mmm7

Managing the Marketing Mix

Lecture 7Lecture 7

Extending the Marketing Mix: Service MarketingExtending the Marketing Mix: Service Marketing

Dr. Martin J. LiuLecturer in Marketing

[email protected]

Objectives

• Explore potential differences between products andservices

• Describe the elements and sub elements of the serviceextension to the marketing mix

• Discuss the challenges services pose for marketing

LearningObjectives

The Differencebetween Product andService

Characteristics ofService

Service MarketingMix

The Products-Services Continuum

Learning Objectives

The DifferencebetweenProduct andService



What is Service Marketing

• Examples: Defense, Postal, Education, health, ReligiousServices, Hospitals, Airlines, Hotels, Law Firms,Entertainment, etc.

• Definition: Activity or benefit that one party can offer toanother that is essentially intangible and does not result inthe ownership of anything. Its production may or may notbe tied to a physical product

Learning Objectives




The Nature of Service

• Regardless of the “product”, there is a services component to theofferings of all firms

• In some cases, a service is the principal purpose of the transaction,as in the rental of a car, a haircut, or legal services -- we refer tothis as the core servicecore service

• In others, service is performed in support of the sale of a tangibleproduct -- these are referred to as supplementary servicessupplementary services

Learning Objectives




Differences betweenProducts and Services

• Customers do not obtain ownership of the intangible element ofthe service product (i.e. service personnel and their performancecannot be ‘owned’ by the customer).

• Intangible elements dominate value creation

• There is greater involvement of customers in the productionprocess (i.e. customers are part of the performance, they interactwith the service provider).

• It is more difficult to maintain quality standards of service products(i.e. individuals’ behaviour is hard to control and standardise).

Learning Objectives





• Many services are difficult for customers to evaluate (i.e. theremay be elements of personal taste, experience, ability and moodthat affect customers’ evaluation).

• Absence of inventories for services (i.e. no use for unsold stock,difficult to deal with sudden increases in demand).

• Importance of time factor (i.e. many services are delivered in realtime so the consumer and provider must be together for theservice to occur).

• Delivery systems may involve both electronic and physicalchannels (i.e. different needs for staff behaviour management).

Learning Objectives





Physical goods Services

tangible intangible

homogeneous heterogeneous

Production and distribution areseparated from consumption

Production, distribution andconsumption are simultaneousprocesses

A thing An activity or process

Core value processed infactory

Core value produced in thebuyer-seller interaction

Customers do not participate inthe production process

Customers participate inproduction

Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

Learning Objectives




Characteristics of Services

•• IntangibilityIntangibility: difficult to sample and to evaluate

•• InseparabilityInseparability:: difficult to separate services from the serviceprovider; mainly direct sales; staff are essential to thedelivery of quality services

•• PerishabilityPerishability:: those not sold can not be stored

•• HeterogeneityHeterogeneity: virtually every service is different; verydifficult to standardize quality

Learning Objectives


Characteristicsof Service


(1) Intangibility “Hurdles””

•• Inability to physically possessInability to physically possess

•• Difficult to evaluate (provide guarantees)Difficult to evaluate (provide guarantees)

•• Difficult to advertise (use personal selling)Difficult to advertise (use personal selling)

•• Difficult to priceDifficult to price

•• Difficult to patentDifficult to patent

•• Difficult to distribute (promote availability)Difficult to distribute (promote availability)

•• Difficult to store (offer a trial basis)Difficult to store (offer a trial basis)

Develop a marketing mix to provide

tangible (symbolic) cues : ex. Uniforms

Learning Objectives




(2) Inseparability(2) Inseparability

BBeing produced and consumed simultaneously

•• The provider of the service is inseparable in the deliveryThe provider of the service is inseparable in the deliveryprocessprocess

• Customers participate in and affect the transaction CannotCannotbe mass producedbe mass produced

•• Difficult to distribute, Mass Production is difficultDifficult to distribute, Mass Production is difficult

• Services cannot be returned or resold

Very Difficult to Balance Supply and

Demand if time sensitive

Learning Objectives




(3)(3) PerishabilityPerishability

Service cannot be stored & used at acannot be stored & used at afuture timefuture time

-- A lost sale is lost revenueA lost sale is lost revenue

-- Unused capacity is lost foreverUnused capacity is lost forever

Use demand management strategiesUse demand management strategiessuch assuch as

-- Peak pricing:Peak pricing:

-- Telephone call pricingTelephone call pricing

-- Theater TicketsTheater Tickets

Example:Example:

Airlines use reservation systems toAirlines use reservation systems tosell their service in advance (Yieldsell their service in advance (YieldManagement)Management)

Learning Objectives




(4) Heterogeneity

Variability in the quality of service

• allows marketers to develop their service product to matchcustomer needs/wants

• Service delivery and customer satisfaction depend onemployee and customer actions

• Service quality is difficult to deliver & control

StandardisationStrategies

CustomisationStrategies

-- Automate serviceAutomate serviceRoutinesRoutines

--Automatic car washAutomatic car wash

--Health ClubHealth Club

-Physician

Learning Objectives




Key Characteristics ofAn Effective Marketing Mix

•The elements are notindependent of each other.

