UNIT 1: Understanding Service Products, Consumer and Example:

Market
- Rented goods services, defined place and space
INTRODUCTION TO SERVICES (Lecture 1) rentals, and Labor and expertise rentals (TAXI)

- We are all experienced service consumers. Characteristics of Services

- Use wide array of services everyday
- Intangibility
UNIVERSITY IS A COMPLEX SERVICE ORGANIZATION THAT - Value Creation is Dominated by Intangible Elements
OFFERS NOT ONLY EDUCATIONAL SERVICES BUT

- Museums
- Guidance Office
- Hospital/ Clinic
- Libraries

PROBLEMS WITH SERVICES

- Complain about broken promises, poor value for

- The Tangibility Continuum
money
- inconvenient service hours, bureaucratic
procedures
- CONSUMERS ARE NOT ALWAYS HAPPY WITH THE
QUALITY AND VALUE OF THE SERVICES RECEIVED
complain about broken promises, poor value for
money inconvenient service hours, bureaucratic
procedures
- rude or incompetent service personnel, lack of
understanding of their needs
- malfunctioning self-service machines, complicated
procedures
- wasted time and a host of other problems

Service

- Act or performance offered by 1 party to another - Inseparability

although the process maybe tied to a physical
product, the performance is transitory, often
intangible in nature and does not normally result in
ownership of any of the factors of production
- An economic activity that creates value & provides
benefits for customers at specific time and places
by bringing about a desired change in on or behalf
of the recipient of service
SERVICES OFFER BENEFITS WITHOUT OWNERSHIP
(CATEGORIES WITHIN THE NON-OWNERSHIP
FRAMEWORK)
- Rented goods services
➢ Power tools / Machines
➢ Dresses / Suits
- Defined place and space rentals
➢ Warehouse
➢ Plane seats
- Labor and expertise rentals
➢ Cleaning Services
➢ Car repair
➢ Business Consulting
- Access to shared physical environments
➢ Theme Parks
➢ Trade Shows
➢ Toll
- Systems and networks access and usage
➢ TV News
➢ Online Banking
➢ Utilities
NOTE: COMBINATION OF SERVICES OFFER BENEFITS
WITHOUT OWNERSHIP (CATEGORIES WITHIN THE NON-
OWNERSHIP FRAMEWORK)
➢ Taxi operators drives taxi, and the passenger
uses it.
➢ The presence of taxi driver is essential to
provide the service
- Perishability
➢ Perishability of service: Services cannot be
produced in anticipation of customer needs &
then stored in inventory until purchased
➢ Perishability of Product: Products can be
inventoried and stored even the most
perishable products
- Heterogeneity
DIFFERENCES BETWEEN GOODS AND SERVICES
- GOODS
✓ Goods are tangible (ex. hotel beds or surgery
implants)
✓ Homogeneous (ex. ATMs or money transfers)
✓ Can be separated from demand (ex. online
communities or online retail)
✓ Last (university degrees or the memory of a
vacation might last indefinitely)
✓ Goods require no customer resources
- SERVICES
✓ Intangible
✓ Heterogeneous
✓ Inseparable from demand
✓ Perishable
✓ require customer resources in the production
process
CUSTOMER RESOURCES ✓ co-operate actively with the
service operation
- has the following consequences for the
❖ Managers should think about process
IHIP(Intangible, Heterogeneous, Inseparable,
and output from customer's
Perishable) characteristics
perspective
- I = services are usually sold as an intangible,
✓ to identify benefits created and
performance, promise. Companies might tangiblize
non-financial costs: Time, mental,
this performance promise by giving the customers a
physical effort
tangible concert ticket but this only serves as proof
and is not the service yet. Who or what is the direct recipient of the
service?
- H =customer resources such as living room walls are Nature of the Service People Possessions
always heterogeneous. Example: Some families will Act
Tangible Actions People- processing Possession-processing
have their living room cleared and ready for John to services (services (services directed at
do his paintwork while some might not. directed at people’s physical possessions):
bodies): - Refueling
- I = The customer resources like the broken car are - Barbers - Disposal/ Recycling
inseparable from a service process it is not the - Health Care
Intangible Actions Mental Stimulus Informational
customer but the customer resources that cannot Processing (Services Processing (Services
be separated directed at people’s directed at intangible
mind) assets)
- P = The production capacity that is perishable. - Religion - Accounting
Example: just imagine John arrives on a Monday - Advertising/PR - Banking
morning in front of Ken's house in order to paint the ➢ Possession processing
living room however ken is not at home too bad for ❖ Customers are less physically
John since on such short notice there's little he can involved compared to people
do to make up for that. in contrast goods processing services
manufacturers can produce without any demand ❖ Involvement is limited
or involvement from customers and then store ❖ Production and consumption are
their goods until there is demand. this is why the separable
production capacity of service providers is ➢ Mental stimulus processing
perishable with customers are not integrated at the ❖ Ethical standards required when
right time customers who depend on such
services can potentially be
CLIENT-BASED RELATIONSHIPS
manipulated by suppliers
- INTERACTIONS THAT RESULT IN SATISFIED ❖ Physical presence of recipients not
CUSTOMERS WHO USE A SERVICE REPEATEDLY required
OVER TIME ❖ Core content of services is
information-based
CUSTOMER CONTACT ✓ Can be "inventoried”
- LEVEL OF INTERACTIONS BETWEEN THE SERVICE ➢ Information processing
PROVIDER AND THE CUSTOMER NECESSARY TO ❖ Information is the most intangible
DELIVER THE SERVICE form of service output,
- HIGH CONTACT ❖ But may be transformed into
- LOW CONTACT enduring forms of service output
❖ Line between information
Four Broad Categories of Services processing and mental stimulus
Who or what is the direct recipient of the processing may be blurred.
service?
Nature of the Service People Possessions Broad Categories of Service
Act
Tangible Actions People- processing Possession-processing Who or what is the direct recipient of the
services (services (services directed at service?
directed at people’s physical possessions): Nature of the Service People Possessions
bodies): - Freight Act
- Hairstylist Transportation Tangible Actions People- processing Possession-processing
- Passenger - Laundry and dry services (services (services directed at
Transportation cleaning directed at people’s physical possessions):
- Health Care - Repair Maintenance bodies): - Refueling
Intangible Actions Mental Stimulus Informational - Barbers - Disposal / Recycling
Processing (Services Processing (Services - Health care
directed at people’s directed at intangible Intangible Actions Mental Stimulus Informational
mind) assets) Processing (Services Processing (Services
- Education - Accounting directed at people’s directed at intangible
- Advertising/PR - Banking mind) assets)
- Psychotherapy - Legal - Education - Accounting
- Advertising/PR - Banking

