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ADM 3322 Chapter Sum

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University of Ottawa
Dennis Saukalakas

Chapter One - New Perspectives on Marketing in the Service Economy Defining Services  Services involve a form of rental and non-ownership  Meaning access and usage fees, for a defined period of time, instead of buying it outright  Services non-ownership framework  Rental-good services — right to a physical good  Defined space and place rentals — private space shared with other customers  Labour and expertise rentals — hire people  Access to shared physical environments — share use of an environment, not private  Systems and networks: access & usage — rent right to participate Defining Services (2) - Services are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility. - In exchange for their money, time and effort, service customers expect to obtain values from access to goods, labour, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved. Defining Services (3)  Service Product  A service product comprises all the elements of the service performance, both tangible and intangible, that creates value for customers  Businesses sell and market the core service product  This is the marketing of services  Customer Service  Customer support of the core product after it is sold  Marketing through service Importance of Services  Services dominate economy in most nations  Service sector is growing rapidly  Most new jobs are generated by services  Powerful forces are transforming service markets  Reshaping of demand, supply, competition, customers Difference Implications Marketing-Related Tasks Most service products Customers may be Use pricing, promotion, and cannot be inventoried turned away reservations to smooth demand; work with ops to Intangible elements Harder to evaluate manage capacity usually dominate service and distinguish value creation from competitors Emphasize physical clues, Services are often Greater risk and employ metaphors and vivid uncertainty perceived images in advertising difficult to visualize and understand Interaction between Educate customers on Customers may be customer and provider; making good choices; offer involved in co-production but poor task execution guarantees could affect satisfaction Develop user-friendly equipment, facilities, and systems; train customers, provide good support Difference Implications Marketing-Related Tasks People may be part of Behaviour of service Recruit, train employees to service experience personnel and customers reinforce service concept can affect satisfaction Shape customer behaviour Operational inputs and outputs tend to vary Hard to maintain quality, Redesign for simplicity and more widely consistency, reliability failure proofing Difficult to shield Institute good service Time factor often assumes great customers from failures recovery procedures importance Time is money; Find ways to compete on Distribution may take customers want service speed of delivery; offer extended hours place through at convenient times nonphysical channels Electronic channels or Create user-friendly, voice telecommunications secure websites and free access by telephone NAICS  North American Industry Classifications System  Replacing the SIC system – Standard Industrial Classification  Better understanding of service dominated economies  Some examples of new classifications:  Diet and Weight Reducing Centres  Management Consulting Services  Temporary Help Services  Telemarketing Bureaus Differentiate between services and goods  Marketing tasks in services differ from the manufacturing sector  Eight common differences :  Service products cannot be inventoried  Intangible elements dominate value creation  Services difficult to visualize and understand  Customers may be involved in co-production  People may be part of the service experience  Operational inputs and outputs tend to vary widely  Time factor assumes great importance  Distribution through nonphysical channels  What are marketing implications? The 8 Ps of Services Marketing  Marketing is the only function to bring operating revenues into a business; all other functions are cost centres  The “8Ps” of services marketing are needed to create strategies for meeting customer needs profitably in a competitive marketplace  Traditional – product elements, place and time, price and other user outlays, promotion and educations  Extended by service delivery – physical environment, processes, people, productivity and quality The 8Ps of Services Marketing: (1) Product Elements  Embrace all aspects of service performance that create value  Core product responds to customer’s primary need  Help customers use core product through array of supplementary service elements  Creates a service concept that offers value to customers and satisfies better than competitors The 8Ps of Services Marketing: (2) Place and Time  Delivery decisions: Where, When, How  Geographic locations served  Service schedules  Physical channels  Electronic channels  Customer control and convenience  Channel partners/intermediaries The 8Ps of Services Marketing: (3) Price and Other User Outlays  Traditional pricing tasks:  Selling price, discounts, premiums  Margins for intermediaries (if any)  Credit terms  Service marketers must recognize that customer outlays involve more than price paid to seller  Identify and minimize other costs incurred by users:  Costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.)  