1. © 2000 South-Western College Publishing1 CHAPTER TWELVE SERVICES AND NONPROFIT ORGANIZATION MARKETING Prepared by Jack Gifford Miami University (Ohio)

2. © 2000 South-Western College Publishing2 IMPORTANCE OF SERVICES. A service is the result of applying human or mechanical efforts to people or objects. Services involve a deed, a performance, or an effort that cannot be physically possessed

3. © 2000 South-Western College Publishing3 IMPORTANCE OF SERVICES SERVICE WORKERS More than 8 of 10 workers currently labor to produce services The service sector accounts for 74% of the U.S. Gross Domestic Product

4. © 2000 South-Western College Publishing4 HOW SERVICES DIFFER FROM GOODS. Intangibility. Inseparability. Heterogeneity. Perishability. They cannot be touched, seen, tasted, heard, or felt or stored.. Few search qualities (characteristics that can be easily assessed before purchase). More experience quality (can be assessed only after use). Credence quality (difficult to assess even after purchase; i.e. medical services)

5. © 2000 South-Western College Publishing5 HOW SERVICES DIFFER FROM GOODS. Intangibility. Inseparability. Heterogeneity. Perishability. Production and consumption activities are inseparable. Airline and flight from A to B. Surgeon and patient. Services cannot normally be produced in a centralized location and consumed in decentralized locations. Your hotel room and you must be in the same physical location. Service quality is largely dependent upon the quality of employees

6. © 2000 South-Western College Publishing6 HOW SERVICES DIFFER FROM GOODS. Intangibility. Inseparability. Heterogeneity. Perishability. Services tend to be less standardized and uniform than products due to their dependence upon the performance of individual employees/individuals. Some level of consistency is gained through training, standard operating procedures, and mechanization of support areas. Airport X-ray surveillance. Automatic coin receptacles on toll roads

7. © 2000 South-Western College Publishing7 HOW SERVICES DIFFER FROM GOODS. Intangibility. Inseparability. Heterogeneity. Perishability. Services cannot be stored, warehoused or inventoried. An empty seat in a theatre cannot produce revenue later. A car not rented results in no revenue for that day. This condition of perishability results in discount pricing of services at almost any price greater than their variable cost.

8. © 2000 South-Western College Publishing8 SERVICE QUALITY. Business executives and consumer rank the improvement of service quality as one of the most critical challenges facing them today.. Quality is normally judged on the basis of… Reliability Responsiveness Knowledge, courtesy and trust (Assurance) Empathy Tangibles (physical evidence of the service, such as uniforms, diplomas, office ambiance, etc.)

9. © 2000 South-Western College Publishing9 Managing service quality. The effective marketing of services requires that managers learn what customers want and expect in their interaction with the service provider (service encounter). If expectations do not equal experience, a gap exists. EXPECTED SERVICE-PERCEIVED SERVICE GAP ANALYSIS

10. © 2000 South-Western College Publishing10 GAP ANALYSIS Customer expectations Mgt. expectations of customer expectations Standards specifying services to be delivered Actual services delivered Retail communications about services Customer perception of service ¬ ­ ® ¯ ° ¬ Knowledge gap ­ Standards gap ® Delivery gap ¯ Communications gap ° Service gap DISCUSS °

11. © 2000 South-Western College Publishing11 MARKETING MIXES FOR SERVICES. Elements of the marketing mix (product, distribution, promotion, and pricing) need to be adjusted to meet the special needs created by the unique characteristics of services just discussed Two hour repair service guarantee for business computers by...

12. © 2000 South-Western College Publishing12 MARKETING MIXES FOR SERVICES: Product. Product (Service Strategy). People processing (transportation services, health clubs). Possession processing (lawn or car repairs). Information processing (accounting, training, financial services). Core and supplementary services. Core Federal Express services = overnight delivery. Supplementary services = package tracking and capturing the signature of the recipient

13. © 2000 South-Western College Publishing13 CORE AND SUPPLEMENTARY SERVICES Clean clothes On hangers or folded Level of starch Bagged in plastic or boxed Drive-through pick and drop off

14. © 2000 South-Western College Publishing14 MARKETING MIXES FOR SERVICES: Product. Product (Service Strategy) - continued. Customized services vs standardized services. Standardized. Economies of scale. Lower cost. More efficient. Customized. May better satisfy the needs of the customer. Higher cost and less efficient. Mass customization. The use of technology to deliver customized services on a mass basis. Major direction of the future of service marketing!

