Hoang Thuy Linh BBUS15

SERVICE MARKETING

REVISION
Chap 1: The important of services marketing
1. Definition of Service: A service is a deed, a performance, an effort (Rathmell 1966).
Services are separated into core and supplementary and facilitating services. Together,
these parts of a service make up the total experience.
2. Services Characteristics
- Intangibility: A service cannot be seen, touched, held or put on a shelf. The intangible
aspects of the service are those that cannot be physically perceived and whose
performance is difficult to measure.
The product is a process, a deed or a performance; therefore:
For the customer: perceived risk is higher, harder to evaluate before (even during
or after) the service
For the marketer: hard to help customer visualize the product and differentiate it
from the competitors.
To tangibilise a service is to make it more concrete, physical real, thus enabling
customers to understand it better. E.g.: collect recommendation from customer;
provide tangible evidence (image, photo) and tangible things (souvenir)
-

Simultaneity (inseparability): Mostly, the production and consumption of the service

performance occur simultaneously ( at the same time)
The provider and the customer are part of the service; they must interact for the service to
happen, therefore:
For the customer: some interaction with the service provider is necessary and
sometimes the product is shared with other customers
For the marketer: customers are co-producers (they help create the very product
they consume, customers often act as co-producer in the service environment
through informing the providers of their needs in the dyadic exchange).
Service marketers must manage the customers role in the interaction for the
service to be delivered effectively and efficiency.
Heterogeneity (variability): It is hard for a service org. to standardize the quality of its
service performance. It refers to the differing nature of services consumers need.
Specifically this refers to the diversity of consumers and their needs in the service
exchange.
For the customer: consistency of product quality is always suspect, and service
provider relationship is critical
For the marketer: customization is an opportunity to satisfy different customers;
and frontline operations and customer skills training are critical. Org. must

recognize the importance of customer-service skill, therefore be creative in

dealing with customers unique needs. Those org. able to respond quickly and
flexibly to the changing needs of the consumer market are very successful.
Perishability: Most services cannot be produced or stored before consumption, they
exist only at the time of their production (hotel room)
For the customer: product needs to be available and produced when necessary
For the marketer: supply must match demand, otherwise opportunity to produce is
lost, and the task is to manage rather than build demand. Answer the question of
How to manage capacity and demand? How to control and make different
promotion?

Lovelock classification
Tangible acts

Intangible acts

On a person

On a thing

E.g.: Health care, Hotel, Airline,

Coffee shop
- Intangibility: present tangible cues to
the customer, less intangibility
- Simultaneity: high involvement since
the presence of customer is required
- Heterogeneity: org. can standardize
some part of the service.
- Perishability: can manage demand
and supply
E.g.: Education, Entertainment, Legal
services
- Intangibility: Highly intangibility
- Simultaneity: less input from service
producer and consumer to produce the
service
- Heterogeneity: less significant
(service is more standardized)
- Perishability: still be an issue

E.g.: House cleaning, Appliance

repair, landscaping services
- Intangibility: provide tangible
components
- Simultaneity: no involvement
- Heterogeneity: less involvement, the
service is slightly different
- Perishability: less involvement, can
be booking in advance
E.g.: Financial and insurance
services, Tax, Banking
- Intangibility: intangible services
- Simultaneity: less involvement,
customer need not be presented
- Heterogeneity: significant, customer
have diverse needs, services can be
customized in some parts.
- Perishability: no involvement

Chapter 2: Frameworks for Managing the Customers Experience

1. Service Components:
- Service workers: those who interact with customers (waiters or bank tellers) and those
who contribute to the service delivery away from the customers sight (chefs, bank
accountants)
- Service setting: the area where the service is provided to the customer (dining room, bank
lobby) and areas of the organization which the customer normally has little access to
(restaurant kitchen or bank vault).

Service customers: The persons receiving the service (the diner or the depositor) and
others who share the service setting with them. Some services require the customer to
play a larger role than others, in that the customers commitment and involvement is vital
to the success of the service experience.
Service process: The sequence of activities necessary to deliver the service

2. Service Marketing mix

- Participants: are all people (customers and workers), who are involved in the service
production
- Physical evidence: is the service environment and other tangible aspects of the service
that facilitate or communicate the nature of the service
- Process: assembly is procedures and flow of activities that contribute to the delivery of
the service

Special Strategic Implications for Service

Intangibility

Simultaneity

Heterogeneity

Perishability

Participants
Frontline service
personnel are part of the
product. Customers can
influence each others
service experiences in
shared services
Customers are coproducer and interact
with the service
provider. Service
providers must be
recruited, trained and
have their roles
carefully scripted so that
customer participation is
managed effectively
The product varied
among customers and
among providers.
Backstage and
frontstage employees
should be motivated and
compensated based on
customer satisfaction
Customer demand and
service providers
supply must match.