- Based on differences in nature of service act

(tangible/intangible) and who or what is direct
recipient of service (people/possessions), there are
four categories of services:
➢ People processing
❖ People Processing Customers must:
✓ physically enter the service factory
Service Classifications 1. Government Policies
- Changes in regulation
- Privatization
- New rules to protect customers, employees, and
the environment
- New agreement on trade in services
- Example:
Government Example Impact on
Policies Service
SERVICE Economy
Changes in Smoking Ban Improved
- Equipment-Based regulations customer
➢ Automated comfort and
❖ Vending Machines health
❖ Automated car washes measures
❖ ATM Privatization Privatization of Potential
➢ Monitored by relatively unskilled operators infrastructure retrenchment
❖ Motion picture theaters services of existing
❖ Dry cleaning suppliers
❖ Taxis 2. Social Changes
➢ Operated by skilled operators - Rising consumer expectations
❖ Electric utilities - More affluence
❖ Airlines - Personal Outsourcing
❖ Computer network installation - Increased desire for buying experience vs things
- People-Based - Rising consumer ownership of high-tech equipment
➢ Unskilled labor - Easier access to more information
❖ Lawn care - Immigration
❖ Security guards - Growing but aging population
❖ Janitorial services - Example:
➢ Skilled Labor Social Changes Example Impact on
❖ Appliance repair Service
Economy
❖ Plumbing
Growing but Matured More services
❖ Catering
aging countries catering to the
➢ Professionals
population (Europe) needs of
❖ Lawyers elderly
❖ Managing Consultants Migration People who Transfer
❖ Accountants have migrated talent to
to the USA, home country
=============================================
etc. move
Forces transforming service markets (Lecture 2) back to home
country
“Powerful services are transforming the market”

What is driving the rapid growth of the service sector? 3. Business Trends
- Push to increase shareholder value
- Creating Value - Emphasis on productivity and cost savings
- Manufacturers add value through service and sell
Five Major Forces are Transforming the Service Economy
services
1. Government Policies - More strategic alliances
2. Social Changes - Focus on quality and customer satisfaction
3. Business Trends - Growth of franchising
4. Advances in IT - Marketing emphasis by nonprofits
5. Globalization - Example:
Business Example Impact on
Government Policies, Social Changes, Business Trends,
Trends Service
Advances in IT, Globalization
Economy
↓
More strategic Airlines from Routes are
- New markets and product categories
alliances Alliances rationalized to
- Increase in demand for services
avoid
- More intense competition
duplications,
↓ schedules and
Innovation in service products & delivery systems,
ticketing are
stimulated by better technology
coordinated
↓
Growth of Expansion of Challenge of
Customers have more choices and exercise more power
franchising fast-food maintaining
↓
chains consistency in
Success hinges on:
service
- Understanding customers and competitors
standards
- Viable business models
- Creation of value for customers and firm
4. Advances in IT Customer Decision Making: The Three-Stage Model of
- Growth of internet Service Consumption
- Greater bandwidth
1. Pre Purchase
- Compact mobile equipment
2. Service Encounter
- Wireless networking
3. Post Encounter
- Faster, more powerful software
- Digitalization of text, graphics, audio, video Stages of Service Key Concepts
- Example: Consumption
Advances in IT Example Impact on 1. Pre-purchase Stage Need arousal
Service Awareness of need
Economy • Information Search Evoked set
Growth of Information at Creation of • Clarify Needs
internet the fingertips of new services • Explore Solutions
the customers • Identify alternative
Wireless Some More brick service products and
networking establishments and mortar suppliers
provide this services firm Evaluation of alternatives Consideration set
service to are expected (solutions and suppliers)
attract • Review supplier Multi-attribute model
customers information (e.g.
advertising, Search, experience, and
5. Globalization brochures, websites) credence attributes
- More companies operation on transnational basis • Review information
- Increased international travel from third parties Perceived risk
- International mergers and alliances (e.g. published
- “Offshoring” of customer service reviews, ratings, Formation of
- Foreign competitors invade domestic markets comments on web, expectations
blogs, complaints to - Desired service
- Example:
public agencies, level
Globalization Example Impact on
satisfaction ratings, - Predicted service
Service
awards) level
Economy
• Discuss options with - Adequate service
Increased More services More services level
service personnel
international offered to provided by
• Get advice and - Zone of tolerance
travel more places transportation
feedback from third-
companies
party advisors and
leading to
other customers
greater
competition Make decisions on service
purchase and often make
Foreign International Build branch
reservations
competitors companies do network and
invade business in invest in new 2. Service Encounter Stage Moments of truth
domestic other and improved Request service from a Service encounters
markets countries e-delivery chosen supplier or Servuction system
channels initiate self-service Role and script theories
(payment may be upfront Theater as a metaphor
=================================================
or billed later)
3-Staged Model of Service Consumption (lecture 3) Service delivery by
personnel or self-service

3. Post-purchase Stage Confirmation/Disconfirm

High-Contact Services
Evaluation of service ation of expectations
- Can visit physical sites; observe (+ low-contact performance
options) Dissatisfaction,
- Can visit in person and observe (possibly test) satisfaction and delight
facilities equipment, and operation in action; meet Future intentions Repurchase
personnel; see customers (+ remote options) Word-of-mouth
- At Physical Site for remote reservation
- At physical Site only

