Marketing Mix Service

MARKETING MIX IN SERVICE
MBA ITB 2015
Services Pose Distinctive Marketing

Challenges
Marketing management tasks in the service sector
differ from those in the manufacturing sector
The eight common differences are:
1. Most service products cannot be inventoried
2. Intangible elements usually dominate value creation
3. Services are often difficult to visualize and understand
4. Customers may be involved in co-production
5. People may be part of the service experience
6. Operational inputs and outputs tend to vary more widely
7. The time factor often assumes great importance
8. Distribution may take place through nonphysical channels
What are marketing implications?
Differences, Implications, and

Marketing-Related Tasks (1)
Difference
Most service
products
cannot be inventoried
Intangible elements
usually dominate
value creation
Services are often
difficult to visualize
and understand
Customers may be
involved in coproduction
Implications
Customers may be
turned away
Harder to evaluate
service and distinguish
from competitors
Greater risk and
uncertainty perceived
Interaction between
customer and provider;
but poor task execution
could affect satisfaction
Marketing-Related Tasks
Use pricing, promotion,

and
reservations to smooth
demand; work with ops to
manage capacity
Emphasize physical clues,
employ metaphors and vivid
images in advertising
Educate customers on
making good choices; offer
guarantees
Develop user-friendly
equipment, facilities, and
systems; train customers,
provide good support
Differences, Implications, and

Marketing-Related Tasks (2)
Difference
Implications
Marketing-Related Tasks
People may be part of

service experience
Behavior of service
personnel and customers
can affect satisfaction
Recruit, train employees to

reinforce service concept
Shape customer behavior
Operational inputs
and
outputs tend to vary
more widely
Time factor often
assumes great
importance
Distribution may take
place through
nonphysical channels
Hard to maintain quality, Redesign for simplicity

and
consistency, reliability
failure proofing
Difficult to shield
Institute good service
customers from failures
recovery procedures
Time is money;
Find ways to compete on
customers want service
speed of delivery; offer
at convenient times
extended hours
Electronic channels or
Create user-friendly,
voice telecommunications
secure websites and free
access by telephone
Value Added by Physical, Intangible Elements

Helps Distinguish Goods and Services
Physical
Elements
High
Salt
Detergents
CD Player
Wine
Golf Clubs
New Car
Tailored clothing
Fast-Food Restaurant
Low
Source; Adapted from Lynn Shostack
Plumbing Repair
Health Club
Airline Flight
Landscape Maintenance
Consulting
Life Insurance
Internet Banking
Intangible Elements
High
Services Require
An Expanded Marketing Mix The 7Ps of
Services Marketing
Product
Place and Time
Price
Promotion and Education
Process
Physical Environment
People
Working in Unison:
(5) Process in Augmented Product
Reservation
Parking
Use
room
Get car
USE GUESTROOM OVERNIGHT
internet
Porter
Meal
Before
Visit
Check out
Internet
Check in
Internet
Pay TV
Room service
Time Frame of An Overnight Hotel Stay

(Real-time service use)
Simple Flowchart for Delivery

of a People-Processing Service
People Processing Stay at Motel
Park Car
Check In
Maid Makes
up Room
Spend
Night in
Room
Breakfast
Breakfast
Prepared
Check Out
(6) Physical Environment

Design servicescape and provide
tangible evidence of service
performances
Create and maintain physical
appearances
o Buildings/landscaping
o Interior design/furnishings
o Vehicles/equipment
o Staff grooming/clothing
o Sounds and smells
o Other tangibles
Manage physical cues carefully
can have profound impact on
customer impressions
(7) People
Interactions between customers and contact
personnel strongly influence customer
perceptions of service quality
The right customer-contact employees
performing tasks well
o Job design
o Recruiting
o Training
o Motivation
The right customers for firms mission
o Contribute positively to experience of other
customers
o Possessor can be trained to have
needed skills (co-production)
o Can shape customer roles and manage
customer behavior
How Product Attributes Affect

Ease of Evaluation
Most Goods Most Services
Difficult
to evaluate*
Easy
to evaluate
Clothing
Chair
Motor vehicle
Foods
Restaurant meals
Haircut
Entertainment
High in search High in experience

attributes
attributes
*NOTE: Difficulty of evaluation tends to decrease with broad exposure
to a service category and frequency of use of a specific supplier
Computer repair
Education
Legal services
Complex surgery
High in credence
attributes
Source:
Adapted from Zeithaml
Service Encounters Range from

