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SERVICE MARKETING

Service
An act or performance one party can offer to another that essentially intangible and
does not result in the ownership of anything.
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The goods producing sector accounted for 14.2 of U.S. employment in 2008, down
from 17.3% in 1998. This number is expected to fall to 12.9% by 2018, a loss of 1.2
million jobs. At the same time, the services sector is expected to account for almost
88% of U.S. employment by 2018.
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Categories of Service Mix

Pure tangible good—a tangible good such as soap, toothpaste, or salt with no
accompanying services.
Tangible good with accompanying services—a tangible good, like a car, computer, or
cell phone, accompanied by one or more services.
Hybrid—an offering, like a restaurant meal, of equal parts goods and services.
Major service with accompanying minor goods and services—a major service, like air
travel, with additional services or supporting goods such as snacks and drinks.
Pure service—primarily an intangible service, such as babysitting, psychotherapy, or
massage.
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Continuum of Evaluation for Products

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PARTICIPATION IN PRODUCTION PROCESS

CLASSIFICATION OF SERVICES
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Service Characteristics
Intangibility - services cannot be seen, tasted, felt, heard, or smelled before they are
bought.
Inseparability - services are typically produced and consumed simultaneously.
Variability - services are highly variable because its quality depends on who provides
them, when and where, and to whom.
Perishability - services cannot be stored.
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This figure depicts the four special service characteristics a company must consider
when designing marketing programs.

Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled
before they are bought. To reduce uncertainty, buyers look for signals of service
quality. They draw conclusions about quality from the place, people, price, equipment,
and communications that they can see.

Service inseparability means that services cannot be separated from their providers,
whether the providers are people or machines. Customer coproduction makes
provider–customer interaction a special feature of services marketing. Both the
provider and the customer affect the service outcome.

Service variability means that the quality of services depends on who provides them
as well as when, where, and how they are provided. For example, within a Marriott
hotel, one registration-counter employee may be efficient, whereas another standing
just a few feet away may be grumpy and slow.

Service perishability means that services cannot be stored for later sale or use. Some
doctors charge patients for missed appointments because the service value existed
only at that point and disappeared when the patient did not show up.
Intangibility
To reduce uncertainty among buyers, firms must “Manage the evidence,” to “tangibilize
the intangible.” Buyers will look for evidence of quality based on numerous cues such
as the place, people, equipment, communication materials, symbols, and price.
Physical Evidence & Presentation
 Place
 People
 Equipment
 Communication material
 Symbols
 Price
Inseparability
Companies can get around the limitations of inseparability with several strategies.
They can work with larger groups. Some psychotherapists have moved from one-on-
one therapy to small-group therapy to groups of over 300 people in a large hotel
ballroom. The y can work faster—the psychotherapist can spend 30 more efficient
minutes with each patient instead of 50 less-structured minutes and thus see more
patients. The y can train more service providers and build up client confidence.
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 Work Faster
 Add More Service Providers
 Work with Larger Groups
Variability
Companies can take steps to increase quality control. They can invest in good hiring
and training procedures; standardize the service-performance process throughout the
organization (a service blueprint for a guest spending a night at a hotel); and monitor
customer satisfaction.
 Good Hiring and Training
 Monitor Satisfaction
 Offer Guarantees
Perishability
Services can not be stored. For example, a flight departing with empty seats can never
be recovered.
Due to its perishability characteristic, demand or yield management is critical—the right
services must be available to the right customers at the right places at the right times
and right prices to maximize profitability.
Complementary Services
Reservation Systems
Nonpeak Demand
Differential Pricing
Overnight Hotel Stay Blueprint
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CLASSIFICATION ACCORDING TO CONTACT

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Levels of Customer Contact wıth Servıce Organızatıons

Distinctions between High-Contact and Low-Contact Services

High-Contact Services
 Customers visit service facility and remain throughout service delivery
 Active contact between customers and service personnel
 Includes most people-processing services
Low-Contact Services
 Little or no physical contact with service personnel
 Contact usually at arm’s length through electronic or physical distribution
channels
 New technologies (e.g. the Web) help reduce contact levels
Medium-Contact Services Lie in between These Two
The Servuction System: Service Production and Delivery
Service Operations (front stage and backstage)
 Where inputs are processed and service elements created
 Includes facilities, equipment, and personnel
Service Delivery (front stage)
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 Where “final assembly” of service elements takes place and service is

delivered to customers
 Includes customer interactions with operations and other customers
Service Marketing (front stage)
 Includes service delivery (as above) and all other contacts between service
firm and customers

New Services Realities

Customer Empowerment: Internet has empowered customers by letting them vent their
rage about bad service—or reward good service—and send their comments around
the world with a mouse click. Companies should respond effectively and prevent
dissatisfaction from occurring in the future.
Customer Coproduction: Costumers play an active role in the delivery of delivery of the
service. Their words and actions affect the quality of their service experiences and
those of others, and the productivity of frontline employees. It’s crucial to prevent
service failures. Figure 13.3 displays the four broad causes of customer failures.
Satisfying employees: Positive employee attitudes promote stronger customer loyalty.
Instilling a strong customer orientation in employees can also increase their job
satisfaction and commitment, especially if they have high customer contact.

