Marketing Concepts Services

1. Marketing ConceptsServices MKTG 3110-004 Spring 2014 Mrs. Tamara L. Cohen Class #7

2. KEY TERMS • Services • Idle production capacity • Off-peak pricing • Non-profit organizations • Relationship marketing • Customer contact audit

3. KEY CONCEPTS 4 I’s of services: • Intangilibility • Inconsistency • Inseparability • Inventory 8 P’s of marketing services: • Product (service) • Price • Place (distribution) • Promotion • People • Physical environment • Process • Productivity

4. Service is ‘big time’ Service = intangible activity or benefit provided in exchange for money or something of value Service is a significant element of US & global economies: • > 42% of GDP from services • 19% of world’s export trade • By 2016 in US, 86% of employment will come from service sector

5. Unique Features of Services Service = intangible activity or benefit provided in exchange for money or something of value Service = any activity or benefit that one party can offer to another, that is essentially intangible and does not result in ownership of anything A service is used and consumed simultaneously. The use of a service is subjectively experienced.

6. What are Services? Professional services (physicians, pharmacists, dentists, attorneys, architects, civil engineers, teachers) Business services (advertising, financial planning, mail, computer & data processing, consulting, training, recruiting) Counseling services (weight loss,career planning,pastoral,psychiatric) Transportation services(trucks,buses,taxis,limos,car rental) Personal services (pets, health clubs, catering, barbers, hairdressers, beauticians, realtors, funeral parlors, wedding planning) Restaurants & lodging (diners, hotels, resorts) Social services (child day care, residential care) Maintenance services (landscaping, plumbing & electrical, equipment, cars)

7. Why is demand for Services growing so fast in the US? • Increased affluence • Increased leisure time • Greater life expectancy • Changing work force demographics • Increased complexity of products/ technological advancement • Increased complexity of life • Increased environmental awareness • Increased number of available services

8. 4 I’s of services • Intangibility • Inconsistency • Inseparability • Inventory

9. 1. Intangibility • Services are INTANGIBLE because they can’t be seen, tasted, felt, heard or smelled before purchasing. • “Signals” of service quality reduce uncertainty. • Marketer of service must make service tangible to send right signals about quality = evidence management

10. Intangibility example:The Mayo Clinic Hard to evaluate quality of hospital’s service. People look for evidence. Mayo Clinic offers visual clues: e.g. facilities designed to be user-friendly & convey respect & consideration. Mayo Clinic offers experiential clues: e.g. staff well trained in “patient-first” philosophy. Dr. John Noseworthy, Mayo Clinic CEO, established the Center for Social Media, which embraces the belief that individuals should be able to advocate for their own health, and that medical service providers should help patients use social media tools to obtain and/or connect to the best resources possible.

11. 2. Inconsistency = variability of quality Quality of services depends on who provides them; also when, where & how they are provided. Quality varies with each person’s capabilities & day-to-day performance. Inconsistency is more of a problem for services than for goods. Organizations try to minimize inconsistency by standardization & training.

12. Inconsistency examples: Quality depends on Professional Performance

13. 3. Inseparability Physical goods are produced, then stored, then sold, and finally consumed. Services are first sold, then produced & consumed at the same time. Service INSEPARABILITY means services cannot be separated from their PROVIDERS, whether providers are people or machines. If a service employee provides the service, the employee is part of the service. Consumer may have to be physically present to receive service.

14. Inseparability examples:Service = Service Deliverer

15. 4. Inventory Services are perishable. They cannot be stored for later sale or use. Inventory cost of a service = cost of paying service provider + associated equipment e.g. fixed cost of idle doctor, barber, plumber, lawyer, etc. Idle production capacity = service provider is available but there is no demand, e.g. appointment scheduling for doctors, hairdressers, lawyers, etc. Inventory costs can be lowered by designing compensation systems accordingly, e.g. paying on commission Value of TIME to consumers adds pressure to service providers maintaining production capacity.