Low-Contact Services

- Surf the web, view yellow pages, make calls 1. Pre-purchase Stage Overview
- Primarily remote contact (websites, blogs, phone,
email, publications, etc.) - Need Awareness
- Remote - Information Search
- Remote - Evaluation of Alternatives
➢ Service Attributes
➢ Perceived Risks
➢ Service Expectations
- Purchase Decision
 ➢ Attributes can be evaluated only after
I. NEED AWARENESS purchase
• “NEED AROUSAL” ➢ Experience Service Attributes:
➢ Decision to buy or use a service is triggered ❖ Concert
by need arousal ❖ Restaurant
❖ Haircut / Salon Service
• Triggers of need: • CREDENCE SERVICE PRODUCTS
➢ Unconscious minds ➢ Credence attributes are those that
❖ (e.g. Personal identity and customers find impossible to evaluate
aspirations) confidently even after purchase and
➢ Physical Conditions consumption
❖ (e.g. Hunger) ➢ Attributes buyers cannot confidently
➢ External Sources evaluate, even after one or more
❖ (e.g. Service firm’s marketing purchases. Thus, buyers tend to rely on the
activities) reputation of the brand name, testimonials
II. INFORMATION SEARCH from someone they know or respect,
• “Need arousal leads to attempts to find a service quality, and price
solution” ❖ Surgery
• Internal Search ❖ Computer Repair
• External Search ❖ Legal Services
(Based on the unique personal qualities that a ❖ hygiene conditions of the kitchen
person brings to the leadership situation) and the healthiness of the cooking
➢ Personal Sources ingredients
❖ Family or friends
➢ Public Sources
❖ Consumer review (Yahoo, Social
media posts)
➢ Market-Dominated
❖ Advertisements / Mall Display

• Evoke Set
➢ The set of alternatives the customer
evaluates when making a selection
➢ The set of products or brands a customer
may consider in the decision-making
B. Perceived Risk
process
• Categories of Perceived Risks
➢ A set of products and brands that a
➢ Functional Risk
consumer considers during the decision-
❖ Unsatisfactory performance
making process that is derived from past
outcomes
experiences or external sources
➢ Social Risk
➢ Alternatives then need to be evaluated
❖ How others may think and react
before a final decision is made
➢ Physical Risk
➢ “Having too many choices can confuse and
❖ Risk of personal injury damage to
cause them to delay the decision to buy or
possessions
sometimes not buy at all
➢ Psychological Risk
❖ Fears and negative emotions
III. EVALUATION OF ALTERNATIVES
➢ Financial Risk
A. Service Attributes
❖ Unexpected extra costs, monetary
• SEARCH SERVICE PRODUCTS
loss
➢ Search attributes help customers evaluate a
➢ Temporal Risk
product before purchase.
❖ Wasting time, consequences of
➢ Have attributes customers can readily
delay
evaluate before they purchase
➢ Sensory Risk
➢ Search Service Attributes:
❖ Unwanted effects on any of the
❖ Hotel Room Price
five senses
❖ Airline Schedule
❖ Entertainment System Quality
• How might consumers handle Perceived Risk
❖ type of food, location, type of
➢ Seek information
restaurant and price
➢ Search for reviews & ratings
• EXPERIENCE SERVICE PRODUCTS
➢ Rely on firm with good reputation
➢ Experience attributes cannot be evaluated
➢ Look for warranty / guaranty
before purchase
➢ Visit service Facilities
➢ The consumer will not know how much they
➢ Ask knowledgeable employees
will enjoy the food, the service, and the
atmosphere until the actual experience.
• Strategic Responses to Managing Customer
Perceptions of Risk
 ➢ Free Trial MOMENT OF TRUTH
➢ Use of Evidence Management
- “We could say that the perceived quality is realized
➢ Display Credentials
at the moment of truth, when the service provider
➢ Offer Guarantee
and the service customer confront one another in
➢ Encourage Visit to service Facilities
the arena. At that moment they are very much on
➢ Advertise
their own... It is the skill, the motivation, and the
tools employed by the firm’s representative and the
C. Service Expectations
expectations and behavior of the client which
• What we expect vs what we perceive
together will create the service delivery process.”
• Expectations vary
(Richard Normann)
• Expectations change over time
SERVUCTION MODEL

- Or the Servuction System

• Components of Customer Expectations

➢ Desired Service Level
❖ Wished-for level of service quality
that customer believes can and
should be delivered
➢ Adequate Service Level
❖ Minimum acceptable level of - The Servuction System: Service Production and
service Delivery
➢ Zone of Tolerance ➢ SERVUCTION SYSTEM
❖ Acceptable range of variations in ❖ Visible front Stage
service delivery ❖ Invisible Backstage
➢ Predicted Service Level ➢ SERVICE OPERATIONS
❖ Service level that customer believes ❖ Technical core where inputs are
firm will actually deliver processed and service elements are
created
❖ Contact people
❖ Inanimate environment
➢ SERVICE DELIVERY
❖ Where final assembly of service
elements takes place and service is
delivered
• Factors influencing customer expectations of ❖ Includes customer interactions with
service operations and other customers

HIGH/LOW CONTACT MODEL

- Service encounters range from high contact to low

contact

IV. Purchase Decision

• Possible alternatives are compared and
evaluated
• Trade offs are often involved

