Ch 10 - Services


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  • Is it possible to market something that cannot be felt, seen, or heard? Can you market something that is not there? Many students may quickly answer “no” to these questions, but after studying Chapter 10; their answer will soon change. Chapter 10 explores the world of marketing services. Students learn how services differ from goods and how marketers create and measure service quality. Marketing services may be more difficult than marketing goods as services are intangible, perishable, variable, and inseparable. Students also learn about marketing people, places, and ideas.
  • Marketing What Isn’t There Intangibles are services and other experience-based products that we cannot touch.
  • What Is a Service? Services </keyterm> are acts, efforts, or performances exchanged from producer to user without ownership rights. Like other intangibles, a service satisfies needs when it provides pleasure, information, or convenience. Services are provided for consumers as well as organizations. The market for business services has grown rapidly because it is often more cost effective for organizations to hire outside firms that specialize in these services than to try to hire a workforce and handle the service themselves. Characteristics of Services Services share four characteristics: • Intangibility • Perishability • Variability Inseparability Intangibility Intangibility is the characteristic of a service that means customers can’t see, touch, or smell good service. Services cannot be inspected or handled before the purchase is made, making it difficult for consumers to evaluate. Because they are buying something that is not there, customers look for reassuring signs before purchasing. Marketers provide physical cues to reassure buyers such as the look of a facility, its furnishings, logos, appearance of employees, etc. Perishability Perishability refers to the characteristic of service that makes it impossible to store for later sale or consumption. Capacity management is the process by which organizations adjust their services in an attempt to match demand. It may mean adjusting the product or it may mean adjusting the price. Inseparability Inseparability is the characteristic of a service meaning that it is impossible to divide the production of a service from the consumption of that service. Although a firm can manufacture goods before sale, a service can take place only at the time the service provider performs an act on either the customer or the customer’s possession. The Service Encounter The central role-played by employees in making or breaking a service underscores the importance of the service encounter, or the interaction between the customer and the service provider. The <emphasis> service encounter </emphasis> has several dimensions that are important to marketers, such as social contact and physical environment. Services are intimately tied to company employees who deliver the service/<emphasis> The quality of a service is only as good as the worst employee is </emphasis>.
  • We classify services in terms of whether the service is performed directly on the customer or on something the customer owns, and whether the service consists of tangible or intangible actions. Either tangible or intangible elements dominate some products, such as salt versus teaching, whereas others such as a commercial airline flight tend to include a mixture of goods and services. Goods-Dominated Products Companies that sell tangible products still must provide support services. Automobile, major appliance and electronics firms can realize a competitive advantage when they provide customers with this support better than the competition. Services may be even more important for marketers of business-to-business tangibles. Equipment- or Facility-Based Services Some products include a mixture of tangible and intangible elements. Facility-driven services, such as automatic car washes, health clubs, and zoos must be concerned with the following three factors: • Operational factors: clear signs and other guidelines must show customers how to use the service. In particular, firms need to minimize waiting times. • Location factors: marketers of services such as dry cleaning or retail banking make sure their service sites are convenient and in neighborhoods that are attractive to prospective customers. • Environmental factors: service managers who operate a storefront service requiring people to come to their location realize they must create an attractive environment to lure customers. People-Based Services At the intangible end of the continuum are people-based services. Because people have less and less time to get things done, the importance of people-based services is increasing. Core and Augmented Services When we buy a service, we may actually purchase a <emphasis> set </emphasis> of services. The <keyterm id="ch10term10" linkend="gloss10_010" preference="0" role="strong"> core service </keyterm> is a benefit that a customer gets from the service. To attract customers, a service firm often tries to offer <keyterm id="ch10term11" linkend="gloss10_011" preference="0" role="strong"> augmented services </keyterm> —additional service offerings that differentiate the firm from the competition.
