Service Marketing exam 4

Five major approaches to overcome service communication channels

Address service intangibility, manage service promises, manage customer expectations, manage customer education, manage internal marketing communication. Goal= service delivery greater than or equal to promises.

Three basic marketing price structures and challenges for services: Cost-based

Challenges: costs are difficult to trace, labor is more difficult to price than materials. costs may not equal the value that customers perceive the services are worth.

Communications and the services marketing triangle

Company, customers, providers: External marketing communication: advertising, sales promotion, public relations, direct marketing. Interactive marketing: personal selling, customer service center, service encounters, social media, servicescapes. Internal marketing: vertical communications, horizontal communications.

Strategies for adjusting CAPACITY to match DEMAND: demand too high (Adjust capacity)

Increase capacity temporarily: stretch people, facilities, and equipment temporarily. Use part-time employees, cross train employees, outsource activities. rent or share facilities and equipment.

Demand too low. (shift demand)

Increase demand to match capacity: educate customers about peak times and benefits of nonpeak use. vary how the facility is used. vary the service offering. differentiate on price.

Provider Gap 4: the communication gap: service delivery: external communications to customers

Lack of integrated services marketing communications: tendency to view each external communication as independent. not including interactive marketing program. Ineffective management of customer expectations: not managing customer expectations through all forms of communication. not adequately educating customers. Over-promising: in advertising, in personal selling, through physical evidence cues. Inadequate horizontal communications: insufficient communication between sales and operations, between advertising and operations, differences in policies and procedures across branches or units. Inappropriate pricing: High prices that raise customer expectations, prices that are not tied to customer perceptions of value.

Constraints on capacity: Time

Legal, consulting, accounting, medical.

Strategies for shifting demand to match capacity. Demand too high (Shift demand)

Reduce demand during peak times: communicate busy days and time to customers. modify timing and location of service delivery. offer incentives for nonpeak usage. Set priorities by taking care of loyal or high-need customers first. Charge full price for the service- no discounts

Excess capacity: demand is below optimum

Resources are underutilized resulting in lower profits. some customers may receive high quality service, but if quality depends on the presence of other customers, customers may be disappointed.

Service brand icons

Ronald McDonald, Geico gecko, Afflack duck.

Interactive Imagery

Travelers

Approaches for addressing service intangibility. (one of 5 major approaches to overcome service communication channels)

Use narrative to demonstrate the service experience. focus on the tangibles, use brand icons to make the service tangible, feature service employees in communication, use buzz or viral marketing, feature satisfied customers in the communication, generate word of mouth through employee relationships.

Approaches for managing customers education 4

Who is responsible for making sure the customer performs their role properly? Starbucks. prepare customers for the service process, confirm performance to standards and expectations, clarify expectations after the sale.

Defensive marketing

a defensive strategy seeks to counter product claims made by the competition or to stem the tide of perceived competitor advantage. companies can keep current customers through defensive marketing. the longer a customer remains with a firm, the more profitable the relationship. already have the customer. loyalty. will pay more. value in keeping current customers.

Integrated Service communications

a strategy that carefully integrates all external and internal communications channels to present a consistent message to customers.

Demand too low

adjust use of resources: schedule downtime during periods of low demand. perform maintenance and renovations. schedule vacations and employee training strategically. modify or move facilities and equipment.

How is this done in services?

advertising, sales presentations, srevice encounters with employees, servicescape and other tangibles, internet and web presence, public relations, pricing, service guarantees, customer education

Net promoter scores vary greatly by industry

airlines, auto insurance, banking etc

Offensive marketing

an offensive marketing strategy seeks to attack the market by targeting the weaknesses of the competition and emphasizing the company's strengths in comparison. companies can attract more and better customers through offensive marketing, businesses that rank in the top 5th on relative service quality average an 8% price premium.

Variations in demand relative to capacity

capacity utilized: volume demanded: demand exceeds capacity (business is lost). Maximum available capacity: demand exceeds optimal capacity (quality declines). Optimal capacity (well balanced demand and supply): ideal use. Low Utilization (may send bad signals): excess capacity (Wasted resources)

Three basic marketing price structures and challenges for services: Demand based

challenges: monetary prices must be adjusted to reflect the value of non-monetary costs. information on service costs is less available to customers; hence, price may not be a central factor.

Three basic marketing price structures and challenges for services: competition based

challenges: small firms may charge too little to be viable, heterogeneity of service limits comparability. prices may not reflect customers value.

Demand patterns

charting demand patterns, predictable cycles, random demand fluctuations, demand patterns by market segment.

Approaches for managing service promises 2

create a strong service brand. coordinate external communication. name a service that has a strong brand: disney, starbucks, home depot etc

Approaches for managing internal marketing communications 5

create effective vertical communications, create effective horizontal communications, sell the brand inside the company, create effective upward communication, align back office and support personnel with external customer through interaction or measurement, create cross-functional teams.

