Challenges of Service Marketing

Clothing

Jewelry

Furniture

Houses

Automobiles

Restaurant Meals

Vacation
Most Goods

Haircuts

Child Care

TV Repair

Legal Services

Dentist Services
Most Services
of Products

Auto Repair

Medical Diagnosis
Continuum of Evaluation for Different Types
 Challenges in Service Marketing
• Can we transfer the marketing concepts and
practices developed in manufacturing
companies to service organizations, where no
transfer of ownership takes place?
NO!!
• Marketing management tasks in the service
sector tend to differ from those in the
manufacturing sector in several important
respects.
• E.g.: When customers rent goods rather than
buying them, their expectation and decision
criteria are different-and so will be the nature
of their experiences, including how they
interact with the service firm that “loans”
them the physical product.
1. Most Services Cannot be Inventoried
• Services involve action or performance. They are perishable and so
can’t be stocked.
• Although facilities, equipment, and labor can be held in readiness
to create the service, each represents productive capacity, not the
product itself.
• If there is no demand, unused capacity is a waste and the firm loses
the chance to create value from the assets.
• Alternatively, when there is huge demand for a service, customers
may be sent away disappointed or asked to wait until later.
• Marketer needs to find ways of smoothing the demand levels to
match available capacity through promotion, reservations and
dynamic pricing strategies.
 2. Intangible Elements Usually Dominate
Value Creation
• Many services include important physical elements, such as
hotel beds, theatre interiors, bank cards.
• However, often it is the intangible elements- such as
processes, internet based transactions, and expertise of
service provider- that create most value in service
performance.
• Since customers can’t see, taste, smell the service elements,
it makes them difficult to assess the important service
feature in advance.
• Likewise, lack of easy reference points can make it hard for
customers to distinguish among competing suppliers.
3. Services are Often Difficult to Visualize and
Understand
• Many services can be described as “mentally intangible”
meaning that it is difficult for customers to visualize the
experience in advance of purchase and to understand what
they will be getting.
This situation can make service purchases seem risky.
• Mental intangibility is most likely to present a problem for the
first-time customers who lack prior exposure to a particular
service.
Service organizations need to build confidence in their abilities in
advance of use, and then justify that confidence by action that
creates lasting trust.
A memorable experience can make or break the trust.
3. Services are Often Difficult to Visualize and
Understand
• A well-trained staff can reduce the perceived
risk of purchase by helping prospective
customers to make good choice- such as
identifying the specific service features that
will be useful for certain types of people.
• Documenting performance, explaining what
was done and why, and offering guarantees are
additional ways to reassure customers and
reduce anxiety.
 4. Customers may be Involved in Co-
production
• Some services require customers to
participate actively in co-producing the service
product.
• E.g.: One is expected to cooperate with the
service provider in salon, hotels, etc.
• Service customers often act as a “partial
employee”.
• For e.g. self service at a fast food joint.
 4. Customers may be Involved in Co-
production
• Service firms have much to gain from helping customers to
become more competent and productive.
• If you do a poor job of performing the tasks for which you’re
responsible, that may spoil your service experience and curtail
the benefits you hope to receive.
• By contrast, if things are made easy for you, not only will you
have a better experience and outcome, your greater efficiency
may boost the firm’s productivity, lower its cost and even enable
to reduce the price you pay.
• So, service marketers must work with specialists from different
departments to develop web sites, equipments, facilities, and
system that are user friendly.
 5. People may be part of the service
experience
• Have you ever noted a difference between one service
provider and another on the basis of how their employees
attitude is?
• Well-managed firms not only provide good services, but
devote time in selecting, training, and motivating their
employees, so that the enhance customer’s experience.
• Good inter-personal skills are important to have along with
good service product.
• How the staff speaks, dress, behave with the customer, is
all a part of service experience. If one thing goes wrong,
whole experience goes down the drain.
 5. People may be part of the service
experience
• Can you cite an example when you felt bad because of
a bad service experience?
• Sometimes, other customer may hamper the
experience. For e.g. people talking too loudly at a
restaurant or a baby crying in a theatre.
• So, marketers must manage their own employees
effectively, as well as, manage and shape customer
behavior.
• In a shared service setting, other customers should
enhance the experience, not detract from its value.
 6. Operational inputs outputs tend to vary
more widely
• Physical products can be manufactured, stored and delivered
to separate locations at separate time. But, not services.
• Services are made and consumed at the same time.
• Same service has a different experience for different person
and sometime for that very person also.
• Attitudes, transaction speed, and quality of performance can
vary widely, and it’s hard, sometimes even impossible, to
shield customers from the results of service failures.
• These factors can make it difficult for service organizations to
improve productivity, control quality, and ensure reliable
delivery.
• E.g.: A detergent will perform in a similar manner every time
you use it, but not service.
 6. Operational inputs outputs tend to vary
more widely
• However, best service firms have made
significant progress in reducing variability by
adopting standardization procedures,
implementing rigorous management of
service quality, training employees carefully,
and automating tasks previously performed by
human beings.
 7. The time factor often assumes great
importance
• Many services are delivered in real-time while customers
are physically present.
• Today’s customers are the most time-sensitive customers.
They may pay extra to save time. Have you?
• Another concern of customers is how much time elapses
between making a request for service and receiving the
finished output.
• Successful marketer understands customers’ time
constraints and priorities. They collaborate with operations
managers to find new ways to compete on speed.
 8. Distribution may take place through non-
physical channels.
• Physical goods can be distributed through different
channels (wholesaler, retailers, directly).
• But what about service? They are intangibles. How to
distribute them?
• Some service businesses are able to use electronic
channels to deliver all or some of their service elements.
• E.g.: Banks offer customers a choice of distribution
channels, including visiting a branch, using a network of
ATMs, doing business by telephone or conducting
banking transactions on the internet.
 8. Distribution may take place through non-
physical channels.
• The internet is reshaping distribution strategy for a broad
array of industries.
• But, one should know the difference between the
potential for delivering information-based core product
(online education) and simply providing supplementary
services that facilitate purchase and use of physical
product.
• So, we can say that services use a mix of distribution
channel. E.g. you can book a ticket through a website, but
you have to take the delivery of core product (flight,
movie) by visiting a physical place.
 Summary of challenges
• How can service quality be defined and
improved.
• How can new service be designed and tested
• How can the firm be certain it is
communicating a consistent and relevant
image
• How can the form best motivate and select
service employees
 Summary of challenges
• How should service be priced
• How should the firm be organized so that good strategic
and tactical decision are made
• How can the balance between standardization and
personalization be determined
• How can the organization protect new service concept from
competitors
• How does firm communicate quality and value to customers
• How can the organization ensure the delivery and co-
creation of consistent quality.