Chapter 24, Service Marketing
Definition:
A service is an intangible product involving a deed, performance,
or an effort that cannot be physically possessed. Dominant
component is intangible.
Includes rental of goods, alteration and repair of goods owned by
customers, and personal services. Major differences between goods
and services are:
- Intangibility
- Inventory--over/under booking restaurant capacity
- Inseparability--of production and consumption
- Inconsistency/Consistency
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Has been limited to:
- Many service firms stress technical expertise, therefore have
lagged in their use of marketing.
- Many service firms are small, marketing expertise cannot be
hired.
- Strict licensing/legal restrictions limit competition and need for
marketing.
- Service associations have prohibited marketing.......Lawyers until
1977; when the US Supreme court struck down such prohibitions as against
freedom of speech...Jacoby & Meyers et al.
- High esteem of professionals, do not need marketing. A number of
professionals have a dislike for marketing and a lack of
understanding.
Use of marketing is likely to increase rapidly in the near
future....due to competition etc.
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Must consider how the intangible/inventory/inseparable/inconsistency
component effect the service.
Prior to purchase, much service promotion must rely on performance
attributes which can only be measured after a purchase experience
(tangible goods have search qualities). Also professional services
have credence qualities. Need to use promotion to help customers
perceive a service as highly tangibility.
- develop tangible representation of the service, ie credit card
serves as the physical product with own image and benefits. Make
advertising easier. Airlines use an aircraft. Travellers
umbrella.
- develop a brand image--seek out U Haul as opposed to a truck
service
- cite 3rd party endorsements...need endorsements from those
that have experienced the service.
- word of mouth very important due to intangibility.
- offer discounts and free samples/service to customers who
encourage friends to come.
- offer tangible benefits in sales promotions, must be
consistent with customers needs/wants
- establish a clear product
position,
ie 24 hour outside service for repair of industrial equipment.
Intangibility also presents pricing problems. How should an auto
mechanic charge for his/her services?
Visibility of the service may be a problem. Although a problem may
have been fixed, you don't understand why (CAR). Need to explain
the time needed for repair, and functions that were performed if you
want the repair to be more tangible.
Psychological role of price is magnified since customers must rely
on price as the sole indicator of service quality when other
quality indicators are absent.
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Services cannot be stockpiled. Need to avoid excess unsatisfied
demand and excess capacity leading to unproductive use of resources.
Handout...Bikers Give Ski Resort Summer Lift
Discusses the seasonal demand patterns of ski resorts, and what ski
resorts are doing to develop demand for their service in the summer months.
To resolve inventory issues:
- market services to segments with different demand patterns
- market new services having counter cyclical demand patterns
from existing services
- market new services to compliment existing services
- market service extras at non-peak times
- market new services not affected by existing capacity
constraints
- train personnel to do multiple tasks
- hire PT employees during peak hours
- educate consumers to use service at non peak hours
- offer incentive, ie. reduce price at non peak times, this will
not work in all instances, ie, travel at non peak hours.
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Lawn care service cannot mow a lawn precisely the same way each time, but need to make the
service as efficient and consistent as possible.
Remedy--use technology to help make the service provider more
consistent...or replace workers with technology :)
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Leads to direct (short) channels of distribution. In some cases it is possible
to use intermediaries, travel agents, ATMs etc.
Close provider-customer relationship--employee interpersonal skills
very important. "relationship managers", quality of relationships
determines the probability of continued interchange with those
parties in the future.
Customers may become loyal to a particular employee as opposed to the company, prevalent
in the advertising industry. Therefore must make sure that multiple
employees are capable of performing the same tasks.
CAA...Michael Ovitz...Coke?
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US is the worlds first service economy. More than 75% of the
workforce in the private sector is employed in the service industry.
Accounts for more than $3bn in output and contribute 60% of GNP.
60% of services are consumed by the final consumer.
The increase in the service sector is a result of LT growth in the US economy deriving demand
for additional services
- Travel
- Financial services
- Entertainment
- Personal care etc.
Dual income families need for convenience.
Increase in health awareness.
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Marriot Hotels: (discussed when reviewing market
segmentation)
Offer different services for different segments of
their target market.
Great attention paid to product positioning.
Rely on research, publicity, TV advertising, use of well conceived
slogans and greater personal attention to consumers.
Quick resolution to customer problems--overbooking, long customer
lines, unresponsiveness, discourteous staff.
Hotels now offer alternative accommodations for over booking,
computerized check out systems, express check outs, serving free
drinks, provide baggage handling etc.
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Definition:
Conducted by organizations and individuals that operate in the
public interest or that foster a cause and do not seek financial
profits.
Involve organizations-Charitable groups, Unions, Universities etc.
Involve people-political candidates etc.
Involve places-resorts, convention centers
Involve ideas-stop smoking
as well as goods and services
Perform exchanges but not necessarily monetary (votes).
Price is not necessarily a reflection of the costs or values.
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Similar in many respects.
Some basic differences include:
- Combination of goals, ie, raise $250,000 from government
grants, increase client usage, find cure for disease, change public
attitudes, and raise $750,000 from private investors. Goals also
include number of clients to be served, amount of service rendered
and quality of service provided.
- Social marketing
- Pricing may be fixed (zoo) or variable (fundraising), also
significant is the opportunity cost of volunteers
- May rely on infrequent fundraising efforts to generate funds
as opposed to day to day revenue stream
- Successful program may lose money if goods are provided at
less than cost
- Objectives can be complex since success or failure cannot be
measured in financial terms
- Usually 3 constituents (3 distinct target markets)-Clients, Donors
and Volunteers, need to develop a marketing
mix for each target market
- Many times, beneficiaries are not the contributors and vis a
versa. The owner is not the beneficiary, as in business marketing
- May need to serve target market that is unprofitable to serve,
Amtrack, Postal service
- Legal advantages, tax deductible contributions, exemptions
from sales and real estate taxes, reduced postal rates.
- Primarily ideas and services as opposed to goods. Need to
define what is being provided, ie., Peace Corpse, vocational
training, health services, nutritional assistance and community
development, also international cooperation and US foreign policy.
- Very flat channels, non-business marketer to client.
- Rely on personal selling (volunteer recruiting) and
advertising, sponsor ship, Public service announcements
Examples:
Handout...Buy a Brand New Pumper Truck
Ideas to generate revenue in order to afford a new truck....need to be
very innovative since there are many non-profit organizations competing
for donors' contributions.
Handout...These Cards List Stats
Marketing to the improve image of the police in the local community by offering baseball type
police cards.
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