  • PHYSICAL ELEMENTS OF THE SERVICE ENCOUNTER: SERVICESCAPES AND OTHER TANGIBLES Because services are intangible, marketers have to be mindful of the <emphasis>physical evidence</emphasis> that goes along with them. An important part of this physical evidence is the <keyterm id="ch10term12" linkend="gloss10_012" preference="0" role="strong"> servicescape </keyterm> : the environment in which the service is delivered and where the firm and the customer interact. Servicescapes include facility exteriors—elements such as a building’s architecture, the signage, parking, and even the landscaping. They also include interior elements, such as the design of the office or store, equipment, colors, air quality, temperature, and smells. Marketers know that carefully designed servicescapes can have a positive influence on customer’s purchase decisions, their evaluations of service quality, and their ultimate satisfaction with the service. HOW WE Provide Quality Service If a service experience is not positive, it can turn into a disservice with nasty consequences. Quality service ensures that customers are satisfied with what they have paid for. However, satisfaction is relative because the service recipient compares the current experience to some prior set of expectations. That is what makes delivering quality service tricky. What may seem like excellent service to one customer may be mediocre to another person. Marketers must identify customer expectations and then work hard to exceed them.
  • How We Measure Service Quality Because the customer’s experience of a service determines if she will return to the provider in the future, service marketers feel that measuring positive and negative service experiences is the “Holy Grail” for the services industry. SERVQUAL The SERVQUAL </ scale is one popular instrument to measure consumers’ perceptions of service quality. SERVQUAL identifies five dimensions, or components, of service quality: tangibles, reliability, responsiveness, assurance, and empathy. Gap Analysis Gap analysis is a measurement tool that gauges the difference between a customer’s expectation of service quality and what actually occurs. By identifying specific places in the service system where there is a wide gap between what is expected and what is received, service marketers can get a handle on what needs improved. Some major gaps include the following: • Gap between consumer expectations and management perceptions • Gap between management perception and quality standards set by the firm • Gap between established quality standards and service delivery • Gap between service quality standards and consumer expectations Gap between expected service and perceived service The Critical Incident Technique The critical incident technique is another way to measure service quality. The company collects and closely analyzes very specific customer complaints. It can then identify critical incidents —specific contacts between consumers and service providers that are most likely to result in dissatisfaction. Some critical incidents happen when the expectations of customers cannot be met by the service organization.
  • Strategic Issues When We Deliver Service Quality Delivering quality is the goal of every successful service organization. Firms work to maximize the likelihood that a customer will choose its service and become a loyal customer. Just as in goods marketing, the first step is to develop effective marketing strategies. Sometimes service quality does fail. The important thing, after a failure, is that the firm takes fast action to resolve the problem. Quick action means that the problem will not occur again (hopefully) and that the customer’s complaint will be satisfactorily resolved. The key is speed; research shows that customers whose complaints are resolved quickly are far more likely to buy from the same company again, than when complaints take longer to be resolved. To make sure that service failures are at a minimum and that recovery is fast, managers should first understand the service and the potential places where failures are most likely to occur and then make plans ahead of time to recover. That is why the process of identifying critical incidents can be so important. In addition, employees should be trained to listen to complaints. They should be empowered to take appropriate actions immediately.
  • The Future of Services As we look into the future, we recognize that service industries will continue to play a key role in the growth of both the United States and the global economy. In fact, in recent years the accelerating impact of service as an integral part of any firm’s value proposition has led some analysts to argue that there is now a dominant logic for marketing. This means that we need to rethink our traditional distinction between services and goods. Instead, we need to recognize that a service is the central (core) deliverable in exchange; any physical products involved are relatively minor in terms of their contribution to the value proposition. Furthermore, several trends are important to consider. Following is a list: • Changing demographics • Globalization • Technological advances Proliferation of information
  • Ch 10 - Services

    1. 1. Chapter 10 Module 1 Module 1
    2. 2. Chapter 10 <ul><li>Services and intangible market offerings </li></ul>
    3. 3. Chapter Objectives 1. Describe the characteristics of services and the ways marketers classify services. 2. Appreciate the importance of service quality to marketers. 3. Explain the marketing of people, places, and ideas.
