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Chapter 12 - The Uniqueness of Services
Terms in this set (35)
Are intangible activities or benefits (such as airline trips, financial advice, or automobile repair) that an organization provides to satisfy consumers' needs in exchange for money or something else of value.
Four I's of Service
Services are intangible; that is, they can't be held, touched, or seen before the purchase decision. In contrast, before purchasing a traditional product, a consumer can touch a box of laundry detergent, kick the tire of an automobile, or sample a new breakfast cereal. Because services tend to be a performance rather than an object, they are much more difficult for consumers to evaluate. To help consumers assess and compare services, marketers try to make them tangible or show the benefits of using the service.
The American Airlines ad shows the airline's new seats and emphasizes their size and other tangible benefits. American Express also provides tangible benefits by allowing cardmembers to earn points for redemption of airline tickets, electronics, and gift cards through its Membership Rewards program.
Developing, pricing, promoting, and delivering services is challenging because the quality of a service is often inconsistent. Because services depend on the people who provide them, their quality varies with each person's capabilities and day-to-day job performance. Inconsistency is much more of a problem in services than it is with tangible products. Tangible products can be good or bad in terms of quality, but with modern production lines the quality will at least be consistent. In contrast, the Philadelphia Phillies baseball team may have great hitting and pitching and look like a pennant winner one day—and the next day they may lose by 10 runs.
A third difference between services and products, and related to problems of consistency, is inseparability. In most cases, the consumer cannot (and does not) separate the deliverer of the service from the service itself. For example, Allstate's reminder that "You're in good hands" emphasizes the importance of its agents. Similarly, to receive an education, a person may attend a university. The quality of the education may be high, but if the student has difficulty interacting with instructors, finds counseling services poor, or does not receive adequate library or computer assistance, he or she may not be satisfied with the educational experience.
With services, inventory carrying costs are more subjective and are related to idle production capacity, which is when the service provider is available but there is no demand for the service. The inventory cost of a service is the cost of paying the person used to provide the service along with any needed equipment. If a physician is paid to see patients but no one schedules an appointment, the fixed cost of the idle physician's salary is a high inventory carrying cost.
idle production capacity
Occurs when the service provider is available but there is no demand for the service.
This range of product-dominant to service-dominant offerings
Classification of Services
classified in several ways, according to whether (1) they are delivered by people or equipment, (2) they are for-profit or nonprofit, or (3) they are government sponsored.
delivered by people or equipment
many companies offer services. Professional services include management consulting firms such as Booz Allen Hamilton or Accenture. Skilled labor is required by Sears in order to offer services such as appliance repair and by Sheraton in order to offer its catering service. Unskilled labor such as that used by Brink's store-security forces is also a service provided by people.
Equipment-based services do not have the marketing concerns of inconsistency because people are removed from the provision of the service. Electric utilities, for example, can provide service without frequent personal contact with customers. Motion picture theaters have projector operators that consumers never see. A growing number of customers use self-service technologies such as Home Depot's self checkout, Southwest Airlines's self check-in, and Schwab's online stock trading without interacting with any service employees.
A third way to classify services is based on whether or not they are government sponsored. Although there is no direct ownership and they are nonprofit organizations, governments at the federal, state, and local levels provide a broad range of services. The United States Postal Service, for example, has adopted many marketing activities. First-class postage revenue has declined as postal service customers have increased their use of the Internet to send e-mail, pay bills, and file taxes. Rather than fight the trend, however, the U.S. Postal Service is embracing the Internet.
To present customers with concrete and convincing evidence of its strengths
The purchase process
1. Products eg. furniture, jewelry- High search properties
2. Combination of product and services provided eg. restaurant meals- High experience properties
3. Most services - High in credence properties
Assessing service quality
Once a consumer tries a service, how is it evaluated? Primarily, a consumer assesses service quality by comparing expectations about a service offering to his or her actual experience with the service.
Differences between the consumer's expectations and experience are identified. This type of analysis asks consumers to assess their expectations and experiences on dimensions of service quality such as reliability, tangibility, responsiveness, assurance, empathy
Customer contact audit
a flowchart of the points of interaction between consumers and service provider.25 This is particularly important in high-contact services such as hotels, educational institutions, and automobile rental agencies. Figure 12-7 is a customer contact audit prepared for a car rental agency.
The interactions identified in a customer contact audit often serve as the basis for developing relationships with customers. Recent research suggests that employees' competence and the authenticity and sincerity of their interactions affect the success of their customer relationships. Another version of a customer contact audit, called a service blueprint.
The contact between a service provider and a customer represents a service encounter that is likely to influence the customer's assessment of the purchase. The number of encounters in a service experience may vary. Disney, for example, estimates that a park visitor will have 74 encounters with Disney employees in a single visit. These encounters represent opportunities to develop social bonds, or relationships, with customers. The relationship may also be developed through loyalty incentives such as airline frequent flyer programs
Includes all employee actions and acknowledges that services are designed to be "experiences.
