Service Marketing

1. Service Marketing

2. Marketing Basics What is Marketing??? Think about organizations/companies (Google, Trader Joe’s, The San Jose Chamber of Commerce, World Wildlife Fund, …) as well as individuals (politicians, professional athletes, …)  They all do marketing! How and why?

3. Marketing Basics Marketing consists of activities designed to generate and facilitate exchanges intended to satisfy human or organizational needs or wants.

4. Marketing Basics Importance of Marketing: Personally - in daily life, in career aspirations, in better informed consumer purchases Organizationally - only marketing directly produces revenue; marketing success depends on customer satisfaction Domestically - employment and costs, creation of utility Globally - closed, national markets no longer exist and companies compete in markets worldwide

5. Product-orientation Stage “make all you can” 1. Demand exceeds available supply. 2. All that is made can be sold. 3. Focus is on engineering and generating output, not the customer. 4. Epitomized between late 1800s and early 1930s. “The American public can have any color car it wants so long as it’s black.” Henry Ford, referring to the Model T. Sales-orientation Stage “sell all you make” 1. Supply frequently exceeds demand. 2. Focus is on promotion and pricing; objective is to sell all the inventory. 3. Hard-sell techniques create stereotype of pushy, annoying salesperson. 4. Epitomized between early 1930s and 1950s. Marketing Basics Evolution of Marketing:

6. “make what you can sell” Market-orientation Stage 1. Variety in markets, variety in products. 2. Employs full marketing mix. 3. Focus is on customer needs and satisfaction; profitability over volume. 4. Most typical current orientation. “make it together with the customer” Service Dominant Logic 1. Service industries gain more and more importance 2. Ideas generated in the service field spread to other sectors (like industrial marketing, marketing for consumer goods, …) 3. “Intangible product features” Marketing Basics Evolution of Marketing:

7. Marketing Goals There are three main objectives that are followed by the marketing discipline: Customer satisfaction and (service) quality Stimulation of market exchanges and customer retention Branding of services, products, and companies

8. delivered (perceived) service/product expected service/product* ≥ delivered (perceived) service/product expected service/product* <  customer dissatisfaction * requires a “positive expectation” Marketing Goals 1. Customer satisfaction and (service) quality  customer satisfaction

9. Marketing Goals 2. Stimulation of market exchanges and customer retention • Customer satisfaction is a main determinant for stable and voluntary buying relationships • Compliance management plays an important role in retaining customers • Stimulation of market exchanges and customer retention is supported by a strong service/product/company brand

10. Marketing Goals 3. Branding of services, products, and companies Brand contacts by Gronroos (2000), p.288

11. The GAP Model Causes of Gaps Promoted Expectation Inflated Expectation Communication G4 Real Expectation Marketing G1 Management’s Perceived Customer Expectation Service Quality Design G2 Service Design Spec. Conformance G3 Service Delivered Service Received Service Provider’s Assessment Customer’s Assessment

12. Requirements of a Service Marketing approach • Closing the “Gaps” (and thereby achieving customer satisfaction, retention, and brand building) with the help of the marketing instruments • The “classic” marketing concept consists of 4 instruments (“4Ps”): • Product • Price • Promotion (also communication) • Place (also distribution) • Due to the specialties of services (intangibility, inseparability, heterogeneity, perishability) some speak of the 5P-approach by adding a 5th instrument: “People”

13. Co-Creation • One of the (if not THE) essential advantage(s) of service management and service marketing is that service development in most of the cases requires the participation of both the supplying company and the customer • Thus, services are “co-created” • Impact on the marketing goals: • Easier to anticipate and to react to customer expectations •  stimulation of market exchanges and customer retention • Direct contact with employees of the service provider impacts the customer’s brand building process • However, co-creation depends on the abilities of the customer and the provider to express, anticipate, and react to the needs of the counterpart!

