1. MKT 321 Aspects of Services Marketing
What is service?
Chapter 1 Service Marketing “A service is an intangible product involving a deed
of performance, or an effort that cannot be
Learning objectives: physically possessed. Services are usually provided
1. To understand the characteristics through the application of human and/or
of services and its implication mechanical efforts directed at people or objects.”
2. The 8P’s in service marketing
For example; education, hotel, ATM, car repair etc
Characteristics of services
Characteristics of services 1. Intangibility : it is impossible for the service
users to taste, feel, see, smell or possess a
service before they buy it.
Marketing service products are not exactly 2. Heterogeneity: people based services are
the same with marketing physical goods. susceptible to heterogeneity, or variation in
To understand these differences, it is first quality. It is difficult to deliver service
necessary to understand the distinguishing consistently.
characteristics of services. 3. Perishability: unused service capacity of one
Services have FOUR characteristics; time period cannot be stored for use in future
time periods.
1. Intangibility
2. Inseparability
4. Inseparability: the production of a service
cannot be separated from its consumption by
3. Perishability customers. Services are produced and consumed
4. Heterogeneity simultaneously.
Key implication derive from the Key implication derive from the
characteristics of service characteristics of service
Service providers are
critical. Training is
Difficult for necessary to ensure
Inseparability
consumers to quality.
(production and
evaluate Customers behavior and
consumption of competence can help or
Difficult to service cannot hinder productivity.
Intangibility advertise and be separated. Customer involvement in
This mean the process of service
display delivery. E.g. self-service
customer must
Prices are be physically Location and opening
difficult to set hours must be convenient
present) for customers.
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2. Key implication derive from the
characteristics of service Key implication derive from the
characteristics of service
Design of service factory
must be appealing and Demand is very time
Inseparability user-friendly. sensitive.
(production and Behavior of other Very difficult to balance
consumption of customers affect supply and demand.
service cannot customer satisfaction. Perishability Solution
be separated. Recognise that spending (services High price during peak
This mean time is often seen by demand, low price
cannot be during off peak
customer must customer as a burden.
inventoried) Increase manpower
be physically To minimize waiting time
present) and capacity
– self service, expand
Make use of technology
service hours.
to improve efficiency
Example: Damai Lagoon
Strategies to control the
Price – increase price during peak season, reduce
fluctuation of demand price during off peak
1. Price and other user costs (time and effort) Changing product element – offer water sports
during peak. Organise more seminar, conference ,
2. Changing product element workshop, etc during off peak.
3. Modifying the place and time of delivery Modifying place and time of delivery – extends
• Varying the time when service is available to reflect operation hour during peak. Restaurant may offer
customer preference by day or week, by season. catering service for local residents during off peak.
• Offering the service to customers at a new location
(I.e. operate the mobile unit that take the service to Promotion and education – use advertising,
the customers) publicity to educate customers to visit the resort
4. Promotion and education during off peak season. Give better promotion
packages during off peak (book one room and
5. Storing demand through queuing and second one half price)
reservations. Design effective reservation system – telephone,
For further reading, refer to “service marketing, Christopher online reservation.
Lovelock”, p.402
Key implication derive from the 8P’s model of integrated service management
characteristics of service
Quality control –
particularly consistency
is more difficult to
achieve
Solution
Heterogeneity
Customized the service
(variation in to the needs and
quality) expectation of
individual customers
Replace employees with
automation may
reduced variability
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3. 8P’s model of integrated service management
Level of Product
1. Product
Expected • Core service – satisfies the needs or solves the
service problem. E.g. hairdressing
Core service
• Expected service – reflect standards required
or expected by customers to satisfy their needs.
E.g. qualified stylists, range of treatment
• Augmented service (supplementary service) –
fine tune the marketing mix to differentiate
from competitors. E.g. refreshment, beauty
Augmented service therapy, etc
8P’s model of integrated service
Product / Service design management
Quality - “the overall characteristics of a product 2. Place, cyberspace and time
that allow it to perform as expected in satisfying
customer needs.” Decisions on when, where and how to
deliver the service have an important
Features - “specific design characteristics that impact on the nature of customers’ service
allow a product to perform certain tasks.” experiences by determining the types of
encounters (if any) with service personnel
Additional customer service and benefits and the price and other costs incurred to
obtain service.
Two main factors serve to shape the
delivery strategy.
1. Does the nature of the service or the firm’s
positioning strategy require customers to be
in direct physical contact with its personnel,
equipment, and facilities?
2. Should it maintain just a single outlet or
offer to serve customers through multiple
outlets at different locations?
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4. Where should services be delivered? Electronic Channels
(Location)
Benefits:
1. Consistent delivery for standardized
• Locational constraint: e.g. airport
services
• Ministores: to maximise coverage. E.g.
