MKTG8 PPT

2015 by Cengage Learning Inc. All Rights Reserved.*Discuss the importance of services to the economy Discuss the differences between services and goods Describe the components of service quality and the gap model of service quality

Develop marketing mixes for services

2015 by Cengage Learning Inc. All Rights Reserved.*Discuss relationship marketing in services Explain internal marketing in services Describe nonprofit organizational marketing Discuss global issues in services marketing

The Importance of ServicesService industries accounted for 68 percent of U.S. GDP in 2012.

Services involve:DeedsPerformancesEfforts 2015 by Cengage Learning Inc. All Rights Reserved.*1

2015 by Cengage Learning Inc. All Rights Reserved.*When Services are Assessed Search quality: More often applied to goods, assessed before purchaseExperience quality: Assessed after purchaseCredence quality: Assessed only with appropriate knowledge.2

*Exhibit 12.1 Gap Model of Service Quality3

2015 by Cengage Learning Inc. All Rights Reserved.*The Service MixDetermine which new services to introduce Determine the target market Decide which existing services to maintain and which to eliminate4

2015 by Cengage Learning Inc. All Rights Reserved.* Price StrategyDefine the unit of service consumption Determine if multiple elements are bundled or priced separately

Pricing Challenges for Services4

2015 by Cengage Learning Inc. All Rights Reserved.*RelationshipMarketing in Services2SocialFinancial1Financial3StructuralSocialFinancialPricing incentivesDesign services to meet customer needsCreating value-added services not available elsewhere5

2015 by Cengage Learning Inc. All Rights Reserved.*Nonprofit Organization An organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment.GovernmentsMuseumsTheatersSchoolsChurches 7

2015 by Cengage Learning Inc. All Rights Reserved.*Setting of marketing objectives Selection of target markets Development of marketing mixes

Unique Aspects of Nonprofit Organization Marketing Strategies7

2015 by Cengage Learning Inc. All Rights Reserved.*Global Issues in Services MarketingThe U.S. is the worlds largest exporter of services.The marketing mix must reflect each countrys cultural, technological, and political environment.8

Cengage Learning Inc. 2015. All Rights Reserved.*Chapter 12 VideoPepes PizzeriaPepes is a family owned and operated pizzeria in Connecticut. The original Pepe earned the nickname Old Reliable for his customer service, and his grandchildren carry out that value today. This video discusses the various ways that Pepes Pizzeria works to provide great, consistent service and why it is important.CLICK TO PLAY VIDEO

Cengage Learning Inc. 2015. All Rights Reserved.*Part 3 VideoScripps Networks InteractiveProduct DecisionsScripps Networks Interactive is a media company that operates popular channels such as Food Network, DIY, and other lifestyle channels. In this video, employees discuss how Scripps manages and develop their new cross-platform products, such as social media and apps for mobile devices. CLICK TO PLAY VIDEO

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:A service is the result of applying human or mechanical efforts to people or objects.In 2012, service industries accounted for 68 percent of U.S. GDP and four out of five U.S. jobs.The marketing process described in Chapter 1 is the same for all types of products, whether they are goods or services.Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:Intangibility: Services cannot be touched, seen, tasted, heard, or felt in the same way as goods. Tangible cues are often used to communicate a services quality and nature. Facilities are a critical tangible part of a service experience. Inseperability: Services are often sold, produced, and consumed at the same time. Consumers are involved in the production of the services that they buy. The quality of services depends on the quality of employees. Heterogeneity: Services are less standardized and uniform than goods. Because services tend to be labor-intensive, consistency and quality control can be hard to achieve. Standardization and training help increase consistency and reliability. Perishability: Services cannot be stored, warehoused, or inventoried. One of the most important challenges in many service industries is finding ways to synchronize supply and demand.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Evaluating the quality of services is harder than evaluating the quality of goods.A search quality is a characteristic that can be easily assessed before purchase. Compared to goods, services tend to exhibit fewer search qualities. Services tend to exhibit more experience and credence qualities. An experience quality is a characteristic that can be assessed only after use.A credence quality is a characteristic that consumers may have difficulty assessing even after purchase because they do not have the necessary knowledge or experience.

OnlineWeb MDhttp://www.webmd.comWhat elements of Web MD Web site communicate the search, experience, and credence qualities of the services offered by online medical consultant?

