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  1. 1. Managing the Marketing Mix Lecture 7 Extending the Marketing Mix: Service Marketing Dr. Martin J. Liu Lecturer in Marketing
  2. 2. Objectives Learning • Explore potential differences between products and Objectives services The Difference • Describe the elements and sub elements of the service between Product and extension to the marketing mix Service • Discuss the challenges services pose for marketing Characteristics of Service Service Marketing Mix
  3. 3. The Products-Services Continuum Learning Objectives The Difference between Product and Service Characteristics of Service Service Marketing Mix
  4. 4. What is Service Marketing Learning Objectives • Examples: Defense, Postal, Education, health, Religious Services, Hospitals, Airlines, Hotels, Law Firms, The Difference Entertainment, etc. between Product and • Definition: Activity or benefit that one party can offer to Service another that is essentially intangible and does not result in the ownership of anything. Its production may or may not Characteristics of be tied to a physical product Service Service Marketing Mix
  5. 5. The Nature of Service Learning Objectives • Regardless of the “product”, there is a services component to the offerings of all firms The Difference • In some cases, a service is the principal purpose of the transaction, between as in the rental of a car, a haircut, or legal services -- we refer to Product and this as the core service Service • In others, service is performed in support of the sale of a tangible Characteristics of product -- these are referred to as supplementary services Service Service Marketing Mix
  6. 6. Differences between Products and Services Learning Objectives • Customers do not obtain ownership of the intangible element of the service product (i.e. service personnel and their performance cannot be ‘owned’ by the customer). The Difference between Product and • Intangible elements dominate value creation Service Characteristics of • There is greater involvement of customers in the production Service process (i.e. customers are part of the performance, they interact with the service provider). Service Marketing Mix • It is more difficult to maintain quality standards of service products (i.e. individuals’ behaviour is hard to control and standardise).
  7. 7. Differences between Products and Services Learning Objectives • Many services are difficult for customers to evaluate (i.e. there may be elements of personal taste, experience, ability and mood that affect customers’ evaluation). The Difference between • Absence of inventories for services (i.e. no use for unsold stock, Product and difficult to deal with sudden increases in demand). Service • Importance of time factor (i.e. many services are delivered in real Characteristics of time so the consumer and provider must be together for the Service service to occur). Service Marketing • Delivery systems may involve both electronic and physical Mix channels (i.e. different needs for staff behaviour management).
  8. 8. Differences between Products and Services Learning Objectives Physical goods Services tangible intangible The Difference homogeneous heterogeneous between Product and Production and distribution are Production, distribution and Service separated from consumption consumption are simultaneous processes A thing An activity or process Characteristics of Service Core value processed in Core value produced in the factory buyer-seller interaction Service Marketing Mix Customers do not participate in Customers participate in the production process production Can be kept in stock Cannot be kept in stock Transfer of ownership No transfer of ownership
  9. 9. Characteristics of Services Learning Objectives • Intangibility: difficult to sample and to evaluate Intangibility The Difference • Inseparability: difficult to separate services from the service between Product and provider; mainly direct sales; staff are essential to the Service delivery of quality services • Perishability: those not sold can not be stored Characteristics of Service • Heterogeneity: virtually every service is different; very Heterogeneity difficult to standardize quality Service Marketing Mix
  10. 10. (1) Intangibility “Hurdles” Learning Objectives • Inability to physically possess • Difficult to evaluate (provide guarantees) The Difference between Product and • Difficult to advertise (use personal selling) Service • Difficult to price • Difficult to patent Characteristics • Difficult to distribute (promote availability) of Service • Difficult to store (offer a trial basis) Service Marketing Mix Develop a marketing mix to provide tangible (symbolic) cues : ex. Uniforms
  11. 11. (2) Inseparability Learning Objectives Being produced and consumed simultaneously • The provider of the service is inseparable in the delivery The Difference process between Product and Service • Customers participate in and affect the transaction Cannot be mass produced Characteristics • Difficult to distribute, Mass Production is difficult of Service • Services cannot be returned or resold Service Marketing Mix Very Difficult to Balance Supply and Demand if time sensitive
  12. 12. (3) Perishability Learning Objectives Service cannot be stored & used at a future time - A lost sale is lost revenue The Difference between Product and - Unused capacity is lost forever Service Use demand management strategies such as Characteristics - Peak pricing: of Service - Telephone call pricing - Theater Tickets Service Marketing Mix Example: Airlines use reservation systems to sell their service in advance (Yield Management)
  13. 13. (4) Heterogeneity Learning Objectives Variability in the quality of service • allows marketers to develop their service product to match The Difference between Product and customer needs/wants Service • Service delivery and customer satisfaction depend on Characteristics employee and customer actions of Service • Service quality is difficult to deliver & control Service Marketing Mix Standardisation Customisation Strategies Strategies - Automate service -Health Club Routines -Physician -Automatic car wash
  14. 14. Key Characteristics of An Effective Marketing Mix Learning Objectives •The elements are not independent of each other. The Difference between Product and •The mix elements should be Service well blended to form a consistent theme Characteristics •The marketing mix matches of Service customer needs •The marketing mix matches Service Marketing Mix corporate resources •The marketing mix creates a competitive advantage The marketing mix paradigm ( Borden, 1964, McCarthy, 1978)
