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Services Marketing Strategic Planning Models

Jack E. Forrest, Middle Tennessee State University

Three related models are presented to provide a framework for services marketing
planning. The models reflect strategic perspectives at both the industry and
enterprise levels. A traditional Strategic Decision Process is related to a "Service
Delivery System Model" described as a channel of cooperation and to a "Services
Marketing Planning Model. " The process and models are suggested as schema for
the elaborate use of collaborative networks of services. The schema anticipate
services marketing from a managerial viewpoint where the conceptual design of a
service enterprise is related to strategic plans and other services.

Introduction

Because of a host of variable elements occurring simultaneously in a service

encounter, service enterprises are more difficult to manage using a traditional
marketing approach developed for products (Kotler, 1994). The manager who
wishes to design a service faces a bewildering array of concepts to align in
meaningful relationships (Peter and Donnelly, 1992). The services marketing
practitioner could benefit from an arrangement which presents its main elements in
a framework conducive to planning.

This paper is a presentation of models which describe the whole of services

marketing using a managerial, strategic planning framework embracing essential
enterprise levels and acknowledging systemic relationships among services
entities. The models reflect the observation that a viable approach to strategic
planning of a service is to cooperate with allied services rather than attempt to
dominate or eliminate them. In a cooperative context specialized services combine
their respective skills into one or more networks. Complementing linkages are
found project by project; new alliances are formed and old ones discarded based
upon project goals. For example, the entertainment industry furnishes motion
pictures and concerts through the combined efforts of more than one service
enterprise.

A strategic planning approach is suggested to encourage the establishment of a

framework for study and practice of services marketing in networks. After a
discussion of strategic planning unique to services, the focus of this paper is placed
on a "Service Delivery System Model" and a "Services Marketing Planning
Model" which are related to the planning process. The delivery system model
contains a channel of cooperation. These models feature intrafirm and interfirm,
marketing planning. They serve to emphasize the uniqueness of services marketing

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while avoiding the "Strategic Management Trap" of applying traditional

manufacturing planning to services (Gronroos, 1990).

A Strategic Decision Process

Strategic Planning

Similar to other models (Pearce, Robinson, 1991), Figure 1 (omitted) presents the
strategic decision process, its components, and their relationships.

The process begins with enterprise leadership which deals with both external and
internal aspects of decision making (Kerin, et al, 1990). Watchful for emergent
trends, an enterprise leader studies the external environment containing social,
economic, competitive and other forces. A mission is stated, and weighing
opportunities and threats against strengths and weaknesses, a strategy is designed.
Internally, functional tasks are then specified, and organizational arrangements
among and within groups are made to carry out enterprise strategy (Hellriegel, et
al, 1989). To do so, functional strategies and goals are determined consistent with
enterprise strategy and each other. Cultural norms develop from the decisions.
Intergroup relationships are established to assure smooth operational sequencing
while interpersonal relationships are identified for both output and well being.
Results are measured at the enterprise, functional, group, and individual levels and
monitored by leadership. Adjustments are made in the light of feedback
information and knowledge of the environments.

Uniqueness of Services

Although product and service firms alike may use such a process, there are
differences (Peter and Donnelly, 1992; Berry and Parasuraman, 1991; Gronroos,
1990). A service entity typically relies on the simultaneous occurrence of other
services in order to provide its own service (Grove and Fisk, 1983), and customer
presence in the service delivery process is assumed (Lovelock, 1991; Gronroos,
1990). Cushioned by inventories, production delays may not impede a product
business. In contrast, a service enterprise may be interrupted without consistent if
not continuous access to reservation systems (travel agencies), credit card
verification (hospitality firms) or air traffic control (air lines). Consequently, a
service enterprise's mission, strategy, and functional arrangements and
performance can be governed by interfirm relations found in a service delivery
system. Intrafirm insufficiencies lead product and service firms alike to seek
interfirm relationships based on common goals (Bowersox and Cooper, 1992).
However, a service firm's performance is immediately affected by the presence or
absence of other services.