Physical evidence
Customer has no physical
product to evaluate
before consumption. Any
means of reducing
customers perceived risk
must be used
Customers evaluate the
physical evidence in the
process and outcome. All
costumes and props are
evaluated. Product
outcome should be
documented for customer
evaluation

Process
Product is a
performance. The
process is created and
produced by personnel
facilities and equipment

Physical evidence must

be tailored to segments.
Physical facilities and
equipment can be divided
and separated to
accommodate different
segments

Process can be
customized or
standardized, and
varying levels of
customer participation in
different steps of the
process (self-service)
can be considered
Product cannot be
inventoried. Services
can be bundled and

Capacity to produce is
lost when staff, physical
facilities and equipment

Consumption and
production are
simultaneous and
product is produced in
real-time. Performance
must be planned with
techniques as
blueprinting and
dramatization

Peaks and valleys in

demand fluctuation
must be smoothed

are idle. Consider

outsourcing,
subcontracting during
high demand or renting
and leasing equipment
and facilities during low
demand

priced attractively to
maintain consistent level
of demand for maximum
profitability

3. Service as Theatre Framework

The services theatre framework involves the same theatrical elements as a stage production:
actors, an audience, a setting, a frontstage, a backstage and a performance
-

Actors (service workers) are those who work together to produce the service for an
audience (customer)
Setting (service environment) is where the action of service performance unfolds
Performance is the dynamic result of the interaction of the actors, audience and setting
Frontstage is the part of the service that is visible and apparent to the customer
Backstage is the invisible, behind-the-scene activity that supports the frontstage

Comparison of different frameworks of the service encounter

General
framework
Setting

Additional 3Ps
Physical evidence

Workers
Customer

Participants
Participants

Process

Process of service
assembly

Servuction framework
Invisible area
Visible area
Contact personnel
Customer A (focal cus.)
Customer B (other cus.)
Bundle of benefits

Theatrical
framewook
Setting: Backstage
Frontstage
Actors
Audience

Performance

Chap 4: Service provider and customer interaction

1. Customer involvement
There are indications that the development of an attitude towards a goods or services
product is intrinsically linked to the level of customer involvement with the product or
service. Customer involvement is a reflection of the relevance of the service to the
customer.
2. Customer and Staff interaction
The concept of affect and involvement are an inherent part of the individuals appraisal of
satisfaction. Indeed, in services of extended duration the relationship between the
customer and the provider is more likely to become boundary-open. Boundaryopenness means that the relationship has developed over the service duration, which
starts to resemble that of friends, and at this stage the service provider is expected to
become involved with the customer and share feelings
If the relationship between the service provider and the customer goes well and
strengthens over the duration of the service, satisfaction is likely to increase and the
customer is more likely to overlook any small hiccups that happened along the way.
The opposite scenario can occur where extended exposure to an individual one dislikes or
finds irritating increases dissatisfaction.

Chap 7: Designing the Service Setting

1. What is the Service Setting?
A service setting (or servicescape) has a significant impact on the process of service
delivery and customers perceptions of the service. It includes all aspects of the physical
environment in which the service provider and customer interact.
The service setting design can affect the movement and interaction between customers
and workers who are present. The scenery, equipment, dcor and other physical cues can
help customers form an impression of an org. and its service offering.
Atmospherics are the factors of the physical environment, such as lighting, scent and
sound that create the atmosphere associated with the physical service setting
2. Key consideration
Duration of the service setting (i.e. how long does the customer spend in the service
environment?). longer duration will create more influence on customer
Service setting as an operational tool (efficiency of service delivery)
o the layout of the servicescape and its equipment can enhance or hinder service
delivery (E.g.. a cluttered setting or one that relies on outdated equipment can keep
workers from moving about with ease and can impede their task performance)
Service setting as a service identifier (differentiation among competitors)

