Service Characteristics of Hospitality and Tourism

Marketing
Chapter 2
 Chapter Objectives
• Describe a service culture

• Identify four service characteristics that affect

the marketing of a hospitality or travel
product.

• Explain marketing strategies that are useful in

the hospitality and travel industries
 Services Marketing
Service industries varies:
• governmental services - courts, hospitals, police, fire
departments, postal services, schools etc;
• private non-profit organizations - museums, colleges,
hospitals etc;
• business organizations - airlines, hotels, restaurants,
advertising, real estate etc.
 Satisfying the Customers
• The aim of the service organizations is also serving and satisfying the
customer.

• Lets look at few examples.

 Satisfying the Customers
• E.g. Novotel and Sofitel; identified loyalty members checking into the
hotels that month, and then checking (public) social media profiles to
identify the guests’ interests. A gift was then selected to “Take guest
recognition to the next level, to a more powerful level,
• E.g. a man suing General electric when his cat had died the microwave.
That the instruction manual did not mention cats. GE gave the man a
compensation and a new microwave.
 The Service Culture
• The service culture focuses on serving and satisfying
the customer.
• Do you think our organizations have a service culture?
Bad customer services example next slide

• Empowers employees to solve customer

problems.

• Majority of many countries’ GDP is service based.

Switzerland is ranked no.1 in hospitality and tourism
The Service Culture
The Service Culture
The Service Culture
 The Service Culture
(Group exercise)

• Someone didn’t like your food. How would you say sorry?
__________________________________________________
________________________________________________
• Or been late or the customer has been waiting. What would
you say to ensure excellent customer service?
__________________________________________________
________________________________________________
 The Service Culture
• Someone didn’t like your food. How would you say
sorry?
• I sincerely apologize for the inconvenience caused
and we would solve this by……
• Or been late or the customer has been waiting. What
would you say to ensure excellent customer service?
• I am sorry for keeping you waiting for such a long
time
Characteristics of Service
Marketing
 Service Intangibility

Unlike physical products, services cannot be seen, tasted, felt,

heard or smelled before they are bought.
• Buyers look for “signals” or “tangible evidences” like the
place, people, price, equipment and information about the
service in order to reduce uncertainty caused by intangibility
before they pay the price.
• E.g. the cleanliness of the restaurant, employee uniforms of the
hotel.
 Service Inseparability
Services cannot be separated from their both (1) providers and (2) other
customers.
• If a service employee provides the service, then the employee is part of the
service. E.g. the food in the restaurant may be outstanding, but if the service
person is rude, customers will downrate the overall service of the restaurant.
• Other customers affect the service outcome as well. E.g. a couple may choose a
restaurant but if a group of loud customers is seated next to them, the couple
will be disappointed.
 Service Variability
• The quality of services depends on who provides them, plus,
when, where, and how they are provided. E.g. within a given hotel
chain, one reception desk agent may be cheerful and efficient one day but
would be unpleasant and slow the other day.
• Fluctuating demand makes it difficult to deliver consistent
services during periods of peak demand.
• Variability or lack of consistency is the major cause of customer
disappointment in the industry.
 Service Perishability
• Services cannot be stored for later sale or use. E.g. if a 100 room hotel can sell
only 40 rooms today, selling the remaining 60 is gone forever.
• If service providers are to maximize revenue, they must manage capacity and
demand. E.g. hotels charge lower rates in the off-season to attract more guests;
restaurants hire part-time employees to serve during peak periods; tour operators
and airline companies have last-minute sales.
• Service perishability is a serious problem when demand fluctuates.
 Group review questions
• Illustrate how a hotel or restaurant (choose one) can deal
with the intangibility, inseparability, variability, and
perishability of the service it provides. Give specific
examples.

