Steve’s Automotive

(Assignment 1

Student: Bharan Sequeira

Student ID: XXXXXX

Lecturer: Dr Stephen Cahoon

Subject: Introduction to Services Marketing

Course: Bachelor of Business (Maritime and Logistics Management)

Due Date: 25 September 2005

Word Count: 2482

 ii

Abstract

The primary function of marketing is to facilitate an exchange between the consumer and the
firm whilst meeting the consumer‟s needs and the organisation‟s objectives. This report
examines the marketing mix of Steve‟s Automotive. As services are intangible in nature and
possess high credence and experience qualities, the right type of marketing mix is of
paramount importance. This report analyses the target markets of the firm Steve‟s
Automotive and discusses the need to target a single or multiple segments. The role of the
employee in the firm Steve‟s Automotive is examined and the necessity of demarcating roles
addressed. Finally this report concludes with the arguments in favour of and against the
promotional mix, employees‟ role and targeting of various segments.

Bharan Sequeira Assignment 1

 iii

Table of contents

Abstract ___________________________________________________________________ii

Table of contents ___________________________________________________________ iii

Introduction ________________________________________________________________ 1

The customers at Steve‟s Automotive ___________________________________________ 1

The marketing mix of Steve‟s Automotive ________________________________________ 3

The employees at Steve‟s Automotive ___________________________________________ 6

The product offering at Steve‟s Automotive ______________________________________ 8

Conclusion ________________________________________________________________ 9

References ________________________________________________________________ 10

Bharan Sequeira Assignment 1

 1

Introduction

Steve‟s Automotive is a service oriented firm having a range of service products and
employing a strategy of differentiated marketing to target customers. The customers include
household and business clients, with the business clients providing a larger percentage of the
revenue. Steve‟s Automotive has competition from the larger stores like K-mart as well as
from other service providers. In order to prosper, Steve must effectively communicate to his
clients, present and prospective, of a superior product at an affordable price (Colby 2000).

The employees including Steve total nine in number, comprising of technically qualified staff
and a customer- relations staff member. There are occasions when the technical staff are in
contact with the customer. The product offering at Steve‟s Automotive possesses both
experience and credence qualities. The report also addresses the marketing mix and the role
of the employees at the firm. In addition this report discusses the target marketing strategy
and the means of alleviating risk perceived by the customer.

The customers at Steve’s Automotive

McColl, Callaghan and Palmer (1998, p.14) define the customer as „the person who makes a
decision to purchase a service and pays for it‟. The needs of a customer vary within a market.
As it is not possible to satisfy the needs of each individual, firms concentrate on meeting the
needs of a group. This process is known as segmenting the market into groups of similar
needs and wants (McColl, Callaghan and Palmer 1998). Segmentation reveals groups with
identical needs and segmentation helps the marketer in complementing the needs of the
consumer with the product. A successful segment must be measurable, accessible, responsive
and substantial. By studying each of the four characteristics of segmentation the marketer
analyses the viability of the product, for the firm as well as the consumer (McColl-Kennedy,
Kiel, Lusch & Lusch 1994).

Bharan Sequeira Assignment 1

 2

A suitable strategy is crucial to a firm‟s success. Undifferentiated marketing, differentiated

marketing, concentrated marketing and micro marketing are four basic strategies employed
by marketers. In undifferentiated marketing the firm produces a single product and markets
the product to the consumers. This strategy is also known as mass marketing. A firm
employing a strategy of differentiated marketing produces a wide range of products and uses
varied marketing mixes aiming to target certain market segments. With concentrated
marketing the firm rivets its efforts on catering to meet the needs of one segment. A firm
using a strategy of micro marketing is aiming for consumers at a certain level (Boone &
Kurtz 1995).

A firm can increase its market share by augmenting the range of services. Additionally
extending the segments served can increase the market share. However by adopting strategies
of increased segments/services the firm may lose focus on important customers (Bateson
1995). Service providers generally target more than one market segment as the particular
service may meet the needs of more than one target market (George & Berry 1981). Steve‟s
Automotive is employing a strategy of differentiation. This is evident from the wide range of
services offered and the host of clients served. Half the customers at Steve‟s Automotive are
household and the other half are business customers. However a larger part of the income is
derived from serving the business customers (around 70 per cent revenue). The Pareto (?)
principle states that 20 per cent of the customers provide 80 per cent of the revenue.
Marketers can use this philosophy to identify key customers and allocate resources to meet
the demands of these customers (Colla 1999). It would then be natural for Steve‟s
Automotive to target only the business clients who provide around 70 per cent of the revenue.