o the setting design can help differentiate a service (E.g.. Hard Rock Caf versus
McDonalds). In some instances the service setting represents an organisations
chief means of distinguishing itself and becomes the most important element in
the services marketing mix
o the significance of service settings increases when targeting an intended market
segment (E.g.. hotels)
o the design of the physical setting can be an effective positioning tool
Service setting as an orientation tool (E.g.. mass transit systems) ~ education tool
o the design of service settings can facilitate or hinder the customers understanding
of the service process
o simple dcor and open design allows customers to see and understand the service
process and their role
o organizations that market new service concepts can rely upon various physical
cues to communicate information about their service offerings (E.g.. signage,
audio or visual aids)
The appeal of the service setting (developing an approach environment in which the
customer feels comfortable and willing to spend time
Service setting as the workers home away from home (workers usually spend more
time in the service environment that the customers therefore their needs must also be
taken into account in designing the service setting). Balance between worker needs and
those things that org. want to bring to customer

3. The Service Setting as a Marketing Tool

Service organizations can use their physical environment as a marketing tool
o The service setting might be the services marketing-mix variable that best creates
the organisations image. Service settings can accomplish a variety of marketing
goals, such as communicating a new concept, repositioning an organisation in the
eyes of its target market or attracting new market segments.
Three issues are most focused on in relation to a settings design:
o Managing tangible evidence
o Frontstage vs. backstage decisions
o Experimenting with the service setting
4. Frontstage and backstage decisions
- Frontstage is the part of the service that is visible and apparent to the customer. Staffs
behavior need to be formal
- Backstage is the invisible, behind-the-scene activity that supports the frontstage. It is
more efficiency for staffs free to behave. Do not let customer any chance to enter the
backstage.
Sometimes it pays to move a backstage feature to frontstage (E.g.. an open kitchen)
o When certain aspects of the service generate considerable customer-perceived risk
(E.g.. car repair)

o Adding an entertainment feature to the service delivery that becomes an

indispensable part of the customers experience (E.g.. preparing meals in full view
of patrons)
o Overcome perceived waiting time
To reduce its susceptibility to service delivery problems = moving some of the service
assembly, service personnel or setting features to the back region might be better able
to control customers impressions of service excellence.

Chap 8: Creating Customer Value and Setting a Price

1. Inelastic service
Price/demand elasticity the economic assessment of demand
Several conditions for inelastic demand
E.g.: emergency/necessity services; unique value; lack of awareness of substitute
service; shared costs; end-benefit
2. Yield management strategy
The objective of yield management is to maximize profits from the fixed operating
assets labour, equipment and facilities
Profits are maximized by increasing revenues and decreasing costs
Offering a difference price at different times is an effective response to
maximizing asset usage
It is related to Perishability, customers have different abilities and different
purchasing patterns. Hence, firm has to manage the highest level (highest ability) of
paying at different time. In some case with high fixed costs, firm has to cover them by
serving more customers (fixed hotel rooms and fixed daily operation fees)
3. Additional Pricing Considerations
Price bundling: means linking several service offerings or features into one
attractive price to give different customer segments a packaged service
offering (combo put several together instead of individual sales)
In fact, customer may pay the same total amount but in individual service, the
amounts they expect to pay are different. Using Price bundling can attract
more demand that can increase the revenue.
Positioning price/quality relationship
Portfolio mix segments differ in price sensitivity
Demand/capacity demand management tool
Membership affinity benefits (discount for member/fluent purchasers)
Customization higher priced tailored versions
Participation lower price for customer effort