High-Contact to Low-Contact
Levels of Customer Contact with

Service Organizations
Theatrical Metaphor:
An Integrative Perspective
Service dramas unfold on a stagesettings may
change as performance unfolds
Many service dramas are tightly scripted, others
improvised
Front-stage personnel are like members of a cast
Like actors, employees have roles, may wear special
costumes, speak required lines, behave in specific ways
Support comes from a backstage production team
Customers are the audiencedepending on type of
performance, may be passive or active participants
Service Employees Are Crucially

Important
Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 11 - 3
Service Personnel: Source of Customer

Loyalty and Competitive Advantage
Customers perspective: Encounter with service staff
is most important aspect of a service
Moments of truth drive customers perception of
the service firm
Firms perspective: Frontline is an important source
of differentiation and competitive advantage. It is:
o
o
o
A core part of the product

the service firm
The brand
Frontline is an important driver of customer loyalty

o
o
o
Anticipating customer needs

Customizing service delivery
Building personalized relationships
Frontline Work Is
Difficult and Stressful
Role Stress in Frontline Employees

Three main causes of role stress:
Person versus Role: Conflicts between what jobs
require and employees own personality and beliefs
o
Organizations must instill professionalism in frontline staff
Organization versus Client: Dilemma whether to follow

company rules or to satisfy customer demands
o
This conflict is especially acute in organizations that are not

customer oriented
Client versus Client: Conflicts between customers that

demand service staff intervention.
Ex.: Smoking in non smoking areas. Ex : Inconvenience caused
by other passengers in train journey
Cycles of Success
Cycle of Success
Low
customer
turnover
Customer
loyalty
Higher
profit
margins
Lowered turnover,
high service quality
Continuity in
relationship with
customer Employee satisfaction,
positive service attitude
High customer
satisfaction
Repeat emphasis on
customer loyalty and
retention
Extensive
training
Broadened
job designs
Train, empower frontline

personnel to control quality
Above average
wages
Intensified
selection effort
Source: Heskett and Schlesinger
The Wheel of Successful HR in

Service Firms
Leadership that:
1. Hire the
Right People
Focuses the entire

organization on
supporting the
frontline
Fosters a strong
service culture with
passion for service
and productivity
Drives values
that inspires,
energizes and
guides service
providers
3. Motivate and
Energize Your People
Be the preferred
employer & compete
for talent market
Utilize the full
share
range of rewards
Service Excellence Intensify the
selection
& Productivity
process
2. Enable Your People
Empower frontline
Build high performance
service delivery teams
Extensive training
Hire the Right People
The old saying People are your

most important asset is wrong.
The RIGHT people are your
most important asset.
Jim Collins
The Inverted Organizational Pyramid
Customer Base
Top
Mgmt
Middle
Mgmt
Frontline Staff
Frontline
Staff
Middle Mgmt
And Top Mgmt
Support Frontline
Traditional Organizational
Pyramid
Inverted Pyramid with a

Customer and Frontline Focus
Legend: = Service encounters, or Moments of Truth

Customer Response Categories to

Service Failures
Complain to the
service firm
Take some form
of Public Action
Service Encounter
is Dissatisfactory
Take some form

of Private Action
Take No Action
Complain to a third
party
Take legal action
to seek redress
Defect (switch
provider)
Negative word-ofmouth
Any one or a combination of

these responses is possible
Understanding Customer Responses to

Service Failure
Why do customers complain?
Obtain compensation for economic loss

Vent their anger
Help improve the service . Ex Alumni Association
For altruistic reasons Want to save prevent other customers from
undergoing the trauma of poor service
What proportion of unhappy customers complain? 5-10%

Why dont unhappy customers complain? time cost, uncertain outcome,
complaint process is not known, fear of confrontation etc.
Who is most likely to complain? people in Higher socioeconomic
circumstances
Where do customers complain? To the service rep in immediate contact
only. Rarely to the HQ or through email. Customer service centers are also called
up.
What do customers expect once they have made a complaint?
How Complaint Resolution Affects

