LESSON 6

RELATIONSHIP OF SERVICE MARKETING

The objective of this lesson is to have an insight into:

Relationship of service marketing to Management and operations
Professional service marketing mix
Developing marketing programmes.

RELATIONSHIP OF SERVICE MARKETING TO MANAGEMENT AND

OPERATIONS

The configuration of appropriate levels of complexity and divergence for processes in

order to achieve a desired strategic position has been described in the previous section.
Once this has been decided it is essential to ensure a balance is achieved between market
and operations perspectives.
In many manufacturing firms marketing takes a limited interest in operations
other than ensuring that a satisfactory supply of products are achievable within a given
cost structure. Within services, marketers should be vitally concerned with the operations
and service delivery Process . This balance becomes especially important in services
which involve a "high level of customer contact such as hotels restaurants and airlines.
However, many service businesses are frequently dominated by the operations function.
Lovelock points out that whilst many services firms are seeking to develop an
effective marketing function to act as a bridge between the organization and the
environment in which it operates, the introduction of a marketing orientation may be
resisted by operations executives who see marketing as a costly add-on function.24 They
see marketing as being confined to consumer research and communications activity and
resent it when marketers seek to become involved in product design and service delivery.
Lovelock also provides an insightful perspective into seven key operations issues
confronting high contact service firms, which are:

Productivity improvement.
Standardization versus customization.
Batch versus unit processing.
Facilities layout and design.
Job design.
Capacity management.
Managing queues.

Table 6.3 summarizes these issues and shows the typical orientations of marketing and
operations managers for each of them.
Each operational issue affects both market and operations. As service firms have
traditionally been dominated by the operations function, the marketing staff are often
relatively new to the function and do not have a full understanding of processes and
operations. Marketers need to take the initiative. and fully understand the implications of
the cost benefit trade offs of changes in processes and their impact on both the marketing
and operations area. However, this is a necessary but not sufficient approach; the people
element needs to be considered at the same time.
This is illustrated by Au Bon Pain, a chain of bakery cafes on the east coast of the USA.
The company made major changes in processes in an attempt to improve performance
and staff turnover. Managers were empowered to make significant alterations to
processes, procedures, store layout and other policies in order to develop service quality
and marketing activities aimed at building stronger relationships with customers.
These changes in processes have led to significant changes in people. Staff
turnover in one of the Boston stores has dropped to 10 per cent per annum for entry .level
jobs versus an industry -norm of about 200 per cent.
Absenteeism has plummeted and sales soared as customers

Table 6.3 Operations and marketing perspectives on operational issues

Operational issues Typical operations goals Common marketing concerns
Productivity Reduce unit cost of Strategies may cause decline in
Improvement production service quality

Standardization versus Keep costs low and quality Consumers may seek variety,
customization consistent; simplify prefer customization to match
operations tasks; recruit low segmented needs
cost employees

Batch versus unit Seek economies of scale, Customers may be forced to

processing consistency, efficient use of wait, feel one of a crowd, be
capacity turned off by other customers

Facilities layout and Control costs; improve Customers may be confused,

design efficiency by ensuring shunted around unnecessarily
proximity of operationally find facilitates unattractive and
related tasks; enhance safety inconvenient
and security

Job design Minimize error waste, and Operationally oriented

fraud; make efficient use of employees with narrow roles
technology; simply tasks for may be unresponsive to
standardization customer needs

Management of Keep costs down by avoiding Service may be unavailable

capacity wasteful underutilization of when needed; quality may be
resources compromised during high
demand periods
Optimize use of available
Management of queues capacity by planning for Customers may be bored and
average throughput; maintain frustrated during wait, see firm
 customer order, discipline as unresponsive

develop an on-going relationship with counter staff. Productivity has increased greatly
and employee head count has been considerably reduced. Under the Partner-Manager
programme at Au Bon Pain employees can earn double the industry average wages and a
manager of an outlet can earn as much as U5$160 000 a year. A complete shift has
occurred in the type and quality of employee, and word of mouth creates strong demand
for jobs at all levels in the chain.
The above example illustrates the critical interplay between processes, marketing
and human resources. A clear understanding of configuring processes in terms of
complexity and divergence, and a balance of marketing and operations activities, are key
inputs for improving service systems. The reader wishing to explore this area further
should refer to the references for this chapter.