Chap 9: Integral Marketing Communications for Services

1. Services and Integrated Marketing Communication

Integrated marketing communications refers to the pursuit of a single
positioning concept for an organization or its products
This is achieved by planning, coordinating and unifying all its communication
devices
2. The Promotional Mix for Services
The services promotional mix consists of:
Advertising: make customers aware and to influence their purchase decisions;
achieving customers attention, interest, desire, action (AIDA)
Sales promotions: create excitement and generate sales for a service
organization in the short run. E.g. contests, premiums, discount sales, coupons
and free sample, provide a short-term solution for a service organization to stand
out from the competition.
Sale promotions are used to generate consumer awareness of a new service,
enable customers to try out the service, accommodate cyclical demand (change
promotions to suit all climate and trends), enhance customers perception of the
service and to provide a lot more information than advertising provides (add
tangibility, giving customers something to hold on to), in order to increase sales
within a specific period.
Sale promotions are particularly well suited to stimulating demand for services
with excess capacity.
Personal selling: an attractive tool to use for providing information and
persuading customers to buy complex or expensive services
Publicity and public relations: present a range of promotional activities to
different types of media in order to increase consumer awareness, persuade
consumers by focusing on specific business information and influence opinions
and behaviours of decision market in target consumer markets
Direct mail
Internal personnel branding
3. Guidelines for advertising services
Provide tangible cues: in the ads, use spokespeople, show the service equipment
or facilities or vital statistics and factual information enhance the customers
perception and understanding of what service quality is on offer.
Capitalize on word-of-mouth communication: consider using what media to
create highly WOM. As Youtube which has a space to comment or easy to share
link to others; hand materials such as keyholder, sticker, bookmark to customer to
encourage WOM
Make the service understood: employ symbols, logos or slogans that convey key
aspects of firms offering
Establish advertising continuity: (in the customers mind) use of well-understood
and effective themes, symbols and other visual cues, emblazon the organizations
logo across all types of physical evidence, stress similar service attributes over
time

 Advertise to employees: employees see the same ads that customers see to
understand what the customer might know about the organization. Hence it makes
sense to design advertising communication.
Promise what is possible: think carefully of the potential pitfall of over-promising
and under-delivering. Need to base on the figures of this service. Be appealing
and creative, but realistic and credible
4. The vividness of services advertising
A vividness strategy is an advertising approach for service offerings that uses concrete
language, tangible objects, and dramatisation techniques to tangibilise the intangible
Interactive imagery uses pictorial representations, verbal associations and letter
accentuations that combine an organisation's name and its service to establish a strong
link between service name and performance in customers minds
Pictorial representations: Picture + Words

Verbal associations: Different words in picture to explain the meaning

Burger king, Pho 24
Letter accentuations: Word of feelings
Yes Optus

Chap 10: Using Information Technologies in Services Marketing

The use of technology in services can be traced through:

Lags: Many services are very people-intensive, hard to standardize and difficult to
technologise

Lulls: Digesting new technology takes time and many changes are more qualitative than
quantitative

Leaps: Organizational transformations are possible and nurturing of intellectual resources

begins

Roles of technology
1. Empowering employees
Technology devices: Mobile phones, wireless PCs, bar code readers, PDAs

Networking
- linking people together for ease of communication
- Phone and computer-based audio/video conferencing, Virtual Office
Self-service machines (vending machines, automated teller machines)
Computerised service delivery systems (E.g..: FedEx)
Intelligent agents
Service robots

2. Enabling the Interactive Experience

Telecommunications technology enabled three phases of communications interactivity
between the marketer and the customer
Phase 1: one-way flow (radio, TV)
Phase 2: partial interactivity (free-call phone numbers in radio and TV ads)
Phase 3: fully interactive (interactive editions of newspapers, adaptive
face-tracking systems etc)
IT helps to improve interactive communication (or interactive experiences)
3. Capturing Customer Information
Advances in information technology have allowed organisations to:
collect large quantities of information about customers
create and deliver customer services from mass marketing to targeting individuals
(Peppers & Rogers 1996)

Chap 11: Delivering Service Quality and Guaranteeing Services

1. Service Quality
Service quality from the providers perspective: means the degree to which the
services features conform (be suitable) to the organisations specifications and
requirements
Service quality from the customers perspective: means how well the service meets or
exceed customers expectations
For the same level of product performance, different customers will perceive different
level of quality
Quality satisfaction customer loyalty: Quality leads to loyalty and longer
customer relationships to the service provider
Quality prizes

3 links connect the customer and the provider

- Service-delivery link: the interactive nature of the service and is strengthened
through satisfying service encounters
- Customer-satisfaction link: the connection between the customers level of
satisfaction and degree of loyalty to the service provider
- Customer-provider link: the mutually rewarding relationship between the
customer and the service provider, resulting in the customers commitment to
that service provider.

How customers evaluate Service Quality

SERVQUAL is a scale designed to measure customer perceptions of service quality
along 5 key dimensions:
- Tangibles: physical facilities, equipment and appearance of personnel
- Reliability: Ability to perform the promised service dependably and accurately
- Responsiveness: Willingness to help customers and to provide prompt service
- Assurance: Knowledge and courtesy of employees and their ability to convey
trust and confidence
- Empathy of the service provider: Caring, individualized attention the firm
provides its customers.