ATM 2. Low cost
• Locating in multipurpose facilities 3. Customer choice and ability to
where customer live or work customize
4. Quick customer feedback
When should service be delivered?
(Time) Service intermediaries
Service intermediaries perform many
24 hours a day – hospital, police, radio, important functions for the service
TV station. principal.
Normal working hour (9am-5pm) – Coproduce the service, fulfilling service
professional service and B2B market principals’ promises to customers and
Extended operating hour (weekend and make service locally available, providing
evening hours when customers are time and place convenience for the
free) customer.
8P’s model of integrated service
Key intermediaries management
Franchising – service outlets licensed by a
principal to deliver a unique service concept it 3. Promotion and education
has created or popularised. E.g. McDonald’s, In launching a new service, promotional
Blockbuster (video store), Holiday Inn. message will be designed to inform consumers
that it exists. Educating consumers in how to
Agents – act on behalf of a service principal and use the service and persuading them to try it.
is authorised to make agreements between
Once a service is established, promotional
customers and the principal. Generally work for
principals continuously rather than for a single messages will serve to increase awareness or
deal. E.g. travel agent remind consumers about the services, and
persuade new customers to purchase.
Brokers – brokers bring buyer and seller together As service is intangible, advertiser will have to
while assisting in negotiation. E.g. real estate sell promise, or use testimonial to proof its
brokers. quality.
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5. 8P’s model of integrated service
management
Promotional mix for services
a) Personal communications
1. Personal selling
Personal selling involves two way,
personal communication between
salespeople and individual customers
whether face to face, by telephone,
through video or web conferencing, or by
other means.
Promotional mix for services
3) Training
2. Customer service • Many companies, especially those selling complex
• Employees in customer service positions business-to-business services offer training courses
usually creating and delivering the service in for their customers. The purpose is to familiarize
the customer presence as well as providing users with the product’s potential and educate
information, taking reservations and them on how to use the service to best advantage.
receiving payment, and solving problems.
• When a customer has the potential to buy 4) Word of mouth
several different products from the same • The comments and recommendations that
supplier, firm encourage their customer- customers make about their service experiences
contact staff to cross sell additional services. can have a powerful influence on other people’s
decisions.
b) Advertising
Advertising media:
The role of advertising in service setting:
To create awareness Broadcast (TV and radio)
Stimulate interest Print (magazine and newspaper)
Educate customer about service features and Outdoor (posters, billboard, electronic
education message boards, exteriors of vehicles such as
To establish and redefine competitive buses)
position
Direct marketing (direct mail, telemarketing,
To help “tangibilise” the intangible fax or email)
Internet
Consumers may rely more on information
provided by advertising for services because Retail display
they find them more difficult to evaluate
than goods
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6. C. Publicity/Public relations
Involves efforts to stimulate positive interest in D. Sales Promotion
and organization and its products and services Sales promotion consists of a diverse
by sending out collection of incentive tools, mostly short
News releases term, designed to stimulate quicker or
Holding press conferences greater purchase of particular products
Special events and services by consumers or the trade.
Sponsoring newsworthy activities put on by third
parties
Obtain testimonial from public figures
Fundraising
• Sales Promotion tools e) Instructional material
Free samples/free trial
Coupon – The role of instructional material is to educate
straight price cut, customers the benefit of using the service
a discount or fee waiver for one or more patrons and how to use the service.
accompanying the original purchaser,
a free or discounted enhancement of the basic Materials used such as;
service (such as free waxing with each car Brochures
washing)
Short term discount – only available for a limited Video / CD-Rom
time period especially slow periods. Website
Gift premiums
Patronage reward
Sign up rebates – waive membership fees
Contest, sweepstake, games
8P’s model of integrated service
d) Corporate design management
To create a unified and distinctive visual 4. Price
appearance for all tangible elements that Key pricing concepts for services
contribute to the corporate image. Skimming pricing – offer the new service at
a high price on a low volume basis.
Such as stationery and promotional literature,
retail signage, uniforms, and color schemes Penetration pricing – price is set at low
for painting vehicles, equipment, and building level to attract high volume sales
interiors.
These elements are created by using Cost – plus pricing; pricing is based on the
costs of producing the good or providing
distinctive colors, symbols, lettering, and the service and add some required mark up.
layout to provide a unifying and recognizing
theme linking all the firm’s operations in a
branded service experience.
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7. Variable pricing – more relevant in industrial and Promotional pricing
business to business markets where individual
contracts are priced according to specification or Discounts, special offer, vouchers, rebates, and even
complexity of the work. buy now pay later schemes, interest free credit, and loss
leaders
Marginal pricing – based on the concept of
marginal cost and anything over the marginal cost is Differential pricing – different prices are charged
the contribution to the company’s profit. Some for the same service at different times or to different
companies rather sell at discounted price at last customers. This tactics is used to attract more
minute rather than empty seat. business in slack periods.
