The inability of services to be stored, warehoused, or inventoried is termed ______.

Presentation on theme: "Chapter 12 Services and Nonprofit Organization Marketing"— Presentation transcript:

1 Chapter 12 Services and Nonprofit Organization Marketing
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2 Learning Outcomes Discuss the importance of services to the economy
Discuss the differences between services and goods Describe the components of service quality and the gap model of service quality Develop marketing mixes for services Discuss relationship marketing in services Explain internal marketing in services Describe nonprofit organization marketing Discuss global issues in services marketing

3 Result of applying human or mechanical efforts to people or objects
Services Chapter 12 Services and Nonprofit Organization Marketing LO 1 Result of applying human or mechanical efforts to people or objects Involve a deed, a performance, or an effort that cannot be physically possessed Service-oriented industries that contribute to U.S. economy Technology, financial services, health care, and retail The marketing process is the same for all types of products, whether they are goods or services. Many manufacturing firms can point to service as a major factor in their success. Services have some unique characteristics that distinguish them from goods, and marketing strategies need to be adjusted for these characteristics.

4 Characteristics of Services
Chapter 12 Services and Nonprofit Organization Marketing LO 2 Inability of services to be touched, seen, tasted, heard, or felt in the same manner that goods can be sensed Intangibility Production and consumption are simultaneous, meaning the consumer takes part in production Inseparability Variability of the inputs and outputs of services, which causes services to tend to be less standardized and uniform than goods Heterogeneity Inability of services to be stored, warehoused, or inventoried Perishability Intangibility Tangible cues are often used to communicate a service’s quality and nature. Facilities are a critical tangible part of a service experience. Inseparability Services are often sold, produced, and consumed at the same time. Consumers are involved in the production of the services that they buy. The quality of services depends on the quality of employees. Heterogeneity Services are less standardized and uniform than goods. Because services tend to be labor-intensive, consistency and quality control can be hard to achieve. Standardization and training help increase consistency and reliability. Perishability Services cannot be stored, warehoused, or inventoried. One of the most important challenges in many service industries is finding ways to synchronize supply and demand.

5 Evaluating the Quality of Services
Chapter 12 Services and Nonprofit Organization Marketing LO 2 Services tend to exhibit fewer search qualities and more experience and credence qualities Search quality: Can be easily assessed before purchase Experience quality: Can be assessed only after use Credence quality: Can be difficult to assess even after purchase as customers lack necessary knowledge or experience Evaluating the quality of services is harder than evaluating the quality of goods. Online WebMD - What elements of the WebMD website communicate the search, experience, and credence qualities of the services offered by online medical consultant?

6 Components of Service Quality
Chapter 12 Services and Nonprofit Organization Marketing LO 3 Ability to perform a service dependably, accurately, and consistently Reliability Ability to provide prompt service Responsiveness Knowledge and courtesy of employees and their ability to convey trust Assurance Caring, individualized attention to customers Empathy Physical evidence of a service Tangibles Service quality is more difficult to define and measure than is the quality of tangible goods. Business executives rank the improvement of service quality as one of their most critical challenges.

7 12.1 Gap Model of Service Quality
Chapter 12 Services and Nonprofit Organization Marketing LO 3 Gap Model of Service Quality Gap model: Model identifying five gaps that can cause problems in service delivery and influence customer evaluations of service quality Gap 1: The gap between what customers want and what management thinks customers want. This gap results from a lack of understanding or a misinterpretation of customers’ needs, wants, or desires. To close gap 1, management has to keep in touch with what customers want by doing research on customer needs and customer satisfaction. Gap 2: The gap between what management thinks customers want and the quality specifications that management develops to provide the service. Gap 3: The gap between the service quality specifications and the service that is actually provided. If gaps 1 and 2 are closed, gap 3 is due to the inability of management and employees to do what should be done. To close gap 3, employees need the skills, training, and tools to perform their jobs. Gap 4: The gap between what the company provides and what the customer is told it provides. This is a communication gap caused by such things as misleading or deceptive advertising campaigns. To close gap 4, companies need to create realistic customer expectations through honest, accurate, and realistic communication. Gap 5: The gap between the service that customers receive and the service they want. This gap can be positive or negative. As the gaps shrink, service quality improves. Discussion/Team Activity Discuss firms that provide high levels of service quality. Examples: Ritz-Carlton, Nordstrom, Neiman Marcus, Lexus.

8 Service strategy decisions
Service Mix Chapter 12 Services and Nonprofit Organization Marketing LO 4 Each organization’s service mix represents a set of opportunities, risks, and challenges Service strategy decisions Introduction of which new services to which target market Maintenance of which existing services Elimination of which services Most service organizations market more than one service. Therefore, each part of the service mix should make a different contribution to achieving a firm’s goals.