Customer service
A major differentiating factor for services companies is the quality of customer service.
Customers are becoming more sophisticated in" their requirements and are increasingly
demanding higher standards of service. Many major services companies have woken up
to the need to improve customer service in order to compete in today's highly competitive
service environment.
In the marketing literature customer service is often seen to be part of the 'place'
marketing mix element and to be concerned with the distribution and logistics component
of that element. This view of customer service as the outcome of the distribution and
logistics functions seeks to explain its significance in terms of the way in which services
are delivered and the extent to which customers are satisfied, especially in the context of
reliability and speed of delivery.
We consider, however, that several arguments support the choice of customer
service as a broader and separate element of the marketing mix. These include the
following:
Changing customer expectations. In almost every market the customer is now
more demanding and more sophisticated than he or she was, say, thirty years ago.
The increased importance of customer service. With changing customer
expectations, competitors are seeing customer service as a competitive weapon
with which to differentiate their sales. The issue and importance of customer
service has been commented on by many writers.
The need for a relationship strategy. To ensure that a customer service strategy
that will create a value proposition for customers is formulated, implemented and
controlled it is necessary to give it a central role and not one that is subsumed in
the various elements of the marketing mix.

TUTORIALS
 Discuss the Operations and marketing perspectives on operational issues.
Explain the key operations issues confronting high contact service firms.
]A major differentiating factor for services companies is the quality of
customer service. Discuss.

THE PROFESSIONAL SERVICES MARKETING MIX

The importance of selecting and balancing the right marketing mix elements has been
stressed in relation to professional services marketing. Creating and fine-tuning the
marketing mix is a task for management which 'will produce unique outcomes for every
organisation and their individual activities within target markets. Some key issues which
do have particular relevance for professional service organisations are raised here:

The service package (product)

The service offering needs to be looked at carefully to ensure it meets customer needs as
closely as possible. The range of services offered may requite extending or updating in
response to new developments within the market. Some large accountancy firms now
receive only a small proportion of their income from audit and accounting work as the
revenue from their other specialist services has grown as these have developed.'
Anderson, including Anderson Consulting, is one such example, earning less than twenty
per cent of revenue from audit and accountancy in 1994 with the remainder coming from
other specialist services.

Pricing policy
It is well recognised that price represents other factors than simply costs and is often used
by prospective clients as a guide to quality. For this reason, as well as profitability
concerns, pricing or fee setting should be regarded as a strategic element of the overall
marketing programme rather than a basic costing exercise. Many professional fees are
charged at hourly rates although other alternatives include fixed fees for fairly standard
jobs (for example, house convincing or health screening checks offered at set fees) and
tendering or quotation schemes for contracts. The competitive situation should also be
considered in relation to pricing with regard to possible provider substitution.

Promotional programmes
Promotional objectives need to be clearly defined before a strategic promotional
programme can be designed. Many professional service providers may have more than
one promotional objective and will use a variety of messages and media to communicate
with target audiences. Advertising can increase awareness "Of the organisation and its
services. Cosmetic surgery clinics advertise widely, using a mixture of informative,
details of the various services provided together with visual images of the possible results
to attract customers.
Newsletters or house magazines can be a useful tool for communicating with existing
customer and other public. Sponsorship, PR and publicity can be used to attract attention
and inform target audiences about changes and innovations within the organisation. A
higher profile and enhanced corporate identity will not only make the organisation more
attractive to customers but also to potential recruits - an important issue in areas of highly
qualified and skilled expertise.

Distribution
Location decisions are important in professional services marketing as many clients use
convenience as a key factor in provider selection, effectively walking in off the street to
make an appointment for an eye test or for legal advice. Location may be less important
for highly complex or specialist services where the service provider may actually visit the
client to perform the service in any case, thus making accessibility and availability more
important than physical location. Some services, such as accounting audits or building
surveying, have to be carried out at the client's premises. Professional service
organisations seldom have channels as such, usually dealing directly with clients and
being more likely to open branch offices and subsidiary operations when moving into
new market areas.

People aspects of successful service delivery

The importance of the people element of the marketing mix has been highlighted
throughout this chapter. Professional service delivery quality depends on the person
delivering the service. Internal marketing and staff development programmes can help to
optimize staff performance through allowing individuals to fulfil their potential and to
understand more fully their role in the organisation and their contribution to success.

Process design
There are many aspects of the process design, which can play an important role in
creating and delivering a quality service, even in highly customised specialist services.
Administration quality, customer care, appointments systems, methods of
communication, office opening hours and operating efficiency in terms of delegation or
team working are all examples of aspects of the service delivery process which may be
improved or revised. Primary nursing, where a nurse takes responsibility for a patient
from the time. They arrive in the hospital until they leave, is an example of a process
change with apparent benefits for both parties. Efficient appointment systems at the
doctor or the dentist with queuing systems so that it is clear whose turn is next can help
improve satisfaction levels and help the service to operate more smoothly. In long drawn-
out legal cases, brief regular updates can be sent to clients to let them know the case is
still progressing or being monitored.

Physical evidence
As stated very early in this chapter, credence plays an important role in customer
assessments of professional service quality. Customers will base their judgment ort the
physical evidence available to them. Professional qualifications and affiliations will be
listed on company literature and stationery and certificates displayed. Awards such as the
Investors in People award won by Latham Crossley and Davis can be well publicised to
help build the organisation's image. The firm's premises and working environment should
reflect the professionalism and expertise of the service provider and also the prices
charged. Staff may wear uniforms or other work wear such as white coats, as is very
common in the medical professions, or they may adhere to certain dress codes in
business.