Time expenditures, especially waiting  Unwanted mental and physical effort  Negative sensory experiences The 8Ps of Services Marketing: (4) Promotion and Education  Informing, educating, persuading, reminding customers  Marketing communication tools  Media elements (print, broadcast, outdoor, retail, the Internet, etc.)  Personal selling, customer service  Sales promotion  Publicity/PR  Imagery and recognition  Branding  Corporate design  Content  Information, advice  Persuasive messages  Customer education/training The 8Ps of Services Marketing: (5) Process  How firm does things may be as important as what it does  Customers often involved in processes, especially when acting as co-producers of service  Process involves choices of method and sequence in service creation and delivery  Design of activity flows  Number and sequence of actions for customers  Nature of customer involvement  Role of contact personnel  Role of technology, degree of automation  Badly designed processes waste time, create poor experiences, and disappoint customers The 8Ps of Services Marketing: (6) Physical Environment  Design servicescape and provide tangible evidence of service performances  Create and maintain physical appearances  Buildings/landscaping  Interior design/furnishings  Vehicles/equipment  Staff grooming/clothing  Sounds and smells  Other tangibles  Manage physical cues carefully— can have profound impact on customer impressions The 8Ps of Services Marketing: (7) People  Interactions between customers and employees influence perceptions of service quality  Need the right customer-contact employees, performing tasks well  Job design  Recruiting  Training  Motivation  Need the right customers for firm’s mission  Contribute positively to experience of other customers  Possess—or can be trained to have— needed skills (co-production)  Can shape customer roles and manage customer behavior The 8Ps of Services Marketing: (8) Productivity and Quality  Productivity and quality must work hand in hand  Improving productivity key to reducing costs  Improving and maintaining quality essential for building customer satisfaction and loyalty  Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key  Technology-based innovations have potential to create high payoffs  But, must be user friendly and deliver valued customer benefits Summary  Services are transforming markets and experiencing rapid growth  The differences between services and goods marketing focus on intangibility, people and time CHAPTER 2 – Customer Behaviour in Service Encounters Differences among Services Affect Customer Behaviour  Consumers often involved in service production and may have preferences for service delivery  Service marketers need to understand how customers interact with service operations  Based on differences in nature of service act (tangible/intangible) and who or what is direct recipient of service (people/possessions), there are four categories of services:  People processing  Possession processing  Mental stimulus processing  Information processing Four categories of Service Marketing: Who or What Is the Direct Recipient of the Service? Nature of the Service Act People Possessions Tangible Actions People processing Possession processing (services directed at people’s (services directed at physical bodies): possessions):  Barbers  Refueling  Health care  Disposal/recycling Intangible Actions Mental stimulus processing Information processing (services directed at people’s minds): (services directed at intangible assets):  Education  Advertising/PR  Accounting  Banking People Processing  Customers must:  Physically enter the service factory  Co-operate actively with the service operation  Managers should think about process and output from customer’s perspective  To identify benefits created and non-financial costs: ― Time, mental, physical effort Possession Processing  Customers are less physically involved compared to people processing services  Involvement is limited  Production and consumption are separable Mental Stimulus Processing  Ethical standards required when customers who depend on such services can potentially be manipulated by suppliers  Physical presence of recipients not required  Core content of services is information-based  Can be “inventoried” Information Processing  Information is the most intangible form of service output  But may be transformed into enduring forms of service output  Line between information processing and mental stimulus processing may be blurred. The Purchase Process for services: Pre purchase Stage  Service Encounter Stage  Post Encounter stage Pre purchase Stage: Overview  Customers seek solutions to aroused needs  Evaluating a service may be difficult  Uncertainty about outcomes increases perceived risk  What risk reduction strategies can service suppliers develop?  