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Functional task decisions anticipate the performance of other enterprises' services

as well as customer presence. Service operations and marketing, for example, often
become intertwined when dealing with other entities and customers, making
strategic planning more complex. A strategic planning approach to services is
facilitated by identifying other service entities in a network. Marketing strategy,
task(s), group composition, norms, intergroup and interpersonal relations and their
measurements can be seen in a complementary context when juxtaposed not only
within a service enterprise but also within the firm's external relationships. One
such relationship is the service delivery system in which a service enterprise
participates.

A Service Delivery System

The entity alliance set used to accomplish an ultimate service transaction within a
delivery system is termed a channel of cooperation. Viewing a service enterprise as
part of a cooperative system closely associates its strategic planning with a greater
context and avoids a sense of enterprise isolation implied by a direct-channel-only
characterization. That is, recognition of external arrangements acknowledges
dependency on other services as a part of marketing planning. With cooperation
the rule (Heide, 1994; Bowersox and Cooper, 1992), conflict resolution between
service entities can be couched in terms of common strategic goals and relationship
governance. Figure 2 (omitted) illustrates a simplified service delivery system in
the hospitality industry.

From Figure 2, a customer who contacts a travel agency about travel arrangements
is assisted by the agency which makes arrangements with a site destination (e.g.,
convention hotel) and perhaps a transport enterprise (e.g., air line) on behalf of the
traveler. Confirmed reservations and credit terms complete the transaction
ostensibly between the agency and traveler but actually between the traveler and
the agency, the transport firm and the site destination. The channel of cooperation
consists of the agency, the transport firm, and the site destination along with the
customer. Similarly, a group of travelers may transact with an agency which
secures travel via a wholesaler's prearranged project or "package" itinerary with an
air line, a ground operator (e.g., tour bus), and each of several site destinations.
The channel of cooperation is the agency, wholesaler, air line, tour bus operator,
and each of the sites along with the group. Again, a pattern of entities is involved
in a concerted effort.

An effective marketing plan reflects the relationships a service has with various
parts of its service delivery system. A travel agency facing-the ultimate consumer
market could find its relationships with customers governed by market place
forces. Meanwhile, the same agency is involved in bilateral relationships (e.g.,

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contracts) with correspondent members of the same cooperative delivery system.

Its marketing plans call for particular attention to frequent contact with counterpart
managers, reliable back office information, operations and equipment in order to
maintain performance. Bilateral agreement with an air line could be part of a
hotel's marketing plan, reflecting a channel relationship.

Services Marketing Planning

The focus of strategic planning, of course, is the individual firm (Kerin and
Peterson, 1993). Its object is the satisfaction of customer needs (Kerin and
Peterson, 1993; Walker, et al, 1992). With a strong relationship between business
performance and competitive advantage (Cravens, 1994), firms endeavor to
possess features which provide sustained advantage. A model description of a firm
in terms of its features and their relationships to each other is a starting point to
planning.

The idea of a "core service" as part of a "service package" has been developed
(Gronroos 1990) to distinguish various parts of a service offering. An Augmented
Service Offering model is a rather extensive treatment of the service core concept
and applicable from a managerial viewpoint (Gronroos, 1990).

The Services Marketing Planning Model shown in Figure 3 (omitted) is an

adaptation of the concept of a core service. Beginning with a core to provide focus
to planning, it goes beyond the augmented model to include program elements of
the marketing function plus other organizational functions. That is, as a planning
model for a service the intrafirm relationships among functions are anticipated for
organizational integration and correlation with overall strategic plans. The
organization functions are identified as marketing, finance, research and
development, operations, personnel, and leadership.

Similar to the augmented model, the planning model of Figure 3 reveals a series of
differentiation levels--Core, Distinctiveness, Support, Agents and Brokers, and
Perceptions. The planning model includes in its core those elements which are
consistent with intrafirm competencies and interfirm relations. Then, by including
other functions, a more complete framework is made available for planning
(Gronroos, 1980).

