Service Marketing

Mix
(Product, Promotion,
Price)

Prof. Arun Mishra

arunjimishra@gmail.com
9893686820
Service Marketing Mix
4. Promotion
Specific Roles of Marketing
Communications
• Position and differentiate service
• Help customer evaluate offerings and highlight
differences that matter
• 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
▫ e.g., 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 Personnel
• 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
▫ Service personnel should be informed about the content
of new advertising campaigns or brochures before launch
Facilitate Customer
Involvement in Production
• Customers are actively involved in service
production; they need training to perform well

• Show service delivery in action

• Television and videos engage viewer

▫ e.g., 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
to Match 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
Overcoming Problems of
Intangibility
• Intangibility creates 4 problems:
▫ Generality
 Items that comprise a class of objects, persons, or
events
▫ Abstractness
 No one-to-one correspondence with physical objects
▫ Non-searchability
 Cannot be searched or inspected before purchase
▫ Mental impalpability
 Customers find it hard to grasp benefits of complex,
multi-dimensional new offerings
Overcoming Problems of
Intangibility
• To overcome intangibility
▫ Use tangible cues in advertising
▫ Use metaphors
• Tangible metaphors help to communicate benefits
of service offerings, e.g.,
▫ Allstate – “You’re in good hands”
▫ Prudential Insurance – uses Rock of Gibraltar as
symbol of corporate strength
• Metaphors communicate value propositions more
dramatically and emphasize key points of
difference
Advertising Strategies for
Overcoming Intangibility
 Marketing
Communications
Planning
Checklist: The “5 Ws” Model

• Who is our target audience?

• What do we need to communicate and achieve?

• How should we communicate this?

• Where should we communicate this?

• When do communications need to take place?

Target Audience: 3 Broad Categories
• Prospects
▫ Employ traditional communication mix because
prospects are not known in advance
• Users
▫ More cost effective channels utilized
• Employees
▫ Secondary audience for communication
campaigns
▫ Shape behavior
▫ Part of internal marketing campaign using
company-specific channels
Educational and Promotional
Objectives in Service Settings
• Create memorable images of specific companies
and their brands
• Build awareness and interest for unfamiliar service
• Compare service favorably with competitors’
offerings
• Build preference by communicating strengths and
benefits
• Reposition service relative to competition
• Reduce uncertainty or perceived risk by providing
useful info and advice
Educational and Promotional
Objectives in Service Settings
• Provide reassurance (e.g., promote service
guarantees)
• Encourage trial by offering promotional incentives
• Familiarize customers with service processes before
use
• Teach customers how to use a service to best
advantage
• Stimulate demand in off-peak, discourage during
peak
• Recognize and reward valued customers and
employees
Educational and Promotional
Objectives in Service Settings

Create
Build Compare Build
memorable
awareness service preference by
images of
and interest favorably with communicatin
specific
for unfamiliar competitors’ g strengths
companies &
service offerings and benefits
their brands

Reduce
Provide Encourage
Reposition uncertainty or
reassurance trial by
service perceived risk
(e.g., promote offering
relative to by providing
service promotional
competition useful info
guarantees) incentives
and advice

Familiarize Teach Stimulate Recognize and

customers customers demand in off- reward valued
with service how to use a peak, customers
processes service to best discourage and
before use advantage during peak employees
 The Marketing
Communications Mix
Marketing Communications
Mix for Services
 Sources of Messages Received
by Target Audience

Adapted from a diagram by Adrian Palmer, Principles of Services Marketing, London: McGraw-Hill,4th ed., 2005, p. 397
Traditional Marketing Channels
Channel Aim
Advertising: Done Build awareness, inform,
via media channels persuade, and remind
Public relations: Builds reputation and
Efforts to stimulate credibility to secure an
positive interest image conducive to conduct
through third parties business
Direct Marketing Send personalized messages
such as mail, e-mail & to highly targeted micro-
text messages segments; use permission
marketing where customers
“raise their hands” and agree
to learn more about a
company and its products
Challenges
Needs to be unique as less
than half of all ads generate
a positive ROI
Form relationships with its
employees, customers, and
the community
Advance in on-demand
technologies (e.g., spam
filters, cookie busters, pop-
up blockers) empower
consumers to decide how
and when they prefer to be
reached, and by whom
Traditional Marketing Channels
Channel Aim Challenges
Sales Promotion: Generate attention and Motivating customers to use a
Communication attached speed up introduction service sooner, in greater
to an incentive that is and acceptance of new volume, or more frequently
specific to a period of services especially during periods when
time, price, or customer demand would be weak
group
Personal Selling: Educate customers and Relationship marketing
Common in b2b and promote preferences strategies based on account
infrequently purchased for particular brand or management programs incur
services product high staffing costs;
telemarketing is a lower cost
alternative
Trade Shows Stimulate extensive Opportunity to learn about
media coverage with latest offerings from wide
many prospective array of suppliers
buyers
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
▫ Promoting consumer awareness and interest
▫ Providing information and consultation
▫ Facilitating 2-way communication
▫ Stimulating product trial
▫ Enabling customers to place orders
• Design should address attributes that affect website
“stickiness”
▫ High in quality content
▫ Ease of use
▫ Quick to download
▫ Frequency of update
• Memorable Web address helps attract visitors to
the site
Effective Advertising on
Internet: Banner Advertising
Banner Advertising: Placing advertising banners and
buttons on portals such as Yahoo and other firms’
websites to draw online traffic to own site

