Dr. S. BornaDr. S. BornaMBA 671MBA 671

Services Marketing isServices Marketing is DifferentDifferent

By: Leonard L. BerryBy: Leonard L. BerryBusinessBusiness (1980) (1980)

Breaking Free From ProductBreaking Free From ProductMarketingMarketing by G. Lynn by G. Lynn Shostack Shostack Journal of MarketingJournal of Marketing (April 1977)(April 1977)

Lecture OutlineLecture Outline

How are services defined andHow are services defined andclassified?classified?How do services differ fromHow do services differ fromgoods?goods?How can service firms improveHow can service firms improvetheir differentiation, quality, &their differentiation, quality, &Productivity?Productivity?

The Complexity of MarketedThe Complexity of MarketedEntitiesEntities

Consider the following twoConsider the following twoexamples: an automobileexamples: an automobileand airline transportation.and airline transportation.What is being marketed?What is being marketed?A tangible or an intangible A tangible or an intangible product?product?

Do “either-or” termsDo “either-or” terms(product vs. service) adequately(product vs. service) adequatelydescribe the true naturedescribe the true natureof marketed products?of marketed products?No!No!Need for a new Need for a new structuralstructuraldefinitiondefinition

A Molecular ModelA Molecular Model

pp

PricePriceDistributionDistribution

Market positioningMarket positioning(Weighted toward evidence or image(Weighted toward evidence or image

The notion of multiple elementsThe notion of multiple elementsand dominance of elementsand dominance of elementsChange in one element may Change in one element may alter the element FE3O2 FE2O3alter the element FE3O2 FE2O3

Intangible elementIntangible element

Tangible elementTangible element

Fast-food outletsFast-food outlets

saltsalt

tangibletangibledominantdominant

intangibleintangibledominantdominant

fast-foodfast-foodoutletsoutlets

teachingteaching

PurePureServiceService

Categories of Service MixCategories of Service MixCategories of Service MixCategories of Service Mix

TangibleTangibleGoodGood

w/w/ServicesServices

MajorMajorServiceService

w/ Goodsw/ GoodsHybridHybrid

PurePureTangibleTangible

GoodGood

Unique Characteristics of Unique Characteristics of ServicesServices

More Intangible Than TangibleMore Intangible Than Tangible

Services are consumed notServices are consumed notpossessed.possessed.

The essence of what is being The essence of what is being bought is intangible.bought is intangible.Note: Services usually come withNote: Services usually come withtangible products.tangible products.

The concept of intangibilityThe concept of intangibilityhas two meanings, both ofhas two meanings, both ofwhich present challenges forwhich present challenges formarketing:marketing:

That which cannot be touched,That which cannot be touched, impalpable (impalpable (Not perceptible to touchNot perceptible to touch))That which cannot be easilyThat which cannot be easily defined, formulated, or defined, formulated, or grasped mentally.grasped mentally.

Simultaneous ProductionSimultaneous Productionand Consumptionand Consumption

Goods: produced sold Goods: produced sold consumedconsumed

Services: sold produced Services: sold produced consumedconsumedProducer of service must beProducer of service must bepresent (in most cases)present (in most cases)

Less StandardizedLess Standardized

Human based services areHuman based services aredifficult to standardize.difficult to standardize.

CLASSIFICATION OF SERVICESCLASSIFICATION OF SERVICES

EQUIPMENT BASEDEQUIPMENT BASEDPEOPLE BASEDPEOPLE BASED

CUSTOMER CONTACTCUSTOMER CONTACT::

HIGH CONTACT SERVICESHIGH CONTACT SERVICESLOW CONTACT SERVICESLOW CONTACT SERVICES

PROVIDED BY PUBLICPROVIDED BY PUBLIC

PROVIDED BY PRIVATE SECTORPROVIDED BY PRIVATE SECTOR

PROVIDED TO THE CONSUMERSPROVIDED TO THE CONSUMERS

PROVIDED TO THE BUSINESSPROVIDED TO THE BUSINESSSECTORSECTOR

Services

Inseparability

Services cannotbe separated

from theirproviders

Inseparability

Services cannotbe separated

from theirproviders

Perishability

Services cannotbe stored for

later sale or use

Intangibility

Services cannotbe seen, tasted,

felt, heard, orsmelled before

purchase

Intangibility

Services cannotbe seen, tasted,

felt, heard, orsmelled before

purchase

Variability

Quality ofservices dependson who providesthem and when,where, and how

Variability

Quality ofservices dependson who providesthem and when,where, and how

ServicesServices

Inseparability

Increaseproductivity of

providers

Inseparability

Increaseproductivity of

providers

Perishability

Match supplyand demand

Perishability

Match supplyand demand

Intangibility

Use cues tomake it tangible

Intangibility

Use cues tomake it tangible

Variability

Standardizeservice

production& delivery

Variability

Standardizeservice

production& delivery

More on Unique characteristicsMore on Unique characteristicsof services and their marketingof services and their marketingimplicationsimplications

IntangibilityIntangibilityThe uncertainty associatedThe uncertainty associatedwith intangibility can be reducedwith intangibility can be reducedby place, people, equipment etc.by place, people, equipment etc.