The services marketing triangle
8P’s model of integrated service
management Company
7. People
Refers to the service providers – the Internal Marketing External Marketing
employees of the firm. E.g. receptionist in Enabling promises Making promises
hotel, hairstylist in hair saloon, nurse in
hospital, etc.
Many services depend on direct, personal
interaction between customers and a Providers Customers
firm’s employees, and these interactions Interactive Marketing
strongly influence the customer’s Keeping promises
perceptions of service quality.
Employee satisfaction, customer satisfaction and profit
External marketing
efforts that the firm set up its customers’
expectations and make promises to customers
regarding what is to be delivered.
Interactive marketing
where the promises are kept or broken by the firm’s
employees. People are critical at this juncture. If
customers are not kept, customers become
dissatisfied and eventually leave.
Internal marketing
these are the activities that management engages in
to aid the providers in their ability to deliver on the
service promise: recruiting, training, motivating,
rewarding, and providing equipment and technology.
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8. Human resource strategies
1. Hire the right people
Compete for the best people
thinking of the recruiting as a marketing activity results
in addressing issues of market (employee)
segmentation, product (job) design and promotion of
job availability in ways that attract potential long term
employees
Hire for service competencies and service
inclination
Requirements for the job: Qualifications/technical
knowledge, ability, skills, experience, personality,
physical characteristics
Be the preferred employer
Provide extensive training, career and advancement
opportunities, excellent internal support, and attractive
incentives, etc.
2. Develop people to deliver service 3. Provide needed support systems
quality
Train for technical and interactive skills
Measure internal service quality
technical skills and knowledge
identify internal customers who need help, determine
operational rules of the company their needs, measure how well they are doing, and
Interactive skills that allow them to provide courteous, make improvements
caring, responsive, and empathetic service.
Empower employees Provide supportive technology and equipment
to be truly responsive to customer needs, front-line
providers need to be empowered to accommodate
customer requests and to recover on the spot when Develop service oriented internal processes
things go wrong. To best support service personnel in their delivery of
Promote teamwork quality service on the front line, an organisation’s
internal processes should be designed with customer
The nature of many service jobs suggests that customer value and customer satisfaction in mind.
satisfaction will be enhanced when employees work as
teams.
4. Retain the best people 8P’s model of integrated service
Include employees in the company’s mission management
When the vision and direction are clear and motivating,
employees are more likely to remain with the company 8. Physical evidence and the servicescape
through the inevitable rough spots along the path to the Visual or other tangible clues that provide
vision. evidence of service quality. E.g. facility
design, equipment, signage, employee
Treat employees as customers appearance, printed materials.
If employees feel valued and their needs are taken care As service is intangible, it is hard for
of, they are more likely to stay with the organisation customers to judge the service quality
before use it. Therefore, customers will
Measure and reward strong service performers base on the tangible objects to evaluate
If a company wants the strongest service performers to service quality.
stay with the organisation, it must reward and promote Servicescape – describe the style and
them. appearance of the physical environment
where customers and service provider
Further reading: Valerie A. Zeithaml and Mary Jo Bitner (2003, Ch.11 interact.
employees’ role in service delivery) Services marketing: integrating customer
focus across the firm. 3rd edition. Mc Graw-Hill
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9. Elements of physical evidence Role of the servicescape
Servicescape Other tangibles
1. Package – physical evidence of services
Facility exterior Business card
exterior design essentially “wrap” the service and convey an
Stationery
signage external image of what is “inside” to
Billing statements
parking consumers.
Reports
landscape
Employee dress This packaging role is particularly important
Surrounding environment
Facility interior Uniforms in creating expectations for new customers
interior design Brochures and for newly established service
equipment Virtual servicescape organisation that are trying to build a
signage particular image.
layout
air quality/temperature
2. Facilitator – how the setting is designed can
enhance or inhibit the efficient flow of activities in 3. Socializer – the design of the servicescape
the service setting,making it easier or harder for aids in the socialisation of both employees
customers and employees to accomplish their and customers in the sense that it helps to
goals.
convey expected roles, behaviours, and
relationships.
A well-designed, functional facility can make the
service a pleasure to ecperienc from the customer’s
point of view and a pleasure to perform from the The design of the facility can also suggest
employee’s. to customers what their role is relative to
employees, what parts of the servicescape
For example, an international air traveler who finds they are welcome in and which are for
himself in a poorly designed airport with few signs, employees only, how they should behave
poor ventilation, and a few places to sit or eat will
find the experience quite dissatisfying, and while in the environment, and what types of
employees who work there will probably be interactions are encouraged.
unmotivated as well.
8P’s model of integrated service
4. Differentiator – the design of the physical management
facility can differentiate a firm from its 5. Process
competitors and signal the market segment the
A particular method of operations or series of action,
service is intended for. typically involving steps that need to occur in a
defined sequence. I.e. flow of activities by which the
service is delivered.