• Easy for advertisers to measure how many visits to its own

website are generated by click-throughs

• Limitations
▫ Obtaining many exposures does not necessarily lead to
increase in awareness, preference, or sales
▫ Fraudulent click-throughs designed to boost apparent
effectiveness
Effective Advertising on
Internet: Search Engine Advertising
Search Engine Advertising (Reverse broadcast
network): search engines let advertisers know
exactly what consumer wants through their keyword
search
• Target relevant messages directly to desired consumers
• Advertising options:
▫ Pay for targeted placement of ads to relevant keyword searches
▫ Sponsor a short text message with a click-through link
▫ Buy top rankings in the display of search results

• E.g., Google – The New Online Marketing Powerhouse via

Adsense and Adwords
Messages Transmitted
through Service Delivery Channels
• Messages reach customers through the
Service outlets service delivery environment
• Servicescape: Physical design

Front-line • Shape customer’s perceptions

• Delivers supplementary services
employees • Cross-selling of additional services

Self-service • ATM, vending machines and websites

• Require clear signage and instructions
delivery points on how to use the service

Customer • Familiarize customers with service

product and teach them how to use it to
training their best advantage
Messages Originating from
Outside the Organization
• Word of Mouth (WOM)
▫ Recommendations from other customers viewed as more
credible

• 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
Messages Originating from
Outside the Organization
• Blogs – A new type of online WOM

• Twitter

• Media Coverage
▫ Compares, contrasts service offerings from
competing organizations
▫ Advice on “best buys”
The Extended Marketing Mix
• People are crucial in service delivery. The best food
may not seem equally tasty if the waitress is in a sour
mood. A smile always helps.
• Processes are important to deliver a quality service.
Services being intangible, processes become all the
more crucial to ensure standards are met with.
• Physical evidence affects the customer’s
satisfaction. Services being intangible, customers
depend on other cues to judge the offering. This is
where physical evidence plays a part.
• Productivity and Quality is the another P which
has grown in significance in Services Marketing is the
8th P.
Unit IV
The Extended Marketing Mix
People
Service Employees Are
Crucially Important
Service Personnel: Source of
Customer Loyalty & Competitive Advantage
• Customer’s perspective: encounter with service
staff is most important aspect of a service

• Firm’s perspective: frontline is an important source

of differentiation and competitive advantage

• Frontline is an important driver of customer loyalty

▫ anticipating customer needs
▫ customizing service delivery
▫ building personalized relationships
Frontline in Low-Contact Services

• Many routine transactions are now

conducted without involving frontline
staff, e.g.,
▫ ATMs (Automated Teller Machines)
▫ IVR (Interactive Voice Response) systems
▫ Websites for reservations/ordering, payment,
etc.

• However, frontline employees remain

crucially important

• “Moments of truths” drive customer’s

perception of the service firm
Factors Contributing to
the Difficulty of
Frontline Work
Boundary Spanning Roles

• Boundary spanners link the organization to outside

world

• Multiplicity of roles often results in service staff

having to pursue both operational and marketing
goals

• Consider management expectations of service staff:

▫ delight customers
▫ be fast and efficient in executing operational tasks
▫ do selling, cross selling, and up-selling
▫ enforce pricing schedules and rate integrity
Role Stress in Frontline
Employees
• Organization vs. Client: Dilemma whether to follow
company rules or to satisfy customer demands
▫ This conflict is especially acute in organizations that
are not customer- oriented

• Person vs. Role: Conflicts between what jobs

require and employee’s own personality and beliefs
▫ Organizations must instill ‘professionalism’ in
frontline staff