Traditionally, little marketing activity has taken place within many professional
organisations. This may be due to the virtual ban on any form of advertising or promotion
activity imposed by regulatory bodies within the professions in the past. Some relaxation
of the rules has taken place since the early 1980s, which has led to some organisations
adopting a marketing approach.
Professional services encompass a wide range of activities but they are associated with
certain features:

High expertise
Qualifications required
Membership of society or governing body
Confidentiality.
High barriers to entry

Many of the characteristics of professional services strengthen the argument in support of

the adoption of marketing, for example:
Highly intangible services
Dependence on people in the service delivery process
Image and reputation are. key factors in gaining and retaining clients
Proliferation in the number of practitioners; increased competition
Low service substitutability but high provider substitutability

Many reasons have been put forward for the banning of advertising and promotional
activity by professional organisations, mainly concerned with possibly misleading
advertisements and the undermining of professional integrity. Eventually professional
bans on advertising were removed when pressure was brought to bear from the UK
Monopolies and Mergers Commission 'as they represented a potential restrictive trade
practice.
Management must play a key role in developing a marketing orientation within
the organisation. Staff development and empowerment and customer care schemes are
two possible ways of developing and fostering a customer orientation. Relationship
marketing has particular relevance for professional services. Professional organizations
can design and develop effective marketing programmers to enable them to satisfy the
needs of both internal and external customers.
The marketing audit can be especially helpful for professional organizations which have
done little marketing previously .
TUTORIALS

Creating and fine-tuning the marketing mix is a task for management which 'will
produce unique outcomes for every organization and their individual activities
within target markets. Discuss the key issues which do have particular relevance
for professional service organizations.
Professional services encompass a wide range of activities with what features is it
associated.
Relationship marketing has particular relevance for professional services. Explain.

DEVELOPING MARKETING PROGRAMMES

The aims of marketing are as follows:

To understand and anticipate customer needs
To provide benefits and satisfactions to meet those needs
To ensure consistent quality and satisfaction
To retain existing customers and attract new ones
To achieve organisational objectives

Each of these aims can clearly be applied to professional services. Professional service
providers can achieve each of these aims by applying marketing tools and concepts as
follows: .

Understanding/Anticipating customer's needs This is at the core of the marketing

concept. Marketing research provides tools for understanding customers and markets in a
structured and organised way. Environmental analysis and monitoring examines and
predicts trends and influences, which will impact on the organization’s activities.
Provision of benefits/satisfactions Variations on the product/service offering design can
be developed to meet the needs and wants of clients in target segments in which the firm
wishes to operate, supported by marketing mixed tailored to each segment.
Setting consistent quality standards -Internal and external research can be carried out
to assess and measure customer expectations and both customer and employee
understanding and perception of service quality. Internal marketing can be used to ensure
consistent high
standards of service delivery, together with benchmarks where appropriate. Even in
highly specialized professional services where the service itself is highly unique and
cannot be standardized, attention can be given to quality in routine transactions and
processes such as:
The length of time taken to reply to routine correspondence
Invoicing procedures
The professional quality of reports and documentation
Keeping within specified time periods and general customer care.

Customer retention/attracting new customers Relationship marketing focuses on

building relationships and provides a framework for higher customer retention, enhanced
customer and employee satisfaction levels and improved corporate image. This can be
reinforced through the marketing mix; especially through the use of promotions and
communications (both internal and external), people and physical evidence, as the
examples shown earlier illustrate.
Attainment of organisational objectives A fundamental feature of a properly structured
and implemented marketing programme is the role of marketing planning. The marketing
planning process coordinates and directs the organisation's marketing effort. It
contributes to overall organisation objectives by setting down action programmes to meet
agreed marketing objectives. Planning can help focus management thinking in terms of
the business mission and strategic objectives setting by addressing the questions:

Where are we now? (analysis stage)

Where do we want to be? (planning stage)
How do we get there? (implementation stage)
How successful are we? (monitoring stage)

The marketing audit can also be a very useful planning tool to check out current practice
and evaluate systems and procedures. It usually consists of several audits which are likely
to be made up various components as follows:

Marketing environment
Marketing strategy
Marketing organisation
Marketing systems
Marketing productivity
Marketing function
The marketing audit can perform a number of functions:

To analyze the organisation's overall marketing effectiveness

To create awareness and involvement in marketing throughout the organisations
In organisations where there has been little or no previous formal marketing
activity, a marketing audit can be used to highlight what activity should be
undertaken and to what extent a marketing orientation exists. Thiscan be
especially applicable to professional service organisations.
TUTORIALS
Discuss the various aims of marketing, while developing marketing
programmes.
The marketing audit can be a very useful planning tool to check out
current practice and evaluate systems and procedures. Explain.