MKTG 440 Lecture Notes - Lecture 1: G1 Phase, Mass Production, Pricing Strategies
Introduction to Services - January 17, January 19, January 22, January 24
1) Products:
a) Core: the products primary purpose; what customers are essentially purchasing
b) Tangible: the specific features that are a part of the product; can be tangible
and/or intangible.
c) Augmented: all the additional products and services that are part of the offering
2) Goods v services:
a) Goods: tangible things
i) Durable: meant to be reused
ii) Nondurable: immediately finished after they’re consumed
b) Services: intangible products
i) Service dominant products: offered as the primary product marketed
(ex: insurance policy, concert ticket) (*this class*)
ii) Service as additional products: extra products as part of augmented
product (ex: buy a car and free repairs comes additionally with the good)
iii) Additional customer services: offered as part of primary product being
marketed; a separate product only bought with a good (ex: warranty with
a phone)
3) Product’s main customers:
a) Consumer products: purchased in order to satisfy individuals purchasing for
personal or household needs
b) Business products: purchased in order to facilitate businesses in their quest to
achieve organizational goals
4) Consumer product classifications:
a) Convenience products: buy because it’s easy and little effort
b) Shopping products: for the experience
c) Speciality products: unique and desirable products
d) Unsought products: people could benefit from buying but don’t recognize their
need for it; need to be persuaded to buy
5) Service sector:
a) Now accounts for more than 70% of GDP
b) 80% of all jobs are service sector related
c) Examples: health care, professional (acctg, legal), financial, hospitality, travel
d) Why service marketing: dominate economies, different, leads to profits, etc.
6) Scale of marketing entities
a) Tangibility spectrum (high to low): salt, soft drinks, detergents, cars,
cosmetics, fast food places/fine dining, ad agencies, airlines, investment
management, consulting, teaching
i) Examples of goods companies turning into services:
7) Reasons for increased importance of service oriented products:
a) Economic affluence
b) Demographic changes:
c) Social and cultural changes:
d) Technology:
find more resources at oneclass.com
find more resources at oneclass.com
e) Gov deregulation:
8) 4 Characteristics of services (compared to goods)
a) Intangibility: the most recognized difference between goods and services is that
services are intangible; must be experience; judgments are much more
subjective
i) 4 implications:
(1) Services cannot be inventoried
(2) Cannot be easily patented
(3) Cannot be readily displayed or communicated
(4) Pricing is difficult
ii) 3 possible solutions:
(1) Use tangible cues wherever possible
(2) Develop greater personal resources for info requirements
(3) Create strong org image
b) Heterogeneity: a distinguishing characteristic of services is that they reflect
variation in consistency from one transaction to the next; almost impossible to
completely standardize
i) 3 implications:
(1) Service delivery and customer satisfaction depend on
employee/customer actions
(2) Service quality depends on many uncontrollable factors
(3) There is no sure knowledge that the service delivered matches
what was planned/promoted
ii) 5 possible solutions:
(1) Emphasis on selection and training qualified people
(2) Developing and adopting effective customer mgmt and
communication strategies
(3) Standardize specific tasks when possible
(4) Emphasize customization rather than standardization
(5) Automate jobs and tasks when possible (ex: ATM over bank teller)
c) Inseparability: the inter-connection between service providers and the
customer(s) receiving the service (customer has input/interaction with production,
purchase, and consumption)
i) 5 Implications of simultaneous production and consumption:
(1) Customers participate in an affect transaction
(2) Customers affect each other (ex: someone distracting someone
else in movie theater)
(3) Employees affect the service outcome
(4) Decentralization may be essential (may need different places to
get different things done)
(5) Mass production is difficult
ii) 3 possible solutions:
(1) Emphasis on selection and training qualified personnel
find more resources at oneclass.com
find more resources at oneclass.com
(2) Developing and adopting effective customer mgmt and
communication strategies
(3) Developing mult-site location strategy (for convenience)
d) Perishability: the intangible aspects of services that cannot be
stored/saved/inventoried; can not be made available when needed; must be used
by certain time → have to manage supply and demand well (goods are less
perishable than services)
i) 2 implications:
(1) Difficult to synchronize supply and demand with services (focus
more on demand side)
(2) Services cannot be returned or resold
ii) Demand-oriented solutions:
(1) Stimulate off-peak demand (when more supply is available) (ex:
early bird dinner specials)
(2) Pricing strategies (cheaper prices during less busy times)
(3) Reservation systems
(4) Develop complimentary services
iii) Supply-oriented solutions:
(1) Make use of part time employees during peak periods
(2) Use capacity sharing techniques
(3) Utilize 3rd parties
(4) Expand present capacity based on future expected needs
(5) Increase customer participation
9) Servuction model:
a) Visible components that affect customer: inanimate environment (place
where you get the experience- ex: interior of an airplane), bundle of services,
benefits received, contact with employees
b) Invisible components: org and systems
10) Qualities of goods and services that factor in buying
a) Search qualities: important ahead of time (ex: size, price, etc. of a desk);
clothing, jewelry, houses, furniture, cars → (easy to evaluate)
b) Experience qualities: don’t know much about them until you’re actually doing it;
haircuts, vacations, restaurants
c) Credence qualities: don’t know about them until well after the job/thing is
completed; legal services, root canals, auto repair → (hard to evaluate)
11) Traditional marketing mix: orgs control to satisfy/communicate with customers
a) Product, price, place, promotion
b) People: employees and customers; play part in service delivery and influence
perceptions
find more resources at oneclass.com
find more resources at oneclass.com