Wright and Esslemont (1994) argue that the success of a company depends on total sales and
not the sales of a particular segment. To increase revenue the total market response is to be
considered in lieu of segment response. Therefore marketing programs should consider the
overall market response rather than high probability segments. Sharing the same school of
thought, both Boles, Barksdale and Johnson (1997) and, Mittal and Lassar (1998) observed
that customers who have been satisfied with service providers may still switch over to the
competition. It would be in Steve‟s interest to target more than one segment, as there are no
guarantees of a particular segment remaining loyal.

Bharan Sequeira Assignment 1

 3

The marketing mix of Steve’s Automotive

A typical marketing mix for services would consist of product, price, promotion, place,
people, physical evidence and the processes (McColl-Kennedy et al. 1994). The product
range at Steve‟s Automotive is varied and it is important to note that there are other service
providers with the same offering. Steve can differentiate the product offering from the quality
of the service offered. Pricing can be another way of differentiating one competitor from the
other, however other service providers can emulate this tactic.

The location of the firm plays a distinct role in attracting potential customers, as the distance
from the target market may be an impediment. People are a critical part of the marketing mix.
As services are heterogenous in nature, it is important to train employees in meeting the
customers needs and wants. Empowerment, cross training and motivation are some ways of
improving and encouraging staff performance.

As services are intangible in nature, the physical evidence may be one of the criteria in
helping the customer make a pre-purchase evaluation. A neatly dressed employee and a clean
workplace can enhance the physical evidence at Steve‟s Automotive. Services by nature are
inseparable and as the customer participates in the service offering the process must ensure
that the customer leaves with a feeling of well being.

Promotional objectives are two dimensional in nature; they create awareness of a product and
the organisation offering the product. Additionally promotion aids in differentiating a product
from the competitors. Finally promotion highlights the merits of availing the product,
thereby effecting a sale (McColl-Kennedy et al. 1994). The promotional mix comprises of
advertising, sales promotions and publicity campaigns.

Bharan Sequeira Assignment 1

 4

Advertising informs and influences the consumer to acquire the product. However the most
important feature of advertising is keeping the product distinct and noticeable to the
consumers. The media, personal selling and referrals are some of the means of promoting a
product or service. Advertising on television, over the radio and advertisements in
newspapers and magazines are some of the mediums used by the media. Television is one of
the most popular and has the largest audience. The use of telemarketing is another form of
communication. This is achieved by advertising a 13 or 1800 number in the media for
product enquiries. By using a radio station frequented by the target audience the marketer can
successfully promote the product (Assael, Reed & Patton 1995).

The audience targeted by advertising in newspapers is widespread and regional newspapers

are helpful in identifying local businesses. Magazines are more selective in targeting
audiences with trade and technical magazines reaching out to selective markets (Mercer
1992). The advantages of direct mail over other forms of advertising are: low cost and
effective in targeting a specific target market (Assael, Reed & Patton1995). Harbig and Hale
(1997) observed that there is an exponential increase in the number of users of the Internet.
The ease of obtaining a web site and the low cost associated with obtaining a web site, allow
small businesses to compete with larger firms.

Publicity campaigns are used to bring about awareness of the firm. Bateson (1995) stated that
publicity campaigns have the advantage that they offer more credence to the customer,
however negative publicity can be difficult to control. Effective communications is known to
have a positive influence on a company‟s image and profits. A well orchestrated public
relations campaign can be beneficial to the firm and may be achieved at a relatively low
expense (Sheehan 1997). Some of the ideas could include sponsoring local sports or
supporting environmental issues like anti-litter drives. These tend to impart a powerful
message of caring, and project an altruistic image of the firm across to the community
(Klemz 1999). With the media and publicity campaigns being one sided it is not possible to
determine the customers response. Personal selling has a higher cost associated but may be
the most effective method to effect a sale or retain a customer (Bateson 1995).

Bharan Sequeira Assignment 1

 5

Bateson (1995, p. 86) stated that „a customer in acquiring a service acquires the experience
associated with the service‟. Steve‟s Automotive is trying to sell a service whose end result is
not readily apparent to the audience and conventional forms of advertising may not be the
best promotional medium. The emphasis of referrals as a means of communication cannot be
underestimated. This is evident as nearly a third of Steve‟s customers are engaged in some
sort of business with the firm as a result of referrals. Consumers of a service may acquire
information about search qualities of services from advertising, however they seek personal
sources of information to address the experience quality factor of services. These word of
mouth communications are explained by Dichter (1966, p.148) as being:

…talk which is mainly stimulated by the way the product is presented through
advertisements, commercials, or public relations, and are not necessarily based on the
speaker‟s experience with the product. In addition, consumers perceive word of mouth
communication to be unbiased and more credible.

