Post on 30-Aug-2014
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Managing the Marketing Mix
Lecture 7Lecture 7
Extending the Marketing Mix: Service MarketingExtending the Marketing Mix: Service Marketing
Dr. Martin J. LiuLecturer in Marketing
Martin.Liu@Nottingham.edu.cn
Objectives
• Explore potential differences between products andservices
• Describe the elements and sub elements of the serviceextension to the marketing mix
• Discuss the challenges services pose for marketing
LearningObjectives
The Differencebetween Product andService
Characteristics ofService
Service MarketingMix
The Products-Services Continuum
Learning Objectives
The DifferencebetweenProduct andService
Characteristics ofService
Service MarketingMix
What is Service Marketing
• Examples: Defense, Postal, Education, health, ReligiousServices, Hospitals, Airlines, Hotels, Law Firms,Entertainment, etc.
• Definition: Activity or benefit that one party can offer toanother that is essentially intangible and does not result inthe ownership of anything. Its production may or may notbe tied to a physical product
Learning Objectives
The DifferencebetweenProduct andService
Characteristics ofService
Service MarketingMix
The Nature of Service
• Regardless of the “product”, there is a services component to theofferings of all firms
• In some cases, a service is the principal purpose of the transaction,as in the rental of a car, a haircut, or legal services -- we refer tothis as the core servicecore service
• In others, service is performed in support of the sale of a tangibleproduct -- these are referred to as supplementary servicessupplementary services
Learning Objectives
The DifferencebetweenProduct andService
Characteristics ofService
Service MarketingMix
Differences betweenProducts and Services
• Customers do not obtain ownership of the intangible element ofthe service product (i.e. service personnel and their performancecannot be ‘owned’ by the customer).
• Intangible elements dominate value creation
• There is greater involvement of customers in the productionprocess (i.e. customers are part of the performance, they interactwith the service provider).
• It is more difficult to maintain quality standards of service products(i.e. individuals’ behaviour is hard to control and standardise).
Learning Objectives
The DifferencebetweenProduct andService
Characteristics ofService
Service MarketingMix
Differences betweenProducts and Services
• Many services are difficult for customers to evaluate (i.e. theremay be elements of personal taste, experience, ability and moodthat affect customers’ evaluation).
• Absence of inventories for services (i.e. no use for unsold stock,difficult to deal with sudden increases in demand).
• Importance of time factor (i.e. many services are delivered in realtime so the consumer and provider must be together for theservice to occur).
• Delivery systems may involve both electronic and physicalchannels (i.e. different needs for staff behaviour management).
Learning Objectives
The DifferencebetweenProduct andService
Characteristics ofService
Service MarketingMix
Differences betweenProducts and Services
Physical goods Services
tangible intangible
homogeneous heterogeneous
Production and distribution areseparated from consumption
Production, distribution andconsumption are simultaneousprocesses
A thing An activity or process
Core value processed infactory
Core value produced in thebuyer-seller interaction
Customers do not participate inthe production process
Customers participate inproduction
Can be kept in stock Cannot be kept in stock
Transfer of ownership No transfer of ownership
Learning Objectives
The DifferencebetweenProduct andService
Characteristics ofService
Service MarketingMix
Characteristics of Services
•• IntangibilityIntangibility: difficult to sample and to evaluate
•• InseparabilityInseparability:: difficult to separate services from the serviceprovider; mainly direct sales; staff are essential to thedelivery of quality services
•• PerishabilityPerishability:: those not sold can not be stored
•• HeterogeneityHeterogeneity: virtually every service is different; verydifficult to standardize quality
Learning Objectives
The Differencebetween Product andService