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:Service quality is more difficult to define and measure than is the quality of tangible goods. Business executives rank the improvement of service quality as one of their most critical challenges.Researchers have shown that customers evaluate service quality by these five components.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:A model of service quality called the gap model identifies five gaps that can cause problems in service delivery and influence customer evaluations of service quality. These gaps are shown in Exhibit 12.1. Gap 1: The gap between what customers want and what management thinks customers want. This gap results from a lack of understanding or a misinterpretation of customers needs or wants. To close gap 1, keep in touch with what customers want by doing research on customer needs and customer satisfaction.Gap 2: The gap between what management thinks customers want and the quality specifications that management develops to provide the service. Gap 3: The gap between the service quality specifications and the service that is actually provided. If gaps 1 and 2 are closed, gap 3 is due to the inability of management and employees to do what should be done. To close gap 3, employees need the skills, training, and tools to perform their jobs.Gap 4: The gap between what the company provides and what the customer is told it provides. This is a communication gap, caused by such things as misleading or deceptive advertising campaigns. To close gap 4, companies need to create realistic customer expectations through honest, accurate, realistic communication. Gap 5: The gap between the service that customers receive and the service they want. This gap can be positive or negative. As the gaps shrink, service quality improves. Discussion/Team Activity:Discuss firms who provide high levels of service quality. Examples: Ritz-Carlton, Nordstrom, Neiman Marcus, Lexus.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Due to services unique characteristics, elements of the marketing mix need to be adjusted to meet these special needs.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Product strategies for service offerings include decisions on: Type of process involved Core and supplementary services Standardization or customization of the service product, and Service mix. These are described on the following slides.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Two things get processed in service organization: people and objects. In some cases, the process is physical, while in others the process is intangible. There are four types of service processing categories:People processing takes place when the service is directed at a customer. Examples include health care and hairstylingPossession processing occurs when the service is directed at customers physical possessions. Examples include lawn care, car repair, and dry cleaning.Mental stimulus processing refers to services directed at peoples minds. Examples include spectator sports events, theater performances, and education.Information processing describes services that use technology or brainpower directed at a customers assets. Examples include insurance, consulting, and banking.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:The service offering is a bundle of activities that includes the core service, which is the most basic benefit, and a group of supplementary services that enhance or support the core service. In many service industries, the core service becomes a commodity product as competition increases. As a result, supplementary services are used to create competitive advantage.

Discussion/Team Activity:Name organizations and discuss their core and supplementary services.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:An important issue in developing service offerings is whether to customize or standardize.Customized services are more flexible but command a higher price. On the other hand, standardized services are more efficient and cost less. Instead of choosing either strategy, elements of both can be incorporated into an emerging strategy called mass customization. Mass customization uses technology to deliver customized services on a mass basis, thus meeting customers specific needs.

Discussion/Team Activity:Identify companies who have successfully used mass customization to deliver individualized services. Examples include Lands End and airlines video on demand.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Most service organizations market more than one service. Therefore, each part of the service mix should make a different contribution to achieving the firms goals. Designing a service strategy means deciding what new services to introduce to which target market, and deciding what services to maintain and to eliminate.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Distribution strategy for services should focus on issues shown on this slide.

Convenience: A key factor influencing the selection of a service provider.Number of outlets: The intensity of distribution should meet the target markets needs and preferences.Direct vs. indirect distribution: Many service firms use direct distribution or franchising. The newest form of direct distribution is the Internet. Location: The location of a service reveals the relationship between its target market strategy and distribution strategy.Scheduling: The most important factor for time-dependent service providers like airlines, physicians, and dentists.

Discussion/Team Activity:Identify specific service providers who have utilized the distribution strategies described above.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Services are less tangible and are more difficult to promote than tangible goods. Four promotion strategies are:Stressing tangible cuesUsing personal informational sourcesCreating a strong organizational imageEngaging in postpurchase communication

Discussion/Team Activity:Identify specific service providers who have utilized the promotion strategies described above.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:The unique characteristics of services present two pricing challenges. Defining the unit of service consumption. Should it be based on completing a service task or should it be time based?Determining if multiple elements are bundled. Should pricing be based on a bundle of elements or whether each element should be priced separately?

Discussion/Team Activity:Identify specific service providers who have utilized the pricing strategies described above.

Chapter 12 Services and Nonprofit Organization Marketing*Online: E*Trade, Ameritrade, Schwab, ScottradeCompare the pricing for services on the largest Internet financial Web sites. How can you account for the great differences in price for essentially the same service?

Notes:1. Marketers should set performance objectives when pricing each service. Three categories of pricing objectives are: Revenue-oriented pricing focuses on maximizing the surplus of income over costs. Operations-oriented pricing seeks to match supply and demand by varying prices. Patronage-oriented pricing tries to maximize the number of customers using the service. 2. A firm may need to use more than one type of pricing objective.