•The mix elements should bewell blended to form aconsistent theme

•The marketing mix matchescustomer needs

•The marketing mix matchescorporate resources

•The marketing mix creates acompetitive advantage The marketing mix paradigm ( Borden,

1964, McCarthy, 1978)

Learning Objectives




Service Extended Marketing Mix

Intangibility

Inseparability

Inseparability

Heterogeneity

ProductMarketingMix (4 Ps)

-Product-Price-Place-Promotion

Service ExtendedMarketingMix (7 Ps)

-Product-Price-Place-Promotion-People-Process-PhysicalEvidence

Ownership

Learning Objectives



ServiceMarketing Mix

Customers PricePlace &Time

Promotion

Product(Service)

PeopleProcess

Physical Evidence

Customers PriceCustomersPlace

An Expanded Marketing Mixfor Services

Learning Objectives




Process

Nature

Procedure

Law

Involvement

Feedback

FlexibilityPersonal Contact

Automation

CustomersChannels

Other Stakeholders

Process

Technology

Learning Objectives




Total Quality Management (TQM)

Total Quality Management (TQM) is an integratedorganizational approach in delighting customers (bothinternal and external) by meeting their expectations all thetime through everyone involved within the organizationworking on continuous improvement improvement in allproducts/services/processes along with structuredmethodology.

• Total involvement of all levels in the organization

• Quality conformance to agreed upon requirements

• Management best use of available resources toachieve total quality

Learning Objectives




Total Quality Management (TQM)

TQM’s key principles are:

1. Commitment to quality

2. Focus on customer satisfaction

3. Assessment of organizational culture

4. Empowerment of employees and teams

5. Measurement of quality efforts

TQM

Learning Objectives




Process for SettingCustomer-Defined Standards

1. Identify existing or desired service encounter sequence

2. Translate customer expectations into behaviors/actions2. Translate customer expectations into behaviors/actions

4. Set hard or soft standards

5. Develop feedback mechanisms5. Develop feedback mechanisms

Measureby

audits oroperating

dataHard Soft

Measureby

transaction-

basedsurveys

3. Select behaviors/actions for standards3. Select behaviors/actions for standards

6. Establish measures and target levels6. Establish measures and target levels

7. Track measures against standards7. Track measures against standards

8. Provide feedback about performance to employees8. Provide feedback about performance to employees

9. Update target levels and measures9. Update target levels and measures

Learning Objectives




People

Organisation

Legal

Individual

Suppliers

Channels

Customers

Feedback

Corporate ValueCulture and Style

PowerOrganisational Structure

RecruitmentEducation / TrainingPersonality / Attitude

Motivation / ValueBehaviour / Appearance

Reward System

Other CustomersCustomer Interaction

Customer Involvement

Staff AppraisalAttitude Surveys

People

Learning Objectives




Barriers To Customer Service

People SkillsPeople Skills -- Weak personality traitsWeak personality traits

(Moodiness, sullenness, laziness)(Moodiness, sullenness, laziness)

Inadequate trainingInadequate training

(Communication, grooming)(Communication, grooming)

Insufficient authorityInsufficient authority

(Ineffective empowerment, too many rules, etc.)(Ineffective empowerment, too many rules, etc.)

•• Customers are viral and can damage a brand.Customers are viral and can damage a brand.•• 90% of angry customers shared their story with a90% of angry customers shared their story with afriend.friend.

Learning Objectives




Equal Employment Opportunity

• A organization must be able to prove:

– That its tests are related to success or failure on the job(validity)

– That its tests don’t unfairly discriminate against minority ornonminority subgroups (disparate impact).

• EEO guidelines and laws apply to all selection devices, includinginterviews, applications, and references.

• Testing alternatives if a selection device has disparate impact:

– Institute a different, valid selection procedure that does nothave an adverse impact.

– Show that the test is valid—in other words, that it is a validpredictor of performance on the job.

– Monitor the selection test to see if it has disparate impact.

Learning Objectives




Physical Evidence

Physical Evidence

Objective

Environment

Tangible Clues

Facilitating Goods

Feedback / Control

Learning Objectives




Elements of Physical Evidence

Servicescape Other tangibles

Facility exteriorExterior designSignageParkingLandscapeSurrounding environment

Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature

Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresWeb pagesVirtual servicescape

Learning Objectives




Cause and Effect Chartfor Airline Departure Delays

Aircraft late to gate- Late arrival

- Gate occupied

- Mechanical Failures

- Late Pushback Tug

Late food service

Late baggage to

aircraft

Late fuel

Gate agents cannotprocess passengers

fast enough- Too few agents

- Agents undertrained- Agents undermotivated

- Agents arrive late at gate

Late/unavailablecockpit crews

Late/unavailablecabin crews

Late cabin cleaners

Poor announcement of

departures

Weight and balance sheet late

DelayedDepartures

Delayed check-in procedure- Confused seat selection

- Boarding pass problems

Acceptance of late passengers- Cutoff too close to departure time

- Desire to protect late passengers

- Desire to help company’s income

- Poor gate locations

Arrive late

Oversize bags

Bypass ticket counter

Weather

Air Traffic

Facilities,Equipment

Front-StagePersonnel

Procedures

Materials,Supplies

BackstagePersonnel

Customers

Other Causes

Learning Objectives




Seven Gaps Leading toCustomer Dissatisfaction

Customer experiencerelative to expectations

Advertising andsales promises

Customer interpretation

of communications

1. Knowledge Gap

2. Standards Gap

3. Delivery Gap

5. Perceptions Gap

7. Service Gap

Customer needsand expectations

Management definitionof these needs

Translation intodesign/delivery specs

Execution ofdesign/delivery specs

Customer perceptionsof product execution

6. Interpretation Gap

4.

MANAGEMENT

Learning Objectives




mmm7

Education

update target

services learning

translate

marketing

provide feedback

disparate

establish

track measures