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Marketing of Services. Nov 27th, 2009.

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1 Marketing of Services. Nov 27th, 2009

2 This section covers: Services Marketing
Specific characteristics of Services The Five Gap Model of Service Quality The Servuction System Model Defection Management and Customer Retention Management

3 What is a Service vs Product?
Def.: Goods are objects, devices, or things whereas services are deeds, efforts or performances. Ultimately, the primary difference between goods and services is the property of intangibility = the lacking of physical substance. Over 2/3rds of the Irish work force is employed in the services sector (67%+), compared with 26% in industry and 7% in agriculture.(2007)* (Declined overall for the 18th month until Oct 2009)

4 Scale of Market Entities
The scale of market entities displays a range of products along a continuum based on their tangibility. Intangible Tangibility Dominant Salt Teaching Soft Drinks Consulting Detergents Investment Cars Airlines Cosmetics Advertising Fast food

5 Search vs. Experience/Credence Attribute.
All goods possess physical properties called search attributes that customers can feel, taste, and see prior to their purchase decision. Services are, in contrast, characterised by their experience and credence attributes. Experience attributes can be evaluated only during and after consumption Theatre, Beauty , hotel etc Credence attributes cannot be evaluated confidently even immediately after consumption Car Servicing – Did you get ripped off?

6 Differences b/w Service & Product
The majority of differences in how to market services and goods/products are attributed to four unique characteristics: Intangibility Inseparability Heterogeneity Perishability Intangibility is the primary source from which the other three characteristics emerge. For example when purchasing a theatre ticket, you buy an experience. The play will be evaluated subjectively and compared to other people’s recommendations. Note: There may be some tangible aspects involved too.

7 Differences b/w Service & Product 2
Inseparability is a distinguishing characteristic of service that reflects the interconnection among the service provider, the customer receiving the service, and other customers sharing the service experience, also called: Service Provider Involvement Customer Involvement Other Customers’ Involvement, the impact here can be negative due to bad press or positive due to laughter, etc. You can’t separate the service from the provider. You’re stuck with the waiter and other staff at the restaurant. Variability is another characteristic of service that reflects the variation in consistency from one service transaction to the next. Again, why do people prefer some restaurants over others?

8 Differences b/w Service & Product 3
Perishability is the characteristic that embodies the fact that services cannot be saved, or their unused capacity cannot be reserved, and they cannot be inventoried. Because of the effects of these 4 characteristics, marketing plays a very different role in service-oriented organisations than it does in pure goods companies. Because in a service organisation all parts of the company are interconnected by a complex network of relationships, the marketing dept. must maintain a close relationship with the rest of the service organisation!

9 The 3 Ps As well as Product Price Place & promotion, we have the concepts of:

10 1) Servicescape – Physical Evidence
Due to the intangibility of services, customers often have trouble evaluating the quality of service objectively. As a result, consumers rely on the physical evidence that surrounds the service to help them form their evaluations. Hence, the servicescape consists of ambient conditions (room temperature or music), inanimate objects (furnishings, equipment), and other physical evidence (signs, symbols, personal artifacts).

11 2) Service Providers - People
The 2nd element of the service experience involves the personnel who provide the service. Simply, the public face of a service firm is its service providers. They have a dramatic impact on the service experience Customer complaints fall into 7 categories: Apathy Robotism Brush-Off - Rulebook Coldness - Runaround Condescension Note: A Service provider’s personnel are the most important source of differentiation from competitors. Can I help you? – Closed Q Are you looking for anything in particular? - Open ended

12 3) Organisations & Systems (invisible)- Processes
A firm’s organisation & systems refer to the technical efficiency that modern systems provide but they also involve a human component. (The staff) Example: Going on a cruise, the customer is exposed to many of the company’s processes.

13 Conclusion: Service firms that are able to effectively mould the customer’s experience via the effective management of servicescape, service providers, organizations & systems have the means to develop compelling experiences which are the latest competitive weapon in the war against service commodification.

14 The 5 Gap Model of Service Quality
The service gap is the gap between customer’s expectations of service and their perception of the service actually delivered. The individual gaps that can occur are as follows: The Knowledge Gap: management thinks that customers expect less or different from their services. The Standards Gap: gap between standards set for delivery of service and what management wants to give. The Delivery Gap: actual quality of service delivery is less than expected. The Communications Gap: the difference between the delivery of service promised and that delivered.

15 Servuction System Model
The production process of services has been called the “servuction” process (Eiglier and Langeard, 1977) It refers to the simultaneous production and consumption of services. The customer is present when the service is produced The customer plays a role in the servuction and the delivery process Customers interact with one another during the servuction process and may be affected (positively or negatively) by this interaction

16 Servuction Framework

17 Defection Management Defection Management refers to a systematic process which actively attempts to retain customers before they defect. It involves tracking the reasons for defection and use this information to make changes to service delivery.

18 Reasons for Defection Price defectors; switch to competitor for lower price Product defectors; switch to competitors who offer superior goods and services Service defectors; switch because of poor customer service Market defectors; switch because of relocation or business failure Technological defectors; switch to products outside the industry

19 Customer Retention Management
It’s a hugely important aspect of any business. Studies have shown that as much as 95% of profits come from long term customers. Who retains customers well in Ireland?

20 Leaky Bucket Theory If new customers replace disloyal customers who leave at the same rate then the company will never grow. But if you can stem your losses of customers you will grow.

21 Retention Strategies Stay focused on customer – king
Remember Customers between sales Build trusting relationships Monitor Service Delivery Process Stand behind the product – refund if necessary Offer Service Guarantees – not happy your money back Practice the art of service recovery – how do you recover from service delivery failure

22 Retention Management Always record the figures and have them easily available % new customers (can be derived from sales figures and from information from sales department) % lost customers in any 12 month period Page of book

23 Next Session - revision
January 22nd ( Friday) – Revision & Exam papers (Tutorials and lecture) January 29th (Friday) – 10% Multiple Choice exam at 1.00pm here. (No tutorials this day)

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