Marketing chapter 12a managing services

Inventory • Inventory problems exist with goods because many items are perishable and there are costs associated with its handling • With services, inventory costs are more subjectiv

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Describe four unique elements of services.

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 12, YOU SHOULD BE ABLE TO:

Discuss the important roles of internal marketing and customer experience management.

LO5

Explain the role of the four Ps in the services marketing mix.

LO6

LEARNING OBJECTIVES (LO)

AFTER READING CHAPTER 12, YOU SHOULD BE ABLE TO:

12-3

FIGURE 12-1 Services are now a larger part

of the U.S gross domestic product (GDP)

THE UNIQUENESS OF SERVICES

Slide 12-6

THE UNIQENESS OF SERVICES

THE FOUR I’S OF SERVICES

LO1

 Four I’s of Services

• Intangibility • Inseparability

THE UNIQUENESS OF SERVICES

Slide 12-6

• The Four I’s of Services

1 Intangibility

• They cannot be held, touched, or

seen before the purchase decision

• Difficult for consumers to evaluate as

they tend to be a performance rather

than an object

• Marketers need to make services

tangible or show their benefits

THE UNIQUENESS OF SERVICES

• The Four I’s of Services

2 Inconsistency

• Services depend on the people who

provide them – their quality varies

with each person's capabilities and

day-to-day performance

• More of a problem with services than

with tangible goods – problems can

be reduced through standardization

and training

THE UNIQUENESS OF SERVICES

Slide 12-6

• The Four I’s of Services

3 Inseparability

• Consumers cannot (and do not) separate

the deliverer of the service from the service

itself

• The amount of interaction between the

consumer and the service provider depends

on the extent to which the consumer must

be present to receive the service

• Some services, such as banking, can now

be delivered electronically, often requiring

no face-to-face consumer interaction and

therefore a more consistent experience

THE UNIQUENESS OF SERVICES

• The Four I’s of Services

4 Inventory

• Inventory problems exist with goods

because many items are perishable and

there are costs associated with its handling

• With services, inventory costs are more

subjective and are related to idle production capacity (the service provider is available

but there is no demand)

THE UNIQUENESS OF SERVICES

Slide 12-6

• The Four I’s of Services

4 Inventory , cont.

• The inventory cost of a service is the cost of

the person used to provide the service

along with any needed equipment

– Inventory costs can be low or nonexistent because idle production capacity can be cut back through reducing hours or paying by commission

– Inventory carrying costs of service vary widely, from the high-end airlines and hospitals with highly trained, salaried specialists to the low-end

of real estate agencies and hair salons with employees working on commission and needing little expensive equipment

FIGURE 12-2 Inventory carrying costs of

services depend on the cost of employees

and equipment

THE UNIQENESS OF SERVICES

THE CONTINUUM & CLASSIFICATION OF SERVICES

LO2

Service Continuum

12-16

THE UNIQUENESS OF SERVICES

• The Service Continuum – range

from the tangible to the intangible

– Tangible , good-dominant offerings, four I’s

are not relevant

– Intangible , service-dominated offerings:

four I’s are major marketing concerns

– Some businesses are a mix of intangible

service and tangible good factors

THE UNIQUENESS OF SERVICES

Slide 12-12

• The Service Continuum

– For businesses today, it is useful to

distinguish between core product and

supplementary services

– Supplementary services allow service

providers to differentiate their offering from

competitors – add value

– Key categories include; information

delivery, consultation, order taking, billing

procedures, and payment options

FIGURE 12-3 Service continuum

THE UNIQENESS OF SERVICES

THE CONTINUUM & CLASSIFICATION OF SERVICES

LO2

Classifying Services

• Delivery by People or Equipment

• Profit or Nonprofit Organizations

• Government Sponsored

12-20

THE UNIQUENESS OF SERVICES

Classifying Services

– Delivery by People or Equipment

• Professional to unskilled labor

• Equipment-based services do not have

inconsistency concerns

– Profit or Not-for-profit

• Not-for-profit organizations net profits are not

taxed or distributed to shareholders

• 1.1 million generate 7 percent of GDP

FIGURE 12-4 Services can be classified as

equipment-based or people-based

12-22

Concept Check

A: intangibility, inconsistency,

inseparability, and inventory

1 What are the four I’s of service?

Slide 12-21

Concept Check

2 Would inventory carrying costs

for an accounting firm with certified public accountants be

(a) high, (b) low, or (c)

nonexistent?

A: (a) high because the inventory

cost of a service is the cost of

paying the person used to provide the service: the salary

of the accountant.

Concept Check

3 To eliminate service inconsistencies, companies

rely on _ and

_.

standardization training

HOW CONSUMERS PURCHASE SERVICES

HOW CONSUMERS PURCHASE SERVICES

• The Purchase Process

– Service organizations must understand how

consumer makes service purchase decision

– Services cannot be displayed, or

demonstrated – consumers cannot make

prepurchase evaluation of all characteristics

Slide 12-24

FIGURE 12-5 How consumers evaluate

goods and services

HOW CONSUMERS PURCHASE SERVICES

• The Purchase Process

– To reduce uncertainty created by these

properties, consumers turn to personal

sources of information – early adopters,

opinion leaders, and reference groups

during the purchase decision process

HOW CONSUMERS PURCHASE SERVICES

HOW CONSUMERS PURCHASE SERVICES

• Assessing Service Quality

– Gap Analysis – differences between consumer

expectations and experiences on dimensions of

service quality

– Expectations are influenced by: word-of-mouth,

personal needs, past experiences, and

promotional activities

– Actual experiences are determined by the way an

organization delivers its service

Slide 12-27

What if Someone Complains?

