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Chapter 10

BU352 Chapter Notes - Chapter 10: Intangibility, Customer Satisfaction, Gift Registry

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Chapter 10: Services: The Intangible Product
-Service: Any intangible offering (deed, performance, effort) that can’t by physically possessed
-Customer Service: Human or mechanical activities firms undertake to help satisfy their
customers’ needs and wants  good customer service = add value to g/s
-Service sector makes up more than 70% of Canada’s economy and is growing:
Generally less expensive for firms to manufacture products in less-developed countries
 proportion of service production to goods production in Canada steadily increased
Household maintenance activities have become quite specialized
People place high value on convenience and leisure (e.g. pay others to do chores);
people demanding more specialized services; aging population = need for health care
Services Marketing Differs from Product Marketing
-4 I’s: Intangible, Inseparable (from providers), Inconsistent (variable), can’t be held in
Inventory (perishable)
-Intangible: Characteristic of service; can’t be touched, tasted, or seen like a pure product can
-Intangibility proves challenging to marketers b/c difficult to convey benefits of services
Services provide cues to help customers experience and perceive service more positively
(e.g. offering tangibility like Wifi or online apps)
Promote quality of services (e.g. touting famous faculty and alumni and accreditations)
-Images marketers use reinforce benefits or value that service provides
Service providers depend heavily on consumers’ perceptions of integrity and
Tension created when service providers use aggressive marketing tactics to attract
clients to service but still attempt to maintain perception of integrity and
trustworthiness, or when invasion of privacy becomes an issue
Inseparable Production and Consumption
-Inseparable: Produced and consumed at the same time – service and consumption are
-Astute service marketers provide opportunities for their customers to get directly involved in
the service
Health care providers found that the more control they allow their patients in
determining the course of treatment, the more satisfied the patients are
-Purchase risks of services are high, services may provide extended warranties and 100%
satisfaction guarantees
You can’t return service or test it out
-Inconsistent: Quality may vary b/c it’s provided by humans
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-Services can’t be recalled – when firm recognizes problem, damage has already been done
-Marketers try to reduce service inconsistency through training and standardization
-Use inconsistent nature of services to their advantage
Micromarketing segmentation strategy can customize service to meet customers’ needs
Each customers’ needs are different = provide what they want
Expensive to deliver though, especially for firms providing multiple services
Consumers may also get confused/irritated if they must pay for each little service
Service providers, therefore, bundle services into one package and charge single price
-Some service providers tackle inconsistency issue by replacing people with machines (e.g.
Self-checkouts can be successful and increase customer loyalty b/c they appeal to
shoppers who want to move quickly and believe they can zip through checkouts faster
by using machines
Expensive but machines reduce labour costs and don’t have to be trained
Machines’ attitudes are the same (won’t come late to work or in bad mood) = consistent
-Retailers installed Internet enabled kiosks – order merch not available in store and provide
routine customer service  employees don’t have to deal with demanding customer requests
and reduces service variability
Used to automate existing store services, such as gift registry management, rain
cheques, firm drop-off credit applications, and pre-ordering services
Customers may not like the idea of replacing humans with machines for business
interactions or may have problems using technology
Technology may not perform adequately (out of order, fail to scan) – may result in
customer dissatisfaction and queuing problems
-Internet reduced service inconsistency in several areas:
Purchase travel items (tickets, hotel, rental cars), concert and movie tickets, insurance,
mortgages, and merch by Internet or cellphones
Apps reduce inconsistency and costs for places (e.g. Cineplex app)
If customers want more info, websites provide customer service contact info
-Inventory: Perishable and can’t be stored for future use
-As long as demand and supply match closely, there’s no problem – rarely occurs
-Some services may offer promotional pricing to encourage people to use service during off-
-Excess demand = turn customers away in peak periods
-Excess capacity = less desirable expense to revenue ratios
-Expenses still need to be paid if customer cancels  maximize capacity by making advance
reminder calls or charging cancellation fees
Providing Great Service: The Gaps Model
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