Achieving Excellence in Services

 Marketing Excellence
 Differentiating Services
 Best Practices
Marketing Excellence
Marketing excellence with services requires excellence in three broad areas: external,
internal, and interactive marketing.
External: Preparing, pricing, distributing, promoting the service
Internal: Training/motivating employees
Interactive: Serving the client

Marketing in Service Industries

Figure shows that marketing excellence with services requires excellence in three
broad areas: external, internal, and interactive marketing.
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8 P MODEL FOR INTEGRATED SERVICE MANAGEMENT

INTEGRATED SERVICE MANAGEMENT

It is the coordination of the planning and implementation efforts of marketing,
operations and human resources activities that are fundamental to a service business.
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PRODUCT (MAL-HİZMET)
It is all part of service performance that creates value for consumers.
PLACE, TIME and CYBERSPACE (YER , ZAMAN ve SİBER ALEM)
They are managerial decisions about where, when, and how to deliver the service to
consumers.
PROCESS (SÜREÇ)
It is an activity method or a series of activities in a defined sequence.
PRODUCTIVITY (VERİMLİLİK)
The activation of the process which is inputs transforming to the outputs to create value
for the customer.
QUALITY (KALİTE)
It is the degree of satisfaction of customers by meeting needs, desires and
expectations from a service.
PEOPLE (İNSANLAR)
Employees involved in the production process of the service (and sometimes other
customers-front line)
PROMOTION and EDUCATION (TUTUNDURMA VE EĞİTİM)
It is all communication activities and incentives organized on the choice of a particular
service or service provider.
PYHSICAL EVIDENCE (FİZİKSEL UNSURLAR)
It is all visual or other tangible tips that provide evidence about the quality of a service.
PRICE and OTHER COSTS (FİYAT ve HİZMETİN DİĞER MALİYETLERİ)
It is money, time and effort spent by customers in purchasing and consuming a service.
Best Practices of Top Service Companies
Strategic concept - Top service companies have a clear sense of their target customers
and their needs and have developed a distinctive strategy for satisfying these needs.
Top management commitment - Companies such as Marriott, Disney, and USAA have
a thorough commitment to service quality.
High standards - The best service providers set high quality standards.
Profit tiers - Firms raise fees and lower services to those customers who barely pay
their way, and to coddle big spenders to retain their patronage as long as possible.
Monitoring systems – Top firms audit service performance, both their own and
competitors’, on a regular basis.
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Satisfy costumer complaints - Companies that encourage disappointed customers to

complain, and also empower employees to remedy the situation on the spot, achieve
higher revenues and greater profits than companies without a systematic approach for
addressing service failures.
Marketing Tasks for Service Companies

Managing service differentiation

• Developing a differentiated offer, delivery,
and image
Managing service quality
• Delivering consistently higher quality than
the competitors
Managing service productivity
• Training current employees or hiring new ones
• Increasing the quantity of service by giving up
some quality
• Harnessing the power of technology

In these days of intense price competition, service marketers often complain about the
difficulty of differentiating their services from those of competitors. The solution to price
competition is to develop a differentiated offer, delivery, and image. For example,
Dick’s Sporting Goods has grown from a single bait-and-tackle store in Binghamton,
New York, into a sporting goods mega-retailer in 44 states by offering interactive
services that set it apart from ordinary sporting goods stores.

A service firm can differentiate itself by delivering consistently higher quality than its
competitors provide. Service providers need to identify what target customers expect
in regard to service quality. Also, good service recovery can turn angry customers into
loyal ones.

With their costs rising rapidly, service firms are under great pressure to increase
service productivity. They can do so in several ways. They can train current employees
better or hire new ones who will work harder or more skillfully. Or they can increase
the quantity of their service by giving up some quality. Finally, a service provider can
harness the power of technology. However, companies must avoid pushing
productivity so hard that doing so reduces quality. For example, many airlines in their
attempts to improve productivity, have mangled customer service. Most airlines have
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stopped offering even the little things for free and now charge extra for everything from
luggage to aisle seats. The result is a plane full of resentful customers.

Differentiating Services
 Primary and secondary service options
 Innovation with services
Innovation is as vital in services as in any industry. Examples of creative solutions in
existing categories:
Online travel : offer customers the opportunity to conveniently book travel at discount
prices: Expedia , Travelocity, Kayak.
Retail health: address a large number of simple cases: Quick Care, RediClinic, and
MinuteClinic.
Private aviation: allowed customers to pay a percentage of the cost of a private plane
plus maintenance and a direct hourly cost: NetJets, Marquis Jets.

Determinants of Service Quality

Based on the service-quality model, researchers identified five determinants of service
quality.
Reliability—The ability to perform the promised service dependably and accurately.
Responsiveness—Willingness to help customers and provide prompt service.
Assurance—The knowledge and courtesy of employees and their ability to convey trust
and confidence.
Empathy—The provision of caring, individualized attention to customers.
Tangibles—The appearance of physical facilities, equipment, personnel, and
communication materials.
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Reliability

Tangibles Responsive

Empathy Assurance

Service-Quality Model
Customer expectations are built by word of mouth, advertising, and past experiences.
Customers compare the perceived service with the expected service to determine
satisfaction.
Gaps that cause unsuccessful delivery of service quality:
1. Consumer expectations and management perceptions
2. Management perceptions and service-quality specification
3. Service quality specification and service delivery
4. Service delivery and external communications
5. Perceived service and expected service
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