MARKETING OF SERVICES

In this article, you will learn that marketers of services face a special marketing challenge because of the nature of service products. Most of the marketing concepts you have learned so far apply to services, but there are some additional considerations that are unique to services. These shall be our main focus here.

NATURE OF SERVICE

A service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product.

General y, a product is anything that can be offered to a market to satisfy a need or want. Usual y, the word “product” suggests a physical object such as a car, telephone set etc. However, the concept is not limited to physical objects. Anything capable of satisfying a need can be called a product. The importance of physical goods lies not so much in owing them as in the benefits they provide. For instance, we don’t buy food to look at it, but because it satisfies our hunger. We don’t buy a microwave oven to admire, but because it cooks our food.

Actual y, a service is a performance that delivers some combination of benefits to the buyers. A service can be provided by a machine (e.g automatic teller), a person (e.g. consultant), or a combination of both (e.g. mechanic). A service can be directed toward the buyer (e.g dental check-up) or toward the buyer’s possessions (e.g. roof repair). Al government agencies are service providers, as are schools, hospitals, and transportation systems.

As you already learnt in units 1 and 8, most products are actually a combination of tangible good and intangible services, Goods —dominant products rely primarily on the exchange of physical goods to fulfil customer needs. However, with service-dominant products, the majority of the exchange is a service. Although we talk about “goods” and “services” as separate categories, you can see that many products include elements of both.

Activities such as renting a hotel room, depositing money in a bank, taking an insurance policy, travelling on an aeroplane, visiting a medical doctor, getting a haircut, having a car repaired, watching a professional sport, seeing a movie, having clothes cleaned at a dry cleaner, and getting advice from a lawyer all involve buying a service.

CHARACTERISTICS OF SERVICES

Services have a number of distinctive characteristics, which create special marketing challenges and opportunities. These characteristics are summarised in the Figure below

Figure 1: Four Service Characteristics

Inseparability Services cannot be separated from their providers

Intangibility Services cannot be seen, tasted, felt, heard, or smelled before purchase

Perishability

Service cannot be stored for later sale or use.

Variability

Quality of services depends on who provides them and when, where, and how

INTANGIBILITY:

This means that services cannot be seen, tasted, felt, heard, or smelled before they are bought. For example, people undergoing cosmetic surgery cannot see the result before the purchase, and airline passengers have nothing but a ticket and the promise of safe delivery to their destinations.

To overcome intangibility, buyers usually look for “signals” of service quality. They draw conclusions about quality from the place, people, price, equipment and communication material that they can see. Therefore, the service provider’s task is to make the service tangible in one or more ways.

Intangibility also leads to special implementation and control challenges. For instance, whereas product marketers try to add intangibles to their tangibles offers, service marketers try to add tangibles to their intangible offers. For instance, a bank that wants to convey the idea that its service is quick and efficient must make this positioning strategy tangible in every aspect of customer contact.

The bank’s physical setting must suggest quick and efficient service: its exterior and interior should have clean lines, internal traffic flow should be planned carefully, waiting lines should seem short at tel er windows and Automatic Teller Machines (ATMS), and background music should be light and upbeat. The bank’s staff should be seen to be busy and properly dressed.

The equipment such as computers, copy machines, current counters, desks etc. should look modern. The bank’s advertisement and other communications should suggests efficiency, with clean and simple designs and carefully chosen words and photos that communicate the bank’s positioning.

Consequently, a company’s promotional programme must portray the benefits to be derived four the service, rather than emphasizing the service itself. From promotional strategies that may be used to suggest service the benefits are:

(i) Visualization – depicting benefits with an advertisement that show many features

(i ) Association, that is, connecting the service with a tangible good, person, object, or place. For example, the following animals listed in Table 16.1 are usual y employed to depict the services offered by some service firms:

Table: Connection between some animals and service delivery

Animal	Perception
Elephant	The strongest animal
Dolphin	The smartest animal
Tiger	The most dynamic animal
Eagle	The sharpen eyes sight
Rhinoceros	The most Volatile animal

(iii) Physical representation. For example, some banks use colour, gold or platinum, for their credit card services to symbolize wealth and prestige Fast food chains, telephone companies, etc. dress their service representatives in clean, distinctive uniforms to stress visibility, cleanliness, and dependability.

(iv) Documentation i.e. citing facts and figures in advertisements to support claims of dependability, performance, care etc. For instance, insurance firms should always publicise claims already set led. In addition, services marketers cannot rely on normal measures of product quality to make sure they are offering the right level of performance. Instead, service marketers often we customer satisfaction surveys to monitor and maintain control over product quality.