Customer Retention Rates
Percent of Unhappy
Customers Retained
100
90
80
70
60
50
40
30
20
10
0
95%
82%
70%
46%
54%
37%
19%
9%
Customer did not
complain
Complaint was
not resolved
Problem cost > $100
Complaint
was resolved
Complaint was
resolved quickly
Problem cost $1$5
Source: Claes Fornell, Birger Wernerfelt, A Model for Customer Complaint Management, Marketing
Science, Vol. 7, No. 3 (Summer, 1988), pp. 287298
The Service Recovery Paradox

Customers who experience a service failure that is
satisfactorily resolved may be more likely to make future
purchases than customers without problems
If second service failure occurs, the paradox disappears
customers expectations have been raised and they
become disillusioned
Severity and recoverability of failure (e.g., spoiled
wedding photos) may limit firms ability to delight
customer with recovery efforts
Best strategy: Do it right the first time
Principles of Effective Service

Recovery Systems
Components of an Effective
Service Recovery System
Do the job right the
first time
Effective Complaint
Handling
Identify Service
Complaints
Resolve Complaints
Effectively
Learn from the

Recovery Experience
Increased
Satisfaction and
Loyalty
Conduct research
Monitor complaints
Develop Complaints as
opportunity culture
Develop effective system

and training in
complaints handling
Conduct root cause analysis
Close the loop via feedback

Fluctuations in Demand Threaten

Service Productivity
Variations in Demand Relative to

Capacity
VOLUME DEMANDED
Demand exceeds capacity
(business is lost)
CAPACITY UTILIZED
Maximum Available
Capacity
Optimum Capacity
(Demand and Supply
Well Balanced)
Low Utilization
(May Send Bad Signals)
Demand exceeds
optimum capacity
(quality declines)
Excess capacity
(wasted resources)
TIME CYCLE 1
TIME CYCLE 2
From Excess Demand to

Excess Capacity
Four conditions potentially faced by fixed-capacity services:
Excess demand
o
Too much demand relative to capacity at a given time => customer is

denied service => biz lost
Demand exceeds optimum capacity

o
Upper limit to a firms ability to meet demand at a given time => no one
turned away, but conditions are deteriorating
Optimum capacity
o
Demand =Supply ; Staff not over worked and Customers face no delay
Excess capacity
o
Supply > Demand
Demand Levels Can Be Managed
Alternative Demand Management Strategies

Take no action
o
Let customers sort it out. They learn from WOM when is the slack
and peak time, where to stand and what is the possible waiting time
Reduce demand
o
o
Higher prices
Communication : promoting usage of time slots. Evening Colleges
Increase demand
o
o
o
Lower prices
Communication, including promotional incentives
More convenient delivery times and places
Inventory demand by reservation system :
Provide priority to special customers, others attended later.
Inventory demand by formalized queuing :

Special line for VIPs.
Marketing Strategies Can

Reshape Some Demand Patterns
Use price and other costs( time, psychological cost)
to manage demand
Change product elements. Price discounting will not
boost sales in off peak seasons. Ex Hotels offer various
menus during different time of the day to cater to
different customer needs
Modify place and time of delivery
No change
Vary times when service is available during summer caf remain
open till late night. Shops extend working hours during Diwali and
dussera
o Offer service to customers at a new location Free dental check up in
mobile dental vans.
o
o
Promotion and education customers about peak period

and slack period
Inventory Demand through Waiting

Lines and Reservations
Waiting Is a Universal Phenomenon!
An average person may spend up to 30 minutes/day

waiting in lineequivalent to over a week per year!
Almost nobody likes to wait
It's boring, time-wasting, and sometimes physically
uncomfortable
Saving Customers from

Burdensome Waits
Add extra capacity so that demand can be met

at most times (problem: may increase costs
too much)
Rethink design of queuing system to give
priority to certain customers or transactions
Redesign processes to shorten transaction
time. Use of internet
Manage customer behavior and perceptions of
wait
Install a reservations system Ex Web check
in
Alternative Queuing Configurations

Single line, single server, single stage
Ex : Small railway reservation stations
Single line, single servers, sequential stages

Govt offices
Parallel lines to multiple servers

Large railway reservation centers
Designated lines to designated servers

Ladies Q, Credit card booking, Group booking Q
Single line to multiple servers (snake)-Ex