16. Inventory examples:Trying to balance Demand & Supply Off-peak pricing Low Season US$325 pppn (Dec. - May) High Season US$450 pppn (June - Nov.) Seasonal work

17. Inventory carrying costs of services depend on costs of employees & equipment

18. Service Continuum shows how offerings can vary in their balance of Goods & Services

19. Classification of Services Delivery by people or by equipment • unskilled or skilled labor or professionally trained Profit or Non-profit • non-profit organizations in the US employ10% of the work force • non-profits must satisfy consumers & donors • CAUSE marketing Government-sponsored • e.g. USPS, Fannie Mae, Freddie Mac

20. Services can be classified as Equipment-based or People-based

21. QUALITY of services Users = consumers, customers, clients, patients, students, etc. Users of services use multiple means of judging services. Examples: • price • performance of provider • quality of location • reputation • brand • endorsement • word-of-mouth information • prior experience • 3rd party recommendation/ accreditation

22. Consumers use search, experience, & credence properties to evaluate services

23. Customer Contact & Relationship Marketing Consumers judge services as a whole, i.e. series of steps that combine to make up the service. Customer contact audit = focus on service encounter opportunities, when there is interaction between providers and consumers. This is valuable in high-contact services, e.g. hotels, schools, car rental agencies. Relationship marketing = managing relationships with current and future customers/clients, in order to retain their support in the long term Relationship requires balance of loyalty, benefits, & privacy.

24. 5 dimensions of Service Quality

25. Actual Experience versus Expectations on Airlines NOT good The BEST

26. 8 P’s of Services Marketing • People • Physical environment • Process • Productivity • Product (service) • Price • Place (distribution) • Promotion

27. 1. Product (service) Branding becomes very important. Branding will distinguish particular services in consumers’ minds. Brand extensions - creative efforts to penetrate consumers’ homes

28. 2. Price SALE PRICE Price = charges (hospitals, hotels); fees (doctors, lawyers, accountants, consultants); fares (airlines, taxis, trains); rates (hotels); tuition (educational institutions) Price as a quality cue Pricing can be used as a tool to manage demand, e.g. off-peak pricing

29. 3. Place Place is a major factor in marketing strategy because of INSEPARABILITY of service provider. Consumer usually must go to service provider’s physical location to purchase or receive service. Technology is used to deliver services remotely. Electronic dissemination is increasingly valuable e.g. education, travel, entertainment

30. 4. Promotion Like for products, advertising is used to demonstrate benefits of service. Publicity is especially valuable because it’s FREE e.g. public service announcements • personal selling, e.g. ‘up sell’ • sales promotions, e.g. coupons, free trials, contests • direct marketing - specific markets, niches

31. 5. People Many services depend on people for creation & delivery of service experience. Customers often judge quality of service experience based on performance of provider. Training programs can be critical in preparing providers appropriately and in ensuring consistent quality.

32. 6. Physical environment Physical evidence can be important influence on customer experience. Tangibles: buildings, landscaping, vehicles, furnishings, signage, printed matter, equipment

33. 7. Process Creation & delivery steps that provide evidence on which consumer judges the service. “WHAT” is created + “HOW” it is created Customer contact audit can serve as basis for improving service creation & delivery process. e.g. oil change service; DMV

34. 8. Productivity Inseparability of service & provider means the service capacity is limited. Challenges to match demand with supply = capacity management e.g. airline contracts, price codes, etc. Technology will be key. “Think global and act local” to optimize service quality.

35. break

36. Next classFeb.5: Midterm Exam Preparation: Study power points, your own notes, assignments & assigned readings for each class.

37. Next ClassFeb.10: Social Responsibility & Ethics Preparation: Read ch.4 pp.89-91 p.94 Pepsi-Coke story p.95 TransparencyInternational pp.100-101 Homework #3:Marketing Ethics