INSEPARABILITY, VARIABILITY (HETEROGENEITY)

Service inseparability means that services cannot be separated from their providers, whether the producers are people or machines. If a service employee provides the employee service, then, the employee is a part of the service. Because the customer is also present as the service is produced, provider — customer interaction is a special feature of services marketing. Both the provider and the customer affect the service outcome. Consequently, customers’ opinions regarding a service are frequently formed through contacts with the production — marketing personnel and impressions of the physical surroundings in the factory.

Inseparability has a special meaning in many service industries. In some cases, a particular provider is so closely identified with a service that substitute providers will simply not suffice. For example, in the case of entertainment and professional services, buyers care a great deal about who provides the service. For example, it is not the same service at a Sunny Ade concert if Sunny gets sick and is replaced by one of his band boys. A legal defence supplied by Rotimi Williams differs from one supplied by Festus Keyamo.

Hence, when consumers have a strongly provider preference, price is used to ration the limited supply of the preferred provider’s time.

From a marketing point of view, inseparability frequently means that direct sale is the only possible channel of distribution, and an individual seller’s services cannot be sold in very many markets. This characteristic limits the scale of operation in a services firm. As an exception to the inseparability feature, the service may be sold by a person who is representing the creator-seller. For example, a travel agent, insurance broker, etc. may represent and help promote services that will be sold by the institution producing them.

Variability (Heterogeneity)

Service variability means that the quality of services depends on who promotes them as well as when, where, and how they are provided. For example, some hotels such as Sheraton have reputations for promoting better service than others, and, within these good ones, one registration, desk employee may be cheerful and efficient whereas another standing just a few feet away may be unpleasant and slower. Even the quality of a single Sheraton’s employee service varies according to his/her energy, and frame of mind at the time of each customer encounter.

Service firms can take several steps to help manage service variability. They can select and carefully train their personnel to give good service. They can provide employee incentives that emphasize quality, such as employee of—the — month awards or bonuses based on customer feedback. A firm can check customer satisfaction regularly through suggestion and complaints systems, customer surveys, and comparison shopping.

PERISHABILITY AND FLUCTUATING DEMAND

Service perishability means that services cannot be stored for later sale or use. For instance, unused telephone time, empty seats in a stadium or aeroplane and idle mechanics in a garage all represent a business that is lost forever.

Furthermore the market for services fluctuates considerably by season, by day of the week, and by hour of day. There are exceptions to this generalization regarding the perishability and storage of services. In health and life insurance, for example, the service is purchased by a person or a company. Then, it is held by the issuance company until needed by the buyer or the beneficiary. This is holding constitutes a type of storage.

The combination of perishability and fluctuating demand offers product: planning, pricing and promotion challenges to service executives. Some organizations have developed new uses for idle plant capacity during off-season.

Advertising and creative pricing are also used to stimulate demand during slack periods. Some hotel offer lower process and family packages on weekends. Telephone service providers charge lower rates for long, distance cal s during nights and weekends.

MARKETING STRATEGIES FOR SERVICE FIRMS

Good service firms should always use marketing to position themselves strongly in chosen target markets. However, because services differ from tangible products, they often require additional marketing approaches. In a product business, products are fairly standardized and can sit on shelves waiting for customers. But in a service business, the customers and frontline service employee interact to create the service. Thus, service providers must work to interact effectively with customers in order to create superior value during service encounters. Effective interaction, in turn, depends on the skills of frontline service employees, and on the service production and support processes backing these employees.

Hence, successful service companies focus their attention on both their employees and customers. They usually employ the service-profit chain, which links the service firm’s profits with employee and customer satisfaction. This chain consists of five links.

Internal service quality i.e. supervisor-employee selection and training, a quality work environment, and strong support for those dealing with customers. This results in:

Satisfied and productive service employees i.e. more satisfied, loyal, and hard-working employees. Thus leading to:

(i i) Greater Service values i.e. more effective and efficient customer satisfied loyal customers i.e. satisfied customer, who remain loyal, repeat purchase, and refer other customers, hence leading to:

(iv) Healthy service profits and growth i.e. superior service firm performance.

Therefore, reaching service profits and growth goals, begins with taking care of those who take care of customers. Evidently, service marketing requires more than just traditional external marketing using the 4PS

Service marketing also requires both internal marketing and interactive marketing.

Company

External Marketing

Employees

Interactive marketing

INTERNAL MARKETING

Means that the service firm must effectively train and motivate its customer contact employees and all the supporting service people to work as a team to provide customers satisfaction. In order for the firm to deliver consistently high service quality, everyone must practice a customer orientation. Internal marketing usual y precedes external marketing.