• When a store is overstocked on ripe fruit, it may

lower the price to sell out quickly.
What are airlines
doing to their prices as the seats get close to “perishing”?
Why are tomorrow’s fares often higher?
• Intangibility- "services cannot be seen, tasted, felt, heard, or
smelled before purchased For Example: if you are booking
online you do not see the physical room you are staying in until
you get there.·
• Inseparability- services cannot be separated from their providers
For Example: If you choose a quiet and romantic restaurant to
spend your anniversary with your wife, but the crowd around you
is noisy, you will be disappointed.
• Variability-Quality of services depends on who provides them
and when, where, and how. For Example: If the restaurant's
service staff can't provide good service to customers, the customer
experience will not be so good. So no matter how good the food
is, if customers receive poor service from a bad employee, they
are likely to negatively impact the restaurant.
• Perishability- services cannot be stored for later sale or use. For
example: If a hotel has a room that is not sold, it has no revenue.
The room is sold the next day, but the previous loss cannot be
made up
 Answer to Airlines
• If their seats are getting perishable, airlines might reduce the
amount of service they provide. Airlines have reported saving
$150,000 just by removing one of 2 glass cups on their trays. So
if airlines are getting in tough financial situations they can reduce
the service. Or provide last minute ticket sales.
• Seats are more expensive ‘’tomorrow’’ as certain uploaded classes
have been sold out and Y class might be available the next day.
 Marketing Strategies for
Service Businesses
• Services are different from tangible products that is why
additional marketing approaches are needed to market
services.
• Service companies must increase their competitive
differentiation, service quality, and productivity
•E.g. next slide
 Marketing Strategies for
Service Businesses
•Market Research. Research is the bedrock of all present-day marketing
efforts.
•Niche strategy.
•High performance website.
•Search engine optimization (SEO).
•Social media. (SMO)
•Advertising.
•Referral service marketing.
•Marketing automation software, CRM.
•examples: http://www.banojhotel.com/

• E.g. Design a marketing program aimed at loyal customers, providing incentives for them to refer
you to their friends and family. E.g. Give a free night's stay to a repeat customer. E,g, Invest more
money during peak booking season
 Service Management
concepts
Service-Profit Chain

e.g. Bill Marriott finds employee satisfaction more

important than customers. Satisfaction and sense of
pride. Why?
Service-Profit Chain
Service profit chain
 Service Management
concepts
Service-Profit Chain
Five Links:
• Internal service quality- superior employee selection and training

• Satisfied and productive service employees - more satisfied, loyal,

and hardworking employees

• Greater service values - more effective and efficient customer value

creation

• Satisfied and loyal customers - satisfied customers who remain loyal

• Healthy service profits and growth - superior service firm performance.

•What do you think internal and
interactive marketing is?
 Internal and Interactive
Marketing
Internal marketing; means that the service firms must effectively train and
motivate,, incentive, rewards. its customer-contact employees to provide
customer satisfaction . E.g in hotels, all employees must be marketing oriented towards
one goal.

Interactive marketing; means that service quality depends on the quality of

the buyer-seller interaction during the service encounter. one-to-one
marketing practice that centers on individual customer and
prospects' actions.
E.g. Service employees have to master interactive
marketing skills or functions as well
Three Types of Marketing in Service
Industries
 Managing Service Differentiation
• Differentiated offer, delivery and image are key solution to price
competition.
• The offer can provide innovative features like
• e.g. in-flight movies, advance seating, frequent-flyer award programs in
an airlines. Etihad/emirates airlines offers a sleeping compartment and
hot showers.
• The delivery can be differentiated by having better customer-contact
people, developing a superior physical environment, or by designing a
superior deliver process like e.g. Armani hotel pick up Bentley.
• The image can differentiate the service company through symbols and
branding. E.g McDonalds arches or Sofitel brand name recognition
 Managing Service Quality
Exceed customers’ service-quality expectations.
E.g. chief executive at American Express puts it, “Promise only what you can deliver and
deliver more than you promise!”

