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MNM3713 Exam pack 2024 (Services Marketing)
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MNM3713 EXAMPACK 2024
QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
EMAIL:gabrielmusyoka940@gmail.com
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Services Marketing MNM3713
Study Unit 1: Introduction to Services Marketing
An Overview of Services Marketing
A Services Sector Overview
• There is an expanding demand for services in most economies across the world and the growing importance of the service
sector in most industrialised countries is evident by its contribution to the GDP. It is therefore important to understand the
issues, problems and opportunities in service industries so they can both proactively be identified and managed.
• Whether an organisation provides a physical product or service, it is important to provide customer service, which is the
interactions that take place between the organisation and the provider to ensure that the customer is satisfied with the product
or service. Excellent customer service can help an organisation retain its existing customers as well as attract new ones.
Why Services Marketing is Different
• There are a number of perspectives in terms of what a service entails and where they fits in with the product offering of an
organisation.
• Firstly, we can consider what a service is by looking at its characteristics. There Are five differentiating characteristics, including:
o Intangibility: Intangibility is a key determinant in differentiating between the service and a physical product. Products that
are predominantly tangible can be tasted, felt, smelled, stored or seen price purchasing- this cannot be said for services. It
is easier for a tangible product to be tried and tested before purchase. The intangibility of services poses unique challenges
to marketers (for example, they need to determine how to advertise a service that no one can see). The following are
marketing implications of service intangibility:
❖ It is difficult if not impossible to patent services.
❖ Most intangible services cannot be demonstrated or illustrated to a potential buyer price purchase.
❖ Pricing is a more complicated issue in services marketing and then in the marketing of tangible products.
❖ Branding is easier for tangible products than services.
❖ Services are perceived as a riskier purchase than a physical product.
NOTE: There are very few products that are purely tangible or intangible and are rather on a spectrum.
• Services can be classified in terms of the extension which it serves a component of the final product. This is divided into the
following service levels:
o Pure tangible products. These products have a small service component. Basic industrial goods, such as chemicals,
raw materials, basic engine parts, lubricants and builders9 supplies have a very small service component rendered by
their suppliers.
o Tangible products with peripheral services: The physical product is what the consumer actually buys and the
services that are provided contribute to the proper working of the physical product. Most buyers of motor cars expect
the dealer to provide an extended warranty and service plan as a standard part of the <package= when it is purchased.
The service plan would, however, not be the reason that a customer would choose one brand over another.
o A physical product with an integral service component: The product/service package is known as a hybrid product.
An example would be a highly technical and vital electronic component used in an aeroplane. The support of the supplier
of this product is required to ensure that the product is correctly installed and serviced over the lifetime of the aeroplane.
o A pure service product with peripheral physical components. There is hardly any physical feature attached to the
product. For example, degrees offered by Unisa, the care of a medical doctor or a hospital, a computer program, the
advice of an insurance salesperson, a savings account at Absa and an airline flight are all pure service products.
o Inseparability: Inseparability is a distinguishing characteristic of services that reflects the interconnectivity between the
service provider delivering the service and the customer receiving the service. Services normally are simultaneously sold
and produced and thus, normally require the physical presence of the service provider and presence of the customer during
the service encounter. The following points illustrate the nature of the inseparability characteristic of service delivery:
❖ For many services, the service provider must be physically present to produce the service.
❖ In many cases the customer must be present to receive the service. The customers involvement in the production of
the service is directly influenced by the type of service required, the duration of the service, the demand cycle and the
successful completion of the service (it is important to note that the environment in which the service takes place is a
tangible cue that influences the customers perception of the service quality).
❖ There are instances with the customer only needs to be partially present to start a service and present when the service
ends.
❖ customers can be mentally but not physically present during services (for example, online courses).
❖ Certain services such as restaurants, hotels, theatres and airlines are experienced by several customers at the same
time. The involvement of other customers during the production of a service can be positive or negative. Service
providers need to manage the different needs of different market segments effectively during a service encounter.
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o Heterogeneity: Heterogeneity refers to the variations in consistency that may occur between different service transactions.