15. © 2000 South-Western College Publishing15 CONCEPT OF MASS CUSTOMIZATION. Relates to the ability of marketing service organizations to offer “packages” of services individually adjusted for each customer to a large target market.. Medical benefit packages. Travel and vacation packages. Airline service (time, food, music )

16. © 2000 South-Western College Publishing16 MARKETING MIXES FOR SERVICES: Service and Distribution. The Service Mix. Service organizations offer multiple services. Designing a service strategy means deciding what new services to introduce to which target markets, what existing services to maintain, and what services to eliminate.. Distribution Strategy. Number of outlets. Direct vs indirect distribution. Location(s). Scheduling

17. © 2000 South-Western College Publishing17 MARKETING MIXES FOR SERVICES: Promotion. Promotion Strategy. Stressing tangible clues (You’re in good hands... with Allstate). Using personal information sources (celebrity endorsements). Create a strong organizational image (McDonald’s Golden Arches). Engage in post purchase communication (call to make sure your car service repair experience was satisfactory)

18. © 2000 South-Western College Publishing18 MARKETING MIXES FOR SERVICES: Price. Price Strategy. Pricing may be based upon a specific task accomplished, time consumed by the task, the consumption of goods, or the expertise of the service provider. Prices are sometimes bundled and other times a la carte. Pricing strategies might include: Revenue-oriented pricing Operations-oriented pricing Patronage-oriented pricing A combination of the above

19. © 2000 South-Western College Publishing19 MARKETING MIXES FOR SERVICES: Relationship Marketing. Involves ongoing interaction between the service organization and the customer.. Desire to create loyalty, mutually beneficial transactions, and a win-win environment Pricing incentives, like frequent flier programs Social incentives, like an online reminder to renew ones driver license (AAA) A combination of the above, such as the no hassle Hertz rental program for frequent users.

20. © 2000 South-Western College Publishing20 INTERNAL MARKETING ENHANCES RELATIONSHIP BUILDING. Public relations efforts to own employees. Employee empowerment. Participative management “We love to fly and it shows! Delta Airlines

21. © 2000 South-Western College Publishing21 NONPROFIT MARKETING. A nonprofit organization is an organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment..Account for over 20% of the economic activity in the united States. The largest nonprofit entity by far in the United States includes federal, state and local government expenditures and purchases.

22. © 2000 South-Western College Publishing22 WHAT IS NONPROFIT ORGANIZATION MARKETING?. Is the effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets through the following marketing activities:. Identify customers they wish to serve or attract. Specify objectives. Develop and manage programs and services. Decide on prices to charge (fees, donations, tuition, fares, fines, rates, etc.). Schedule events or programs and determine where they will be held or where services will be offered. Communicate through signs, brochures, advertisement, or public service announcements

23. © 2000 South-Western College Publishing23. Objectives are very different. Target marketing differences. Product and Service decisions. Distribution decisions. Promotional decisions. Pricing decisions. Measures of success UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES Change opinions Correct social problems Provide ideas and beliefs Target individuals that may not desire their services or are not adequately provided for from other sources

24. © 2000 South-Western College Publishing24. Objectives are very different. Target marketing differences. Product and Service decisions. Distribution decisions. Promotional decisions. Pricing decisions. Measures of success UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES Market complex behaviors or ideas Sometimes weak benefits perceived May involve low or high involvement messages Often marketed where and when the target market dictates

25. © 2000 South-Western College Publishing25. Objectives are very different. Target marketing differences. Product and Service decisions. Distribution decisions. Promotional decisions. Pricing decisions. Measures of success UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES Volunteers Sales promotion activities Public service advertising Licensing agreements Prices to support costs Indirect payment through taxes Payment through contributions Below cost pricing Number of persons helped Attitudes changed or converted