Service Marketing

Marketing Basics

What is Marketing???
Think about organizations/companies (Google, Trader Joes, The San Jose Chamber of Commerce, World Wildlife Fund, ) as well as individuals (politicians, professional athletes, )

They all do marketing! How and why?

Marketing Basics

Marketing consists of activities designed to generate and facilitate exchanges intended to satisfy human or organizational needs or wants.

Marketing Basics Importance of Marketing:

Personally - in daily life, in career aspirations, in better informed consumer purchases
Organizationally - only marketing directly produces revenue; marketing success depends on customer satisfaction Domestically - employment and costs, creation of utility Globally - closed, national markets no longer exist and companies compete in markets worldwide

Marketing Basics Evolution of Marketing: Product-orientation Stage

make all you can

1. Demand exceeds available supply. 2. All that is made can be sold. 3. Focus is on engineering and generating output, not the customer. 4. Epitomized between late 1800s and early 1930s.
The American public can have any color car it wants so long as its black. Henry Ford, referring to the Model T.

Sales-orientation Stage

sell all you make

1. Supply frequently exceeds demand. 2. Focus is on promotion and pricing; objective is to sell all the inventory. 3. Hard-sell techniques create stereotype of pushy, annoying salesperson. 4. Epitomized between early 1930s and 1950s.

Marketing Basics Evolution of Marketing: Market-orientation Stage

make what you can sell

1. Variety in markets, variety in products. 2. Employs full marketing mix. 3. Focus is on customer needs and satisfaction; profitability over volume. 4. Most typical current orientation.

make it together with the customer

Service Dominant Logic

1. Service industries gain more and more importance 2. Ideas generated in the service field spread to other sectors (like industrial marketing, marketing for consumer goods, ) 3. Intangible product features

Marketing Goals There are three main objectives that are followed by the marketing discipline:

1. Customer satisfaction and (service) quality

2. Stimulation of market exchanges and customer retention 3. Branding of services, products, and companies

Marketing Goals 1. Customer satisfaction and (service) quality delivered (perceived) service/product expected service/product*

customer satisfaction

delivered (perceived) service/product

<

expected service/product*

customer dissatisfaction
* requires a positive expectation

Marketing Goals 2. Stimulation of market exchanges and customer retention

- Customer satisfaction is a main determinant for stable and voluntary buying relationships
- Compliance management plays an important role in retaining customers

- Stimulation of market exchanges and customer retention is supported by a strong service/product/company brand

Marketing Goals 3. Branding of services, products, and companies

Brand contacts by Gronroos (2000), p.288

The GAP Model

Causes of Gaps Promoted Expectation Managements Perceived Customer Expectation Service Design Spec. G3 Service Delivered Inflated Expectation G4 G1 Communication Real Expectation Marketing

Service Quality

G2

Design

Conformance Service Received

Service Providers Assessment

Customers Assessment

Requirements of a Service Marketing approach

- Closing the Gaps (and thereby achieving customer satisfaction, retention, and brand building) with the help of the marketing instruments - The classic marketing concept consists of 4 instruments (4Ps): - Product

- Price
- Promotion (also communication) - Place (also distribution) - Due to the specialties of services (intangibility, inseparability, heterogeneity, perishability) some speak of the 5P-approach by adding a 5th instrument: People

Co-Creation
- One of the (if not THE) essential advantage(s) of service management and service marketing is that service development in most of the cases requires the participation of both the supplying company and the customer - Thus, services are co-created - Impact on the marketing goals: - Easier to anticipate and to react to customer expectations stimulation of market exchanges and customer retention - Direct contact with employees of the service provider impacts the customers brand building process - However, co-creation depends on the abilities of the customer and the provider to express, anticipate, and react to the needs of the counterpart!