Mangold, Miller and Brockway (1999) observed that word of mouth communication has a
significant impact on the behaviour of consumers purchasing services, due to the unique
features attributed to services. The reasons cited are the perceived risks and uncertainties
associated with services. As the results of an exchange are not known, consumers try to
reduce their risk in exchanges. When the service required is more expensive the consumer
seeks redress in word of mouth advice (Mitra, Reiss & Capella 1999; Silverman 1997).

The importance of word of mouth communication opens avenues for service providers to
exploit this interface and promote their services. By portraying satisfied customers in
advertisements, the service provider can exploit word of mouth communication (George &
Berry 1981). Charlett, Garland and Marr (1995) stated that the word of mouth referrals are
credible and both positive and negative remarks have an influence on a consumer‟s purchase
behaviour.

Building a quality relationship between customer and the firm can lead to the customer
remaining loyal and in turn referring the services of the firm. Maintaining a customer
oriented outlook, good ethics and expertise help to develop a good relationship. Expertise and

Bharan Sequeira Assignment 1

 6

positive performance leads to overall satisfaction and future re-purchase intentions of

customers (Boles, Barksdale & Johnson 1997; Mittal, Ross & Baldasare 1998). The
foundation of building a quality relationship is directly related to customer satisfaction.
Johnson, Zinkhan and Ayala (1998) stated that the outcome of the event, the competency of
the service provider and the courtesy displayed by the service provider are the main facets of
customer satisfaction. This in turn will lead the customer to make referrals and
recommendations.

The employees at Steve’s Automotive

The process of transforming inputs into goods and services is the function of the
production/operations division of an organisation. The activities featured under this
department encompass the major part of the firm‟s resources. In order to meet the fluctuating
demand of goods and services many firm‟s cross-train their employees. David (1999) stated
that cross training increases efficiency as well as increases productivity of the firm. In service
industries employees assume the role of „part time marketers‟ as they are directly involved in
service offering. Therefore there is a need for diversified training and enhanced people
management skills in the service sector (McColl, Callaghan & Palmer 1998). Cross training
provides employees with the wider picture namely, a sense of the whole organisation.
Although specialisation in a particular job has enormous benefits, it tends to create tunnel
vision. An employee who is cross-trained has a better chance of identifying the different
aspects of the service package and will react quickly to meet the customer‟s needs (Hart,
Heskett & Sasser 1990).

In the many „headed buyer and seller role‟ the staff are engaged in various duties, namely
technical work and meeting clients (Hewitt 1998). Steve has nine employees who include the
technicians and a customer service representative named Gerry whose responsibility is to
meet with clients. Gerry prioritises the technical aspect of the job namely getting the car
repaired and is not customer focussed. The clients also interact with Steve, however there are

Bharan Sequeira Assignment 1

 7

occasions when Steve and Gerry are away, leaving the technicians to interact with the clients.
As the employees possess only technical skills, there is a need to cross train the employees in
customer relations. It is important the employees focus on making the sale and on building a
relationship with the customer. To facilitate this interaction, the staff should be trained and
empowered to meet the customer‟s needs and wants. This will result in retention of a
customer; thereby increasing the firm‟s market share and revenue (Broderick 1998).

The business cycle of Steve‟s automotive is a classic case of fluctuation in demand. The staff
cope with these fluctuations to the best of their abilities and at times Steve has employed part
time employees to handle the excess workload in summer and in winter. In order to meet the
fluctuating demand Steve employs part time workers. Bateson (1995) states that the use of
part-time workers in operations is a beneficial strategy to the firm. However part time
employees may deliver a lower quality of service as well may be ill equipped to handle a
wide range of situations. This will likewise create a poor impression in the eyes of the
consumer.

According to Gronroos (1978) the human factor in a service-oriented firm is very important
and good human resource management and deployment is a key competitive advantage for
the firm. It is the frontline employee who is in contact with the customer and, as the service
offering requires customer and service provider interaction, the performance of the employee
influences the customer.

In a small firm like Steve‟s Automotive it is not conducive to segregate employees into front
stage and back stage. The two main reasons for this argument are: the employees are in
contact with the customers at some stage and there are part time employees employed at
times. Instead it would be more prudent to provide cross training to the employees in public
relations which is in tune with Steve‟s motto “ Customers Are Really Everything” (CARE).