Equipment

delivery services, telecommunications, network services, utilities, health clubs

Value is low price

discounting, odd pricing, synchro-pricing, penetration. (synchro-pricing: charging different prices to different people based off place, person etc)

Waiting line strategies

employ operational logic to reduce wait. how to configure the queue? multiple queue, single, take a number

Best practices for closing the communication gap (Gap 4)

employing integrated service marketing communication strategies around everything and everyone that sends a message or signal. Manage customer expectations effectively throughout the experience. develop mechanisms for internal communication to avoid over-promising and ensure successful delivery.

Waiting line strategies 2

establish a reservation process, differentiate waiting customers: importance of the customer, urgency of the job, duration of the service transaction, payment of a premium price. Make waiting more pleasurable.

Facilities

hotels, restaurants, hospitals, airlines, schools, theaters, churches

Framing

how much did it costs to fly from NY to LA in 1959? 1447 after you adjust inflation 747 today 350. was it a better experience? yes, but there were 2.9 fatal accidents per 100k departures then compared to .098 today. this is an example of an industry in need of some price framing.

Customer often lack

knowledge of service prices.

labor

law firm, accounting firm, consulting firm, health clinic

Challenges and risks in using yield management

loss of competitive focus, customer alienation, overbooking, incompatible incentive and reward systems, inappropriate organization of the yield management function.

Price as an indicator of service quality

low price and low quality/ weight/rarity: infers low quality service. High quality/weight/rarity and high price: infers high quality service.

Approaches for managing customers expectations 3

make realistic promises, offer service guarantees, offer choices, create tiered-value service offerings (American express), communicate the criteria and levels service effectiveness.

How does price relate to service value? what is service value?

mental tradeoff of perceived quality and perceptions of sacrifice. can include both monetary and non-monetary sources of sacrifice. but it may mean different things to different people.

Bottom boxes

neutral to very dissatisfied 7%: repurchase: 7% recommend: 4%.

Demand exceeds optimum capacity

no one is turned away, but quality may still suffer

Prestige pricing

nobody would buy when they were first introduced. put them in the window at harry winston in NY with a big price tag and they became highly sought after.

Bundling

offering several products for sale in one "package" cable, phone, high speed internet. Microsoft office. unbundling: charging separately for previously bundled products/ services

Value is everything I want in a service

prestige pricing, skimming pricing

Value is all that I get for all that I give

pricing framing, price bundling, complementary pricing, results-based pricing

Net promoter score:

promoters rated 9 or 10. detractors rated 0 through 6.

this means coordination across

sales and service people, print, internet, other forms of tangible communication including the servicescape.

Customers often lack reference prices for service

service variability limits knowledge, providers are unwilling to estimate prices, individual customers needs vary, collection of price information by customers is difficult (angies list) prices are not visible. nature of service, variability. won't give estimate on price. it depends on problem.

Price skimming

set a relatively high price at first and then lower it over time: popular in electronics category (play station was originally $600) allows for sunk costs (R&D) recovery. good for inelastic demand. encourages competition.

Excess demand: the level of demand exceeds max capacity

some customers will be turned away. For customers who do receive service, quality may be lacking because of crowding or overtaxing of staff and facilities.

second box

somewhat satisfied 29%: 44 point drop will repurchase: 52%. would recommend xyz 36% 55 point drop

Demand and supply are balanced at optimum capacity

staff and facilities are occupied at ideal level. no one is overworked, facilities can be maintained customers are receiving quality.

Integrated service marketing communications

the need for coordination in marketing communication. key service communication challenges. five categories of strategies to match service promises with delivery.

Yield Management

the process of allocation the right type of capacity to the right kind of customer at the right price so as to maximize revenue or yield. yield = actual revenue/ potential revenue. where actual revenue = actual capacity x average actual price. potential revenue = total capacity x maximum price. Most effective when: 1) different segments make reservations at different times and 2) customers who arrive/ reserve early are more price sensitive than those who arrive/reserve late.

Focusing on Tangibles associated with the services: the sierra club

this little bundle of joy is now a reservoir of mercury poster. tangible dangers of mercury

Capacity constraints or what prevents the service from being delivered.

time, labor, equipment, and facilities. optimal versus maximum use of capacity

Issues to consider in making waiting more pleasurable

unoccupied time feels longer than occupied time. pre-process waits feel longer than in process waits. anxiety makes waits seem longer. uncertain waits seem longer than known, finite waits. unexplained waits seem longer than explained waits. unfair waits feel longer than equitable waits. the more valuable the service, the longer customers will wait. solo waits feel longer than group waits.

Four customer definitions of value

value is low price, value is everything i want in a service, value is the quality i get for the price i pay, value is all that I get for all that I give.

Value is the quality I get for the price I pay

value pricing, market segmentation pricing

Top box

very satisfied 64%. definitely will repurchase from xyz = 96% definitely would recommend xyz 91%

The role of non-monetary costs

what does is cost you to come to class today? Time costs, search costs, convenience costs, psychological costs