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THEATER METAPHOR
2. Service Encounter Stage
Theater as a Metaphor for Service Delivery
- A period of time during which a customer interacts
directly with the service provider “Good metaphor as service delivery is a series of events that
customers experience as a performance”
• Models and Frameworks
- “All the world’s a stage and all the men and women
➢ Moments of truth
merely players. They have their exits and their
➢ High/Low Contact Model
entrances and each man in his time plays many
➢ Servuction Model
parts (William Shakespeare)
➢ Theater Metaphor
 - Service Facilities
➢ Stage on which drama unfolds - CORE PRODUCT
➢ This may change from one act to another ➢ Central component that supplies the
- Personnel principal, problem solving benefits
➢ Front stage personnel are like members of a customers seek
cast - SUPPLEMENTARY SERVICES
➢ Backstage personnel are support ➢ Augment the core product, facilitating its
production team use & enhancing its value & appeal
- Roles - DELIVERY PROCESS
➢ Like actors, employees have roles to play ➢ Used to deliver both the core product &
and behave in specific way each of the supplementary services
➢ a set of behavior patterns learned through
Example: Hotel
experience and communication to be
performed by an individual in a certain - Core service: To provide a place to stay
social interaction in order to attain - Supplemental Service: Offer Gym access, Buffet,
maximum effectiveness in goal and Free Shuttle
accomplishment - Delivery processes: Menu selection and Food
- Scripts preparation, driving and scheduling, Room cleaning
➢ Specifies the sequences of behavior for and fixing
customers and employees
Designing a Service Concept
“Role and Script theory complement each other”
(Service concept design must address the following issues)
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1. How the different service components are delivered
3. POST ENCOUNTER STAGE to the customer
2. The nature of the customer’s role in those
Post Encounter Stage – Overview
processes
- Evaluation of service performance 3. How long delivery lasts
- Future intentions 4. The recommended level and style of service to be
offered
Customer Satisfaction with Service Experience
Integration of Product (for hotel example)
- Satisfaction
➢ attitude-like judgment following a service - Core Delivery Process
purchase or series of service interactions ➢ Scheduling
➢ Customer Satisfaction with Service ➢ Nature of Process
Experience Satisfaction: attitude-like ➢ Service Level
judgment following a service purchase or ➢ Customer Role
series of service interactions - Supplementary Services
➢ Parking
Satisfaction judgments are based on this comparison
➢ Check-in/out
- Positive Disconfirmation ➢ Porter
➢ (+ ) Better than expectations ➢ Television
- Confirmation ➢ Room service
➢ ( +/-) Same with expectations ➢ Reservation
- Negative Disconfirmation
THE FLOWER OF Service
➢ (-)Lesser than expectations
- Facilitating elements
Customer Delight: Going Beyond Satisfaction
➢ either needed for service delivery, or help in
- Unexpectedly high levels of performance the use of the core product
- Arousal ➢ INFORMATION
- Positive affect ➢ PAYMENT
➢ BILLING
================================================= ➢ ORDER TAKING
- Enhancing elements
➢ add extra value for the customer
UNIT 2: Applying the 4Ps to Services ➢ CONSULTATIN
Developing Service Product (Lecture 4) ➢ HOSPITALITY
➢ SAFE KEEPING
Developing Service Products: Core and Supplementary ➢ EXCEPTIONS
Elements

Components of a Service Product

- A Service product comprises of all elements of

service performance, both tangible and intangible,
that create value for customers
FLOWER OF SERVICE FACILITATING ELEMENTS Facilitating Services – Billing