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:Many services involve ongoing interaction between the service organization and the customer. They can benefit from relationship marketing as a means of attracting, developing, and retaining customer relationships. It is more cost effective to keep existing customers than to attract new ones. Increasing customer retention by 2 percent can have the same effect on profits as reducing costs by 10 percent. Relationship marketing can be practiced at three levels: Level 1: The firm uses pricing incentives to encourage customers to continue doing business. This level of relationship marketing is the least effective because its price-based advantage is easily imitated by competitive firms. Level 2: This level uses pricing incentives as well as building social bonds with customers. The firm keeps in touch with customers. Level 3: At this level, the firms adds structural bonds to the formula. This offers value-added services that are not available by competitive firms.

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:Services are performances, so the quality of a firms employees is an important component in building long-term relationships with customers.It is beneficial to the company to keep happy employees. To satisfy employees, companies have designed and instituted a wide variety of programs such as flextime, on-site day care, and concierge services. A firm that makes its employees happy has a better chance of retaining customers.

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:Nonprofit organizations account for more than 20 percent of the economic activity in the United States.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Nonprofit organization marketing is the effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets.Nonprofit organizations share characteristics with service firms. Both market intangible products, and often require the customer to be present during the production process. Services often vary greatly, and can not be stored in the same way as tangible goods.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Most nonprofit organizations perform the marketing activities as shown on this slide. Often, nonprofit organizations that carry out these functions do not realize they are engaged in marketing.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Like their counterparts in business organizations, nonprofit managers develop marketing strategies to bring about mutually satisfying exchanges with target markets.Chapter 12 Services and Nonprofit Organization Marketing*Notes:Nonprofit organizations do not seek to make a profit for redistribution to owners or shareholders. The focus is often on generating enough funds to cover expenses. Most nonprofit organizations are expected to provide equitable, effective, and efficient services that respond to the wants and needs of multiple constituencies.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Three issues relating to target markets are unique to nonprofit organizations:Apathetic or strongly opposed targets: Nonprofit organizations must often target those who are apathetic about or strongly opposed to receiving their services.Pressure to adopt undifferentiated segmentation strategies: Nonprofit organizations often fail to recognize the advantages of targeting, or are pressured to service the maximum number of people. Complementary positioning: Nonprofit organizations must often complement, rather than compete with, the effort of other groups.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:There are three product-related distinctions between business and nonprofit organizations:Benefit complexity: Nonprofit organizations often market complex behavior or ideas, such as the need to quit smoking. The benefits that a person receive are complex, long term, and intangible, and therefore are difficult to communicate to consumers.Benefit strength: The benefit strength of many nonprofit offerings may be weak or indirect.Involvement: Many nonprofit organizations market products that elicit low involvement, such as Prevent forest fires, or very high involvement, such as Stop smoking.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Many nonprofit organizations (such as federal organizations) are prohibited from advertising, or do not have the resources to retain marketing expertise. However, special promotion resources include:Professional volunteers, such as donation of advertising agency time. Donated services create goodwill, personal contacts, and general awareness of the organization. Sales promotion activities that make use of existing services to draw attention to the offerings of nonprofit organizations.Public service advertising that is donated by a sponsor, so the public service advertiser does not pay for the time or space.

Chapter 12 Services and Nonprofit Organization Marketing*Notes:Five key characteristics distinguish the pricing decisions of nonprofit organizations from those of the profit sector:Pricing objectives: The main objective is to defray all or partial costs rather than achieve a profit.Nonfinancial prices: In many nonprofit situations, consumers must absorb nonmonetary costs, such as costs of time, embarrassment costs, and effort costs. Indirect payment: Indirect payment through taxes is common to marketers of free services, such as libraries, fire protection, and police protection.Separation between payers and users: The services of many nonprofit organizations are used by those who are relatively poor and paid for by those who are better off financially.Below-cost pricing: An example is university tuition, with services priced below cost.

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*Notes:International marketing of services is a major part of global business. The United States is the worlds largest exporter of services. Because of competitive advantages, many U.S. service industries, such as banking, have been able to enter the global marketplace. To be successful in the global marketplace, firms must first determine the nature of their core product, then design the marketing mix elements to take into account each countrys cultural, technological, and political environment.

Chapter 12 Services and Nonprofit Organization Marketing*Chapter 12 Services and Nonprofit Organization Marketing*

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