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Master TEW
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Services Marketing
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Services Marketing
LECTURE 1
1.1. General course introduction
The gap framework : when are customers satisfied related to services : it depends on
what they expect versus what they actually get
What are the internal aspects a services organization has to manage in order to do this
1.2. Framewrok for services
1.2.1. Adding value: evolutionary process of manufacturers and service companies
Major changes in the 90ies
• 60ies: product and on the other side pure intangible immaterial on the other end Product side → careful change in the 70ies and 80ies: IBM and apple introduced the computer and realized that extra services added value => servitization Intangible services side → products and technologies added value so the other way around → adding value through materializing => Materialization
• 90ies: we see companies as provinding solutions: combinations of products and services, a mixture of tangible and intangible components
Mass customization:: we have the technology not just to customize/personalize for one customer, but do this on a mass scale
Every company, especially with the extension of the customer experience online, is providing services today → think online services and apps, website
Servitization is still often used and companies try to add value by increasing services
Evolution in marketing management philosophies and focus
A way to position services marketing in the evolution of marketing: services are unique and have to be treated in a different way
Strategic planning: oil prices were invasive they were devastating the entire economy and influenced the economy: organizations like Shell wanted to anticipate shocks and be prepared
Total quality management: full of admiration for Japanese business-culture, they were very efficient and had much lower costs to produce cars
10. Managing service promisses
Part of the fourth gap!! = the communication (creates expectations) gap = making the right promises!
10.1. Positioning within gaps model of service quality
All about making the right promises, because
communicating not only to your customers but also your
internal employees creates expectations
People build their expectations on the implicit promises that are being made
Your service delivery should equal the promises being made and the expectation => 4th gap = communication gap
10.2. Coordinating online & offline communication channels
Complexity of today’s communication:
• Today’s communications comeS from a wide variety of sources– websites, direct mail, and interactive communication tools such as virtual communities social media, logs, mobile phone apps, viral marketing and gaming.
• In addition, consumers receive additional communication from servicescapes, customer service departments and everyday service encounters with employees. • Consistency in communication is critical.
→ Management of communication is very complex. Communication is not done by one person! you have an HR, PR, Marketing,.. Department so it is very complex → this illustrates the need for a integrated communication strategy!
Communications and the services marketing triangle
EXTERNAL = advertising, sales promotions, public relations…
INTERNAL = vertical communications ( between superiors and employees), horizontal communications (cross departments)
10.3. Key services communication challenges and strategies to match servie promises with delivery
• Service intangibility. (can not be returned) • Management of service promises.
• Management of customer expectations customer education. (create realistic expectations)
• Internal marketing communications. (employees input is a reflection of the communication message)
Services advertising strategies matched with properties of intangibility
Five approaches to overcome service communication challenges GOAL = service delivery greater than or equal to promises
1. Address service intangibility 2. Manage service promises 3. Manage customer expectations 4. Manage customer education
1. Address service intangibility
• Use narratives to demonstrate the service experience. • Present vivid information.
• Use interactive imagery. • Focus on the tangibles.
• Use brand icons to make the service tangible.
• Use association, physical representation, documentation and visualization. • Make your offer as tangible as possible, show customers and employees and
include stories! Provide tangible messages • Feature service employees in communication. • Feature satisfied customers in the communication. • Encourage word-of-mouth communication.
• Leverage social media. Create buzz • Make use of video-sharing networks. COMMUNICATION TOOLS:
• Websites.
• Search Engine Optimization. • Traditional Advertising. • Online Advertising. • Social Media Advertising. • Mobile apps.
• Sales promotion. PAID SEARCH ADVERTISING
• Represents the largest share of online spending among all online advertisement formats.
• Advertisers pay only when qualified leads are delivered to their websites. • Advertisers buy from Google the rights to words and terms related to their
business.
• When a consumer searches Google using one of those keywords, the advertiser’s web address, along with its name and description, appears in a box beside the search results.
• The advertiser pays only when a user clicks on the advertisement. VIRAL MARKETING
• The seeding of interesting content on websites, blogs or by e-mail that people will want to watch and pass on.
• Requires a video clip, song or picture that is seen as being sufficiently funny, clever or shocking to make it compulsive viewing.
2. Managing service promises
• Make realistic promises. • Offer service guarantees. • Offer choices.
• Create tiered-value service offerings.
• Communicate the criteria and levels of service effectiveness. • Improve customer education.
• Prepare customers for the service process.
• Confirm performance to standards and expectations. • Clarify expectations after the sale.
• Teach customers to avoid peak demand periods.
5. Manage internal marketing communications
• Create effective vertical communications. • Sell the brand inside the company.
• Create effective upward communication. (vertical)
• Create effective horizontal communications. (cross-functional interfaces, people should agree on message)
• Align back-office and support personnel with external customers. • Interaction.
• Measurement.
• Create cross-functional teams.
10.4. Approaches to pricing services
Reasons why service prices are different for customers:
• Customers often have inaccurate or limited reference prices for services. • Price is a key signal of quality in services.
• Monetary price is not the only price relevant to service customers.
Setting a price is difficult you often don’t have a reference point for prices and is more expensive better service provided? Not always the case
→ Sometimes it is very difficult to quantify how expensive something is so setting a price is not easy
Low customer knowledge of prices
• Service variability limits knowledge.
• Providers are unwilling to estimate prices in advance. • Individual customer needs vary.
• Collection of price information is overwhelming in services. • Prices are not visible.
Monetary costs and non-monetary costs
The role of non-monetary costs
• Time costs = How much time do we invest
• Search costs = What is the expense of finding someone to do your task? • Convenience costs = the availablitiy of the service is just easy
• Psychological costs.
• Non-monetary cost priorities = What is important to you • Reducing non-monetary costs.
10.4.1. Pricing approaches
1. Cost-based pricing = pricing based on cost, to cover the cost
2. Competition-based pricing = based on competition, benchmarking 3. Demand-based pricing = value based pricing
Three Basic Marketing Price Structures and Challenges Associated with their use for Services
Some issues that we should consider in the case of services
Competition = does not always reflect the actual value!
Cost = costs are difficult to trace, costs may not equal the value that customers receive
Demand = the price as such may not be the most important argument ➔ Theoretically the best way to go is the demand based pricing strategy, but companies often combine all three! Try and base yourself on the expectation of the customers
Four customer definitions of value 1. Value is low price
- Discounting - Odd-pricing - Synchro-pricing - Dynamic pricing
- Penetration pricing = when we launch new products and want to have a large initial market share, you can set a low price to introduce your product to the market
2. Value is everything I want in a service - Prestige pricing
- Skimming pricing = wipe of the cream and make profits quickly 3. Value is the quality I get for the price I pay
- Value pricing
- Market segmentations pricing
4. Value is all that is get for all that is give - Price framing
- Price bundeling
- Complementary pricing - Results-based pricing
