Service Characteristics of Hospitality and Tourism Marketing Marketing for Hospitality and Tourism Kotler, Bowen and Makens Service Characteristics of Hospitality and Tourism Marketing Chapter 2

Learning Objectives Describe a service culture. Identify four service characteristics that affect the marketing of a hospitality or travel product. Explain seven marketing strategies for service businesses

Characteristics of Service Marketing Intangibility Inseparability Variability Perishability Characteristics of Services Service marketers must understand the four characteristics of services: intangibility, inseparability, variability, and perishability. Intangibility Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are purchased One implication of experiential products is that we take away only the memories of our experiences Service marketers should provide tangible evidence or takeaways However, physical evidence that is not managed properly can hurt a business Inseparability Hospitality products are first sold and then produced and consumed at the same time Customers and employees must understand the service delivery system because they are coproducing the service Variability Services are highly variable. Their quality depends on who provides them and when and where they are provided Variability or lack of consistency in the product is a major cause of customer disappointment in the hospitality industry Perishability Services cannot be stored Example: A 100-room hotel that sells only 60 rooms on a particular night cannot inventory the 40 unused rooms and then sell 140 rooms the next night Revenue lost from not selling those 40 rooms is gone forever

Service marketers must understand the four characteristics of services: intangibility, inseparability, variability, and perishability. 1- Intangibility Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are purchased One implication of experiential products is that we take away only the memories of our experiences Service marketers should provide tangible evidence or takeaways However, physical evidence that is not managed properly can hurt a business 2- Inseparability Hospitality products are first sold and then produced and consumed at the same time Customers and employees must understand the service delivery system because they are coproducing the service

3- Variability Services are highly variable. Their quality depends on who provides them and when and where they are provided Variability or lack of consistency in the product is a major cause of customer disappointment in the hospitality industry 4- Perishability Services cannot be stored Example: A 100-room hotel that sells only 60 rooms on a particular night cannot inventory the 40 unused rooms and then sell 140 rooms the next night Revenue lost from not selling those 40 rooms is gone forever

Characteristics of Service Marketing Service marketers must be concerned with four characteristics of services: intangibility, inseparability, variability, and perishability Four service characteristics.

Steps to Reduce Variability Invest in good hiring & training procedures Standardize The service- performance process Monitor Customer Satisfaction Invest in good hiring and training procedures Better trained personnel exhibit six characteristics: Competence Courtesy Credibility Reliability Responsiveness Communication Standardize the service-performance process throughout the organization Diagramming the service delivery system in a service blueprint can simultaneously map out: The service process The points of customer contact The evidence of service from the customer’s point of view Monitor customer satisfaction Use suggestion and complaint systems, customer surveys, and comparison shopping

Invest in good hiring and training procedures Better trained personnel exhibit six characteristics: Competence Courtesy Credibility Reliability Responsiveness Communication Standardize the service-performance process throughout the organization Diagramming the service delivery system in a service blueprint can simultaneously map out: The service process The points of customer contact The evidence of service from the customer’s point of view Monitor customer satisfaction Use suggestion and complaint systems, customer surveys, and comparison shopping

The Service Profit Chain Internal service quality Satisfied and productive service employees Greater service value Satisfied and loyal customers Healthy service profits and growth The service profit chain links service firm profits with employee and customer satisfaction Internal service quality Superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in… Satisfied and productive service employees More satisfied, loyal, and hardworking employees, which results in… Greater service value More effective and efficient customer value creation and service delivery, which results in… Satisfied and loyal customers Satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in… Healthy service profits and growth: superior service firm performance.

Internal service quality The service profit chain links service firm profits with employee and customer satisfaction Internal service quality Superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in… Satisfied and productive service employees More satisfied, loyal, and hardworking employees, which results in… Greater service value More effective and efficient customer value creation and service delivery, which results in… Satisfied and loyal customers Satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in… Healthy service profits and growth: superior service firm performance.

Management Strategies for Service Businesses Service Marketing Service marketing requires more than just traditional external marketing using the four Ps. service marketing also requires both internal marketing and interactive marketing.