• Expectations are based on past experiences, word-of-

mouth, and service firm advertising

• Good service companies also communicate their qualities to

employees and provide performance (appraisals)
 Tangibilizing the Product
• Providing “evidence” of the service

– Promotional Material

– Physical Environment

– Employee appearance
 Managing Service
Productivity

• Service productivity can be increased by;

• training the employees better or hiring new and better employees
• industrializing the service with equipment and standardized production as in
McDonald’s
• using technology to save time and money
• Trying to increase the productivity would reduce quality and
diminish customer service. That is why, some service providers
accept to have lower productivity levels.
 Resolving Customer
Complaints
• Many service companies have invested heavily to develop
streamlined and efficient service-delivery systems.

Eg. Marriot ensure Well-trained employees are given the authority to

do whatever it takes, on the spot, to keep guests happy
E.g. Customer tips
 In class exercise

•What are some common

management practices that
restaurants use to provide a
consistent product?
 Answer
Some common management practices to provide a
consistent product include:
• Correct temperature, cleanliness, training standardize,
customer complaints, and being consistent with every
food chain or worker.
• One of the most important parts of this is training
standardization. When the restaurant standardize their
employees it will allow all of the employees to treat
each customer exactly the same. The customers will
then be able to have the same service every time they
go no matter who is working.
 Answer
Standard Operating Procedures (SOPs): These SOPs include guidelines for food preparation,
cooking, and plating.
Quality Control: The quality control department provides feedback to the kitchen and service staff on
areas that require improvement to maintain the desired level of consistency.
Inventory Control: Restaurants maintain proper inventory control by tracking inventory levels and
usage to ensure that they always have enough ingredients and supplies to prepare the dishes on the
menu.
Staff Training: Regular training of employees helps maintain consistency in product delivery by
ensuring that all employees are aware of the SOPs and guidelines for food preparation, cooking, and
plating.
Standardized Recipes: Restaurants use standardized recipes to ensure that each dish is prepared and
served in the same way across different locations, leading to consistent product delivery.

Correct temperature, cleanliness

 Managing the Physical
Surroundings
• Improperly managed physical evidence
can hurt a business

• Surroundings should reinforce company

positioning in customer’s mind

• Organizational Image is how customers

perceive your organization
 Managing the Physical
Surroundings
Physical surrounding consists of:
• Store location
• Interior décor
• Music
• Smell/aroma – for hotels this is essential
• Temperature
• E.g. next slide what do you think of this
design?
 Managing Perceived Risk
• Alleviate customer anxiety due to inability to
experience the product beforehand.

• Familiarization trips encourage clients to experience

the enterprise in a low- risk situation.
E.g. Crowne Plaza attracted its competitor’s loyal customers by using the
following tactic:

Guests were billed at the regular room rate. However, they were free to pay
less if they felt the accommodations and service were not worth the price.
 Managing Capacity and
Demand
• Due to perishability, managers must maximize
service capacity and quality during times of high
and low demand.
• E.g. airlines use dynamic capacity management to adjust capacity to match
demand. The airlines swap small aircraft for larger aircraft on flights that are
selling out faster than normal

• Customer complaints increase when service firms

operate above 80% capacity
 Managing the Customer
Relationship – CRM
• Combines marketing, business strategy and
information technology to better understand
the customers

• Develop unique, lasting relationships with

customers
 Service Failure

• Problems will inevitably occur

• Keep the customer informed

• Provide service recovery options.

Contingency plans
 Interaction Between Customer A
and Customer B
• Contact between customers can be
positive or negative

• In some cases interaction between

customers can be managed

• Customers can significantly impact all

around them
 The Invisible Organization
and System
A service organization management must
decide what they want the guest to
see and what they want to keep out of
the
guest’s vision
E.g. displaying the kitchen while dining
 Best Practices
• Ritz-Carlton Leadership Center offers
innovative ways to:
– Increase employee retention and loyalty
– Increase customer retention and loyalty
– Achieve service excellence in your
industry
– Effectively drive your organization’s culture,
philosophy, vision, and mission
 Key Terms

• Interactive marketing

• Internal marketing

• Organization image

• Physical evidence
 Key Terms
• Point-of-encounter

• Service culture

• Service intangibility

• Service inseparability
 Key Terms
• Service perishability

• Service-profit chain

• Service variability

• Trade dress