How Services Can Recover From Failure to

Satisfy a Customer

Many service companies have developed strategies to

encourage customer satisfaction and loyalty However,

every company has some service failures that lead to

customer complaints How can services recover from these

situations? Professors Stephen Tax and Stephen Brown

suggest four steps:

1 Identify service failures Only 5 to 10 percent of

dissatisfied customers actually complain—the rest switch

firms or make negative comments Firms must encourage

customer feedback.

2 Resolve customer problems A key to resolving

complaints is training employees, especially those on the

front line, to handle likely situations and giving them

authority to solve problems.

What if Someone Complains?

How Services Can Recover From Failure to

Satisfy a Customer

3 Communicate and classify service failures This step reflects the concept of organizational learning, or the

capacity to improve performance based on experience.

4 Integrate data and improve overall service Ongoing

customer research must be integrated with complaint

information to identify areas for service quality

improvement.

Many firms are improving their methods of dealing with

FIGURE 12-6 The five dimensions of service

quality

12-35

HOW CONSUMERS PURCHASE SERVICES

HOW CONSUMERS PURCHASE SERVICES

Slide 12-28

• Customer Contact and Relationship Marketing -

customers judge services on “service encounters”

– Customer Contact Audit – flow chart of the

points of interaction between customer and

service provider

– Serve as basis for developing relationships with

customers

– There are points where customer sees tangible

and intangible aspects of the service that are

essential but do not involve points of customer

interaction

FIGURE 12-7 Customer contact audit for a

car rental agency (green boxes = customer

activity; orange boxes = employee activity)

MANAGING THE MARKETING

MANAGING THE MARKETING OF SERVICES

• Internal Marketing – service

organizations must focus on its employees

– Ensure employees have attitudes, skills

and commitment needed to meet customer

expectations

– Employee development through

recruitment, training, communication,

coaching, management, and leadership

MANAGING THE MARKETING OF SERVICES

Slide 12-32

I Product (Service) – three aspects of

the marketing mix that warrant special

attention:

MANAGING THE MARKETING OF SERVICES

1 Exclusivity

– Major difference is that services cannot

be patented

– Many businesses try to distinguish their

core product with new or improved supplementary services

MANAGING THE MARKETING OF SERVICES

Slide 12-32

– Because services are intangible, the

brand name or identifying logo of the service organization is particularly

important in consumer purchase decision

MANAGING THE MARKETING OF SERVICES

3 Capacity Management

– Most services have limited capacity due to the inseparability

of the service from the service provider and the perishable nature of the service

– Capacity management integrates the service component of

the marketing mix with efforts to influence customer demand

– Service organizations must manage availability of the

offering so that:

cycle (one day, week, month, year)

MANAGING THE MARKETING OF SERVICES

2 Be used in capacity management – many use

MANAGING THE MARKETING OF SERVICES

II Price – price is referred to in various ways

MANAGING THE MARKETING OF SERVICES

Slide 12-32

III Place (Distribution)

– Historically little attention has been paid

to distribution

– As competition grows, the value of

conventional distribution, or access, is being recognized

– Availability of electronic distribution

through the internet now provides global coverage for a variety of services

MANAGING THE MARKETING OF SERVICES

IV Promotion

– the value of promotion, specifically

advertising, is to show the benefits of purchasing the service by stressing availability, quality, location, etc

– Publicity has played a major role in the

promotional strategy of not-for-profit services and some professional

organizations

Slide 12-32

1 Technology

– New e-services will include

voice-over-Internet (telephone), home videoconferencing, and new forms of security and identification (e.g., fingerprint and retinal scans)

– New Internet-based services also make it

possible to obtain videos, movies, and textbooks electronically

SERVICES IN THE FUTURE

2 Global Economy

– Increasing attention to the cross-cultural

implications for service quality

– Shifting from the focus on goods and

tangible resources to services and intangible attributes

SERVICES IN THE FUTURE

Services are the intangible

activities or benefits that an

organization provides to

consumers in exchange money

or something else of value.

12-51

Four I’s of Services

The four I’s of services consists

of the four unique elements to

services: intangibility,

inconsistency, inseparability,

and inventory.

Idle Production Capacity

Idle production capacity occurs

when the service provider is

available but there is no demand.

12-53

Service Continuum

The service continuum consists

of the range of offerings

companies bring to the market,

from the tangible to the intangible

or good-dominant to

service-dominant offerings.

Gap Analysis

Gap analysis is a type of

analysis that identifies the

differences between a consumer’s expectations about and

experiences with a service based

on dimensions of service quality.

12-55

Customer Contact Audit

A customer contact audit is a

flowchart of the points of

interaction between consumers

and a service provider.

Internal Marketing

Internal marketing is the notion

that a service organization must

focus on its employees, or

internal market, before successful programs can be directed at

customers.

12-57

Customer Experience Management

(CEM)

Customer experience

management (CEM) is the

process of managing the entire

customer experience within the

company.

Capacity Management

Capacity management

integrates the service component

of the marketing mix with efforts

to influence consumer demand.

12-59

Off-Peak Pricing

Off-peak pricing involves

charging different prices during

different times of the day or days

of the week to reflect variations

in demand for the service.