Advantages of Relationship Marketing
Relationship marketing provides several benefits for service customers, including the continuity of a single provider, customized service delivery, reduced stress due to a repetitive purchase process, and an absence of switching costs.
The concepts of the product component of the marketing mix apply equally well to Cheerios (a product) and American Express (a service). Managers of products and services must design the product concept with the features and benefits desired by customers. An important aspect of the product concept is branding. Because services are intangible, and more difficult to describe, the brand name or identifying logo of the service organization is particularly important when a consumer makes a purchase decision.32 Therefore, service organizations, such as banks, hotels, rental car companies, and restaurants, rely on branding strategies to distinguish themselves in the minds of consumers. Strong brand names and symbols are important for service marketers, not only as a means of differentiation, but also to convey an image of quality. A service firm with a well-established brand reputation will also find it easier to introduce new services than firms without a brand reputation
Seven Ps of the services marketing
An expanded marketing mix concept for services that includes the four Ps (product, price, promotion, and place or distribution) as well as people, physical environment, and process
In service businesses, price is referred to in many ways. Hospitals refer to charges; consultants, lawyers, physicians, and accountants to fees; airlines to fares; hotels to rates; and colleges and universities to tuition. Because of the intangible nature of services, price is often perceived by consumers as a possible indicator of the quality of the service.
Pricing of service
Pricing of services goes beyond the traditional tasks of setting the selling price. When customers buy a service, they also consider nonmonetary costs, such as the mental and physical efforts required to consume the service. Service marketers must try to minimize the effort required to purchase and use the service. Pricing also plays a role in balancing consumer demand for services.
Charging different prices during different days of the week to reflect variations in demand for the service
Place, or distribution, is a major factor in developing a service marketing strategy because of the inseparability of services from the producer. Rarely are intermediaries involved in the distribution of a service; the distribution site and the service deliverer are the tangible components of the service. Until recently, customers generally had to go to the service provider's physical location to purchase the service. Increased competition, however, has forced many service firms to consider the value of convenient distribution and to find new ways of distributing services to customers.
This another form of promotion that has played a major role in the promotional strategy of many service organizations. Nonprofit organizations such as public schools, religious organizations, and hospitals, for example, often use publicity to disseminate their messages. For many of these organizations, the most common form of publicity is the public service announcement (PSA) because it is free
The value of promotion, especially advertising, for many services is to show consumers the benefits of purchasing the service. It is valuable to stress availability, location, consistent quality, and efficient, courteous service37 and to provide a physical representation of the service or a service encounter.38 The Accenture ad, for example, describes the benefits available to its customers—"High performance. Delivered." The Space Adventures ad describes the benefit of its service as being "the world's first civilian explorer to circumnavigate the moon," and it provides a photo of the service encounter—a close-up view of the moon! In most cases, promotional concerns of services are similar to those of products.
Personal selling, sales promotion, and direct marketing also can play an important role in services marketing. Service firm representatives, such as hotel employees handling check-in services or waitstaff in restaurants, are often responsible for selling their services. Similarly, sales promotions such as coupons, free trials, and contests are often effective tools for service firms. Finally, direct marketing activities are often used to reach specific audiences with interest in specific types of services. Increasingly, service firms are adopting an integrated marketing communications approach
The notion that service organization must focus on its employees, or internal market, before successful programs can be directed at customers.
Moroever, Service firms need to ensure that employees have the attitude, skills, and commitment needed to meet customer expectations and to sustain customer loyalty.
Customer experience management (CEM)
The process of managing the entire customer experience with the company. the process should be intentional and planned, consistent so that every experience is similar, differentiated from other service offerings, and relevant and valuable to the target market.
The appearance of the environment in which the service is delivered and where the firm and customer interact can influence the customer's perception of the service. The physical evidence of the service includes all the tangibles surrounding the service: the buildings, landscaping, vehicles, furnishings, signage, brochures, and equipment. Service firms need to manage physical evidence carefully and systematically to convey the proper impression of the service to the customer.
Integrating the service component of the marketing mix with efforts to influence consumer demand
Process refers to the actual procedures, mechanisms, and flow of activities by which the service is created and delivered. The actual creation and delivery steps that the customer experiences provide customers with evidence on which to judge the service. These steps involve not only "what" gets created but also "how" it is created. The customer contact audit discussed earlier in the chapter is relevant to understanding the service process discussed here. The customer contact audit can serve as a basis for ensuring better service creation and delivery processes.
Services in the future
technological development, improved understanding of service delivery and consumption, and the social imperative for sustainability.
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