Because of human involvement in service delivery, service standardisation and quality control is sometimes difficult to
achieve. It is easier to measure quality intangible products. Because of this, the selection and training of front-line staff is
crucial.
o Perishability: Services cannot be stored in a storeroom and used later. Perishability is essentially the result of variations in
demand and supply. The inability to store services poses various problems for service marketers. In services, the operations
and marketing are intertwined and interact with each other because of the inability to store the service. Because of this, the
organisation needs to develop strategies when there is a high demand for services so they can manage this.
o Lack of Ownership: Services cannot be owned. Customers purchase the right to a service process, and this may involve
illegal transaction, but there is no physical transfer of ownership that takes place.
Classification of Services:
• Equipment-Based Services:
o Automated Services (car washes, vending machines).
o Unskilled Operators (taxis, cinemas).
o Skilled Operators (airline pilots).
• People-Based Services:
o Unskilled Labour (garden services, security guards).
o Skilled Labour (electricians, plumbers).
o Professionals (accountants, medical doctors, architects).
The Service Value Mix
• The traditional marketing mix consists of product, price, promotion and place. Which were referred to as the four P9s. The service
marketing mix (the 7-P9s of Services Marketing/Expanded Service Value Mix) is as follows:
o Product: The product is represented by intangible sets of activities.
o Place: This is represented by the direct interaction between the service provider and the client at the point of where the
service is manufactured.
o Price: This refers to how much a service will cost the customer.
o Promotion: That refers to how an organisation will make the customer aware of the services offered.
o People: This refers to all aspects of employee involvement in service delivery, including the interaction with customers,
employee recruitment, training, motivation, rewards, and teamwork.
o Processes: The refers to the procedures, mechanisms, flow of activities and operations by which service is delivered.
o Physical Evidence: this refers to the environments in which services are delivered and where customer interaction during
the service encounter takes place.
Ethical Concerns in Service Marketing
• Business ethics can be described as the moral principles and standards that guide behaviour in the world of business.
• The following are ethical concerns in terms of service marketing:
o Exploiting Customer Ignorance: Service organisations can exploit customers as they are not always present for the entire
service delivery process, or they don9t have the knowledge or skills to know if the service is being done properly.
o Complexity and Fairness: For certain services, the costing structure can be complex and organisations operating in certain
industries (such as credit cards and cell phones) should demonstrate their integrity by making the fee structure transparent,
simple and understandable. fairness is an outcome of just treatment, equity and impartiality and customers should be treated
equitably.
Service and Profitability
• To address the issue of the relationship between service and profitability, a framework known as the service profit chain has
been developed.
• The service profit chain suggests that there are critical linkages between internal service quality; employee
satisfaction/Productivity; the value of services provided to the customer and customer satisfaction; retention and profits. The
chain is as follows:
1. Internal Service Quality: Internal service quality is important because services are largely performed by humans. The
quality of these services will highly depend on their attitude and actions, and good internal marketing will help build internal
relationships between staff at different levels of the organisation in order to create a service-orientated culture among front-
line employees, support staff, team leaders, supervisors and managers. If this is done, it will help employees be satisfied.
2. Employee Satisfaction: When employees are satisfied, they will provide services that will satisfy customers. If employees
are not satisfied, customer satisfaction is difficult to achieve. It is important that organisations treat their employees right.
3. Employee Retention: It is important that organisations keep well-trained, well-paid staff working in a well-designed
workplace with appropriate job design because this will result in satisfy employees which will lead to high levels of internal
service quality and eventually high levels of customer satisfaction. Satisfied employees will be more loyal to the organisation
and stay with them for longer. This will drive down costs associated with recruitment and training.
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4. Employees Productivity: Satisfied staff will remain with the organisation for longer and their individual productivity will also
improve. Loyalty increases the organisations productivity.
5. External Service Value: The quality of services, whatever the customers perceives it to be, rather than some objective
standard that determine its quality. Customers can perceive quality and two dimensions, namely technical or outcome (what
they get); and functional or process-related (how it is delivered). An increase in productivity of employees, the acceptance
of service culture and the reflection of behaviour towards customers will result in or enhance excellent external service value.
