Dr. S. Borna MBA 671

Services Marketing is Services Marketing is Different Different By: Leonard L. Berry Business (1980) Breaking Free From Product Marketing by G. Lynn Shostack Journal of Marketing (April 1977)

Lecture Outline How are services defined and classified? How do services differ from goods? How can service firms improve their differentiation, quality, & Productivity?

The Complexity of Marketed Entities Consider the following two examples: an automobile and airline transportation. What is being marketed? A tangible or an intangible product?

Do “either-or” terms (product vs. service) adequately describe the true nature of marketed products? No! Need for a new structural definition

A Molecular Model p Price Distribution Market positioning (Weighted toward evidence or image

The notion of multiple elements and dominance of elements Change in one element may alter the element FE3O2 FE2O3

Intangible element Tangible element

Fast-food outlets salt tangibledominant intangibledominant fast-foodoutlets teaching

PureService Categories of Service Mix TangibleGoodw/ServicesMajorService w/ Goods Hybrid PureTangibleGood

Unique Characteristics of Services More Intangible Than Tangible Services are consumed not possessed. The essence of what is being bought is intangible. Note: Services usually come with tangible products.

The concept of intangibility has two meanings, both of which present challenges for marketing: That which cannot be touched, impalpable ( Not perceptible to touch ) impalpable ( Not perceptible to touch ) That which cannot be easily defined, formulated, or defined, formulated, or grasped mentally. grasped mentally.

Simultaneous Production and Consumption Goods: produced sold consumed consumed Services: sold produced consumed consumed Producer of service must be present (in most cases)

Less Standardized Human based services are difficult to standardize.

CLASSIFICATION OF SERVICES EQUIPMENT BASED PEOPLE BASED CUSTOMER CONTACT: HIGH CONTACT SERVICES LOW CONTACT SERVICES

PROVIDED BY PUBLIC PROVIDED BY PRIVATE SECTOR PROVIDED TO THE CONSUMERS PROVIDED TO THE BUSINESS SECTOR

Services Inseparability Services cannot be separated from their providers Inseparability Services cannot be separated from their providers Perishability Services cannot be stored for later sale or use Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase Variability Quality of services depends on who provides them and when, where, and how Variability Quality of services depends on who provides them and when, where, and how

Services Inseparability Increase productivity of providers Inseparability Increase productivity of providers Perishability Match supply and demand Perishability Match supply and demand Intangibility Use cues to make it tangible Intangibility Use cues to make it tangible Variability Standardize service production & delivery Variability Standardize service production & delivery

More on Unique characteristics of services and their marketing implications Intangibility The uncertainty associated with intangibility can be reduced by place, people, equipment etc.

In “high-contact” service business, the quality of service is inseparable form the quality of service provider. Need for Internal Marketing

MANAGING EVIDENCE Making the service tangible Earlier it was mentioned that intangibility has two meanings:

that which cannot be touched; that which cannot be easily grasped mentally. Implication: making services touchable

TangibledominanceTangibleevidence fastfoodoutletsairlines intangible dominance intangibleimage

Physical Services Environment The physical environment in which services are purchased generally provides an important opportunity to tell the “right” story about a given service.

The Appearance of service provider is another tangible that can be managed. Service Pricing (another tangible item to be managed) Tying Services Marketing To Goods Marketing (Sears selling Insurance)

Inseparability: simultaneous production and consumption of services. How to solve the storage problem: working with large no. of people, working efficiently etc.

Supply and Demand: Need to Synchronization Demand peaks can occur during certain times of day (airlines, restaurants), during certain days of the week (movies, hair styling) and during certain month of year (income tax services)

Reshaping Supply: Using part-time employees Training employees to perform multiple jobs so that they can switch. Substituting equipment for human labor.

Variability: Variability: This is a limitation specially for people-based services: How to overcome this limitation? Training, Standardization of Training, Standardization of procedures procedures

Three Types of Marketing in Service Industries Internal marketing CompanyCustomers External marketing Employees Interactive marketing Cleaning/ maintenance services Financial/ banking services Restaurant industry

Service Differentiation Offer Delivery Image

How to differentiate or position services? The notion of product offering: Delivery Delivery Sales personnel Sales personnel Image Image Customer service Customer service

Managing Service Quality 1. Gap between Consumer expectation and management perception; and management perception; 2. Gap between management perception and service-quality specification; and service-quality specification; 3. Gap between service-quality specification and service delivery; specification and service delivery; 4. Gap between service delivery and external communication; and external communication; 5. Gap between perceived service and expected service. expected service.

Complaint Resolution ä Hiring Criteria & Training for Employees ä Develop Guidelines for Fairness ä Remove Complaint Barriers ä Analyze Types & Sources of Complaints

Managing Product Support Services Customers’ concern: 1. Frequency of Failure (a question of Product (a question of Product reliability) reliability) 2. Downtime duration 3. Out-of-pocket cost to the customer customer

Postsale Service Strategy Four strategies are available: 1. Manufacturer provides the service service 2. Authorized Dealers provide the service. the service. 3. Independent service specialist specialist 4. Customer performs the service

ReviewReview ä Service Definitions & Classifications ä How Services Differ Goods ä Improving Service Differentiation, Quality, & Productivity ä Improving Customer Support Services