• Client vs. Client: Conflicts between customers that

demand service staff intervention
Emotional Labor
• “The act of expressing socially desired emotions
during service transactions” (Hochschild, The
Managed Heart)
▫ Performing emotional labor in response to society’s
or management’s display rules can be stressful
▫ Good HR practice emphasizes selective recruitment,
training, counseling, strategies to alleviate stress
 Cycles of Failure,
Mediocrity, and Success
Cycle of Failure
Cycle of Failure

• The employee cycle of failure

▫ Narrow job design for low skill levels
▫ Emphasis on rules rather than service
▫ Use of technology to control quality
▫ Bored employees who lack ability to respond to
customer problems
▫ Customers are dissatisfied with poor service attitude
▫ Low service quality
▫ High employee turnover
Cycle of Failure
• The customer cycle of failure
▫ Repeated emphasis on
attracting new customers
▫ Customers dissatisfied with
employee performance
▫ Customers always served by
new faces
▫ Fast customer turnover
▫ Ongoing search for new
customers to maintain sales
volume
Cycle of Failure

• Costs of short-sighted policies are ignored:

▫ Constant expense of recruiting, hiring, and training
▫ Lower productivity of inexperienced new workers
▫ Higher costs of winning new customers to replace
those lost—more need for advertising and
promotional discounts
▫ Loss of revenue stream from dissatisfied customers
who turn to alternatives
▫ Loss of potential customers who are turned off by
negative word-of-mouth
Cycle Of Mediocrity
Cycle Of Mediocrity

• Most commonly found in large, bureaucratic organizations that

are frustrating to deal with
• Service delivery is oriented towards
 Standardized service  Narrow and repetitive
 Operational efficiencies jobs
 Promotions with long  Successful performance
service measured by absence of
 Rule-based training mistakes
 Little incentive for customers to cooperate with
organizations to achieve better service
 Complaints are often made to already unhappy
employees
 Customers often stay because of lack of choice
Cycle of Success
Cycle of Success

• Longer-term view of financial performance; firm

seeks to prosper by investing in people

• Attractive pay and benefits attract better job

applicants

• More focused recruitment, intensive training, and

higher wages make its employees:
▫ Happier in their work
▫ Provide higher quality, customer-pleasing service
Cycle of Success

• Broadened job descriptions with empowerment

practices enable frontline staff to control quality,
facilitate service recovery

• Regular customers more likely to remain loyal

because they:
▫ Appreciate continuity in service relationships
▫ Have higher satisfaction due to higher quality
 Human Resources
Management –
How to Get it Right?
The Service Talent Cycle
Hire the Right People
• Be the Preferred Employer
• Create a large pool: “Compete for Talent Market
Share”
• Select the right people:
▫ Different jobs are best filled by people with
different skills, styles, or personalities
▫ Hire candidates that fit firm’s core values and
culture
▫ Focus on recruiting naturally warm personalities
for customer-contact jobs

The old saying ‘People are your most important

asset’ is wrong.
Tools to Identify Best
Candidates
• Employ multiple, structured interviews

• Observe behaviour

• Conduct personality tests

• Give applicants a realistic preview of the job

Train Service Employees
Service employees need to learn:

• Organizational culture, purpose, and strategy

• Interpersonal and technical skills

• Product/service knowledge
Is Empowerment Always Appropriate?
• Empowerment is most appropriate when:
▫ Firm’s business strategy is based on personalized,
customized service, and competitive differentiation
▫ Emphasis on extended relationships rather than short-
term transactions
▫ Use of complex and non-routine technologies
▫ Service failures are non-routine
▫ Business environment is unpredictable
▫ Managers are comfortable letting employees work
independently for benefit of firm and customers
▫ Employees seek to deepen skills and have good
interpersonal and group process skills
Control vs. Involvement
• Empowerment systematically redistributes the
following:
▫ Information about operating results and measures of
competitive performance
▫ Knowledge/skills that enable employees to understand
and contribute to organizational performance
▫ Power to influence work procedures and organizational
direction (e.g., quality circles, self-managing teams)
▫ Rewards based on organizational performance (e.g.,
bonuses, profit sharing, stock ownership)

• The Control model concentrates these elements at the top of

the organization whereas the Involvement model pushes
these features throughout the organization
Levels of Employee Involvement
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Job involvement
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Build High-Performance
Service Delivery Teams
• The Power of Teamwork in Services
▫ Facilitate communication among team members
and knowledge sharing
▫ Higher performance targets
▫ Pressure to perform is high
• Creating Successful Service Delivery Teams
▫ Emphasis on cooperation, listening, coaching, and
encouraging one another
▫ Understand how to air differences, tell hard truths,
ask tough questions
▫ Management needs to set up a structure to steer
teams toward success
Motivate and Energize the Frontline
• Use full range of available rewards effectively,
including:
• Job content
▫ People are motivated knowing they are doing a good
job
• Feedback and recognition
▫ People derive a sense of identity and belonging to an
organization from feedback and recognition
• Goal accomplishment
▫ Specific, difficult but attainable, and accepted goals
are strong motivators
Role of Labor Unions
• Challenge is to work jointly with unions, reduce
conflicts, and create a service climate