Airport Check in One entrance and diff check in for diff
flights
Take a number (single or multiple servers)

Ex Banks
28
26
32
21
20
25
30
31
29
27
24
23
Minimize Perceptions of Waiting Time
Ten Propositions on Psychology of

Waiting Lines (1)
Unoccupied time feels longer than occupied time Place
TV
Pre- and post-process waits feel longer than in-process
waits Ex Movie: Wait 1 Buying Ticket, Wait 2 : Maneuvering vehicle
from parking lot
Anxiety makes waits seem longer

Uncertain waits are longer than known, finite waits
Inform customer the approx wait time
Unexplained waits are longer than explained waits- Inform
customer reason for delay and possible time for recovery
Sources: Maister; Davis & Heineke; Jones & Peppiatt
Ten Propositions on Psychology of

Waiting Lines (2)
Unfair waits are longer than equitable waiting : People
jumping Q
People will wait longer for more valuable services
Waiting alone feels longer than waiting in groups
Physically uncomfortable waits feel longer
Waits seem longer to new or occasional users Place a
lobby manager to take care of this
Sources: Maister; Davis & Heineke; Jones & Peppiatt
Create An Effective Reservation

System
Benefits of Reservations
Controls and smoothes demand

Pre-sells service
Informs and educates customers in advance of arrival
Saves customers from having to wait in line for service
(if reservation times are honored)
Data captured helps organizations
o
o
Prepare financial projections

Plan operations and staffing levels
Characteristics of Well-Designed
Reservations System
Fast and user-friendly for customers and staff

Answers customer questions
Offers options for self service (e.g., the Web)
Accommodates preferences (e.g., room with view)
Deflects demand from unavailable first choices to
alternative times and locations
Includes strategies for no-shows
o
o
Requiring deposits to discourage no-shows

Canceling unpaid bookings after designated time
Setting Hotel Room Sales Targets by

Segment and Time Period
Week 36
Week 7
100%
(High Season)
(Low Season)
Out of commission for renovation
Loyalty Program Members
Loyalty Program
Members
Capacity
(% rooms) Transient guests
50%
Weekend
package
W/E
package
Transient guests
Groups and conventions
Groups (no conventions)

Airline contracts
M
Tu W Th
Time Nights:
Airline contracts
F
Su
Tu
Th
Su

Marketing Mix Service

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MARKETING MIX IN SERVICE

MBA ITB 2015

Services Pose Distinctive Marketing

What are marketing implications?

Differences, Implications, and

Use pricing, promotion,

Differences, Implications, and

People may be part of

Recruit, train employees to

Hard to maintain quality, Redesign for simplicity

Value Added by Physical, Intangible Elements

Source; Adapted from Lynn Shostack

(5) Process in Augmented Product

USE GUESTROOM OVERNIGHT

Time Frame of An Overnight Hotel Stay

Simple Flowchart for Delivery

(6) Physical Environment

How Product Attributes Affect

High in search High in experience

Service Encounters Range from

Levels of Customer Contact with

Service Employees Are Crucially

Service Personnel: Source of Customer

A core part of the product

Frontline is an important driver of customer loyalty

Anticipating customer needs

Role Stress in Frontline Employees

Organizations must instill professionalism in frontline staff

Organization versus Client: Dilemma whether to follow

This conflict is especially acute in organizations that are not

Client versus Client: Conflicts between customers that

Train, empower frontline

Source: Heskett and Schlesinger

The Wheel of Successful HR in

Focuses the entire

2. Enable Your People

Hire the Right People

The old saying People are your

The Inverted Organizational Pyramid

Inverted Pyramid with a

Legend: = Service encounters, or Moments of Truth

Customer Response Categories to

Take some form

Any one or a combination of

Understanding Customer Responses to

Obtain compensation for economic loss

What proportion of unhappy customers complain? 5-10%

What do customers expect once they have made a complaint?

How Complaint Resolution Affects

Problem cost > $100

Problem cost $1$5

The Service Recovery Paradox

Principles of Effective Service

Learn from the

Develop effective system

Close the loop via feedback

Fluctuations in Demand Threaten

Variations in Demand Relative to

From Excess Demand to

Too much demand relative to capacity at a given time => customer is

Demand exceeds optimum capacity

Supply > Demand

Demand Levels Can Be Managed