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)

Documents

Marketing Principles 2811 1