6. Customer Satisfaction: Any service environment the customers relationship should be a concern with the entire
organisation and not just an individual employee. Customer satisfaction can be adopted in two ways. First, customer
satisfaction can be viewed as an outcome of a consumption activity or an experience. Secondly, it can represent a process.
The following are steps that an organisation can take to ensure customer satisfaction:
o Communicating with your customers.
o Managing the overall experience.
o Handling difficult situations with empathy and in a dignified manner.
o Cultivating a service culture with employees and task teams.
o Learning how to implement and control service processes.
7. Customer Loyalty(Retention, Repeat Business and Referral): If customers consistently experience satisfaction, it can
lead to customer loyalty. This is important because it can lead to increased profits because:
o Total acquisition costs decline.
o Satisfied repeat customers refer new customers.
o Word of mouth is free.
o Long established customers buy more than new customers.
o Loyal customers always price sensitive.
o Long established customers cost list to serve because their likes, dislikes and needs have become known.
Retention strategy is important to organisations and need to make sure they understand who their lifetime value customers
are, who the good customers are, if they need to follow up if customers have stopped buying and how they can use feedback
to improve service delivery.
NOTE: Organisations can use customer loyalty programmes as an instrument to ensure continuing loyalty.
8. Revenue Growth and Profitability: the concept of revenue is linked to profitability and profitability is tide to productivity.
Productivity
• Productivity measures that output produced relative to the inputs used. It can be defined as the efficiency in the process of
transforming inputs. Resources in a service or manufacturing process into customer value.
• Efficiency can be internal or external. Internal efficiency refers to how efficiently outputs can be produced using given amounts
of production resources. External efficiency refers to how efficiently and effectively perceived quality can be produced.
Demand
• The output of the service process is twofold: it includes the quantity of the output and the quality of the output.
• The quantity is delivered is dependent on the demand of customers. It is important that demand meets supply. If there is excess
demand. There may be a negative impact on the level of output if demand is lower than output than the capacity is underutilised.
• The more efficiently perceived quality is delivered for better external efficiency or revenue efficiency, with concomitant improved
service productivity. The way to measure service productivity as a function of cost efficiency, revenue efficiency and capacity
utilisation is as follows:
ÿÿăÿÿĂÿĀ ĀÿĀþ � 㕎 āÿăÿÿ Āÿÿăÿýÿ
Service Productivity =
ýĀĀāĀ ĀĀ āÿĀþĂýāÿÿā ā/ÿĀ Āÿÿăÿýÿ
• The perceived quality emanating from a given resource can create revenue and if the resource structure is changed, the cost
level changes together with the perceived quality and revenue generating capability of the service provider. A change in cost
efficiency leads to a change in revenue efficiency which can be measured as a ratio between revenue and costs.
• An organisation must be cautious not to have an unbalanced view with regard to service productivity- Unjustified cost reductions
may lead to a decrease in revenues, which may be greater than cost savings, which can result in a decline in service productivity.
The Interrelationship Between Productivity, Quality, Customer Participation and Demand
• Customers participate in the service process and therefore influence its outcome. For instance, the customer can provide
instruction, Information, feedback and enquiries that influence quality of service and the productivity of the organisation.
• In terms of services, productivity is influenced by demand. If demand is low, the service providers will be underutilised, which will
lead to a decline in internal efficiency. Wind amount increases and exceeds available capacity. There will be a negative impact
on customers perceived service quality.
Productivity Management
• Following an important aspect in productivity management in services:
o An optimal balance between perceived service quality and cost efficiency must be maintained.
o The service providers resource must contribute to interactions with customers in the service process to create synergy
between perceived quality, an internal efficiency.
o Demand must be managed to establish a balance between perceived quality and internal efficiency.
• Increasing productivity and increasing service quality can be done in the following ways:
Downloaded by Gabriel Musyoka (gabumusyoka928@gmail.com)
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