The Service Core

The Core is that service which is designed to meet the primary demand need of a
specifically described target market. It is the reality of that which is offered and
accomplished in an enterprise mission statement. As such, it is an integral part of a

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service delivery system. For an air line, the core is relatively long distance travel in
a relatively short time. With an airplane and flight personnel the core can be
performed.

Service Distinctiveness

The presence of secondary features provides further opportunity to be distinctive

by serving customers more satisfactorily with particular features and support. The
nature of additional elements adopted is a planning decision to be made consistent
with an enterprise core.

Although leadership was responsible for enterprise mission and strategy

development, it is included in the firm's distinctiveness when it becomes an
apparent feature. For example, a professional sport team's owner may be a
recognized feature.

Of course, a firm's logotype is its own distinguishing mark. Guided by servicemark

regulations, a logotype is the name of a service, an asset professional sports teams
and others protect (Lans, 1995).

Site is the building facility, location, or network of locations associated with a

service. Air terminals with gates, aprons, and runways are site facilities for air
lines. Appointments and layouts provide opportunities for enhancing a service
experience and competitiveness.

Closely related to site is the process occurring in it. Physical accessibility to the
service itself is a combination of these two features (Gronroos, 1990), a
competitive aspect of no small importance. Process refers to the sequence of
encounters between customers and service providers, however brief, which
accomplish the service. It also includes the intrafirm coordination between
functions and between groups within functions whether in front-office or back-
office situations (Lovelock, 1991). Persons not normally known as service
providers often are nevertheless in contact with customers, and their secondary
roles are part of process.

Price in Figure 3 refers to the rates and fees charged to customers, a traditional
ingredient in a marketing program. It also involves warranties, payment, and other
terms of exchange such as conditions under which refunds are made outside of
warranty circumstances. Another traditional marketing program ingredient is
Promotion the communication effort of the service offer. Period is the timing of a
service as it pertains to such things as schedule(s), hours of operation, seasons, and
trends. It also pertains to the offer of a service in relation to phenomena like

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demand patterns, service delivery system practices, and competitive activity.

Amenities are complimentary enhancements to a core. "Warm- up" performances

prior to a main attraction concert performance are amenities. Air line frequent flyer
programs, inflight snacks, and hotel room bath supplies are amenities, too.
Amenities are a form of premium; they are generally made available to all
customers in a given category regardless of payment terms. Ancillary services are
typically provided for a fee. During an air line flight, for example, air- to-ground
telephone service is available for a fee. A restaurant in a hotel is typically an
ancillary profit center. The distinction between amenities and ancillary services
may be arbitrary, however, in that one class of air line passenger may receive
complimentary goods and services (first class) where another class (coach or cabin
class) may be required to pay to receive similar goods and services. Herein lies
potential for competitiveness between service offers.

Because customers (e.g., air line passengers) and/or their assets (e.g, baggage) are
present when a service is performed, the Customer element is part of the planning
model. Customer behavior is a component in the service experience, becoming part
of a service's ambiance. A service process is affected by the amount and type of
customer served. Certification is the performance credibility awarded to a service
by others, evidence of ability to perform. Official and legal certifications are
awarded through licensing, but other forms of certification add to a bona fide
offering. Certification in a particular service delivery system, for example, could
be based on that which is gained by such membership. A continuous quest for
certifications via customer testimonials and industry awards is desirable.

The Service Support

In Figure 3, four organizational functions are presented as supportive of the core

and distinctiveness levels. Finance,Personnel, Research and Development, and
(back office) Operations are important but often remote. They are manifested
through other features; personnel may be evident through service provider morale
while finance may be evident through primary equipment and operations detected
through processes involving customers. New core and ancillary services may be
made known through research and development. Similarly, Suppliers may be made
evident through their simultaneously provided services.

After a service is provided there are Residuals both tangible and intangible.
Examples of tangible residuals are in-flight magazines taken home and concert
ticket stubs kept as souvenirs. An example of an intangible residual is the memory
of the service experience. Opportunities to provide follow-up through residuals are
competitive ones, even if a residual must be created. Followup communication

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with customers about frequent flyer points comes to mind.

