase decision.
Services are, in contrast, characterised by theirexperience and credence attributes. Experience attributes can be evaluated only during
and after consumption
Theatre, Beauty , hotel etc Credence attributes cannot be evaluated
confidently even immediately after consumption
Car Servicing Did you get ripped off?
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Differences b/wService & Product
The majority of differences in how to marketservices and goods/products are attributed tofour unique characteristics: Intangibility Inseparability
Heterogeneity Perishability
1. Intangibility is the primary source from whichthe other three characteristics emerge. Forexample when purchasing a theatre ticket, you
buy an experience. The play will be evaluatedsubjectively and compared to other peoplesrecommendations. Note: There may be sometangible aspects involved too.
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Differences b/wService & Product 2
2. Inseparability is a distinguishing characteristic of servicthat reflects the interconnection among the service
provider, the customer receiving the service, and othercustomers sharing the service experience, also called:
Service Provider Involvement
Customer Involvement Other 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 stuckwith the waiter and other staff at the restaurant.
3. Variability is another characteristic of service thatreflects the variation in consistency from one servicetransaction to the next.Again, why do people prefer some restaurants over others?
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Differences b/wService & Product 3
4. Perishability is the characteristic that embodiesthe fact that services cannot be saved, or theirunused capacity cannot be reserved, and theycannot 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 goodscompanies. Because in a service organisation all
parts of the company are interconnected by acomplex network of relationships, the marketingdept. must maintain a close relationship with therest of the service organisation!
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The 3 Ps
As well as Product PricePlace & promotion, we have
the concepts of:
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1)Servicescape Physical Evidence
Due to the intangibility of services, customers oftenhave trouble evaluating the quality of serviceobjectively. As a result, consumers rely on the
physical evidence that surrounds the service to
help them form their evaluations.
Hence, the servicescape consists ofambientconditions (room temperature or music),
inanimate objects (furnishings, equipment), andother physicalevidence (signs, symbols, personal
artifacts).
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2)Service Providers - People
The 2
nd
element of the service experience involvesthe personnel who provide the service.
Simply, the public face of a service firm is itsservice providers. They have a dramatic impact onthe service experience
Customer complaints fall into 7 categories:
Apathy - Robotism
Brush-Off - Rulebook
Coldness - Runaround
Condescension
Note: A Service providers personnel are the most important sourceof differentiation from competitors.
Can I help you? Closed Q
Are you looking for anything in particular? - Open ended
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3) Organisations & Systems (invisible)- Processes
A firms organisation & systems refer tothe technical efficiency that modern
systems provide but they also involve ahuman component. (The staff)
Example: Going on a cruise, the customer is exposed to many
of the companys processes.
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Conclusion:
Service firms that areable to effectivelymould
thecustomersexperience via theeffective
management ofservicescape, service providers,organizations & systems have themeansto
develop compelling experiences which are
thelatest competitiveweapon in thewaragainst
service commodification.
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The 5 Gap Model ofService Quality
The service gap is the gap between customersexpectations of service and their perception of theservice actually delivered. The individual gaps thatcan occur are as follows:
The Knowledge Gap: management thinks thatcustomers expect less or different from their services.
The Standards Gap: gap between standards set fordelivery of service and what management wants to give.
The Delivery Gap: actual quality of service delivery isless than expected.
The Communications Gap: the difference between thedelivery of service promised and that delivered.
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Servuction System Model
The production process of services has beencalled the servuction process (Eiglier andLangeard, 1977)
It refers to the simultaneous production andconsumption of services.
The customer is present when the service isproduced
The customer plays a role in the servuction andthe delivery process
Customers interact with one another during theservuction process and may be affected(positively or negatively) by this interaction
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Servuction Framework
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Defection Management
Defection Managementrefers to asystematic process which activelyattempts to retain customers before they
defect.
It involves tracking the reasons fordefection and use this information tomake changes to service delivery.
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Reasons forDefection
1. Price defectors; switch to competitor forlower price
2. Product defectors; switch to competitors
who offer superior goods and services3. Service defectors; switch because of
poor customer service
4. Market defectors; switch because of
relocation or business failure5. Technological defectors; switch to
products outside the industry
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CustomerRetention Management
Its a hugely important aspect of anybusiness. Studies have shown that
as much as 95% of profits comefrom long term customers.
Who retains customers well in
Ireland?
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Leaky Bucket Theory
If new customers replace disloyalcustomers who leave at the same
rate then the company will nevergrow.
But if you can stem your losses of
customers you will grow.
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Retention Strategies
Stay focused on customer king
Remember Customers between sales
Build trusting relationships
Monitor Service Delivery Process
Stand behind the product refund if necessary
Offer Service Guarantees not happy your moneyback
Practice the art of service recovery how do yourecover from service delivery failure
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Retention Management
Always record the figures and have themeasily available
% new customers (can be derived fromsales figures and from information fromsales department)
% lost customers in any 12 month period
Page 306 -7 of book
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Next Session - revision
January 22nd ( Friday) Revision& Exam papers (Tutorials and
lecture)
January 29th (Friday) 10%Multiple Choice exam at 1.00pm
here.(No tutorials this day)