Characteristicsof Service
Service MarketingMix
(1) Intangibility “Hurdles””
•• Inability to physically possessInability to physically possess
•• Difficult to evaluate (provide guarantees)Difficult to evaluate (provide guarantees)
•• Difficult to advertise (use personal selling)Difficult to advertise (use personal selling)
•• Difficult to priceDifficult to price
•• Difficult to patentDifficult to patent
•• Difficult to distribute (promote availability)Difficult to distribute (promote availability)
•• Difficult to store (offer a trial basis)Difficult to store (offer a trial basis)
Develop a marketing mix to provide
tangible (symbolic) cues : ex. Uniforms
Learning Objectives
The Differencebetween Product andService
Characteristicsof Service
Service MarketingMix
(2) Inseparability(2) Inseparability
BBeing produced and consumed simultaneously
•• The provider of the service is inseparable in the deliveryThe provider of the service is inseparable in the deliveryprocessprocess
• Customers participate in and affect the transaction CannotCannotbe mass producedbe mass produced
•• Difficult to distribute, Mass Production is difficultDifficult to distribute, Mass Production is difficult
• Services cannot be returned or resold
Very Difficult to Balance Supply and
Demand if time sensitive
Learning Objectives
The Differencebetween Product andService
Characteristicsof Service
Service MarketingMix
(3)(3) PerishabilityPerishability
Service cannot be stored & used at acannot be stored & used at afuture timefuture time
-- A lost sale is lost revenueA lost sale is lost revenue
-- Unused capacity is lost foreverUnused capacity is lost forever
Use demand management strategiesUse demand management strategiessuch assuch as
-- Peak pricing:Peak pricing:
-- Telephone call pricingTelephone call pricing
-- Theater TicketsTheater Tickets
Example:Example:
Airlines use reservation systems toAirlines use reservation systems tosell their service in advance (Yieldsell their service in advance (YieldManagement)Management)
Learning Objectives
The Differencebetween Product andService
Characteristicsof Service
Service MarketingMix
(4) Heterogeneity
Variability in the quality of service
• allows marketers to develop their service product to matchcustomer needs/wants
• Service delivery and customer satisfaction depend onemployee and customer actions
• Service quality is difficult to deliver & control
StandardisationStrategies
CustomisationStrategies
-- Automate serviceAutomate serviceRoutinesRoutines
--Automatic car washAutomatic car wash
--Health ClubHealth Club
-Physician
Learning Objectives
The Differencebetween Product andService
Characteristicsof Service
Service MarketingMix
Key Characteristics ofAn Effective Marketing Mix
•The elements are notindependent of each other.
•The mix elements should bewell blended to form aconsistent theme
•The marketing mix matchescustomer needs
•The marketing mix matchescorporate resources
•The marketing mix creates acompetitive advantage The marketing mix paradigm ( Borden,
1964, McCarthy, 1978)
Learning Objectives
The Differencebetween Product andService
Characteristicsof Service
Service MarketingMix
Service Extended Marketing Mix
Intangibility
Inseparability
Inseparability
Heterogeneity
ProductMarketingMix (4 Ps)
-Product-Price-Place-Promotion
Service ExtendedMarketingMix (7 Ps)
-Product-Price-Place-Promotion-People-Process-PhysicalEvidence
Ownership
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Customers PricePlace &Time
Promotion
Product(Service)
PeopleProcess
Physical Evidence
Customers PriceCustomersPlace
An Expanded Marketing Mixfor Services
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Process
Nature
Procedure
Law
Involvement
Feedback
FlexibilityPersonal Contact
Automation
CustomersChannels
Other Stakeholders
Process
Technology
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Total Quality Management (TQM)
Total Quality Management (TQM) is an integratedorganizational approach in delighting customers (bothinternal and external) by meeting their expectations all thetime through everyone involved within the organizationworking on continuous improvement improvement in allproducts/services/processes along with structuredmethodology.