Bharan Sequeira Assignment 1

 8

The product offering at Steve’s Automotive

Lamb, Hair and McDaniel (1999, p. 230) define a service as „the result of applying human or
mechanical efforts to people or objects‟. This definition is further elaborated upon by
McColl, Callaghan and Palmer (1998 p. 47) stating that „a service through some form of
exchange, satisfies a customer‟s need‟.

Services can be discerned from goods due to unique characteristics. These are intangibility,
inseparability, perishability and heterogeneity. As a result of these attributes the consumer
has a difficulty in assessing the benefits of a service and there is a perception of risk (McColl,
Callaghan and Palmer 1998). Search, experience and credence are three main attributes that
distinguish services from goods. Services like automobile repairs have one or more of these
characteristics and the leave the consumer no clues to making the right decision (Berry &
Yadav 1996; Zeithaml 1981).

Lamb, Hair and McDaniel (1999, p. 231) define credence quality as „the search quality that
consumers have difficulty in assessing even after purchase because they do not have the
necessary knowledge or experience.‟ Credence attributes cannot be evaluated confidently by
the consumer of the product even after acquisition. This in turn will lead a consumer to be
suspicious, as the claims made by the provider of the product cannot be validated. Products
associated with credence qualities have low pre-purchase knowledge and in order to mitigate
the risk involved, the customer spends more time in seeking information about the product in
question. There is a greater reliance on word of mouth referrals from personal and impersonal
sources. It is imperative for a firm offering services having high credence qualities to
promote the right message and illustrate dependability (Mitra, Reiss & Capella 1999).
Building trust between customer and the firm, providing a service guarantee and post
purchase communication are some of the methods that Steve‟s Automotive may employ to
alleviate the risk associated with credence qualities.

Bharan Sequeira Assignment 1

 9

In a research survey on trust in buyer and seller relationships Doney and Cannon (1997)
concluded that trust influences future consumer procurement behaviour. As certain services
are high in credence qualities, a building of trust between the service provider and consumer
is very important. Services guarantees have a positive effect on clients, who in turn will
generate favourable word of mouth referrals (Silverman 1997). Post purchase communication
to inquire of the satisfaction of the service encounter will help in reducing any dissonance
that the customer may experience (Klemz 1999).

Conclusion

The various aspects of the firm Steve‟s Automotive have been examined. The firm employs a
strategy of differentiated marketing to cater to business and household consumers. The
business consumers provide a lion‟s share of the revenue and it would only be natural to
target this particular segment as Steve can effectively deploy resources to meet the
customer‟s needs. However there are no guarantees that the customers may remain loyal and
targeting all segments would be prudent.

The cross training of employees will increase employee skills and the firm‟s productivity.
This will have an effect on the service outcome and will leading to a satisfied customer. A
satisfied customer may remain loyal and may also recommend or refer the firm to future
customers. As the product offering at Steve‟s Automotive is high in credence qualities, the
firm should encourage positive word of mouth communication. By offering service
guarantees and post purchase communication Steve can alleviate the customer‟s perception of
risk. This is important as the cost of attracting new customers far exceeds the cost of retaining
present customers. At the end of the day marketing is about meeting customers‟ needs and
satisfying the firm‟s objectives namely market share and profit whilst facilitating an
exchange.

Bharan Sequeira Assignment 1

 10

References

Assael, H., Reed, P. & Patton, M. 1995, Marketing; Principles and Strategy, Harcourt Brace
& Company, Sydney, Australia.

Bateson, J. E. G. 1995, Managing Services Marketing; Text and Readings, 3rd edn, Dryden
Press, Harcourt Brace College Publishers, Orlando, Florida, U.S.A.

Berry, L. L. & Yadav, M. S. 1996, „Capture and communicate value in the pricing of
services‟, Sloan Management Review, Summer, pp. 41-51.

Boles, J. S., Barksdale, H. C. Jr. & Johnson, J. T. 1997, „Business relationships: an

examination of the effects of buyer-salesperson relationships on customer retention
and willingness to refer and recommend‟, Journal of Business and Industrial
Marketing, vol. 12, no. 3-4, pp. 248-258.

Boone, L. E. & Kurtz, D. L. 1995, Contemporary Marketing Plus, 8th edn, Dryden Press, Fort
Worth, Texas, U. S. A.

Broderick, A. J. 1998, „Role theory, role management and service performance‟, Journal of
Services Marketing, vol. 12, no. 5, pp. 348-361.

