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

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

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.

Types of Marketing Service Marketing Interactive Internal Marketing Service marketing requires more than just traditional external marketing using the four Ps Internal marketing means that the service firm must effectively train and motivate its customer-contact employees and all the supporting service people to work as a team to provide customer satisfaction Interactive marketing means that perceived service quality depends heavily on the quality of the buyer–seller interaction during the service encounter

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

Recommendations for Improving Service Quality Listening Reliability Basic service Service design Recovery Surprising customers Fair play Teamwork Employee research Servant leadership Listening Understand what customers really want through continuous learning about the expectations and perceptions of customers and noncustomers (for instance, by means of a service-quality information system). Reliability The single most important dimension of service quality, reliability must be a service priority. Basic service Service companies must deliver the basics and do what they are supposed to do: keep promises, use common sense, listen to customers, keep customers informed, and be determined to deliver value to customers. Service design Develop a holistic view of the service while managing its many details. Recovery To satisfy customers who encounter a service problem, service companies should encourage customers to complain (and make it easy for them to do so), respond quickly and personally, and develop a problem-resolution system. Surprising customers Although reliability is the most important dimension in meeting customers’ service expectations, process dimensions such as assurance, responsiveness, and empathy are most important in exceeding customer expectations (e.g., by surprising them with uncommon swiftness, grace, courtesy, competence, commitment, and understanding). Fair play Service companies must make special efforts to be fair, and to demonstrate fairness, to customers and employees. Teamwork Teamwork is what enables large organizations to deliver service with care and attentiveness by improving employee motivation and capabilities. Employee research Marketers should conduct research with employees to reveal why ser-vice problems occur and what companies must do to solve problems. Servant leadership Quality service comes from inspired leadership throughout the organization; from excellent service-system design; from the effective use of information and technology; and from a slow-to-change, invisible, all-powerful, internal force called corporate culture.

Capacity Management Involve the Customer in the Service Delivery System Cross-Train Employees Use Part-Time Employees Rent or Share Extra Facilities and Equipment Corporate management is responsible for matching capacity with demand on a long-term basis; unit managers are responsible for matching capacity with fluctuations in short-term demand Involve the Customer in the Service Delivery System Getting the customer involved in service operations expands the number of people that one employee can serve, thus increasing the capacity of the operation Cross-Train Employees When managers cross-train their employees, they can shift employees to increase the capacity Use Part-Time Employees Managers can use part-time employees to expand capacity during an unusually busy day or meal period or during the busy months of the year for seasonal businesses Rent or Share Extra Facilities and Equipment Businesses do not have to be constrained by space limitations or equipment limitations Schedule Downtime During Periods of Low Demand One way to decrease capacity to match the lower demand is to schedule repairs and maintenance during the low season Change the Service Delivery System Adjust operating systems to enable the business to operate at maximum capacity However, remember that your goal is to create satisfied customers! Schedule Downtime During Periods of Low Demand Change the Service Delivery System

Use Price to Create or Reduce Demand Create Promotional Events Demand Management Use Price to Create or Reduce Demand Use Reservations Overbook Revenue Management Use Queuing The following are some ways to manage demand: Use Price to Create or Reduce Demand Pricing is one method used to manage demand When demand exceeds capacity, managers raise prices to lower demand Use Reservations Hotels and restaurants often use reservations to monitor demand When it appears they will have more demand than capacity, managers can save capacity for the more profitable segments. Reservations can also limit demand by allowing managers to refuse any further reservations when capacity meets demand Overbook Not everyone who reserves a table or books a room shows up Overbooking is another method that hotels, restaurants, trains, and airlines use to match demand with capacity Revenue Management Managers can create more demand for a product by lowering its price and lower demand by raising its price Use Queuing Voluntary queues, such as waits at restaurants, are a common and effective way of managing demand Shift Demand If the date is flexible, the manager shifts the date to a period when the hotel is not projected to sell out and needs the business Create Promotional Events An object of promotion is to increase demand or, as we will learn later, to shift the demand curve to the left Shift Demand Create Promotional Events

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.