• Labor unions and service excellence are sometimes

seen
as incompatible, yet many of the world’s most
successful service businesses are highly unionized
(e.g., Southwest Airlines)

• Management consultation and negotiation with

union representatives are essential if employees are
to accept new ideas
Service Leadership and Culture
• Charismatic/transformational leadership:
▫ Change frontline personnel’s values and goals to be
consistent with the firm
▫ Motivate staff to perform at their best

• Service culture can be defined as:

▫ Shared perceptions of what is important
▫ Shared values and beliefs of why they are important

A strong service culture focuses the entire

organization on the frontline, with the top
management informed and actively involved
The Inverted Organizational Pyramid
Internal Marketing

• Necessary in large service businesses that operate

in widely dispersed sites

• Effective internal marketing helps to:

▫ Ensure efficient and satisfactory service delivery
▫ Achieve harmonious and productive working
relationships
▫ Build employee trust, respect, and loyalty
The Extended Marketing Mix
Physical Evidence
Physical Evidence
• ‘The environment in which the service is
delivered and where the firm and customer
interact, and any tangible components that
facilitate performance or communication of the
service’.

(Zeithaml and Bitner, 2003).

Importance of Physical evidence
1. It helps to package the service offering for the
customers.
2. Servicescape can appeal to the emotions of a
person and educe a favourable response from
the customers.
3. It can act as a facilitator to shape customer
behaviour and enable effective flow of activities.
4. It can act as a differentiator to distinguish a
service provider from its competitors.
5. It influences a customer’s subjective perception
of waiting time.
Purpose of Service
Environments
• Shape customers’ experience and their behaviors

• Support image, positioning, and differentiation

• Part of the value proposition

• Facilitate service encounter and enhance

productivity
1. Shape customers’ experience & their
behaviors
• Message-creating medium
▫ symbolic cues to communicate the distinctive nature
and quality of the service experience

• Attention-creating medium
▫ make servicescape stand out from competition and
attract customers from target segments

• Effect-creating medium
▫ use colors, textures, sounds, scents, and spatial
design to enhance desired service experience
2. Support Image, Position & Differentiation

Google Office

Hotel Taj, Mumbai

3. Servicescape as Part of Value Proposition
• Physical surroundings help shape appropriate
feelings and reactions in customers and employees
Main Dimensions in
Servicescape Model
• Ambient Conditions
▫ Characteristics of environment pertaining to our five
senses
• Spatial Layout and Functionality
▫ Spatial layout:
 Floorplan
 size and shape of furnishings
▫ Functionality: ability of those items to facilitate
performance
• Signs, Symbols, and Artifacts
▫ Explicit or implicit signals to:
 help consumers find their way
Selection of Environmental
Design Elements
• Consumers perceive service environments
holistically
▫ No dimension of design can be optimized in
isolation, because everything depends on everything
else
▫ Holistic characteristic of environments makes
designing service environment an art
Tools to Guide Servicescape Design
• Keen observation of customers’ behavior and
responses
• Feedback and ideas from frontline staff and
customers
• Photo audit – Mystery Shopper to take
photographs of service experience
• Field experiments can be used to manipulate
specific dimensions in an environment and the
effects observed
• Blueprinting or service mapping – extended to
include physical evidence in the environment
The Extended Marketing Mix
Processes
Service Process
• It is a flow of activities and a sequence in
which numerous tasks are performed.
• It also attributes roles and
responsibilities of various stakeholders
involved in the process
• A better service provides a key to market
success and growth.
• A better model needs to be designed to
create a superior customer experience.
Factors Influencing choice
of Service Process
• Degree of tangibility
• Direct recipient
• Place and time
• Customisation vs standardisation
• Customer relationship
• Demand and supply
Service Process and
Profitability
• Close link between service process and customer
experience
• Various touch points which offers opportunity to
the service provider to interact with the customer
• For each touch point, opportunity to build up a
relationship with the customer
• A great experience at each touch point leads to
higher customer satisfaction leading to loyalty
• Customer value is a yardstick for measuring a
service process. That should also determine the
resource allocation for resources of the firm.