INTERACTIVE MARKETING

This means that perceived service quality depends heavily on the quality of the buyer-seller interaction during the service encounter. The customer judges service quality not just on technical quality (e.g success of surgery) but also on its functional quality (whether the doctor showed concern and inspired confidence). Thus, professionals cannot assume that they will satisfy the customer singly by providing good technical service. They need to master interactive marketing skills or function as well.

Today, as competition and costs increase, and as productivity decreases, more marketing sophistication is needed. Hence, service companies face three major marketing tasks: They want to increase their competitive differentiation, service quality, and productivity. Let’s examine each of these.

MANAGING DIFFERENTIATION

Many service firms experience the difficulty of differentiating their services from those of competitors, especially in these days of intense price competition. This is even made worse by the attitudes of customers who view the service of different providers as being similar. They therefore care less about the provider than the price.

Price competition is can be tackled by developing a differentiated offer, delivery, and image. For instance, the offer can include innovative features that set one company’s offer apart from competitors’ offers. eg. Airlines have introduced such innovations as in-flight movies, advanced seating, air-to-ground telephone service, and frequent-flyer award programmes to differentiate. Some airlines also provide sleeping compartments hot showers and cooked-to-order breakfasts.

The unfortunate thing here is that most service innovations are copied easily. This notwithstanding, the service company that innovates regularly will gain a succession of temporary advantages and an innovative reputation that may help it keep customers who want to go with the best.

It is possible for service companies to differentiate their service delivery in three ways, namely, through people, physical environment, and process. The company can distinguish itself by having more able and reliable customer-contact people than its competitors have. Or it can develop a superior physical environment in which the service product is delivered. Finally, it can design a superior delivery process. (eg. Electronic home banking). Service companies also can work on differentiating their image through symbols and branding. e.g Lions/elephants as an image of strength.

MANAGING SERVICE QUALITY

One of the major ways a service firm can differentiate itself is by delivering consistently higher quality than its competitors do.

To this end, many service firms have now joined the total quality movement, having observed that outstanding service quality can give them a potent competitive advantage that leads to superior sales and profit performance.

The key is to exceed the customers’ service — quality expectations. As one chief executive puts it, “promise only what you can deliver and deliver more than you promise!”. These expectations are based on past experiences, word of mouth, and service firms’ advertising. If the perceived service of a given firm exceeds expected service, customers will want to use the provider again. Customer retention is perhaps the best measure of quality, therefore, a service firm’s ability to hang onto its customers depends on how consistently it delivers values to them. Hence, the service provider’s quality goal should be “zero customer defections”

The service provider needs to identify the expectations of target customers concerning service quality. Unfortunately, service, quality is harder to define and judge than product quality. Moreover, although greater service quality results in higher costs, still, investments in service quality usual y pay off through increased customer retention and sales. Whatever the level of service provided, it is important that the service provider clearly define and communicate that level so that its employees know what they must deliver and customers know what they will get.

Service providers should always take steps that will offer good service every time. They must also take steps that will allow them to recover from service mistakes when they occur.

In these regards, the first step to take is to empower frontline service employees, to give them the authority, responsibility and incentives they need to recognize, care about, and tend to customer needs.

Studies of well-managed service companies show that they share a number of common virtues regarding service quality:

(i) Top service companies are “customers obsessed. They have a distinctive strategy for

satisfying customer needs that wins enduring customer loyalty.

(ii) Well-managed service companies have a history of top management commitment

to quality i.e. apart from financial performance, service performance is looked into.

(iii) The best service providers set high service quality standards

(iv) The top service firms watch service performance closely, i.e. both their own and that

of competition. For example, they use methods such as comparison shopping, customer surveys, and suggestion and complaint forms. Some service providers also take the regular measure of “ART” (an acronym for Accuracy, Responsiveness, and Timeliness)

(v) Good service companies also communicate their concerns about service quality to employees and provide performance feedback.

MANAGING PRODUCTIVITY

Service firms are under great pressure to increase productivity, especially with their costs rising rapidly. This can be done in several ways:

(i) The service providers can train current employees better, or they can hire new ones who will work harder or more skillfully for the same pay. Or they can increase the quantity of their service by giving up some quality eg. Some doctors who work in health maintenance organizations have moved towards handling more patients and giving less time to a patient. The provider can “industrialise the service” by adding equipment and standardizing production.

However, companies must avoid pushing productivity so hard that doing so reduces perceived quality. Some productivity steps help standardize quality and increase customer satisfaction. But other productivity steps lead to too much standardization and can rob customers of customised services.

CONCLUSION

You have learned in this unit that conceptually, services are marketed in the same way as tangible goods. In practice, however, the characteristics that differentiate services from goods lead to different marketing programmes.

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