Marketing Series: Services Marketing, Is It Different?

 SERVICE CULTURE

A service culture focuses on serving the customer and satisfying their needs. The service culture must begin with top management and flow down. Present to your class different hospitality companies that exemplify a service culture (Four Seasons, Ritz Carlton, etc.) 

Mini Case: Are you happy with the customer service?

FOUR SERVICE CHARACTERISTICS

Service marketers must understand the four characteristics of services: intangibility, inseparability, variability, and perishability.

Intangibility

• Unlike physical products, services cannot be seen, tasted, felt, heard, or smelled before they are purchased

• Problem: more difficult for customers to evaluate 

• Solution: providing physical cues to reassure the buyer

• Examples: Decoration of the store, the appearance of its employees, logo&image, advertisements

Inseparability

•  It’s impossible to separate the production of the service from the consumption of the service. 
  

• Explanation: the expertise, skill and personality of a service provider, the quality of company employees, facilities and equipment, cannot be detached from the service offering itself.

• “Service encounter”: the actual interaction between the customer and the service provider. To minimise the potentially negative effects of bad service encounters, and save on labour costs, customers are encouraged to use self-service technology.

• Solutions: 1. staff training 2. self-‐‐service (minimise the potentially negative effects of bad service encounters) 3. offering guarantees or warranties for lowering the risk

  
  

Variability

• It’s hard to maintain the same level of service as you’re having different staff dealing with different customers.

• Explanation: Because the quality of services depends on who provides them, when and where, and to whom, services are highly variable

• Solution: Total quality management

  
  

  
  

Perishability

• Services cannot be stored. It’s impossible to store a service for later sale or use

• Problem: It’s more sensitive to the change in demand compared to tangible products.

• Example: A 100-room hotel that sells only 60 rooms on a particular night cannot inventory the 40 unused rooms and then sell 140 rooms the next night Revenue lost from not selling those 40 rooms is gone forever

• Solution: capacity management, the process by which organizations adjust their offerings in an attempt to match demand. Example: Discount flight ticket for off-‐‐season.
  

THE SERVICE PROFIT CHAIN

The service profit chain links service firm profits with employee and customer satisfaction

1. Internal service quality (Internal Marketing) - Superior employee selection and training, a quality work environment, and strong support for those dealing with customers, which results in…

2. Satisfied and productive service employees - More satisfied, loyal, and hardworking employees, which results in…

3. Greater service value - More effective and efficient customer value creation and service delivery, which results in…

4. Satisfied and loyal customers - Satisfied customers who remain loyal, repeat purchase, and refer other customers, which results in…

5. Healthy service profits and growth: superior service firm performance.

MARKETING STRATEGIES FOR BUSINESSES

Today as competition and costs increase and as productivity and quality decrease, more marketing sophistication is needed. The seven services marketing strategies include: 

1. Managing Service Differentiation: Service companies can differentiate their service delivery through the people that work for them, their physical environment and their service delivery process. Example: British Airways 

2. Managing Service Quality: Once customer expectations are determined, managers need to develop a service delivery system that will deliver a service that meets the guest’s expectations. Example: Ritz-Carlton

3. Managing Service Productivity: In attempting to improve service productivity, companies must be mindful of how they create and deliver customer value. Example: McDonald’s

4. Resolving Customer Complaints: A company cannot always prevent service problems, but it can learn from them. Good service recovery can turn angry customers into loyal ones. To have an effective complaint resolution, managers must empower frontline service employees. Example: Marriott. 

5. Managing Employees As Part Of The Product: The manager must hire friendly and capable employees and formulate policies that support positive relations between employees and guests. The job of the marketing department includes encouraging everyone in the organization to practice customer-oriented thinking. Example: Four Seasons. 

6. Managing Perceived Risk: Customers who buy hospitality products experience some anxiety because they cannot experience the product beforehand. 

7. Managing Capacity and Demand: Corporate management is responsible for matching capacity with demand on a long-term basis; unit managers are responsible for matching capacity with fluctuations in short-term demand. Example: Mother’s Day and New Year’s Eve