Remember the Acronym (PIBO) - Periodic statements of account activity

- Invoices for individual transactions
Payment
- Verbal statements of amount due
Information - Self-billing (computed by customer)
- Machine display of amount due
Billing
--------------------------------------------------------------------------------
Order-taking
FLOWER OF SERVICE ENHANCING ELEMENTS
Facilitating Services – Payment
Remember the Acronym (CHES)
- Self-Service
➢ Insert card, cash or token into machine Consultation
➢ Electronic funds transfer
Hospitality
➢ Mail a check
➢ Enter credit card number online Exception
- Direct to Payee or Intermediary
Safekeeping
➢ Cash handling or change giving
➢ Check handling Enhancing Services –Consultation
➢ Credit/charge/debit card handling
➢ Coupon redemption - Customized advice
- Automatic deduction from financial deposits - Personal counseling
➢ Automated systems (e.g., machine-readable - Tutoring/training in product use
tickets that operate entry gate) - Management or technical consulting
➢ Human systems (e.g., toll collectors) - Examples:
- Examples: ➢ Training / Tutoring
➢ Cash ➢ Product Training
➢ Check ➢ Counseling or Advise (Legal services)
➢ Electronic System Payment Enhancing Services –Hospitality
➢ Human System Payment
- Greeting, Food and beverages, Toilets and
Facilitating Services –Information washrooms, Waiting facilities and amenities
- Directions to service site ➢ Lounges, waiting areas, seating
- Schedules/service hours ➢ Weather protection
- Prices ➢ Magazines, entertainment, newspapers
- Reminders - Transport
- Warnings - Security
- Conditions of sale/service - Examples:
- Notification of changes ➢ Physical Security
- Documentation ➢ Data Security
- Confirmation of reservations ➢ Welcome Food and Drinks
- Summaries of account activities ➢ Greetings
- Receipts and tickets ➢ Lounge / waiting areas
- Examples: ➢ Free reading materials
➢ Warning (Out of Service) ➢ Free Shuttle
➢ Operational hours (Open Monday-Friday) Enhancing Services –Exceptions
➢ Direction
➢ Confirmation of reservation - Special Requests in Advance of Service Delivery
➢ Children’s needs
Facilitating Services – Order-Taking ➢ Dietary requirements
- Applications ➢ Medical or disability needs
➢ Memberships in clubs/programs ➢ Religious observances
➢ Subscription services (e.g., utilities) - Handling Special Communications
➢ Prerequisite based services (e.g., financial ➢ Complaints
credit, college enrollment) ➢ Compliments
- Order Entry ➢ Suggestions
➢ On-site order fulfillment - Problem Solving
➢ Mail/telephone/e-mail/web order ➢ Warranties and guarantees
- Reservations and Check-in ➢ Resolving difficulties that arise from using
➢ Seats/tables/rooms the product
➢ Vehicles or equipment rental ➢ Resolving difficulties caused by accidents,
➢ Professional appointments service failures
- Examples: ➢ Assisting customers who have suffered an
➢ Telephone Order Taking (Jollibee #8-7000) accident or a medical emergency
➢ Membership Subscription (S&R and Landers - Restitution
shopping) ➢ Refunds and compensation
➢ On-line Subscription (Netflix) ➢ Free repair of defective goods
 - Examples: THE BRANDED HOUSE
➢ Complaint
- A firm employing n umbrella corporate or family
➢ Special Requests
branding for all its products
➢ Refund for Unsatisfied Service
- Using a single brand to cover all products and
➢ Repair of Defective Product
services
Enhancing Services –Safekeeping - Example:
➢ Apple (iPhone, iPad, iMac)
- Caring for Possessions Customer Bring with Them
➢ FedEx Corporation (FedEx Express, FedEx
➢ Child care, pet care
Freight, FedEx Ground, FedEx Logistics)
➢ Parking for vehicles, valet parking
➢ Coat rooms HOUSE OF BRANDS
➢ Baggage handling
- Collection of individual brands with different names
➢ Storage space
- Contains independent, disconnected brands classic
➢ Safe deposit boxes
and most powerful model for a brand portfolio
➢ Security personnel
- Company owns a number of different brands,
➢ Examples:
possibly several brands in the same category
❖ Child Care / Pet care
- Advantages
❖ Safety deposit Box
➢ Each brand can precisely target a group of
❖ Parking
customers with a distinct product offering
❖ Transportation and Delivery
and positioning
❖ Material Handling
➢ Company can stretch the brand to cover
- Caring for Goods Purchased (or Rented) by
another target market
Customers
➢ Easy to make global
➢ Packaging
➢ Creates a distinct corporate brand
➢ Pickup
➢ Minimize risk because of diversification
➢ Transportation and delivery
- Disadvantages
➢ Installation
➢ Hard to manage due to complexity
➢ Inspection and diagnosis
➢ Senior management cannot focus on each
➢ Cleaning
brand individually
➢ Refueling
➢ Company is forced to devote resources to
➢ Preventive maintenance
marketing the corporate brand
➢ Repair and renovation
- Example:
-------------------------------------------------------------------------------- ➢ P&G Procter & Gamble (Gillette, Tide, Head
& Shoulders, VICKS, Oral B, Olay)
Branding Service Products & Experiences
➢ Volkswagen (Audi, Porsche, Skoda, Bugatti,
- Branding can be employed at both the corporate Bentley)
and product levels by almost any service business
SUB-BRANDS
1. Corporate Level Branding
➢ Corporate branding refers to the practice of - New product carries both parent brand name and a
promoting the brand name of a corporate new name
entity, as opposed to specific products or - Example:
services ➢ Apple (Apple Watch, Apple News, Apple
➢ Fore example: Apple, Nike, & Coca-Cola TV+, Apple Music)
2. Product Level Branding ➢ Ayala’s Ayala Land (AC Energy, AC
➢ Product branding is a strategy that defines a Industrials, AC Health, AC Education, AC
unique set of marketing elements to Infa)
differentiate a given product
ENDORSED BRANDS
➢ For Example: Bisleri, Thumbs-up & Nails
- Example:
BRAND ARCHITECTURE or THE SPECTRUM OF BRAND
➢ Nestle (Milky Bar, Kit Kat, Milo, Crunch)
ALTERNATIVES
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New Service Development

Hierarchy of New Service Categories

- Major Service Innovations

- Major Process innovations
- Product Line Extensions
- Process Line Extensions
- Supplementary Service Innovations
- Service Improvements
- Style Changes (Simplest type of innovation)
STYLE CHANGES Setting Price-and-Revenue-Management (Lecture 5)

- Simplest type of innovation, involving no changes in Pricing of services

either processes or performance
- Customers find service pricing difficult to
- Example:
understand, risky and sometimes even unethical
➢ McDonald’s crew uniform redesign and
(example: Cebu Pacific Piso fare, with hidden
restaurant interior design
charges)
SERVICE IMPROVEMENTS
Objectives for Pricing of Service
- Involve changes in the performance of current
- Revenue and Profit Objectives
products, including improvements to either the core
➢ Seek Profit
or to existing supplementary services
➢ Cover Costs
- Example:
- Patronage and User-Based Objectives
➢ Use of QR codes
➢ Build Demand
SUPPLEMENTARY SERVICE INNOVATIONS ❖ Demand Maximization
❖ Full Capacity Utilization
- Take the form of adding new facilitating or
➢ Build a user base
enhancing service elements to an existing core
❖ Stimulate trial and adoption of new
service or significantly improving an existing
service
supplementary service
❖ Build market share / large user base
- Example:
➢ Payment options (cash, digital payments,
crypto) Pricing Strategy As Represented by the Pricing Tripod

PROCESS LINE EXTENSIONS (Costs, Competition, and Value to Customers)

- Less innovative than process innovations but often

represent distinctive new ways of delivering existing
products, either with the intent of offering more
convenience and a different experience for existing
customers or of attracting new customers
- Example:
➢ Agoda (before only offers hotels, now it
offers car rentals, airline tickets, etc)

PRODUCT LINE EXTENSIONS Three Main Approaches to Pricing

- Additions to a company’s current product lines 1. Cost Based Pricing
MAJOR PROCESS INNOVATIONS ➢ Set prices relative to financial costs
➢ Activity-Based Costing
- Using new processes to delivery existing core ➢ Pricing implications of cost analysis
products in new ways with additional benefits ➢ Example:
- Example:
➢ Online classes

MAJOR SERVICE INNOVATIONS

- New core products for markets that have not been

previously defined
- Example:
➢ Waterless Car wash
2. Value Based Pricing
================================================= ➢ Relate price to value (benefits)perceived by
customer
➢ Understanding net value
❖ Value is low price
❖ Value is whatever I want in a
product
❖ Value is the quality I get for the
price I pay
❖ Value is what I get for what I give
➢ Example: Cebu Pacific (low-cost carrier) vs
Philippine Airlines (Full-service airlines)
3. Competition Based Pricing
➢ Monitor competitors’ pricing strategy
➢ Dependent on the price leader
➢ Example: (Computer shop vs computer
shop 20-30 pesos per hour)
Price competition increases due to: Key Categories of Rate Fences: Non Physical Fences