2. Service Guarantee
A service guarantee is a promise to compensate customers if the service delivery
fails to meet established standards
A guarantee
- forces the company to focus on customers
- sets standards for employees and customers
- try to keep the first promise
- generates feedback: if any difference happens between promise and delivery
- builds loyalty and discourages switching behaviour, Hart (1988)
Three main types of Service Guarantee
Unconditional guarantees (no criteria for circumstances under which a customer can
claim a refund. If the customer is dissatisfied their money will be refunded without
question. This covers both the tangible and intangible parts of the service)
Strongest guarantees (are close to the unconditional guarantee but with a specified
payout, and might provide a scale of refund according to the severity and nature of
the problem)
Specific guarantees (apply to measurable outputs e.g. lose 5 kg before Christmas or
your money back)

Chap 12: Service Recovery Program

1. The need for Service Recovery
Service recovery is the effort an organisation expends to win back customers goodwill
once it has been lost due to service failure.
2. The high cost of lost customer
Losing a customer is expensive up to five times higher than retaining a loyal one
Increasing an organisations retention rate by even 5% can increase profits by up to
85%
Loyal customers are more familiar with using the service and thus do not require
costly assistance. They also generate positive WOM, whereas a customer who
switches might dissuade others from patronizing the organization

Customer complaints should not be taken lightly

All attempts should be made to win back customers

So, lead customer to complain: customer will complain when they find it is easy. Staffs
may ask for any complain by some kinks of survey.
What will you do when receiving customer complaint?
The STEP to SERVICE RECOVERY
i.

ii.

iii.

iv.

v.

Apology: when an organization becomes aware of customer dissatisfaction, someone

should apologise. This act can go a long way to framing the customers perception of
their value to the organization and helps pave the path for subsequent steps to regain
their goodwill
Urgent reinstatement: Urgent means the action is taken quickly, reinstatement
means making an effort to correct the problem. This action sends the message that
customer satisfaction is important to the organization.
Empathy: The organization must convey to the angered customer that it understands
the extent to which the organization failed to meet their needs. Empathy means
making the effort to comprehend why the customer is disappointed with the
organization, more than simply acknowledging failure
Symbolic atonement: to make amends in some tangible way for the organisations
failure, perhaps by offering a gift to communicate to the customer that the
organization take responsibility for their disappointment and is willing pay a price for
its failure
Follow-up: give organization a chance to evaluate the recovery plan itself and
identify where improvement are necessary (redesign to prevent the mistake to happen
again)

Chap 13: Monitoring and Researching Service Success and Failure

1. REASONS why Researching Service Success and Failure is necessary.
Determining success or failure is a key focus of service performance measurement
Information about success or failure can be used to:
Reward excellent performance
Set priorities among process improvement options
Preempt customers switching behavior
In cases of extreme dissatisfaction and satisfaction, the customer is often very vocal in
letting the organization and its employees know their feelings
2. METHODS
a. Observation techniques:

b.

c.

d.

e.

f.

g.

Allow the researcher to gain a first-hand thorough picture of service phenomena,

depending upon the specific technique selected.
Can be human or mechanical (e.g. computer in the front door to count)
Can be collected through direct (real-time) or indirect (after the event) observation
Can be obtrusive or unobtrusive (related to ethical issue)
All these forms can be combined concealed direct human observation is often a
preferred research method
Mystery shopping (secret customer do observation)
An unobtrusive method of gathering data in which people pose as bona-fide shoppers to
observe and collect information about an organisations service performance
Mystery shoppers are unknown to the staff and their presence is unexpected
They submit questionnaires after their service experience which identify any service
problems
Employee reports (input from the view of employee basing on their own position)
Useful when a service organization needs feedback from its frontline or backstage
employees
Can provide insight unavailable from customer surveys (direct contact with customer)
The staffs have a unique view about the service performance, including the process and
backstage support.
Employee report is effective only when a firm has good empowerment system
Survey methods (good way of promotion and communication)
Surveys record large numbers of respondents for statistical testing of data with low costs
Surveys ask several customers to evaluate a service transaction or assess their customers
total relationship with the organization.
Survey questions must be carefully worded to produce quality data
Focus group
Comprise 8-12 customers
Led by a trained moderator
Probe specific aspects of a service in depth
Focus groups often reveal unexpected information and useful ideas for new services or
improvements
Participants must be carefully chosen to ensure they reflect the companys customer or
non-user profiles
Experimental field testing
Method of offering new services or modifications to consumers on a limited scale
Feedback from the experiment is then used to test the efficacy of the service concept and
modify it if necessary
Tests can range from testing brand new services to manipulating atmospherics
The critical-incident report
A research method based on the analysis of critical incidents in service experiences of
customers and frontline employees
It allows customers and employees to articulate their own feelings, thoughts and behavior
They are not forced into choosing a predetermined response to a situation

