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Extensive summary for Service Marketing for the chapters 1,4,5,6,7
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- NHL Stenden Hogeschool (NHL)
Extensive summary for the chapters 1,4,5,6,7
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Chapter 1. SERVICE MARKETING MANAGEMENT1.1. Service delivery, marketing, and management
- Services are tangible activities that perish relatively quickly and which, during interactive
consumption, satisfy direct needs rather than the desire for material possession.
- Basic characteristics of services
1. Intangibility
2. Perishability
3. Heterogeneity
4. Interactive consumption
- Intangibility and lack of ownership
▪ A service is an experience rather than a thing or a commodity and thus, by its nature,
not physically present. Nevertheless, a service is not always entirely intangible
▪ Physically intangibility
▪ Mental intangibility is closely associated with a buyer’s limited capacity to predict
exactly how a service is performed.
▪ The customer is often hardly in a position to objectively assess service delivery,
especially complex services. This mental uncertainty often leads to a feeling of
uncertainty is also known as perceived risk.
▪ Services can also involve lack of ownership. When a customer has purchased a physical
product, he/she then becomes its owner and will, in principle, possess it for an
unlimited time. Services usually have limited availability for the customer, namely as
long as the service lasts. Consider, for example, a theatre performance or a train
journey.
- Perishability
▪ As intangibility increases, the opportunities for a producer to create inventory and for
the consumer to assume ownership decrease.
→ The service then often becomes temporary or perishable
- Heterogeneity
▪ People are often part of the service-delivery process.
→ As a consequence, it is not always feasible to simple standardise the service –
from the point of view of both the consumer and the service provider.
▪ Heterogeneity (or variability) arises primarily due to human interaction – between
employees, between employees and customers, and mutually between customers.
- Interactive consumption
▪ The customer is central to the service delivery process within the service marketing
system. This model views a service-providing organisation as a system, comprising
three elements:
• Operations, operational activities: here the input is processed, and the elements
of the service delivery are created. Certain elements are not visible to the
customer are known as back office, while the visible parts are called front office.
• Delivery: this is where the components are assembled, and the actual service is
delivered to the customer. A distinction can be made between contact-intensive
services (such as a personal interview with a bank’s account manager) and low-
contact services (home banking).
, • Marketing and other contact in which mainly involves the communication
activities and all other methods of contact with the customer, including
advertising, website, invoicing and even market research.
Figure 1. Services marketing system
- The customer only experiences the front office, which is where the service encounter takes
place and where the service can be delivered and potentially consumed.
→ A service provider must therefore ensure that the front office has the right appearance,
and that customers are attended to in an expert and friendly manner.
- Someone using a service might well know the provider of the service personally. This is
because, in many cases, production of the service only commences when the consumer is
present. This is known as interactive consumption or a service encounter – but one in which
the inseparability of provider and consumer is evident.
- Service might differ in the degree to which they are equipment-based (mainly machine
oriented) or people-based (mainly people oriented).
▪ An ATM or cash dispenser is a good example of machine-oriented service delivery,
while a visit to the cashier at a bank is an example of people-oriented service delivery.
- Service delivery innovation can
be derived from figure 2:
Management could ask itself,
for instance, what opportunities
exist for shifting services and
service delivery – for instance,
moving those in the box at
bottom left the box at bottom
right.
Figure 2. Degrees of interactive consumption, according to Lovelock
- Interactive consumption not only implies that the consumer is involved in producing a
service, but also that the customer has an idea of how the service is produced and delivered.
→ It can be described customers as prosumer, since the involvement required of them often
involves a contribution towards producing the service, while they also consume it. This is
particularly evident with internet-based service delivery.
,- The core of prosumership is the major involvement of the customer, while (software)
systems take over part of the role of the personal producer.
- A service concept encompasses the entire presentation of the service package (possibly in
combination with a physical product) in the experience of the consumer or the organisation.