9 Issues with Place (Distribution) Strategy
Chapter 12 Services and Nonprofit Organization Marketing LO 4 Convenience Number of outlets Direct or indirect distribution Location Scheduling Convenience - Key factor influencing the selection of a service provider Number of outlets - Intensity of distribution should meet the target market’s needs and preferences Direct versus indirect distribution Many service firms have to use direct distribution or franchising. The most-used form of direct distribution is the Internet. Location - Reveals the relationship between service's target market strategy and distribution strategy Scheduling - Most important factor for time-dependent service providers such as airlines, physicians, and dentists Discussion/Team Activity Identify specific service providers who have utilized the distribution strategies described above.

10 Promotion Strategies Stressing tangible cues
Chapter 12 Services and Nonprofit Organization Marketing LO 4 Stressing tangible cues Using personal information sources Creating a strong organizational image Engaging in postpurchase communication Consumers and business users have more trouble evaluating services than goods because services are less tangible. In turn, marketers have more trouble promoting intangible services than tangible goods. Discussion/Team Activity Identify specific service providers who have utilized the promotion strategies described above.

11 Categories of Pricing Objectives
Chapter 12 Services and Nonprofit Organization Marketing LO 4 Focuses on maximizing the surplus of income over costs Revenue-oriented pricing Seeks to match supply and demand by varying price Operations-oriented pricing Tries to maximize the number of customers by varying price Patronage-oriented pricing Marketers should set performance objectives when pricing each service. A firm may need to use more than one type of pricing objective. Online - E*Trade, Ameritrade, Schwab, Scottrade Compare the pricing for services on the largest Internet financial websites. How can one account for the great differences in price for essentially the same service?

12 Levels in Relationship Marketing
Chapter 12 Services and Nonprofit Organization Marketing LO 5 Financial - Using pricing incentives Social - Building social bonds Customization - Developing one-to-one solutions to fit customers’ needs Structural - Offering value-added services Many services involve ongoing interaction between the service organization and the customer. They can benefit from relationship marketing as a means of attracting, developing, and retaining customer relationships. Relationship marketing can be practiced at four levels: Level 1: The firm uses pricing incentives to encourage customers to continue doing business. This level of relationship marketing is the least effective because its price-based advantage is easily imitated by competitive firms. Level 2: This level uses pricing incentives as well as building social bonds with customers. The firm keeps in touch with customers. Level 3: A customization approach encourages customer loyalty through intimate knowledge of individual customers. Level 4: At this level, firms add structural bonds to the formula. This involves offering value-added services that are not available at competitive firms.

13 Critical in service firms
Internal Marketing Chapter 12 Services and Nonprofit Organization Marketing LO 6 Treating employees as customers and developing systems and benefits that satisfy their needs Critical in service firms Employees deliver the brand promise directly to customers Services are performances, so the quality of a firm’s employees is an important component in building long-term relationships with customers. To satisfy employees, companies have designed and instituted a wide variety of programs such as flextime, on-site day care, and concierge services.

14 Nonprofit Organization Marketing
Chapter 12 Services and Nonprofit Organization Marketing LO 7 Effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets Identifying desired customers Specifying objectives explicitly or implicitly Developing, managing, and eliminating programs and services Deciding on prices Scheduling events or programs Communicating their availability Nonprofit organizations account for more than 20 percent of the economic activity in the United States.

15 Global Issues in Services Marketing
Chapter 12 Services and Nonprofit Organization Marketing LO 8 Many U.S. service industries have been able to enter the global marketplace because of competitive advantages To be successful in the global marketplace, firms must: Determine the nature of their core product Design marketing mix that reflects each country’s cultural, technological, and political environment The international marketing of services is a major part of global business, and the United States has become the world’s largest exporter of services. Competition in international services is increasing rapidly.

16 Key Terms Service Intangibility Search quality Experience quality
Credence quality Inseparability Heterogeneity Perishability Reliability Responsiveness Assurance Empathy Tangibles Gap model Core services Supplementary services Mass customization Internal marketing Nonprofit organization Nonprofit organization marketing Public service advertisement (PSA)

17 Summary Service quality is more difficult to define and measure than is the quality of tangible goods According to the gap model, there are five gaps that can cause problems in service delivery and influence Nonprofit organizations have unique objectives, target markets, and marketing mixes

18 Chapter 12 Services and Nonprofit Organization Marketing

What are services that Cannot be stored or warehoused called?

Which term refers to the inability of services to be touched seen tasted heard or felt in the same manner that goods can be sensed?

Is defined as the inability of the production and consumption of service to be detached?

Which of the following is an example of heterogeneity of services?