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Service Marketing

Introduction

The world is not just filled with products. Service marketing is the area that involves all the ‘intangible’ deliverables that companies have. For example, a bank is in the service industry – even though our money may be deposited there, the bank is delivering a service to us by communicating and interacting with customers on their particular monetary needs. The education industry is purely service…the only real ‘tangible’ aspect is the diploma that you receive when you graduate, as the online experience is merely delivering the education ‘message.’

Nearly 78% of the world is in involved in service marketing. We will be analyzing how this is truly a challenging area for marketing because there are no products that customers can ‘see, taste, feel, or touch’ but rather, customer rank their satisfaction on the service experience.

Learning Objectives

1. To be able to distinguish between service strategies and product strategies

2. To understand the four key characteristics that determine what service strategies need to incorporate

3. To identify successful service strategies and the criteria necessary to implement them

Service Marketing – Topology of Planning

Overview

There are many other aspects that customers use when evaluating how effective companies are at delivering their services. One of the major areas that is used is service quality – how well do we take care of our customer? Do we know ‘what’ satisfies them? Do we know why customers have chosen our service over our competitors? Once we understand our what customers ‘want’ then we can design the strategies that best satisfy them.

Service Attributes

· Understanding how SERVICE QUALITY = CUSTOMER SATISFACTION

Customers choose among products and services

· Customer value – benefit that the customer gains from using a product/service compared to the cost

· Customer Satisfaction – perceived performance in delivering value in relation to the buyer’s expectations

If the customer is expecting a certain level of service, and experiences a lower level of service then we have a dissatisfied customer. This is known as the service gap.

This does not mean that we have to ‘spoil’ every customer that walks in our door.

What it means is that we have to deliver ‘what’ they want from us and if we have designed a certain strategy, then we need to deliver that service strategy every time the customer walks through our door.

For example, the service strategy at Wal Mart is certainly not designed to ‘spoil’ us but rather to ‘assist’ us when necessary. This will be in contrast to a store like Neiman Marcus- whose high end service quality is world renowned.

We have previously discussed the 5P’s of marketing, and now we will look at the

4 I’s of service strategies – intangibility, inseparability, inventory, and invariability.

Intangibility –

As stated previously, we cannot ‘see, feel or touch’ services like we can with products. This makes it very challenging to market services as we have to concentrate on the actual service experience as our marketing tool.

Inseparability-

Customers rank our services based on their service experience. This service experience comes directly from our front line employees – anyone who has actual contact with customers. It is at this point that customers associate the ‘service provider’ as representing the actual company and will judge the company on that experience. Thus, we must be wary of the fact that any employee’s interaction with customers is critical in our strategic planning, as they ARE the company in our customer’s mind. For example, when you go out to dinner and a waitress is there to serve and you have a wonderful evening – the service provider (waitress) represents the restaurant and you will judge this restaurant based on your experience (along with the food, of course).

Inventory-

Based on the fact that the service experience is the actual ‘product’ that customers will ultimately judge their satisfaction level on, it becomes important to realize that once that service experience is over, it’s over. It cannot be stored on a shelf like a product, which can be picked up numerous times and re-evaluated. Making sure that the service experience is providing customer satisfaction is even more critical at this point.

Invariability-

This concept is based on the fact that every time you go to the service provider, you receive the same level of service. However, for most companies this is challenging as customers may NOT receive the anticipated level of service they got the last time they came. Let’s use our restaurant example again. You had a great evening the last time you went and decide to go there again this weekend.

This time, your waitress is rude, you wait ‘forever’ for the food, it wasn’t what you ordered, and the entire experience is a ‘nightmare.’ Your satisfaction level the first time you went was exceptional, but the second time you went, the service provider (waitress) ruined your night. Invariability (inconsistent) service can cause customers to decide NOT to come back and you may lose them as a potential future customer forever. Below is a chart that summarizes the 4I’s of service characteristics:

Service Characteristics

Service Characteristics

Intangibilitynot productcan't see, feelhold, touchInseparabilitysame as providernot separaterepresent companyInventorycannot storenot on shelfover...it's overInvariabilitychangesinconsistentquality issues

Let’s look at marketing strategies that assist companies in formulating quality service strategies in order to achieve and maintain optimum customer satisfaction.

