The Seven P’s of Service
- Product elements: all components of the service performance that create value for
- Place and Time: management decisions about when, where, and how to deliver
services to customers.
- Price and other user outlays: expenditures of money, time, and effort that customers
incur in purchasing and consuming services.
- Promotion and education: all communication activities and incentives designed to
build customer performance for a specific service or service provider.
- Process: a particular method of operations or series of actions, typically involving steps
that need to occur in a defined sequence.
- Physical Environment: the appearance of visible cues, all providing tangible evidence
of a firm’s image and service quality. Can have profound impact on customer’s
- People: customers and employees who are involved in service production.
- The idea that a brand has numeric dollar value even though there are no tangible
- The dollar amount attributed to the value of the brand, based on all the intangible
qualities that create that value.
Competition Based Pricing
- Setting prices relative to those charged by competitors
- Firms with relatively similar services need to monitor what competitors are charging
and try to price accordingly.
- When customers see little or no difference between competing offerings, they must
choose what they think is cheapest.
Consumer Buyer Behavior
1) Need recognition and Problem Awareness: the buyer recognizes a
problem or need.
2) Information Search: the consumer spends time searching for information
on the product.
3) Evaluation of Alternatives: how we go about evaluating our purchase
alternatives depends on the buying situation. Sometimes rely on impulse or intuition, other times use careful calculations and logical thinking.
4) Purchase: all purchases begin with a need recognition and a purchase
intention. Final purchase decisions are a result of all those influences on
our behaviour – personal preferences, beliefs, and attitudes. The
information sought and found, and the comparisons made.
5) Post-Purchase Evaluation: the process of evaluating what our
expectations of the purchase were and comparing those expectations
to how we feel now that we own the product.
- The concept that an ever-expanding consumption of goods is advantageous to the
- The belief that high and constantly increasing consumer-spending leads to a healthy
economy, and that government policy should encourage this.
- Bolstered by advertising, encourages people to judge themselves and others by what
they own rather than who they are.
Conventional distribution channel vs vertical marketing system
Marketing or Distribution Channel: A set of independent organizations in the process of
making a product or service available to use or consumption by the consumer or business
Vertical Marketing System: A distribution channel structure in which producers, wholesalers,
and retailers act as a unified system. One channel member owns the others, has contacts
with them. Or has so much power that they all cooperate.
Conventional vs. Vertical
Conventional marketing channel:
Manufacturer Wholesaler Retailer Consumer
Vertical Marketing System:
(Manufacturer, wholesaler, retailer) Consumer
Core product & Supplementary services (flower of service)
Core Product- Central component that supplies the principal, problem-solving benefits
Supplementary Services- Augment the core product, facilitating its use and enhancing its
value and appeal
Delivery Process- Used to deliver both the core product and each of the supplementary
services. The Flower of Services
A visual framework for understanding the supplementary service elements that surround and
add value to the product core.
There are two kinds of supplementary services
- Facilitating Supplementary Services: either needed for service delivery, or help in the
use of the core product
- Enhancing Supplementary Services: add extra value for the customer
These different supplementary services can be classified into one of the eight clusters:
- Information: to obtain value from any good or service, customers need relevant
- Order taking: once customers are ready to buy, the company accepts applications,
orders and reservations.
- Billing: expected to be clear, and prompt.
- Payment: the action taken after billing is complete.
- Consultation: consists of immediate advice from knowledgeable service people in
response to a request.
- Hospitality: should ideally, reflect pleasure at meeting new customers and greeting old
ones when they return.
- Safekeeping: a reliable place for customers to keep their possessions and feel safe.
- Exceptions: involve supplementary services outside the normal service delivery.
How to Determine What Supplementary Services should be Offered
- Market positioning strategy
- Firms with different levels of service often add extra supplementary for each upgrade
in service levels.
Criticisms of marketing
CRM (Customer Relationship Management) Strategies
CRM Systems – what are they and what do they do?
- Stands for Customer Relationship Management
- Helps the researcher collect, store, and organize customer data.
- The purpose is to manage customers artificially so that we don’t have to.
- Crucial to success because it reduces that number of hours worked all around.
- Any corporate software system that collects and organizes data and provides marketing
managers, customer-service representatives with powerful information tools.
Common Objectives of CRM Systems (Service Perspectives)
- Data collection
- Data Analysis
- Sales Force automation - Marketing Automation
- Call Centre automation
Common Failures in CRM Implementation
- Unfortunately, there is a high failure rate for CRM implementations
- Common reasons for failures
o Viewing CRM as a technology Initiative
o Lack of customer focus
o Not enough understanding of customer lifetime value (CLV)
o Inadequate support from top management
o Lack of coordination
o Failure to reengineer business processes
o Underestimating the challenges in data integration
Cycle of failure, mediocrity, success
Importance of frontline employees and how difficult their work is. How poor mediocre and
excellent firms set up their frontline employees for failure mediocrity or success.
Cycle of Failure: begins with a narrow design of jobs for low skill levels.
Demand management approaches
Demand Management Strategies
Dimensions of service quality
Tangibles: Appearance of physical facilities, equipment, personnel, and communication
Reliability: Dependable and accurate performance. The ability to perform the promised
service dependably and accurately.
Responsiveness: promptness; helpfulness. Willingness to help customers and provide prompt
Assurance: Competence, courtesy, credibility, security.
Empathy: Easy access, good communication, understanding of customer.
Distribution channel conflict
An organized movement of concerned citizens, businesses, and governments agencies
working to protect and improve the natural environment.