Marketing Strategies Service Differentiation Service Quality Service Productivity Customer Complaints Employees As Part Of The Product Perceived Risk Capacity and Demand Today as competition and costs increase and as productivity and quality decrease, more marketing sophistication is needed Managing Service Differentiation Service companies can differentiate their service delivery in three ways: People Physical environment Process Managing Service Quality Once customer expectations are determined, managers need to develop a service delivery system that will deliver a service that meets the guest’s expectations Well-managed service companies: Are “customer obsessed” Have top management committed to quality Set high service-quality standards Watch service performance closely, both their own and that of competitors Managing Service Productivity In attempting to improve service productivity, companies must be mindful of how they create and deliver customer value Resolving Customer Complaints A company cannot always prevent service problems, but it can learn from them Good service recovery can turn angry customers into loyal ones To have effective complaint resolution, managers must empower frontline service employees When a customer does complain, management should be grateful because it gives them a chance to resolve the complaint and gain the customer’s repeat business Managing Employees As Part Of The Product The manager must hire friendly and capable employees and formulate policies that support positive relations between employees and guests The job of the marketing department includes encouraging everyone in the organization to practice customer-oriented thinking Managing Perceived Risk Customers who buy hospitality products experience some anxiety because they cannot experience the product beforehand Managing Capacity and Demand See Slides 9-10

Today as competition and costs increase and as productivity and quality decrease, more marketing sophistication is needed Managing Service Differentiation Service companies can differentiate their service delivery in three ways: People Physical environment Process Managing Service Quality Once customer expectations are determined, managers need to develop a service delivery system that will deliver a service that meets the guest’s expectations Well-managed service companies: Are “customer obsessed” Have top management committed to quality Set high service-quality standards Watch service performance closely, both their own and that of competitors Managing Service Productivity In attempting to improve service productivity, companies must be mindful of how they create and deliver customer value

Resolving Customer Complaints A company cannot always prevent service problems, but it can learn from them Good service recovery can turn angry customers into loyal ones To have effective complaint resolution, managers must empower frontline service employees When a customer does complain, management should be grateful because it gives them a chance to resolve the complaint and gain the customer’s repeat business Managing Employees As Part Of The Product The manager must hire friendly and capable employees and formulate policies that support positive relations between employees and guests The job of the marketing department includes encouraging everyone in the organization to practice customer-oriented thinking Managing Perceived Risk Customers who buy hospitality products experience some anxiety because they cannot experience the product beforehand Managing Capacity and Demand See Slides 9-10

Management Strategies for Service Businesses Managing Differentiation Service companies can differentiate their service delivery in three ways: through people physical environment process tab

Management Strategies for Service Businesses Managing Service Quality A service firm can differentiate itself by delivering consistently higher quality than competitors. with hospitality products, quality is measured by how well customer expectations are met Expectations are based on past experiences, word- of-mouth, and service firm advertising. A service firm’s ability to retain customers depends on how consistently it delivers value to them.

See this feature on page 43 of your textbook.

Management Strategies for Service Businesses Managing Service Quality Studies of well-managed service companies show they share common virtues regarding service quality. top service companies are “customer obsessed” well-managed service companies have a history of top management commitment to quality the best service providers set high service- quality standards the top service firms watch service performance closely, both their own and that of competitors tab

Management Strategies for Service Businesses Resolving Customer Complaints Problems inevitably occur. a company cannot always prevent service problems, but it can learn from them Good service recovery can turn angry customers into loyal ones, and can win more customer purchasing & loyalty than if things had gone well in the first place. Companies should take steps not only to provide good service every time but also to recover from service mistakes.

