Reaching services:

communication & distribution

IDL
 Recap
• Issues in pricing services
• Approaches to pricing
– Activity based costing
– Net value and consumer surplus
• Increasing value
– Enhancing perceptions
– Reducing costs
• Yield management
• Rate fences to prevent migration
• Operationalizing pricing
 Reaching services
• Service influence on communication
• Message source
– Marketing, Production & WoM
• Corporate design
• Distribution without product: Service sites
• Role of intermediaries
• Service environment
 Communicating Services Presents
Both Challenges and Opportunities
• Overcoming Problems of Intangibility
– Tangible cues/ Tangible metaphors
• Customer Involvement in Production
– Educate customers
• Difficulty distinguishing one firm from another
– Tangible clues related to service performance
• Need to balance demand and supply
– Stimulate or Dampen Demand to
Match Capacity
• Role of customer contact personnel
– Highlight expertise and commitment of employees
 Messages through Marketing Channels
• Personal selling
– Common in b2b and infrequently purchased services
– Relationship marketing strategies based on account
management programs
– It is expensive, telemarketing is lower cost alternative
• Trade shows
– Stimulate extensive media coverage
– Many prospective buyers come to shows-efficient
– Physical evidence displayed through exhibits, samples,
demonstrations
• Advertising
– Issue of clutter
 Marketing channels (contd)
• Direct marketing
– Mailings, recorded telephone messages, faxes, e-mail
– Potential to send personalized messages to highly targeted
microsegments
– Need detailed database of information about customers and
prospects
• Sales promotion
– Communication attached to an incentive to accelerate
purchase, induce trial
• Samples, coupons, gifts, prize etc.
• Public relations
– Stimulate positive interest through third parties
• press conferences, news releases, sponsorships, community support
 Messages Originating from Outside
the Organization
• Word of Mouth (WOM) - credible
– Strategies to stimulate positive WOM
• Referencing other purchasers and knowledgeable
individuals
• Developing referral incentive schemes
• Presenting and publicizing testimonials that stimulate
WOM
 Strategies for Corporate Design
• Many service firms employ a unified and
distinctive visual appearance for all tangible
elements
– For example, logos, uniforms, physical facilities
 Distribution Options for Serving
Customers
• Distribution of services is unlike a physical
product and may require service delivery sites.
This suggests different contact options
– Customers visit service site
• Convenience of service factory locations and operational
schedules important
– Service providers go to customers
• Unavoidable when object of service is immovable
– Service transaction is conducted remotely
 Places of Service Delivery
• Location constraints
– Operational requirements (Airports)
– Geographic factors (Ski resorts)
– Need for economies of scale (Hospitals)
• Ministores
– Create many small service factories for geographic
coverage (Automated kiosks)
– Separating front and back stages of operation (K-
restaurants)
• Locating in multipurpose facilities
– Proximity to where customers live or work
 Role of Intermediaries
• Franchising is a fast growth strategy, when
– Resources are limited
– Long-term commitment of store managers is crucial
– Local knowledge is important
– Fast growth is necessary to pre-empt competition
• Alternative: license another supplier to act on the
original supplier’s behalf to deliver core product,
for example:
– Trucking companies
– Banks selling insurance products
 Dimensions of the Service Environment
Helps the firm to create a distinctive image & positioning that
is unique. The main dimensions in the servicescape model
includes:

• Ambient Conditions
– Music (e.g, fast tempo and high volume increase arousal levels)

– Scent (strong impact on mood, affect and evaluative responses,

purchase intention and in-store behavior)

– Color (e.g, warm colors associated with elated mood states and
arousal but also increase anxiety, cool colors reduce arousal but
can elicit peacefulness and calm)
 Dimensions of the Service
Environment (con’t)
• Spatial Layout and Functionality
– Layout refers to size and shape of furnishings and the ways it is
arranged
– Functionality is the ability of those items to facilitate performance

• Signs, Symbols and Artifact

– Explicit or implicit signals to communicate the firm’s image, help
consumers find their way and to convey the rules of behavior
 Recap
• Service influence on communication
• Message source
– Marketing, Production & WoM
• Corporate design
• Distribution without product: Service sites
• Role of intermediaries
• Service environment