The Service Agents and Brokers

The outlying portions in Figure 3, Agents or Brokers, and Perceptions of

Customers and Others are included because they are features which can be
attributed to a given service firm. Not the same as site networks, agents and
brokers associated with a service become an element in the planning model. This
level in the planning model is a direct connection with a service delivery system.
Ticket sales by agents, rental real estate brokers, and sporting event announcers are
often viewed as features of other services.

Perceptions

Although customers and certification are included in the planning model's

distinctiveness level, there are the general perceptions of prospective customers
and other constituent groups to be planned. The news media may present a means
of perceiving a service its leaders overlooked. Regulators can find their own ways
of viewing a service as can special interest groups. Anticipating such an element
aids preparation which the planning model provides.

Discussion

As intangible items services are something of an abstraction. Providing a planning

model related to a greater perspective at an industry level aids the linkage planning
of services entities. Moreover, issues about services marketing can be placed in the
planning model's framework to facilitate learning (Farrell, 1990). Thus, demand
management can be identified with customer and process elements; inseparability
problems can be linked with those services where separability is feasible. The
relationships and likely impacts of various service delivery systems on individual
services marketing efforts can be included.

Two observations about the planning model itself are its flexibility of use and its
application at various levels of service delivery. First, with regard to flexibility, a
planner with managerial insights may elect to place an element described above
into another differentiation level of the model. In the U.S., retail eyeglass
operations formerly in a back-office mode have been placed closer to and in full
view of the customer. Operations became more of a service distinctiveness. The
model can be applied to all types of services, but not all services can utilize any
one element to the same extent. This leaves competitive, creative maneuverability
for a planner to develop.

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Second, the model can be used at various levels of a service delivery system. In
fact, it can be applied to a service delivery system itself.

On the other hand, the planning model can be applied to a component within an
enterprise. An ancillary service has its own core and differentiating levels,
acquiring its certification from its host enterprise. Applying the strategic planning
model, the ancillary service manager would develop its task, group composition,
performance norms, intergroup and interpersonal relations in line with the host's
features.

Whether projects developed by complements of service organizations are short-

lived or on-going, each entity involved can use the planning process presented and
relate external marketing aspects to a channel of cooperation. Internal marketing
aspects can be related to each other and to a channel of cooperation based on the
planning model's set of concentric levels for one service.

References

Berry, Leonard L. and Parasuraman A, Marketing Services: Competing Through

Quality, The Free Press, New York, NY. 1991.

Bowersox, Donald J., and Cooper, M. Bixby, Strategic Marketing Channel

Management, McGraw-Hill, New York, NY. 1992.

Cravens, David W., Strategic Marketing, Fourth Edition, Irwin, Burr Ridge, IL.:
1994.

Farrell, O. C., Improving Marketing Education in the 1990s: A Faculty

Perspective, Marketing Education Review, 1, (November 1990): pp. 30-33.

Gronroos, Christian, Designing a Long Range Strategy for Services, in Managing

Services Marketing, vol. 2, John E. G. Bateson, ed., Dryden Press, Orlando, FL.
1992, pp. 496-505.

Gronroos, Christian, Service Management and Marketing, Lexington Books,

Lexington, MA. 1990.

Grove, Stephen J., and Fisk, Raymond P., The Dramaturgy of Services Exchange:
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Christopher H. Lovelock, ed., Prentice- Hall, Englewood Cliffs, NJ. 1991, pp. 59-
68.

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Heide, Jan B. Interorganizational Governance in Marketing Channels, J.

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Hellriegel, Don, Slocum, John W., Jr., and Woodman, Richard W., Organizational
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Kotler, Philip, Marketing Management, 8 ed., Prentice-Hall, Englewood Cliffs, NJ.

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Lans, Maxine S., Sports team logos are big business, Marketing News, 29, Number
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Lovelock, Christopher H., Services Marketing, 2 ed., PrenticeHall, Englewood

Cliffs, NJ. 1991.

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Pearce, John A., and Robinson, Richard B., Strategic Management: Formulation,
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Peter, J. Paul, and Donnelly, James H., Jr. Marketing Management: Knowledge
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