▪ This presentation consists of the acquisition of specific benefits by the target group as well as
their engaging in role-fulfilment. The concept also takes into account the brand, the design,
the specific content of the marketing mix (and, therefore, also the other Ps), and the
positions on the continuum of the four basic characteristics of services.
- A value proposition is also necessary. This states the points on which the strategic services
concept will differentiate itself from the group of main competitors (per group). A service
concept is therefore defined in terms of the results that are relevant to customers.
- Service benefits are the total advantage that a customer derives from the performance and
features of the various components of a service delivered by an organisation.
- Converting expected or desired benefits into profitable services can be difficult for the
following reasons:
▪ It is not always easy to assess the user requirements and benefits.
▪ Advantages for users change over time, for various reasons: these include experiences
gained in the past and/or environmental influences.
▪ Measuring these benefits will not always be possible.
- The difference between features and benefits is significant, because a service provider
attempts to formulate the advantages of its product in such a way that these correspond
with the needs of the user. Many service providers think in terms of user benefits involving
issues such as convenience, self-service, speed, trust or low costs.
- Service providers can, for example, opt for bundling, where all services are offered in a
single package or opt for unbundling.
- There are four ways of explaining the services concept, namely:
1. In terms of the marketing mix (four, six or seven Ps)
2. In terms of the perception of service delivery
3. By using the elements of the service package
4. By using a mental image
- Marketing mix
▪ In the original application, this mix only contains four Ps (product, place, promotion,
and price), two further Ps (personnel and process) additionally sometimes cite a P for
physical evidence.
→ Determines the final service concept
- Perception of service delivery
▪ The service concept is split into the service delivery process (and in particular the
delivery, or the way the service is provided) and the service experience (the customer’s
primary experience, or the way in which the organisation would like its service
perceived by its customers, personnel, shareholders, and other stakeholders).
→ Involves the organisation’s business proposition.
- Elements of the service package
▪ Known as customer benefit package. This approach is based on the aspects that the
customer acquires and sees as valuable. The service concept is the detailed description
of the customer’s needs and wants that the organisation really wants to satisfy.
, ▪ Important questions in this approach to the service concept are:
• In what way should customer needs and wants to be satisfied?
• What can customers (and the organisation) do with the experience that service
provides?
• What is the service outcome: what are the benefits and results for the
customer?
→ Requires a great deal of insight, on the part of the organisation, into customers’ needs
and wants.
- Mental image
▪ The main issue here is the need to align the image of the service concept for all involved,
throughout the service concept. The hoped-for results are a service concept that the entire
organisation understands, and which is shared by both employees and customers
→ The aim is to reduce the gap between expectations and (perceived) service
delivery.
- The services lifecycle in which 5 phases are differentiated, is a somewhat adapted version of
the familiar product lifecycle (PLC)
1. Introduction phase
2. Growth phase
3. Maturity phase
4. Saturation phase
5. Expiry phase
- Introduction phase
▪ Mainly be on developing primary demand for the service (category)
▪ Various price strategies can be pursued
▪ Promotion focuses on the service (such as single-premium policies, supplementary pension
plans and cash machines)
- Growth phase
▪ Rapid turnover growth, with opinion leaders and early adopters increasingly using the
service
▪ Competitors are attracted by these opportunities, and since many services are
relatively easy to copy, the competition will attempt to attract customers by offering
extra features in the form of additional services
▪ The original service provider should now focus on perfecting his service concept and on
finding new target groups and distribution channels
▪ Promotion is more focused on the brand
- Maturity phase
▪ The service will have grown to maximum turnover level
▪ The market is optimally served, and the service can be considered a real cash cow
▪ The aim of every service and service provider
▪ Optimising the service
- Saturation phase
▪ The market if fully subscribed
▪ Competition is tough and this bears heavily on the profit margins
▪ The service has lost its power of attraction and, at one point, enters the expiry phase.
This might be due to innovations that make the service superfluous and/or outdated. It
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