InIn “high-contact“high-contact” service” servicebusiness, the quality of servicebusiness, the quality of serviceis inseparable form theis inseparable form thequality of service provider.quality of service provider.Need forNeed for Internal MarketingInternal Marketing

MANAGING EVIDENCEMANAGING EVIDENCE

Making the service Making the service tangibletangible

Earlier it was mentioned that Earlier it was mentioned that intangibility has two intangibility has two meanings:meanings:

that which cannot bethat which cannot be touchedtouched;;that which cannot be easilythat which cannot be easily grasped mentallygrasped mentally..Implication: making servicesImplication: making servicestouchabletouchable

Tangible Tangible dominancedominance

Tangible Tangible evidenceevidence

fastfastfoodfoodoutletsoutlets

airlinesairlines

intangible dominanceintangible dominanceintangibleintangibleimageimage

Physical Services EnvironmentPhysical Services Environment

The physical environment in The physical environment in which services are purchasedwhich services are purchasedgenerally provides an importantgenerally provides an importantopportunity to tell the “right”opportunity to tell the “right”story about a given service.story about a given service.

TheThe AppearanceAppearance of of service provider is anotherservice provider is anothertangible that can be managedtangible that can be managed..

Service Pricing (anotherService Pricing (another tangibletangible item to be managed)item to be managed)

Tying Services MarketingTying Services MarketingToTo Goods MarketingGoods Marketing (Sears(Searsselling Insurance)selling Insurance)

Inseparability:Inseparability:

simultaneous production andsimultaneous production andconsumption of services.consumption of services.

How to solve the storage How to solve the storage problem: working with large no.problem: working with large no.of people, working efficientlyof people, working efficientlyetc.etc.

Supply and Demand:Supply and Demand:Need to SynchronizationNeed to Synchronization

Demand peaks can occurDemand peaks can occurduring certain times of dayduring certain times of day(airlines, restaurants), during(airlines, restaurants), duringcertain days of the week certain days of the week (movies, hair styling) and (movies, hair styling) and during certain month of yearduring certain month of year(income tax services)(income tax services)

Reshaping Supply:Reshaping Supply:

Using part-time employeesUsing part-time employeesTraining employees to performTraining employees to performmultiple jobs so that they canmultiple jobs so that they canswitch.switch.Substituting equipment forSubstituting equipment forhuman labor.human labor.

VariabilityVariability::

This is a limitation speciallyThis is a limitation speciallyfor people-based services:for people-based services:

How to overcome this limitation?How to overcome this limitation?

Training, StandardizationTraining, Standardization ofof proceduresprocedures

Three Types of MarketingThree Types of Marketingin Service Industriesin Service Industries

Three Types of MarketingThree Types of Marketingin Service Industriesin Service Industries

Internalmarketing

CompanyCompany

CustomersCustomers

Externalmarketing

EmployeesEmployees Interactivemarketing

Cleaning/maintenance

services

Financial/bankingservices

Restaurantindustry

ServiceService DifferentiationDifferentiationServiceService DifferentiationDifferentiation

Offer

Delivery

Image

How to differentiate or positionHow to differentiate or positionservices?services?

The notion of productThe notion of product offeringoffering::

• DeliveryDelivery• Sales personnelSales personnel• ImageImage• Customer serviceCustomer service

Managing Service QualityManaging Service Quality

1. Gap between Consumer expectation1. Gap between Consumer expectation and management perception;and management perception;2. Gap between management perception2. Gap between management perception and service-quality specification;and service-quality specification;3. Gap between service-quality3. Gap between service-quality specification and service delivery;specification and service delivery;4. Gap between service delivery4. Gap between service delivery and external communication;and external communication;5. Gap between perceived service and5. Gap between perceived service and expected service.expected service.

Complaint ResolutionComplaint Resolution

Hiring Criteria & Training for Hiring Criteria & Training for EmployeesEmployees

Develop Guidelines for FairnessDevelop Guidelines for FairnessRemove Complaint BarriersRemove Complaint BarriersAnalyze Types & Sources of Analyze Types & Sources of

ComplaintsComplaints

Managing Product SupportManaging Product SupportServicesServices

Customers’ concern:Customers’ concern:1. Frequency of Failure1. Frequency of Failure (a question of Product(a question of Product reliability)reliability)2. Downtime duration2. Downtime duration3. Out-of-pocket cost to the3. Out-of-pocket cost to the customercustomer

Postsale Service StrategyPostsale Service Strategy

Four strategies are available:Four strategies are available:1. Manufacturer provides the1. Manufacturer provides the serviceservice2. Authorized Dealers provide2. Authorized Dealers provide the service.the service.3. Independent service 3. Independent service specialist specialist 4. Customer performs the service4. Customer performs the service

ReviewReviewReviewReview

Service Definitions & ClassificationsService Definitions & Classifications How Services Differ GoodsHow Services Differ Goods Improving Service Differentiation, Improving Service Differentiation,

Quality, & ProductivityQuality, & Productivity Improving Customer Support Improving Customer Support

ServicesServices