- Increasing competition Consumption Characteristics

- Increase in substituting offers
Rate Fences Examples
- Wider distribution of competitor
Time or • Early bird special in restaurant
- Increasing surplus capacity in the industry
duration of before 6pm
However under these circumstances, price competition use • Must stay over on Sat for airline,
can decrease: hotel
• Must stay at least five days
- High non-price-related costs of using alternatives Location of • Price depends on departure
- Personal relationships matter consumption location, especially in international
- Switching costs are high travel
- Time and location specificity reduces choice • Prices vary by location (between
- Managers should examine all related financial and cities, City Centre vs edges of city)
non-monetary costs

Revenue Management (Yield Management) Transaction Characteristics

- involves setting prices according to predicted - consumption, transaction or buyer characteristics,

demand levels among different market segments but otherwise they actually refer to the same basic
- Most Effective in the following conditions: service
➢ High fixed cost structure
Rate Fences Examples
➢ Relatively fixed capacity
Time of • Requirements for advance purchase
➢ Perishable inventory
booking or • Must pay full fare two weeks before
➢ Variable and uncertain demand reservation departure
➢ Varying customer price sensitivity
Location of • Passengers booking air tickets for an
Price Elasticity booking or identical route in different countries
reservation are charged different prices
Flexibility of • Fees/penalties for canceling or
ticket usage charging a reservation (up to loss of
entire ticket price)
• Non-refundable reservation fees