Charlett, D., Garland, R. & Marr, N. 1995, „How damaging is negative word of mouth‟,
Marketing Bulletin, vol. 6, pp. 42-50.

Colby, C. 2000, „Perspectives in pricing services‟, Rockbridge Associates,

http://www.rockresearch.com/Articles/mr02/mr02.html, accessed 18 July 2005.

Colla, G. 1999, „Many are called but few should be chosen‟, Business Focus, Autumn, p. 15.

Bharan Sequeira Assignment 1

 11

David, F. R. 1999, Strategic Management; Concepts and Cases, 7th edn, Prentice Hall
International Inc., New Jersey, U.S.A.

Doney, P. M. & Cannon, J. P. 1997, „An examination of the nature of trust in buyer-seller
relationships‟, Journal of Marketing, vol. 61, April, pp. 35-51.

George, W. R. & Berry, L. L. 1981, „Guidelines for the advertising of services‟, Business
Horizons, Vol. 24, no. 4, July-August, pp. 402-406.

Gronroos, C. 1978, „A service-oriented approach to marketing‟, in Contemporary Services

Marketing Management, eds M. Gabbott & G. Hogg, 1997, Harcourt Brace &
Company, London.

Harbig, P. & Hale, B. 1997, „Internet: the marketing challenge of the twentieth century‟,
Internet Research: Electronic Networking Applications and Policy, Vol. 7, no. 2,
pp. 95-100.

Hart, C. W. L., Heskett, J. L. & Sasser, W. E. 1990, „The profitable art of service recovery‟,
Harvard Business Review, July/August, pp. 148-156.

Hewitt, K. 1998, „Successful marketing strategies for shipyards in the fast car ferry market‟,
14th Fast Ferry International Conference, Copenhagen, 24-26 February, pp. 1-18.

Johnson, M., Zinkhan, G. M. & Ayala, G. S. 1998, „The impact of outcome, competency and
affect on service referral‟, Journal of Services Marketing, vol. 12, no. 5, pp. 397-415.

Klemz, B. R. 1999, „Assessing contact personnel/customer interaction in a small town:

differences between large and small retail districts‟, Journal of Services Marketing,
vol. 13, no. 3, pp. 194-207.

Bharan Sequeira Assignment 1

 12

Lamb, C. W. Jr., Hair, J. F. & McDaniel, C. 1999, Essentials of Marketing, South Western
College Publishing, Cincinnati, Ohio, U.S.A.

Mangold, W. G., Miller, F. & Brockway, G. R. 1999, „Word-of-mouth communication in the

service marketplace‟, Journal of Services Marketing, vol. 13, no. 1, pp.73-89.

McColl, R., Callaghan, B. & Palmer, A. 1998, Services Marketing; A Managerial

Perspective, McGraw-Hill, Rosevale, New South Wales, Australia.

McColl-Kennedy, J. R., Kiel, G. F., Lusch, R. F. & Lusch, V. N. 1994, Marketing, Concepts
and Strategies, 2nd edn, Thomas Nelson, Melbourne.

Mercer, D. 1992, Marketing, Blackwell Publishers, Oxford, U.K.

Mitra, K., Reiss, M. C. & Capella, L. M. 1999, „An examination of perceived risk,
information search and behavioural intentions in search, experience and credence
services‟, Journal of Services Marketing, vol. 13, no. 3, pp. 208-228.

Mittal, B. & Lassar, W. M. 1998, „Why do customers switch? The dynamics of satisfaction
versus loyalty‟, Journal of Services Marketing, vol.12, no. 3, pp. 177-194.

Mittal, B., Ross, W. T. & Baldasare, P. M. 1998, „The asymmetric impact of negative and
positive attribute-level performance on overall satisfaction and repurchase intentions‟
Journal of Marketing, vol. 62, January, pp. 33-47.

Sheehan, G. 1997, „Using the media for your message‟, Business Focus, Spring 1997.

Silverman, G. 1997, „How to harness the awesome power of word of mouth‟, Market
Navigation INC, http://www.mnav.com/H2HarnWOM.htm, accessed 21 September
2005.

Bharan Sequeira Assignment 1

 13

Wright, M. & Esslemont, D. 1994, „The logical limitations of target marketing‟, Marketing
Bulletin, vol. 5, pp. 13-20.

Zeithaml, V. A. 1981, „How consumer evaluation processes differ between goods and
services‟ in Contemporary Services Marketing Management, eds, M. Gabbott & G.
Hogg, 1997, Harcourt Brace & Company, London.

Bharan Sequeira Assignment 1