• Total involvement of all levels in the organization
• Quality conformance to agreed upon requirements
• Management best use of available resources toachieve total quality
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Total Quality Management (TQM)
TQM’s key principles are:
1. Commitment to quality
2. Focus on customer satisfaction
3. Assessment of organizational culture
4. Empowerment of employees and teams
5. Measurement of quality efforts
TQM
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Process for SettingCustomer-Defined Standards
1. Identify existing or desired service encounter sequence
2. Translate customer expectations into behaviors/actions2. Translate customer expectations into behaviors/actions
4. Set hard or soft standards
5. Develop feedback mechanisms5. Develop feedback mechanisms
Measureby
audits oroperating
dataHard Soft
Measureby
transaction-
basedsurveys
3. Select behaviors/actions for standards3. Select behaviors/actions for standards
6. Establish measures and target levels6. Establish measures and target levels
7. Track measures against standards7. Track measures against standards
8. Provide feedback about performance to employees8. Provide feedback about performance to employees
9. Update target levels and measures9. Update target levels and measures
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
People
Organisation
Legal
Individual
Suppliers
Channels
Customers
Feedback
Corporate ValueCulture and Style
PowerOrganisational Structure
RecruitmentEducation / TrainingPersonality / Attitude
Motivation / ValueBehaviour / Appearance
Reward System
Other CustomersCustomer Interaction
Customer Involvement
Staff AppraisalAttitude Surveys
People
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Barriers To Customer Service
People SkillsPeople Skills -- Weak personality traitsWeak personality traits
(Moodiness, sullenness, laziness)(Moodiness, sullenness, laziness)
Inadequate trainingInadequate training
(Communication, grooming)(Communication, grooming)
Insufficient authorityInsufficient authority
(Ineffective empowerment, too many rules, etc.)(Ineffective empowerment, too many rules, etc.)
•• Customers are viral and can damage a brand.Customers are viral and can damage a brand.•• 90% of angry customers shared their story with a90% of angry customers shared their story with afriend.friend.
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Equal Employment Opportunity
• A organization must be able to prove:
– That its tests are related to success or failure on the job(validity)
– That its tests don’t unfairly discriminate against minority ornonminority subgroups (disparate impact).
• EEO guidelines and laws apply to all selection devices, includinginterviews, applications, and references.
• Testing alternatives if a selection device has disparate impact:
– Institute a different, valid selection procedure that does nothave an adverse impact.
– Show that the test is valid—in other words, that it is a validpredictor of performance on the job.
– Monitor the selection test to see if it has disparate impact.
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Physical Evidence
Physical Evidence
Objective
Environment
Tangible Clues
Facilitating Goods
Feedback / Control
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Elements of Physical Evidence
Servicescape Other tangibles
Facility exteriorExterior designSignageParkingLandscapeSurrounding environment
Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature
Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresWeb pagesVirtual servicescape
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Cause and Effect Chartfor Airline Departure Delays
Aircraft late to gate- Late arrival
- Gate occupied
- Mechanical Failures
- Late Pushback Tug
Late food service
Late baggage to
aircraft
Late fuel
Gate agents cannotprocess passengers
fast enough- Too few agents
- Agents undertrained- Agents undermotivated
- Agents arrive late at gate
Late/unavailablecockpit crews
Late/unavailablecabin crews
Late cabin cleaners
Poor announcement of
departures
Weight and balance sheet late
DelayedDepartures
Delayed check-in procedure- Confused seat selection
- Boarding pass problems
Acceptance of late passengers- Cutoff too close to departure time
- Desire to protect late passengers
- Desire to help company’s income
- Poor gate locations
Arrive late
Oversize bags
Bypass ticket counter
Weather
Air Traffic
Facilities,Equipment
Front-StagePersonnel
Procedures
Materials,Supplies
BackstagePersonnel
Customers
Other Causes
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix
Seven Gaps Leading toCustomer Dissatisfaction
Customer experiencerelative to expectations
Advertising andsales promises
Customer interpretation
of communications
1. Knowledge Gap
2. Standards Gap
3. Delivery Gap
5. Perceptions Gap
7. Service Gap
Customer needsand expectations
Management definitionof these needs
Translation intodesign/delivery specs
Execution ofdesign/delivery specs
Customer perceptionsof product execution
6. Interpretation Gap
4.
MANAGEMENT
Learning Objectives
The Differencebetween Product andService
Characteristics ofService
ServiceMarketing Mix