Buyer Characteristics

Rate Fences Examples

- Demand is price elastic. Small changes in price lead Frequency or • Members of certain loyalty tier with
to big changes in demand volume of the firm get priority pricing,
- Demand for service is price inelastic. Big changes consumption discounts or loyalty benefits
have little impact on demand Group • Child, student, senior citizen
- Formula of Price Elasticity = membership discounts
Percentage change in demand • Affiliation with certain groups (e.g.
Percentage change in price Alumni)
Size of • Group discounts based on size of
Designing Rate Fences customer group
group
- Revenue Management is price customization
➢ Charge different value segments different
prices for same product based on price ETHICAL CONCERNS IN PRICING
sensitivity
- Many services have complex pricing schedules
Key Categories of Rate Fences: Physical (Product-related) ➢ Hard to understand
Fences ➢ Difficult to calculate full costs in advance of
service
Rate Fences Examples - Unfairness and misrepresentation in price
Basic Product • Class of travel (Business/ Economy promotions
Class) ➢ Misleading advertising
• Size and furnishing of a hotel room ➢ Hidden charges
• Seat location in a theater
- Too many rules and regulations
Amenities • Free breakfast at a hotel, airport
➢ Customers feel constrained, exploited
pickup, etc
➢ Customers unfairly penalized when plans
• Free golf cart at a golf course
change
Service Level • Priority wait listing
• Increase in baggage allowances
• Dedicated service hotlines
• Dedicated account management
team
DESIGNING FAIRNESS INTO REVENUE MANAGEMENT
- Design clear, logical, and fair price schedules and
fences
- Use high published prices and present fences as
opportunities for discounts
- Communicate consumer benefits of revenue
management
- Use bundling to “hide” discounts
- Take care of loyal customers
- Use service recovery to compensate for
overbooking
PRICING ISSUES: PUTTING STRATEGY INTO PRACTICE
1. How much to charge?
2. What basis for pricing?
3. Who should collect payment?
4. Where should payment be made?
5. When should payment be made?
6. How should payment be made?
7. How to communicate prices?
=================================================
Distributing Services Through Physical and E-Channels
(Lecture 6)
How does distribution work in a service context?
Applying the Flow Model of Distribution to Service
Distribution embraces 3 interrelated elements:
1. Information and Promotion Flow
➢ Get customer interested in buying the
service
➢ “Grab customer’s attention through flyers”
2. Negotiation Flow
➢ sell the right to use a service
➢ “Agreement between customer and seller
has been made”
3. Product Flow
➢ Develop a network of local sites
Distinguishing between Distribution of Supplementary and
Core Service
- Most core services require physical locations
- Many supplementary services are informational;
can be distributed widely & cost-effectively via
other means such as telephone and internet
How should services be distributed?
Distribution Options for Serving Customers
- Customers visit service site
➢ Convenience of service factory locations and
operational schedules assume great
importance when a customer has to be
physically present
➢ Example: Salons
- Service providers go to customers
➢ Unavoidable when object of service is
immovable
➢ Needed for remote areas
➢ Greater likelihood of visiting corporate
customers than individuals
➢ Example: Plumbing services
- Service transaction is conducted remotely (at arm’s
length)
➢ Achieved with help of logistics and
telecommunications
--------------------------------------------------------------------------------
Channel Preferences Vary Among Customers
- Cost implications
- Affects the nature of service experience
- Example: Online banking – fast transactions but has
security threats
1. Complex & high perceived risk services
➢ Rely on personal channels
2. Higher confidence &knowledge about service
➢ Use impersonal self-service channels
3. Customers with social motives tend to use personal
channels
4. Convenience is a key driver of channel choice
--------------------------------------------------------------------------------
PLACE AND TIME DECISIONS
HOW SHOULD SERVICE MANAGERS MAKEDECISIONS ON
THE PLACES WHERE SERVICE ISDELIVERED AND THE TIMES
WHEN IT IS AVAILABLE?
1. Understanding customer needs and expectations
2. Competitive activity
3. Nature of the service operation
Place and Time Decisions
- PLACE DECISION OF SERVICE DELIVERY
➢ Cost, productivity and access to labor are
key determinants to locating a service
facility
➢ Mini stores
➢ Locating in multipurpose facilities
- Locational Constraints
➢ Need for economies of scale (e.g. Hospitals)
➢ Operational requirement(e.g. airports)
➢ Geographic factor (e.g. ski resorts)
Time of Service Delivery
➢ Traditionally, schedules wererestricted
❖ Service availability limited today
time, 40-50 hours a week
➢ Today
❖ Flexible, responsive service
operations: 24/7
Delivering services in cyberspace
➢ Technological innovations
➢ Examples: Drones, AI etc
E-Commerce: Move to Cyberspace
What are the factors that encourage firms to use virtual
stores?
- Convenience
- Ease of search
- Broader selection
- Potential for better prices
- 24-hour service with prompt delivery
Role of Intermediaries
How should a service provider work in partnership with one
or more intermediaries to deliver a complete service
package to customers?
Splitting responsibilities for supplementary service elements
As created by As enhanced by As experienced
originating firm distributor by customer
Core Product Supplementary Total experience
services and benefits
Challenges for original supplier
- Act as guardian of overall process
- Ensure that each element offered by intermediaries
fits overall service concept
Challenges of Distribution in Large Domestic Markets
- Distributing services (e.g. Physical logistics) faces
challenges due to:
➢ Distances involved
➢ Multiple time zones
➢ Multiculturalism
➢ Differences in laws and tax rates
=================================================
Promoting services and Educating Customers (Lecture 7)
THE ROLE OF MARKETING COMMUNICATIONS
“Fastest way to kill a product is to advertise it heavily”
- The location and atmosphere of a service delivery
facility
- Corporate design features such as the consistent
use of colors and graphic elements
- Appearance and behavior of employees
SPECIFIC ROLES OF MARKETINGCOMMUNICATIONS
- Position and differentiate service
- Help customers to evaluate service offerings
- Promote contribution of personnel and backstage
operations
- Add value through communication content
- Facilitate customer involvement in production
- Stimulate or dampen demand to match capacity
Help customers to evaluate service offerings
- Customers may have difficulty distinguishing one
firm from another
➢ Provide tangible clues related to service
performance
- Some performance attributes lend themselves
better to advertising than others
➢ Airlines
- Firm’s expertise is hidden in low-contact services
➢ Need to illustrate equipment, procedures,
employee activities that take place
backstage
PROMOTE CONTRIBUTIONS OF SERVICE PERSONNELL
- Frontline personnel are central to service delivery in
high contact services
➢ Make the service more tangible and
personalized
- Show customers work performed behind the scenes
to ensure good delivery
➢ To enhance trust, highlight expertise and
commitment of employees
➢ Advertisements must be realistic
➢ Messages help set customers’ expectations
FACILITATE CUSTOMER INVOLVEMENT INPRODUCTION
- Customers are actively involved in service
production; they need training to perform well
- Show service delivery in action
- Television and videos engage viewer
➢ Dentists showing patients videos of surgical
procedures before surgery
- Streaming videos on web and podcasts are new
channels to reach active customers
STIMULATE OR DAMPEN DEMAND TOMATCH CAPACITY
- Live service performances are time-specific and
can’t be stored for resale at a later date
➢ Advertising and sales promotions can
change timing of customer use
- Examples of demand management strategies:
➢ Reducing usage during peak demand
periods
➢ Stimulating demand during off-peak period
--------------------------------------------------------------------------------
CHALLENGES OF SERVICES COMMUNICATIONS
Problems of intangibility (Intangibility creates 4 problems)
1. Generality
➢ Items that comprise of class of objects,
persons or events
2. Abstractness
➢ No one to one correspondence with
physical objects
3. Non-Searchability
➢ Cannot be searched or inspected before
purchase
4. Mental Impalpability
➢ Customers find it hard to grasp benefits of
complex, multidimensional new offerings
Overcoming Problems of Intangibility
1. To overcome intangibility
➢ Use tangible cues in advertising
➢ Use metaphors
2. Tangible metaphors help to communicate benefits
of service offerings
➢ “You’re in Good Hands”
3. Metaphors communicate value propositions more
dramatically and emphasize key points of
difference
➢ Accenture features Tigerwoods
ADVERTISING STRATEGIES FOROVERCOMING INTANGIBILITY Educational and Promotional Objectives in Service Settings

Intangibility Advertising Description - Create memorable images of specific companies

Problem Strategy and their brands
Incorporeal Physical Show Physical - Reposition service relative to competition
Existence Representation Components of - Familiarize customers with service processes before
Service use
Generality: - Build awareness and interest for unfamiliar service
• For System Objectively - Reduce uncertainty or perceived risk by providing
Objective documentation document physical useful info and advice
Claims system capacity
- Teach customers how to use a service to best
Performance
advantage
documentation Document and cite
past performance - Compare service favorably with competitors’
statistics offerings
• For Service Present an actual - Provide reassurance (e.g., promote service
Subjective performance service delivery guarantees)
Claims episode incident - Stimulate demand in off-peak, discourage during
Non- Consumption Obtain and present peak
Searchability documentation customer - Build preference by communicating strengths and
testimonials benefits
- Encourage trial by offering promotional incentives
Reputation Cite independently - Recognize and reward valued customers and
documentation audited performance employees
Abstractness Service Capture and display
Consumption typical customers MARKETING COMMUNICATIONS MIX FOR SERVICES
episode benefiting from the
service 1. Personal Communications
Impalpability Service process Present a vivid ➢ Selling
episode documentary on the ➢ Customer Service
step by step service ➢ Training
process ➢ Telemarketing
➢ Word of mouth
Case history Present an actual 2. Advertising
episode case history of what ➢ Broadcast
the firm did for a ➢ Print
specific client ➢ Internet
➢ Outdoor
Service An articulate
➢ Direct Mail
consumption narration or
3. Sales Promotion
episode depiction of a
customer’s ➢ Sampling
subjective ➢ Coupon
experience ➢ Sign-up rebates
➢ Gifts
➢ Prize promotions
MARKETING COMMUNICATIONS PLANNING 4. Publicity & Public Relations
CHECKLIST: The “5 WS” Model ➢ Press releases/kits
➢ Press conferences
1. Who is our target audience? ➢ Special events
2. What do we need to communicate and achieve? ➢ Sponsorship
3. How should we communicate this? ➢ Trade shows, Exhibitions
4. Where should we communicate this ➢ Media-initiated coverage
5. When do communications need to take place? 5. Instructional Materials
➢ Web sites
➢ Manuals
TARGET AUDIENCE: 3 BROAD CATEGORIES ➢ Brochures
➢ Video-audiocassettes
1. Prospects
➢ Software CD-ROM
➢ Employ traditional communication mix
➢ Voice mail
because prospects are not known in
6. Corporate Design
advance
➢ Signage
2. Users
➢ Interior Décor
➢ More cost-effective channels utilized
➢ Vehicles
3. Employees
➢ Equipment
➢ Secondary audience for communication
➢ Stationery
campaigns
➢ Uniforms
➢ Shape behavior
➢ Part of internal marketing campaign using
company-specific channels
Sources of Messages Received by Target Audience Internet Marketing Offers Powerful Opportunities