Management Strategies for Service Businesses Resolving Customer Complaints: tips To have effective complaint resolution, managers must empower frontline service employees. Resolving complaints is a critical component of customer retention. If you resolve a complaint, do it quickly—the longer it takes to resolve, the higher the defection rate Seek out customer complaints as most customers do not complain. They just leave and never come back tab

Management Strategies for Service Businesses Methods to encourage Customer Complaints: Customer hotlines Comment cards Training a service guarantee is a way to get customers to complain. It may encourage customers to check and complain if not happy Note: Customer complaints are one of the most available yet underutilized sources of customer and market information. tab

Management Strategies for Service Businesses Tangibilizing the Product Promotional material, employees’ appearance, and the service firm’s physical environment all help tangibilize a service. Everything about a hospitality company communicates something. Physical surroundings should be designed to reinforce product position in the customer’s mind. A service organization should review all tangible evidence to ensure it delivers the desired image.

Management Strategies for Service Businesses Managing Employees as Part of the Product In the hospitality industry, employees are a critical part of the service product and marketing mix. This means the human resources and marketing departments must work closely together The manager must hire friendly, capable employees and formulate policies that support positive relations between employees and guests. tab

Management Strategies for Service Businesses Managing Perceived Risk Customers of hospitality products experience anxiety because they cannot experience the product first. Warranty, assurance of satisfaction, physical evidences, accurate information, credibility… etc. may help reduce such risk tab

Management Strategies for Service Businesses Managing Capacity and Demand Corporate management is responsible for matching capacity with demand on a long-term basis. Managers have two major options for matching capacity with demand: change capacity or change demand. tab

Capacity Management Involving the Customer in the Service Delivery Getting the customer involved in service operations expands productive capacity of the operation (i.e Self-service technologies (SSTs) allow the customer to serve as the company’s employee) Cross-Training Employees can also increase productive capacity Part-Time Employees Renting or Sharing Extra Facilities Schedule Downtime During Periods of Low Demand (to match lower demand or during the low season) Change the Service Delivery System (i.e extend or reduce hours of operations)

Demand Management Using Price to Create or Reduce Demand Using Reservations Deposits (In cases where demand is greater than capacity, guests can be asked to prepay or make a deposit) Overbooking (managers who limit reservations to the number of available rooms are often left with empty rooms. In fact, not everyone who reserves a table or a room shows up plans change & people with reservations become no-shows overbooking is a method use to match demand with capacity, and it must be managed carefully Revenue management (handling demand fluctuations through price modification) Use Queuing (When capacity exceeds demand and guests are willing to wait, queues are used to manage demand) Shifting Demand (i.e. peak pricing or off-peak pricing) Create Promotional Events (i.e. special rates during slow periods)

Tips for Managing Waiting Lines Unoccupied time feels longer than occupied time Unfair waits are longer than equitable waits Uncertain Waits Are Longer than Known, Finite Waits Examples: Entertainment parks have characters who talk to kids in waiting lines, occupying time and making the wait pass faster Rather than put a party of four at a table for six, the restaurant seats a party of six at the table, even if there are several parties of four in front of them. This sometimes leads to anger on the part of the guests in the passed-over party of four When possible we should tell guests the reason for the delay and the expected amount of time of the delay to prevent customer anxiety caused by uncertainty

Key Terms Interactive marketing Marketing by a service firm that recognizes perceived service quality depends heavily on the quality of the buyer–seller interaction. Internal marketing Marketing by a service firm to train effectively and motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction. Organization image The way a person or group views an organization. Physical evidence Tangible clues such as promotional material, employees of the firm, and the physical environment of the firm. Physical evidence is used by a service firm to make its product more tangible to customers. Revenue management A pricing method using price as a means of matching demand with capacity. Service culture definition to look like this. Definition to look like this.

Key Terms (cont.) Service inseparability A major characteristic of services; they are produced and consumed at the same time and cannot be separated from their providers, whether the providers are people or machines. Service intangibility A major characteristic of services; they cannot be seen, tasted, felt, heard, or smelled before they are bought. Service perishability A major characteristic of services; they cannot be stored for later use. Service-profit chain A model that shows the relationships between employee satisfaction, customer satisfaction, customer retention, value creation, and profitability. Service variability A major characteristic of services; their quality may vary greatly, depending on who provides them and when, where, and how they are provided.