Understanding customers’ service expectations  Components of customer expectations  Making a service purchase decision Service Encounter Stage: Overview  Service encounters range from high- to low-contact  Understanding the servuction system  Service marketing systems: high-contact and low-contact  Role and script theories  Theatre as a metaphor for service delivery: An integrative perspective  Implications for customer participation in service creation and delivery High Versus Low Contact Services  Service marketers must manage the ways customers encounter the service organization  Each element they encounter must be consistent or the organization’s credibility is weakened  High contact services present marketing challenges  More contact points, more moments of truth  Requires consistent messaging at each contact point  Low contact services have less contact points with higher importance  Customer more reliant on the contact point chosen  Importance of self service technology (SST) that works The Servuction System =Service + Production  Service Operations (front stage and backstage)  Where inputs are processed and service elements created  Includes facilities, equipment, and personnel  Service Delivery (front stage)  Where “final assembly” of service elements takes place and service is delivered and visible to customers  Includes customer interactions with operations and other customers  Service Marketing (front stage)  Visible part of service operations, service delivery and other contact points Post Encounter Stage: Overview  Evaluation of service performance  Future intentions Customer Satisfaction Is Central to the Marketing Concept  Satisfaction defined as attitude-like judgment following a service purchase or series of service interactions  Customers have expectations prior to consumption, observe service performance, compare it to expectations  Satisfaction judgments are based on this comparison  Positive disconfirmation if better than expected  Confirmation if same as expected  Negative disconfirmation if worse than expected  Satisfaction reflects perceived service quality, price/quality tradeoffs, personal and situational factors  Research shows links between customer satisfaction and a firm’s financial performance Summary – Chapter 2  People, Possession, Mental Stimulus and Information processing are the 4 Categories of Services  Services can be difficult to evaluate and customers will use search, experience and credence attributes to do so  Service marketers need to manage at least 6 key variables during the service encounter stage  Long term customer relationships are built on satisfying customer expectations CHAPTER 10 Chapter 10 – Crafting the Service Environment Purpose of service environment: - Helps firms to create distinctive image n unique positioning - Service environment (serviceescape) affects buyer behaviour in 3 ways: o Message-creating medium : symbolic cues to communicate the distinctive nature and quality of the service experience o Attention- creating medium: make services stand out from competition and attract customers from the target segments o Effect-creating medium: use colours, textures, sounds, scents, and spatial design to enhance desired service experience. Ex of companies: American apparel (not everywhere cuz they want to send their image as an experience); the brick (always has sales, might show that they don’t have good quality...); Nike (commercials with Michel Jordan...); Starbucks (music, style). Comparison of Hotel Lobbies (Figure 10.1): - Each servicescape clearly communicates and reinforces its hotel’s respective positioning and service expectations as guests arrive. - Difference between Lobby of a Howard Johnson hotel and Lobby of Fairmont Banff Springs Hotel. The money is coming from business people, coming to the hotel. There are 2, 5 stars hotels in Canada: Chateau laurier and Brockstreet. Theres a criteria you have to qualify to get the money of starts... depends of the quality of your service and what they offer. If you have issues, you can lose you 5 star ranking. Servicescape as part of value proposition: - Physical surrounding help shape appropriate feelings and reactions in customers and employees o Ex: dysney land, Denmark’s Legoland - Servicesacpes form a core part of the value proposition o Ex: club med, los Vegas, Florida-based muvico o L-V: repositioned itself to a somewhat more wholesome fun resort, visually striking entertainment center. - The power of servicescapes is being discovered CHAPTER 3 - Developing Service Concepts: Core and Supplementary Elements  In depth understanding of service products  Explore the use of supplementary services and how they add customer value  The use of branding in services  An approach for new service design Planning and Creating Services  A service product comprises all elements of service performance, both tangible and intangible, that create value for customers  The service concept is represented by:  A core product  Accompanied by supplementary services – facilitate and enhance use of the core product and add value and differentiation
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