  15. 15. Service Extended Marketing Mix Learning Objectives Intangibility The Difference between Product and Product Service Extended Service Marketing Marketing Mix (4 Ps) Inseparability Mix (7 Ps) Characteristics of Service -Product -Product -Price Inseparability -Price -Place -Place Service -Promotion -Promotion Marketing Mix -People Heterogeneity -Process -Physical Evidence Ownership
  16. 16. An Expanded Marketing Mix for Services Learning Objectives The Difference between Product and Service Product (Service) People Process Characteristics of Service Place & Place Customers Customers Price Price Time Customers Service Marketing Mix Promotion Physical Evidence
  17. 17. Process Learning Objectives The Difference between Product and Nature Flexibility Service Personal Contact Automation Procedure Technology Characteristics of Service Process Law Service Involvement Customers Channels Marketing Mix Other Stakeholders Feedback
  18. 18. Total Quality Management (TQM) Learning Objectives Total Quality Management (TQM) is an integrated organizational approach in delighting customers (both The Difference internal and external) by meeting their expectations all the between Product and Service time through everyone involved within the organization working on continuous improvement improvement in all products/services/processes along with structured Characteristics of methodology. Service Service • Total involvement of all levels in the organization Marketing Mix • Quality conformance to agreed upon requirements • Management best use of available resources to achieve total quality
  19. 19. Total Quality Management (TQM) TQM’s key principles are: Learning Objectives 1. Commitment to quality The Difference 2. Focus on customer satisfaction between Product and Service 3. Assessment of organizational culture 4. Empowerment of employees and teams 5. Measurement of quality efforts Characteristics of Service Service Marketing Mix TQM
  20. 20. Process for Setting Customer-Defined Standards Learning Objectives 1. Identify existing or desired service encounter sequence 2. Translate customer expectations into behaviors/actions 2. Translate customer expectations into behaviors/actions The Difference between Product and Service 3. Select behaviors/actions for standards 3. Select behaviors/actions for standards Measure Measure 4. Set hard or soft standards Characteristics of by by Service audits or transacti operating on- Hard 5. Develop feedback mechanisms 5. Develop feedback mechanisms Soft data based surveys Service 6. Establish measures and target levels 6. Establish measures and target levels Marketing Mix 7. Track measures against standards 7. Track measures against standards 8. Provide feedback about performance to employees 8. Provide feedback about performance to employees 9. Update target levels and measures 9. Update target levels and measures
  21. 21. People Learning Objectives Corporate Value Culture and Style Organisation Power The Difference Organisational Structure between Product and Service Legal Recruitment Individual Education / Training Characteristics of Personality / Attitude Service Motivation / Value People Suppliers Behaviour / Appearance Reward System Service Channels Marketing Mix Other Customers Customers Customer Interaction Customer Involvement Feedback Staff Appraisal Attitude Surveys
  22. 22. Barriers To Customer Service Learning Objectives People Skills - Weak personality traits (Moodiness, sullenness, laziness) The Difference between Product and Inadequate training Service (Communication, grooming) Insufficient authority Characteristics of (Ineffective empowerment, too many rules, etc.) Service Service • Customers are viral and can damage a brand. Marketing Mix • 90% of angry customers shared their story with a friend.
  23. 23. Equal Employment Opportunity Learning Objectives • A organization must be able to prove: – That its tests are related to success or failure on the job The Difference (validity) between Product and Service – That its tests don’t unfairly discriminate against minority or nonminority subgroups (disparate impact). Characteristics of • EEO guidelines and laws apply to all selection devices, including Service interviews, applications, and references. Service • Testing alternatives if a selection device has disparate impact: Marketing Mix – Institute a different, valid selection procedure that does not have an adverse impact. – Show that the test is valid—in other words, that it is a valid predictor of performance on the job. – Monitor the selection test to see if it has disparate impact.
  24. 24. Physical Evidence Learning Objectives The Difference between Product and Service Physical Evidence Environment Tangible Clues Characteristics of Service Facilitating Goods Service Marketing Mix Objective Feedback / Control
  25. 25. Elements of Physical Evidence Learning Objectives Servicescape Other tangibles The Difference between Product and Facility exterior Business cards Service Stationery Exterior design Signage Billing statements Characteristics of Parking Reports Service Landscape Employee dress Surrounding environment Uniforms Brochures Service Facility interior Web pages Marketing Mix Interior design Virtual servicescape Equipment Signage Layout Air quality/temperature
  26. 26. Cause and Effect Chart for Airline Departure Delays Learning Objectives Facilities, Front-Stage Procedures Equipment Personnel The Difference Delayed check-in procedure Gate agents cannot between Product and process passengers - Confused seat selection Service Aircraft late to gate fast enough - Boarding pass problems Arrive late - Late arrival - Too few agents Acceptance of late passengers Oversize bags - Gate occupied - Agents undertrained - Cutoff too close to departure time - Agents undermotivated Bypass ticket counter - Mechanical Failures - Agents arrive late at gate - Desire to protect late passengers Characteristics of Customers - Late Pushback Tug Late/unavailable - Desire to help company’s income Service cockpit crews - Poor gate locations Late/unavailable cabin crews Delayed Departures Service Late food service Marketing Mix Late cabin cleaners Other Causes Late baggage to aircraft Poor announcement of Weather departures Late fuel Air Traffic Weight and balance sheet late Materials, Backstage Supplies Personnel
  27. 27. Seven Gaps Leading to Customer Dissatisfaction Learning Objectives Customer needs and expectations The Difference 1. Knowledge Gap between Product and Management definition Service of these needs MANAGEMENT 2. Standards Gap Characteristics of Translation into Service design/delivery specs 3. Delivery Gap Service Execution of 4. Advertising and design/delivery specs sales promises Marketing Mix 5. Perceptions Gap 6. Interpretation Gap Customer perceptions Customer interpretation of product execution of communications 7. Service Gap Customer experience relative to expectations