The Integrated Service Marketing Model

Level of Information

Initial Market Research

Market information

Idea generation

Initial market research

Service expectations

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model Initial Market Research - Capturing market trends, market sizes, market potentials - What do customers expect? - Market research can be performed in a formal way (e.g. standardized questionnaires, telephone interviews, ) or informally (checking competitors websites, ask experts, visit trade shows, ) - Design of marketing instruments relies on adequate market and customer information

The Integrated Service Marketing Model

Level of Information

Strategic Service Definition

Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model Strategic Service Definition

- Dominated by product, price, and distribution decisions
- Product: service design including the service environment (service encounter), service components, service production process (including communication) - Price: setting prices on the basis of costs, competitor prices, and demand; price segmentation as major pricing tool (also: Yield Management) - Distribution: importance of the service location varies (where do customers and producers meet?), services cannot be distributed like products - The service definition impacts expectations and perceptions of consumers!

The Integrated Service Marketing Model

Level of Information

Initial Service Communication

Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model Initial Service Communication

- Raising awareness and convincing customers - Typical instruments are:

- TV commercials - Advertisements in newspapers, magazines (also billboards)

- Direct marketing - Events (incl. trade shows)

- Sponsoring - Sales promotions

- Online marketing - Public relations

- Word-of-mouth - Instruments have to be adjusted to each other!

- Initial service communication has a huge impact on consumer expectations!

The Integrated Service Marketing Model

Level of Information

Service Production (Co-Creation)

Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Service production

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model Service Production (Co-Creation)

- Mainly impacted by the service encounter and interpersonal communications - Service performing employees often have a huge influence on the customers service perception - It is not only important to communicate the service to consumers (external communication) but also within the organization (internal communication) - the latter is also called internal marketing - Important to balance employee behavior with initial communication instruments (integrated marketing communication)

The Integrated Service Marketing Model

Level of Information

After Sales Support

Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Service production

After sales support

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model After Sales Support

- Communicative instruments to ensure customer satisfaction and to stimulate customer retention - Ensure that customer perceptions have at least met their expectations - Otherwise: compliance management

The Integrated Service Marketing Model

Marketing implementation Level of Information

Marketing Implementation
Market information

Idea generation

Initial market research

Service expectations Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Service production

After sales support

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model Marketing Implementation

- Information management plays a crucial role in service marketing - Information is not only gathered during initial market research but also during the whole service (marketing) process - Also, information can be spread not only during the initial communication phase but also (and especially) during the service production process - Important to ensure an effective information flow within the company

The Integrated Service Marketing Model

Marketing implementation Level of Information

Information gathering
Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Service production

After sales support

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model

Marketing implementation Level of Information

Information transfer
Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Service production

After sales support

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

The Integrated Service Marketing Model

Marketing implementation Level of Information

Internal information processing

Market information

Idea generation

Initial market research

Service expectations

Strategic service definition

Initial service communication

Buying decision Integration into the service production process quality perception/ (dis-) satisfaction

Service production

After sales support

Marketing process of service companies

Buying process of the customer (to be influenced by the service firm)

Conclusion

- Coordination of all marketing instruments - Achievement of marketing goals: - Service marketing offers several opportunities to balance customer expectations with customer perceptions - Customer satisfaction (service quality) is a main factor that impacts customer retention - Continuous and constant service quality accompanied by continuous, constant, and balanced communication efforts lead to the development of a strong brand image - Growing impact of service marketing on the whole marketing field

Case Study Questions

1. Evaluate the Zipcar venture. What are the strengths, opportunities, weaknesses, and threats of the business model? 2. How does the Zipcar idea fit the Integrated Service Marketing Model? Please apply the case to the several marketing instruments that are discussed in the model. 3. What are the main drivers of customer satisfaction at Zipcar? 4. Describe the process of co-creation at Zipcar! 5. What are the success factors of Zipcars promotional strategy? Please consider also the impact of environmental issues on the marketing success of Zipcar. 6. Imagine that Zipcar aims on entering the Chinese market. What factors have to be covered in an according market research study? Would you recommend China as target market?
Please search for additional information to answer the case study questions!