- Supplement traditional marketing channels at a

reasonable cost
- Part of an integrated, well-designed
communications strategy
- Can market through the company’s own website or
through online advertising

Website Design Considerations

- Used for a variety of communication tasks

Traditional Marketing Channels
➢ Promoting consumer awareness and
Channel Aim Challenges interest
Advertising: Build awareness, Needs to be ➢ Providing information and consultation
Done via media inform, unique as less ➢ Facilitating 2-way communication
channels persuade, and than half of all ads ➢ Stimulating product trial
remind generate a ➢ Enabling customers to place orders
positive ROI - Design should address attributes that affect
Public Relations: Builds Form relationships website “stickiness”
Efforts to reputation and with its
➢ High in quality content
stipulate positivecredibility to employees,
➢ Ease of use
interest through secure an image customers, and
third parties conducive to the community ➢ Quick to download
conduct ➢ Frequency of update
business - Memorable Web address helps attract visitors to
Direct Send Advance in on- the site
Marketing: Such personalized demand
as mail, e-mail & messages to technologies (e.g.,
Effective Advertising on Internet: Banner Advertising
Text messages highly targeted spam filters,
micro-segments; cookie busters, - Banner Advertising: Placing advertising banners and
use permission pop-up buttons on portals such as Yahoo and other firms’
marketing blockers)empower websites to draw online traffic to own site
where consumers to
- Easy for advertisers to measure how many visits to
customers “raise decide how and
its own website are generated by click-throughs
their hands” and when they prefer
agree to learn to be reached, - Limitations
more about a and by whom ➢ Obtaining many exposures does not
company and its necessarily lead to increase in awareness,
products preference, or sales
Sales Promotion: Generate Motivating ➢ Fraudulent click-throughs designed to boost
Communication attention and customers to use apparent effectiveness
attached to an speed up a service sooner,
incentive that is introduction and in greater volume, Effective Advertising on Internet: Search Engine
specific to a acceptance of or more Advertising
period of time, new services frequently - Search Engine Advertising (Reverse broadcast
price, or especially during
network): search engines let advertisers know
customer group periods when
exactly what consumer wants through their
demand would be
weak keyword search
Personal Selling: Educate Relationship - E.g., Google – The New Online Marketing
Common in b2b customers and marketing Powerhouse via Adsense and Adwords
and infrequently promote strategies based - Target relevant messages directly to desired
purchased preferences for on account consumers
services particular brand management - Advertising options:
or product programs incur ➢ Pay for targeted placement of ads to
high staffing costs; relevant keyword searches
telemarketing is a ➢ Sponsor a short text message with a click-
lower cost through link
alternative ➢ Buy top rankings in the display of search
Trade Shows Stimulate Opportunity to
results
extensive media learn about latest
coverage with offerings from
many wide array of
prospective suppliers
buyers
Messages Transmitted through Service Delivery Channels Developing An Integrated Marketing Communications
Strategy
1. Service Outlets
➢ Messages reach customers through the - Communications in different media should form
service delivery environment part of a single, overall message about the service
➢ Servicescape: Physical design firm
2. Front-line employees - IMC ties together and reinforces all
➢ Shape customer’s perceptions communications to deliver a strong brand identity
➢ Delivers supplementary services
➢ Cross-selling of additional services
3. Self-service delivery points
➢ ATM, vending machines and websites
➢ Require clear signage and instructions on
how to use the service
4. Customer training
➢ Familiarize customers with service product
and teach them how to use it to their best
advantage

Messages Originating from Outside the Organization

- Word of Mouth (WOM)

➢ Recommendations from other customers
viewed as more credible
➢ Blogs – A new type of online WOM
- Strategies to stimulate positive WOM:
➢ Creating exciting promotions that get
people talking about firm’s great service
➢ Offering promotions that encourage
customers to persuade others
➢ Developing referral incentive schemes
➢ Referencing other purchasers and
knowledgeable individuals
➢ Presenting and publicizing testimonials
- Media coverage
➢ Compares, contrasts service offerings from
competing organizations
➢ Advice on “best buys”

--------------------------------------------------------------------------------

Ethical and Consumer Privacy Issues in Communication

- Poor internal communications between operations

and marketing personnel concerning level of service
performance
- Deliberately exaggerated promises to secure sales
- Deceptive promotions
- Unwanted intrusion by aggressive marketers into
people’s personal lives

Role of Corporate Design

Strategies for Corporate Design

- Many service firms employ a unified and distinctive

visual appearance for all tangible elements
➢ e.g., Logos, uniforms, physical facilities
- Provide a recognizable theme linking all the firm’s
operations use of physical evidence
➢ e.g., BP’s bright green and yellow service
stations
- Use of trademarked symbol as primary logo, with
name secondary
➢ McDonald’s “Golden Arches”