1. Marketing: Real People, Real Decisions Marketing Intangibles & Services Chapter 11 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number Date

2. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-2 Chapter Learning Objectives When you have completed your study of this chapter, you should be able to: Explain the marketing of people, places, and ideas. Describe the four characteristics of services, and understand how services differ from goods. Explain how marketers measure service quality. Explain marketing strategies for services and not-for-profit organizations.

3. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-3 Introduction to the Topic This chapter is about the marketing of intangibles, of which, services form the majority of this product category. The marketing of intangibles is similar and different from other goods, hence its separation as its own topic. Intangibles: experience-based products that cannot be touched. Intangibles are pervasive, from supporting charities to political candidates, getting a post-secondary education or going to a hockey game. While all services are intangible to some degree, not all intangibles are services.

4. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-4 Marketing Intangibles Many of those in the not-for-profit, health care, legal, or cultural arts are only recent converts to the necessity of marketing what they have to offer to the buying public. Intense competition for a limited pool of resources will do that to you! It is important to remember that intangibles (including services) are similar to products in that: –They address customer needs –They involve an economic exchange –They transform resources into something of greater value –They can be differentiated The differences are more interesting.

5. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-5 Marketing People, Places, and Ideas Entertainers and politicians can be marketed just as any product can, just ask any of the “boy bands” currently torturing the ears of parents with teenagers! Marketing people can take a number of approaches: –Pure selling: attempting to market the person as they are, to target markets who might be interested. –Product improvement: modifying the person’s characteristics (or talent level) to be more attractive to target markets. –Market fulfillment: identifying a need in the market and developing a person whose characteristics or talent fills that need.

6. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-6 Marketing People, Places, and Ideas Place marketing: marketing activities aimed at attracting people or companies to a particular area. This can be for tourism purposes, or to attract companies to invest in the area by locating facilities there to create jobs. Competition between areas for people and companies is fierce due to the limited number of prospective “customers”. Idea marketing: marketing activities that seek to gain market share for a concept, philosophy, belief, or issue by using elements of the marketing mix to create or change a target market’s attitude or behaviour. Cause marketing falls under this category.

7. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-7 Marketing Services Services: intangible products that are exchanged directly from the producer to the customer. Intangible means that you cannot see, touch, or hear the product prior to agreeing to purchasing it. Services will vary in their intangibility.

8. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-8 Marketing Services (continued) Four essential characteristics of services: Intangibility Cannot be seen, tasted, felt or smelled before purchasing Variability Service quality depends on who provides and under what conditions. Inseparability Production and, consumption, and from the provider. Perishability Cannot be stored, for resale or later use.

9. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-9 Marketing Services (continued) Providers deal with intangibility by carefully managing the appearance of their facility and themselves, to convey the appropriate desired image to customers. A lawyer’s office is expected to exude competence through its nice furnishings, well-dressed people, and equipment. Otherwise, customers would not feel too confident in their abilities prior to hiring them. The use of standard signage, uniforms, brand logos, characters, and now web sites are also aimed at reducing the problems associated with intangibility.

10. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-10 Marketing Services (continued) Service providers deal with perishability by attempting to manage both the supply and demand for their services. An airplane taking off with empty seats represents lost revenue, hence they will do things to try to avoid this. They will attempt to manage demand by: –scheduling appointments –offering incentives for off-peak consumption –offering a mix of services to appeal to different segments Capacity management: the process by which organizations adjust their offerings in an attempt to match (supply with) demand. Using part-time workers also helps!

11. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-11 Marketing Services (continued) Variability is the difference in performance across time that inevitably results from the high amount of labour content in the production of services. Not all variability is a bad thing. The appeal of live theatre or attending sports is that every performance is a little bit different, and you do not know how it will end. If variability is a problem, then standardizing policies, procedures, materials, and equipment, training employees, and quality control programs are used to reduce it inconsistency in performance. Encouraging variability is not really necessary, it just happens!

12. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-12 Marketing Services (continued) Service providers attempt to address the problem of inseparability in similar ways to intangibility, in that they must carefully manage the service experience received by the customer. Service encounter: the actual interaction between the customer and the service provider. The appearance and behaviour of all those who come in contact with customers are critical to maintaining service quality. Disintermediation: the process of eliminating interaction between customers and service providers. Encouraging self- service or using ATM’s helps to take some of the contact out of the service provided.

13. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-13 The Goods-Services Continuum Most products are a combination of goods and services, with varying degrees of attention needed to the service elements. Good-dominated products will add value to what they have to offer with supporting services, that helps to differentiate them from their competition. Embodying: the inclusion of a service with a purchase of a physical good. These services need not be free to add value, many maintenance programs are excellent profit generators for retailers.

14. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-14 The Goods-Services Continuum Equipment- or facility-driven services, such as restaurants need to be concerned with: –Operational factors –Locational factors –Environmental factors People-based services are increasing in importance as consumers feel more and more pressed for time, and are willing to pay to have things done for them. Personal attention is key to maintaining quality in these types of services.

15. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-15 Core and Augmented Services Core service: the basic benefit of having a service performed. It helps to remember what it is that consumers are really paying for, to avoid making mistakes in delivering that service. People buy legal services to keep themselves out of trouble or to avoid losing money, not always successfully. People buy insurance for the peace of mind associated with being protected from loss. Augmented services: the core service plus additional services provided to enhance value. Figure 11.2

16. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-16 Providing Quality Service The evaluative dimensions of service quality that consumers use to decide if the service received met or exceeded their expectations are: Search qualities: qualities that can be perceived before buying by sight, touch, or hearing Experience qualities: qualities in a product that can be perceived after buying by senses such as taste. Credence qualities: qualities in a product that a purchaser believes exist but that are not subject to objective proof. Such as the quality of the gall bladder operation you just had.

17. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-17 Measuring Service Quality Gap analysis: a marketing research methodology that measures the difference between a customer's expectation of a service quality and what actually occurred. Critical incident technique: a method for measuring service quality in which marketers use customer complaints to identify critical incidents, specific face-to-face contacts between consumers and service providers that cause problems and lead to dissatisfaction.

18. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-18 Delivering Service Quality Internal marketing: marketing activities aimed at employees to inform them about the firm’s offerings and their high quality. The service profit chain is an idea that service company profits (and success) are dependent upon both employee and customer satisfaction, due to the inseparability of the customer from the service provider. The chain works like this: –Healthy service profits and growth come from satisfied and loyal customers who have received, –greater service value, from –satisfied and productive service employees, due to internal service quality, such as selection, training, support, and a good working environment. Any weak link in this chain will cause less than optimal performance.

19. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-19 Developing and Managing Services Services as theatre is an approach that likens the service experience to a theatre performance, which distinguishes between the back stage, where the service is created, and the front stage, where the service is actually delivered. Targeting actions that a service provider might take: –audience maintenance to retain present customers –audience enrichment to add value to the service experience –audience expansion to increase the size of the regular customer base –audience development to add new customers of the service to its base Service providers will use the same segmentation and growth strategies used by goods producers.

20. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-20 Developing and Managing Services Five dimensions to successfully position a services are: Physical evidence: a visible signal that communicates not only a products quality but also the product’s desired market position to the consumer. Branding strategy: using branding to create a unique identity for the company. Responsiveness: the speed and care in which a provider delivers the service. Empathy: the ability to understand the customers’ needs better than the competition. Assurance: emphasizing the knowledge and competence levels of employees.

21. Marketing: Real People, Real Decisions ©Copyright 2003 Pearson Education Canada Inc.11-21 Famous Last Words… The marketing of intangibles is both similar to and different from the marketing of goods. The trick is knowing which from which.