 Subjects responses are reviewed to identify patterns and details to critical incidents
h. Moment-of-truth impact analysis
Involves a combination of 3 measurements:
It measures the customers expectations of the service organization at the contact point
It identifies what the customer has experienced in the past that detracted from their
perception of service excellence at that contact point
It assessed that the customer has experienced in the past at that contact point that
enhanced their perceptions of service excellence
This research method can detect specific trouble spots that require attention and
ultimately enable an organization to fashion a better service experience for its customers.

Chap 14: Developing marketing strategies for services

1. Overview of Marketing strategies
Marketing strategy is the process of adjusting controllable marketing factors to cope
with or exploit uncontrollable environmental forces
A carefully focused, customer-oriented strategy allows organisations to retain existing
customers and acquire new ones even in bad economic times

Todays business: Stay within existing customers, provide no new service or new
market, apply the service for all years
Unserved opportunities: indentifying new customers that the organization might serve
(market-expansion strategy)
Unarticulated opportunities: looking for new needs their existing customers might
have (product-expansion strategy)
Unarticulated and unserved opportunities: simultaneously pursuing new customers
with new service products (diversification strategy)

2. Scanning the External Business Environmental

Reactive strategy is a slow response to environmental changes

Proactive strategy is a rapid response to environmental changes

o Offensive strategies rapid responses employed to capture opportunities
o Defensive strategies rapid responses to protect the organisation from
environmental threats

3. Developing the Service-Marketing Strategy

Planning the strategy Determination of the service's objectives and the manner in
which they will be accomplished
Designing the strategy Careful specification of what it is that the organisation
hopes to accomplish
Implementing the strategy Developing a detailed timetable and itemised budget
Controlling the strategy Continuous assessment and modification of the success of
strategies
4. Positioning and Service Segmentation
Positioning how marketers attempt to create favorable customer perceptions of
their product in relation to all other products.
Market segmentation The division of a heterogeneous market into homogeneous
segments
o Market segments become target markets
o Understanding market segments is critical to the success of marketing strategy
5. Marketing Mix Strategy
To reach a target market, marketers must design all elements of the services
marketing mix, i.e. personnel, facilities, equipment etc
The services-marketing approach should reflect the market segments needs and
market position chosen by the organisation
The service organisation needs to establish a clear image in the consumers minds of
their service benefits
6. Strategic Challenges for Service
Six strategy-related challenges affect most service industries:
1) Performance Service performances must be carefully planned with such
techniques as blueprinting, scripting and dramatisation
2) Demand Services must develop very flexible systems to make their service
supply meet the demand
3) Employees Recruiting, training, compensating and motivating employees are
essential strategic factors for services
4) Setting The setting is often the only tangible representation of the service
organisation's quality
5) Customers Because most service organisations have more direct contact (than
manufacturers) with customers, they must be very sensitive to customer needs
6) Service quality Numerous techniques are available to measure and improve
service quality

7. Strategies for Sustainable Competitive Advantage

Surpass your competition the term sur/petition was coined by Edward de Bono
(1992) to describe his concept of surpassing the normal kinds of competition by
surpassing competitors.
Dramatise your performance The most effective service organisations learn to
stage their performances
Build relationships Strong customer relationships can lead to customer loyalty
Harness technology Modern communication and transportation technology
allow service organisations to operate in multiple countries, but maintain close
contact with employees and customers
Jazz your delivery Like great jazz musicians, great service organisations are
great improvisers

Chap 15: Coping with Fluctuating Demand for Services

1. The Nature of Service Demand
Demand Cycle
Hours of the
day

Days of the
week
Weeks or days
of the month
Months or
seasons of the
year

Holidays or
special events

E.g. of reasons for fluctuation

Work schedules, business hours, regulations,
types of shifts and types of employment by
consumer, physiological needs and existence
of other complementary activities
Work hours, lifestyle, personal and social
needs, needs of family and friends
Pay period, timing of bills, opening hours
and rules by service provider
Predictable weather patterns, local and
national business rules and regulation,
lifestyle, personal needs
Government regulation, available facilities,
complementary services
School and tertiary education terms,
employment regulation
Cultural norms, religious celebrations,
school and tertiary education holiday
Government business regulations