Overcoming Intangibility

· Brand-Benefit linkage – yes, it’s all about the brand, even in service marketing

· Tangible Cues – insurance companies give out umbrellas, key chains, pens

· Ethical Service- always be honest with customers, as they want the truth

Overcoming Inventory

· Off-peak pricing

· Flexible delivery – provide services when customers need them

· Improve waiting – no one likes to wait in line or be put on hold on the phone

Overcoming Inseparability

· Training, training and more training – employees need to know what you expect from them in the service category

· Equipment and technology – standardizes services (ATM machines were implemented by banks for this reason)

· Role and routines – everyone has a specific role to play in the service experience

Overcoming Invariability

· Training, training and more training (again)

· Standardized service – as you can see, standardizing the service experience (having everyone ‘say’ the same thing to customers, is a strategy used in many service categories)

· Technology – again, we can overcome the problem of having our customers experience different service levels if technology is an option (online education)

· Personalized service – this one is the most difficult. Here companies try to give a level of service that differs with each customer, depending on what level of service the customer wants. (Fitness centers can provide individualized training, or customers can just go there and work out on their own)

Now let’s analyze these concepts from the customer’s point of view. How exactly do customers determine the level of quality in their service experience? What are the determinants of service quality?

There are actually ten determinants of service quality that customers will use when evaluating their service experience.

· Accessibility

· Definition – approachability, ease of contact

· Example –waiting time, hours of operation, location

· Communication

· Definition – keeping customer informed, listening

· Examples – explain, assure client,. clarify

· Competence

· Definition - Possession of required skill and knowledge

· Example – knowledge of personnel, research capabilities

· Courtesy

· Definition – consideration of others, respect, friendliness

· Example – clean and neat appearance, not interrupting

· Credibility

· Definition – trustworthy, believability, honesty

· Example – image and reputation

· Reliability

· Definition – consistency of performance, dependability

· Example – accuracy with records, follow-through with commitments

· Responsiveness

· Definition- readiness to provide, timeliness

· Example – mailing a confirmation, calling back

· Responsiveness

· Definition- readiness to provide, timeliness

· Example – mailing a confirmation, calling back

· Tangibles

· Definition – physical evidence of the service

· Example – facilities, personnel, equipment, other customers

· Understanding and Knowing the Customer

· Definition – needs, wants

· Examples – knowing what the customer requires for a level of service (know the customer’s name)

Quality Control in Services

Benchmarking –some companies have figured out to deliver optimum service strategies so ‘copy’ them

Employee Training –should be ongoingPerformance Evaluation –reward great

service and provide more training for those that need improvement

Collaborate

Find a service provider that you believe delivers optimum levels in the service experience categories. Go online and analyze ‘why’ this particular company is ‘good’ at what they do. Compare and contrast with your peers to determine which companies have succeeded in all aspects and which ones still may need improvement.

Here are a few suggestions: Hotels, Insurance Companies, Investment Firms, Fitness Centers, Colleges/Universities, Banks, Physicians, Beauty Salons, Spas, Restaurants or any other ‘service’ provider that you may be interested in analyzing.

Apply & Discover

Apply the service characteristics outlined in this module to your experiences. You should be honest and not worry about where they may be ‘service gaps’ but rather, your input should suggest what is being done well and what needs improvement. The objective of this exercise to for you to be able to apply your own service experiences into the topology learned in this module.

You should address the 4I’s and the determinants of service quality in your responses.

Service Characteristics

Service Characteristics

Intangibility

not product

can't see, feel

hold, touch

Inseparability

same as provider

not separate

represent company

Inventory

cannot store

not on shelf

over...it's over

Invariability

changes

inconsistent

quality issues

Quality Control in Services

Benchmarking – some companies have figured out to deliver optimum service strategies so ‘copy’ them

Employee Training – should be ongoing

Performance Evaluation – reward great service and provide more training for those that need improvement