Given its power as a differentiator, changes in
the physical environment can be used to
reposition a firm and/or to attract new market Customers are often involved in the service
production. Badly designed processes are likely to
segments. annoy customers when the latter experience slow,
bureaucratic, and ineffective service delivery.
Price differentiation is also often partially
achieved through variations in physical setting. Similarly, poor processes make it difficult for frontline
Larger seats with more leg room are more staff to do their jobs well, result in low productivity,
and increase the likelihood of service failure.
expensive on an airplane.
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10. The purpose of setting down clear outlines or
blueprints for service delivery is as follow;
Example of a simple flowchart
To ensure tat the service is carried out in the fastest,
most efficient and cost effective manner possible
Stay at motel:
To enable service quality to be monitored and
park car check in benchmarks to be put in place thus allowing accurate
spend night in room check out measurement of both quality and productivity
To facilitate staff training and enable individuals to
carry responsibility for individual stages of the service
transaction and delivery
To reduce the amount of divergence thus enabling
accurate budgeting and manpower planning etc. to
take place.
Issues to consider in designing service delivery
8P’s model of integrated service
process
management
Customer participation in the process – level of involvement
or participation of the customer in the service process (self
service vs waitress service restaurant) 6. Productivity and quality
Location of service delivery – at service providers’ premises Productivity measures the amount of output
or at the customer’s home?
produced by an organisation relative to the
High-contact or low-contact services – the level of contact amount of inputs required.
between the customer and the service provider’s personnel.
Degree of standardization
Quality- refers to the degree to which a
service satisfies customers by meeting their
Complexity of the service – this is measured by the number needs, wants, and expectations.
of steps or activities which contribute toward the service
delivery.
What are the input in service
context? Output?
No of customers served
Labor
Customers’ satisfaction
Materials, energy, and capital
(consisting of land, buildings,
equipment, information system, and
financial assets)
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11. How productivity improvement
impacts quality and value?
Reduced input could mean:
Improvement in productivity means; Reduced number of staff
1. Reduced input but to produce same Recruit low cost staff
amount of output. Reduced number of equipments used
Etc
Increased output
2. Maintain the input but increase the for example a hairdresser suppose to serve
volume of output. 3 customers in one hour but increase her
output to 4 customers. Customers will feel
rushed and unwanted.
But these could cause decline in service
quality
• Improving productivity is essential to keep costs under
control, but managers must beware of making
Strategies to improve productivity
inappropriate cuts in service levels that are resented by
customers. Improving the quality of the labor force
Profitability - less mistakes, higher quality service
Investment in more efficient technology and capital
equipment (computer, ATM, automated baggage
Productivity Quality system, scrubbing machine)
Work faster and more Improve customer it reduces labor cost, increase efficiency, and
efficiently to reduce cost satisfaction provide consistent level of service quality.
•Hence, productivity and quality improvement strategies
need to be considered jointly rather than in isolation from
one another.
Modify customer-service interaction Increasing self-service options
Changing how customers and service providers interact Firms can improve productivity by shifting some of the
can often enhance productivity. Most customers now service operation to customers. E.g. petrol station, ATM,
conduct business over the telephone, by fax, or through self service restaurant.
the internet rather than in person.
Reduce staff and increase the number of customers per
hour that could be served.
Separate customer contact and support functions
By physically separating the support and customer contact Using subcontracting or outsourcing
components, the quality and efficiency of both can be
A service consists of four primary components:
improved.
information, reservations, payments,and consumption.
Outsourcing with third parties or subcontractors can be
The support personnel can work more efficiently without used for any of these four components.
interruptions from customers and can normally perform a
better job. Freeing customer contact personnel from
For example, airlines use travel agent to perform
service performance can enhance the level of
information, reservations and payments functions. Airlines
communication with the customer and improve the quality
can reduce labour force and productivity is improved
of that interaction.
because potential customers can deal with a travel agent
in an area where they live.
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12. Further reading;
1. Christopher Lovelock, Services Marketing. 4th
edition.
- Chapter 1, distinctive aspects of service
management
- Ch 10, customer education and service promotion
pg.296-306
- Ch 11, creating delivery system in place,
cyberspace, and time
2. David L.K/Kenneth E.C (1998), Services Marketing.
- Ch.11 Pg.363-369 “enhancing productivity”
3. Valerie A. Zeithaml and Mary Jo Bitner (2003),
Services marketing: integrating customer focus
across the firm. 3rd edition.
- Ch.11 employees’ role in service delivery ,
pg.325-337
- Ch.10 physical evidence and the servicescape,
pg.287-289
4. Helen Woodruffe (1995), Services Marketing.
- Ch.12 Pricing the service, pg.138
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