Chapter 8: Services Marketing and Customer Relationships

The Nature of Services  regardless of the “product”, there is a services aspect to the offerings of all firms. Services organizations now account for a major part of the national economy  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 to this as the core service  in others, service is performed in support of the sale of a tangible product -- these are referred to as supplementary services

Figure 8-1 A Goods-Services Continuum

Marketing in Service Organizations  marketing has historically been focused on tangible products  many service organizations are in the not-for-profit sector and have not been particularly marketing- oriented or customer-focused  service industries have become much more competitive in recent years; technology has made it difficult to compete on tangible products  service is now seen to offer competitive advantage

Characteristics of Services  intangibility: difficult to sample and evaluate  inseparability: difficult to separate services from the provider; staff are essential to the delivery of quality services  heterogeneity: virtually every service is different; very difficult to standardize quality  perishability: those not sold can not be stored  fluctuating demand: demand for some services fluctuates by season, or by time of day

Strategic Services Management  intangibility generally makes the marketing of services a challenge  understanding how people buy services and the segments that exist is just as important  knowing more about the value of customer segments is important -- some are more valuable than others  knowing what they value so that service levels can be tailored is also important

Services Value Proposition  the value proposition in a services setting is influenced by services’ characteristics  services firms must get the core service right  they must provide solid support service  and they must deliver excellent service to their customers  make sure we understand these three different uses of the term “service”

Figure 8-2 The Services Value Proposition

Strategic Aspects of the Core  to succeed at the marketing of services, the essential marketing mix principles apply: understand the customer plan the core offer (product/service) set an attractive and fair price distribute the service conveniently promote it effectively

Strategic Product Implications  service organizations have to plan the introduction of new services and the management of the life-cycle  the core service can be enhanced through the addition of supplementary services, thereby creating added value (the service mix)  the branding of a service can be difficult as the customer often has nothing tangible to show

Pricing of Services  pricing is more difficult in services because of heterogeneity and variability of the “product”  because of intangibility, buyers of services often have difficulty assessing value received  it is more difficult to standardize a price for a service than it is for most physical products  nevertheless, services firms use many of the same pricing strategies: volume and frequency discounts, variable pricing, etc..

Distribution of Services  because most services are tied directly to a specific service provider, most have been distributed directly to customers  with advancing technology, many firms are now delivering services through technology channels  channels of distribution are necessarily short; some firms use one agent intermediary, such as insurance, real estate, and travel agents  some firms use franchises to distribute services

Promotion of Services  customer contact personnel represent the main channel of customer communication  service providers must ensure that each service encounter is a positive one if customers are to develop a positive image  many professional service firms are now permitted to advertise  other elements of the promotional mix used include publicity and community affairs

Supplementary Services  regardless of the quality of the core service, a firm must offer a range of support services that enhance the attractiveness of the core  customers need information  they need the service to be accessible  they need warranties, installation and repair  they need a selection to choose from  it should be delivered in pleasant surroundings

Figure 8-3 Types of Supplementary Services

The Role of Customer Service  one of the most effective ways to compete and to differentiate one’s company is on the basis of providing superior service  in many ways the distinction between tangible products and services is becoming less important for marketing purposes  marketers must pay attention to delivering superior quality in both the tangible and service components of the total offering

Managing Service Quality  quality is more difficult to define in services; depends on customer’s perception  very difficult to maintain consistent quality  perceived quality varies across customers, and over time and circumstances  the customer is concerned about the quality of the core product or outcome, the process of service delivery, and interaction with staff  many companies turn to an internal marketing program to encourage staff buy-in

Components of Service Quality  the core service: the basic telephone call  quality of support services such as billing, repair, installation, voice mail, etc.  technical aspects of service quality, including whether errors are made; on-time service  interaction with staff: whether our people are friendly, courteous, helpful, attentive, etc.  emotional dimensions: how the customer is made to feel in dealing with the company

Service Failure and Recovery  no matter how well designed the core service, things will occasionally go wrong  how the company responds to service failure is key to customer satisfaction  effective service recovery can actually make a customer more satisfied than he or she was before the problem occurred  many firms encourage complaints! WHY?

Service Drives Relationships  the level of core, support and personal service provided to customers is a key driver of satisfaction and relationships  service represents a valuable form of value – customers appreciate good service  firms are able to create both functional and emotional value for customers – it is the emotional value that leads to relationship formation

Services Marketing Challenges  possibly the greatest challenge for services firms is to ensure consistently high quality of service and increased productivity  many are investing heavily in technology -- they need to assess its impact on service quality  firms will need to improve their approach to measuring the quality of the service they provide and to benchmark against other firms  growth in emphasis on service will continue and firms will have to deliver better services