Group of citizens, businesses and government agencies that...
- Protect and improve the living environment
- Maximize life quality, rather than consumption choice or satisfaction
- Strive for environmental sustainability
- Enact government regulations to support these goals. Establishing service levels
Establishing Service Levels and Tiers
- Need to make decisions on service levels – level of performance firm plans to offer on
- Segment customers according to willingness to trade off prices versus service level
- Service Tiering: Positioning strategy based on offering several price-based classes of
Review four principles (objectives) of positioning strategy
Four categories of service
Four service focus strategies
Front and back stage personnel
Gaps in service design and delivery
Gap 1 – The Knowledge Gap: is the difference between what senior management believes
customers expect and what customers actually need and expect.
Gap 2 – The Policy Gap: is the difference between management’s understanding of
customers’ expectations and the service standards they set for service delivery. We call it the
policy gap because the management made a policy decision not to deliver what they think
customers expect. Reasons for setting standards below customer expectations are typically
cost and feasibility considerations. Gap 3 – The Delivery Gap: is the difference between service standards and the service
delivery teams’ actual performance on these standards
Gap 4 – The Communications Gap: is the difference between what the company
communicates and what it actually delivers to the customer. The gap is caused by two sub-
gaps called internal communications gap and the overpromise gap.
Gap 5 – The Perceptions Gap: is the difference between what is actually delivered and what
customers feel they have received because they are unable to accurately judge service
Gap 6 – The Service Quality Gap: is the difference between what customers expect to
receive and their perception of the service that is actually delivered.
How Close the Gaps?
1) Knowledge gap: Learn what customers expect
2) Policy gap: specify SQ standards that reflect expectations
3) Delivery Gap: ensure service performance meets standards
4) Internal communications gap: Ensure that communication promises are realistic
5) Perception gap: educate customers to see reality of service quality delivered
6) Service Gap: Close gaps 1 to 6 to meet customer expectations consistently
Tools to Analyze and Address Service Quality Problems
- Fishbone diagram
o Cause-and-effect diagram to identify potential causes of problems
- Pareto Chart
o Separating the trivia from the important. Often, a majority of problems is caused
by minority of causes (i.e. the 80/20 rule)
o Visualizations of service delivery, identify points where failures are most likely to
General Pricing Approaches
- Cost-plus pricing
- Break-even analysis
- Target profit pricing
- Consumer perceptions of value
- What competitors are charging
Market skimming Pricing
- High price to reap maximum profit from early adopter segments - Strategy must be supported by product quality, production costs, and competitors’
difficulty in entertainment market.
Market Penetration Pricing
- Low price to gain maximum market share
- Market must be price sensitive, costs must fall with rising volume, and price must
Good vs. Service
Service: any activity or benefit that one party can offer to another that is essentially
intangible and does not result in ownership of anything.
Good: Anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need.
High vs. Low involvement products
Important vs determinant attributes
Customers usually make their choices between alternative service offerings based on the
perceived differences between them. But the attributes that differentiate competing
services aren’t always the most important ones.
Determinant attributes (those that actually determine buyers’ choices between competing
alternatives) are often not on the top of the list of service characteristics that are important
for making buying decisions. Rather, consumers focus on attributes that are different
between competing alternatives.
In contrast, for budget-conscious holiday-makers, price is often a determinant attribute.
Jack Trout’s four principles of positioning
Marketing communications mix
The specific blend of advertising, sales promotion, public relations, personal selling, and
direct marketing tools a company uses to pursue its advertising and marketing objective.
- Advertising: Any paid form of non-personal presentation and promotion of ideas,
goods, or services by an identified sponsor. The paid placement of a promotional
message in the mass media.
- Sales Promotion: Short-term incentives, usually presented at the point of purchase,
designed to encourage the immediate purchase of a product or service.
- Public Relations: building good relations with the company’s various publics by
obtaining favourable publicity, building a good corporate image, and handling or
heading off unfavourable rumours, stories and events.
- Personal Selling: Personal presentation by the firm’s sales representatives for the
purpose of making sales and building customer relationships. - Direct Response Marketing: Direct communications with carefully targeted customers
(consumers or businesses) that request an immediate, measureable response and
cultivate customer relationships.
- Affordability/availability: buyers will favour products that are widely available and
- The proper focus of marketing management is to improve production and distribution
- Profits through price and saturation
- Quality and innovation
- Believing that the focus of marketing management should be on product
development and improvement
- Profits through innovation
- Although, better products will not sell without an attractive design, package and
price. And it must be brought to the attention of the buyer
- Promotion and hard selling
- If their sales people are good enough, they can sell anything.
- Profits through volume
- Customer satisfaction and relationships, customer focus and value.
- Profits through customer satisfaction
- Starts with a well-defined market, focuses on customer needs and integrates the
marketing activities that affect customers.
- Achieving marketing and company goals depends on knowing the needs and wants
of your chosen customers and delivering the values and satisfaction they need, want
- Long-term value to both customer and society.
- Profits through customer satisfaction and social responsibility
- Integrated Marketing
- Considers not only the needs and wants of individuals but the welfare of society.
- Maintains or improves the well-being of society
The factors and forces outside marketing’s direct control that affect marketing direct control
that affect marketing management’s ability to develop and maintain successful transactions
with target consumers.
- The major actors that influence the marketer’s microenvironment. - Marketing success will require building relationships with other company departments,
suppliers, marketing intermediaries, customers, competitors, and various publics, all of