2. Managing Demand Fluctuations for Greater Profits

E.g. of services
Car parks
Restaurants

Cinema
Nightclubs
Banks
Community services
Beach or ski resorts
Income-tax
preparation
Family or special
group holidays
Telephone services,
festival, massparticipants events
Retailing service

What
Whatisisthe
thepattern
patternofof
demand
fluctuations
demand fluctuations
across
acrossall
allrelevant
relevant
time
periods?
time periods?What are the causes for
What are the causes for
customer
customerbehavior
behaviorresponsible
responsible
for
the
fluctuations
in
for the fluctuations indemand?
demand?
Which
Whichaspects
aspectsofofthe
the
customer
behavior
can
customer behavior canbe
be
modified
so
that
demand
modified so that demand
fluctuations
fluctuationscan
canbe
besmoothed?
smoothed?
Which
Whichmarketing
marketingtools
tools
Objectiv
(7Ps)
can
be
effective
(7Ps) can be effective

Maximise lifetime value

and
es

Maximise revenues from assets

andefficient
efficientinin
modifying

Minimise costs of marketing actions

modifyingcustomer
customer
behaviour?
behavior ?

3. Chasing Demand to balance Service Capacity

a. Service Capacity: has 3 aspects
- The physical facility in which the service is bought, performed, rendered
(hotels, aeroplanes)
- The personnel who create the service and skill level (hairdresser, teachers,
serving staffs)
- The equipment that enables the service to occur (computers)
Most service organizations are capacity-constrained services (most capacity
are fixed)
Their productive capacity limits how many customers they can serve and the
quality of service (difficult to manage capacity to deal with the change in
demand)
To manage capacity:
- cross-train: change in labour
- configuration: change in physical (e.g. put more plastic chair in a bus to
serve more customer
- The key is to have enough capacity for when demand is high, but not so
that it goes to waste when demand is low. Need the balance between
capacity and demand.
b. Chasing Demand
Chase demand a way of striking a balance between capacity and demand by
stretching or shrinking the organisations production capacity to meet fluctuating
demand
Optimum capacity the number of customers an organisation can handle
effectively under ideal conditions

4. Principle of waiting

5. Smoothing demand
Smoothing demand means shifting patronage to times when a service's productive
capacity is underused and discouraging patronage when its capacity
is oversubscribed (change the service, change in strategies or organization)
Strategies to increase demand include dropping prices during normally slow times (e.g.
reduced holiday prices during off-peak times)
Strategies to increase demand include:
Dropping prices during normally slow times (e.g. reduced holiday prices during
off-peak times)
Altering the nature of the product ~ offer different services ( e.g. a ski resort
offering outdoor activities during summer)
Place or distribution modifications (e.g. a vet who uses house calls to fill slow
times)
Promotion
Strategies to decrease demand during periods that exceed capacity are similar
The goal is often to shift some of the demand to slower periods
Demarketing (strategies of decreasing the demand) include promotion, price, product,
place or distribution enticing people to use slower periods to manage service quality and
profit for the organization

Chap 16: Thinking globally, acting locally

Global trade in service is a reality in most countries, with sharp increases in trade volume and
foreign investment in services in recent years. Measuring the service sectors global influence is
complicated by several factors, including their intangibility, the multiple transactions involved in

the purchase of services in other countries, the effect of changing social roles and lifestyles, and
the difficulty of clear data collection.
1. Service and Culture
4 cultural dimensions associated with international marketing services operations:
Cultural orientation towards the natural environment
Cultural orientation towards process and results of service activities
Cultural orientation towards past, present and future time
Cultural orientation towards people and human relationships
2. Patterns of Services Export
An outbound service-export strategy involves sending the service provider to
other countries
An inbound service-export strategy involves bringing foreign customers to the
service providers country
A teleservice-export strategy refers to exporting services by delivering them
electronically
3. Standardization vs. Adaption
Standardisation refers to the strategy of selling the same service in the same
manner around the world
Adaptation refers to the strategy of tailoring service offerings to accommodate
conditions in the local market