    4. 4. Suppose an airline was considering eliminating pilot uniforms (in favor of suits). As a member of the airline’s marketing department, would you support or object to eliminating uniforms?
    5. 5. Services & Intangibles Both services and other intangibles can be branded and marketed. Concerts Hair cuts Government Museums Zoo Car wash Nail salon Church Health care Legal All services are intangibles, but not all intangibles are services.
    6. 6. What’s a service? A service: intangible products (acts of effort) that are exchanged directly from the producer to the receiver (purchaser). The service provider is inseparable from the service, making the service encounter a primary component. The service sector is growing because it is more cost effective (Outsourcing). intangibility perishability variability inseparability We cannot see, touch, or smell it. We cannot store a service for later use. The service outcome can never be exactly replicated.
    7. 7. End Module 1
    8. 8. Chapter 10 Module 2 Module 2
    9. 9. The service continuum Is the customer or his possession the recipient? Augmented Service Most products: are a combination of tangible and intangible market offerings, i.e., they are both product and service. Core service Housecleaning Includes deep-steam cleaning of carpets Type of restaurant?
    10. 10. Pause: Short Activity <ul><li>List and describe the core and augmented services of each of the following: </li></ul><ul><li>• A personal trainer </li></ul><ul><li>• An accountant </li></ul><ul><li>• A drycleaner </li></ul><ul><li>• A public swimming pool </li></ul><ul><li>Your personal banker </li></ul>
    11. 11. The Service Encounter A service encounter: is especially important for offerings high on the service continuum.... Remember, the service provider is inseparable from the service itself! A service encounter: is influenced by both the person & the physical surroundings. Ever been in a dirty waiting room? This environment is called the servicescape, and includes all components of the environment: parking lot, waiting room, restroom, music, lighting, etc... Servicescapes: can have positive influences on purchase decisions, upselling, service evaluations, satisfaction with service delivery, repeat business, word of mouth, etc....
    12. 12. Pause: Short Task Assume you are a marketing consultant for a local bank. There is a great deal of local competition in the banking industry. List and describe the challenges the bank faces as a service provider. Then, come up with one tactic to address each challenge to give your bank a competitive advantage or point of differentiation. intangibility perishability variability inseparability
    13. 13. Measure Service Quality SERVQUAL: A survey instrument that measures consumers’ perceptions of service quality in terms of: Tangibles - facilities, servicescape Reliability - received what was promised? Responsiveness - willingness to help customers Assurance - knowledge and courtesy Empathy - caring and attention given GAP ANALYSIS: measuring the difference between expectations and actual experiences in the service encounter. CRITICAL INCIDENCE: An analysis of specific complaints that result in dissatisfaction.
    14. 14. SERVQUAL On a 7-pt scale - (disagree-agree) <ul><li>ACME has up-to-date equipment </li></ul><ul><li>ACME employees are well dressed and neat. </li></ul><ul><li>ACME is dependable </li></ul><ul><li>ACME provides services at the time it promises to do so. </li></ul><ul><li>ACME is dependable </li></ul><ul><li>You can trust ACME employees </li></ul><ul><li>ACME employees are polite., etc... </li></ul>
    15. 15. End Module 2
    16. 16. Chapter 10 Module 3 Module 3
    17. 17. Marketing the Intangible ex: marketing places
    18. 18. Marketing the Intangible ex: marketing ideas
    19. 19. Service Recovery Resolving Customer Dissatisfaction: Is a strategic issue. Firms must take quick action to resolve the problem. Who is good at service recovery?
    20. 20. Service Future The service industry: - Is the largest employer of any other type of industry. - Is the fastest growing as services are going global and populations are aging. - Is being expanded due to technological capabilities.
    21. 21. End Chapter 10