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 serviceand they must deliver excellent service to

their customersmake 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 customerplan the core offer (product/service)set an attractive and fair pricedistribute the service convenientlypromote 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