14. Level of Information Idea generation Market information Initial market research Service expectations Buying decision Integration into the service production process quality perception/(dis-) satisfaction Buying process of the customer (to be influenced by the service firm) Marketing process of service companies The Integrated Service Marketing Model Initial Market Research

15. The Integrated Service Marketing Model Initial Market Research • Capturing market trends, market sizes, market potentials • What do customers expect? • Market research can be performed in a formal way (e.g. standardized questionnaires, telephone interviews, …) or informally (checking competitors’ websites, ask experts, visit trade shows, …) • Design of marketing instruments relies on adequate market and customer information

16. Strategic Service Definition Strategic service definition The Integrated Service Marketing Model Level of Information Idea generation Market information Initial market research Service expectations Buying decision Integration into the service production process quality perception/(dis-) satisfaction Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

17. The Integrated Service Marketing Model Strategic Service Definition • Dominated by product, price, and distribution decisions • Product: service design including the service environment (service encounter), service components, service production process (including communication) • Price: setting prices on the basis of costs, competitor prices, and demand; price segmentation as major pricing tool (also: Yield Management) • Distribution: importance of the service location varies(where do customers and producers meet?), services cannot be distributed like products • The service definition impacts expectations and perceptions of consumers!

18. Initial Service Communication Initial service communication The Integrated Service Marketing Model Level of Information Idea generation Market information Initial market research Service expectations Strategic service definition Buying decision Integration into the service production process quality perception/(dis-) satisfaction Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

19. The Integrated Service Marketing Model Initial Service Communication • Raising awareness and “convincing customers” • Typical instruments are: • TV commercials • Advertisements in newspapers, magazines (also billboards) • Direct marketing • Events (incl. trade shows) • Sponsoring • Sales promotions • Online marketing • Public relations • Word-of-mouth • Instruments have to be adjusted to each other! • Initial service communication has a huge impact on consumer expectations!

20. The Integrated Service Marketing Model Service Production(Co-Creation) Level of Information Idea generation Market information Initial market research Service expectations Strategic service definition Initial service communication Buying decision Integration into the service production process Service production quality perception/(dis-) satisfaction Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

21. The Integrated Service Marketing Model Service Production (Co-Creation) • Mainly impacted by the service encounter and interpersonal communications • Service performing employees often have a huge influence on the customer’s service perception • It is not only important to communicate the service to consumers (external communication) but also within the organization (internal communication) - the latter is also called “internal marketing” • Important to balance employee behavior with initial communication instruments (“integrated marketing communication”)

22. The Integrated Service Marketing Model Level of Information After Sales Support Idea generation Market information Initial market research Service expectations Strategic service definition Initial service communication Buying decision Integration into the service production process Service production quality perception/(dis-) satisfaction After sales support Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

23. The Integrated Service Marketing Model After Sales Support • Communicative instruments to ensure customer satisfaction and to stimulate customer retention • Ensure that customer perceptions have at least met their expectations • Otherwise: compliance management

24. The Integrated Service Marketing Model Marketing implementation Level of Information Marketing Implementation Idea generation Market information Initial market research Service expectations Strategic service definition Initial service communication Buying decision Integration into the service production process Service production quality perception/(dis-) satisfaction After sales support Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

25. The Integrated Service Marketing Model Marketing Implementation • Information management plays a crucial role in service marketing • Information is not only gathered during initial market research but also during the whole service (marketing) process • Also, information can be spread not only during the initial communication phase but also (and especially) during the service production process • Important to ensure an effective information flow within the company

26. The Integrated Service Marketing Model Marketing implementation Level of Information Information gathering Idea generation Market information Initial market research Service expectations Strategic service definition Initial service communication Buying decision Integration into the service production process Service production quality perception/(dis-) satisfaction After sales support Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

27. The Integrated Service Marketing Model Marketing implementation Level of Information Information transfer Idea generation Market information Initial market research Service expectations Strategic service definition Initial service communication Buying decision Integration into the service production process Service production quality perception/(dis-) satisfaction After sales support Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

28. The Integrated Service Marketing Model Marketing implementation Level of Information Internal information processing Idea generation Market information Initial market research Service expectations Strategic service definition Initial service communication Buying decision Integration into the service production process Service production quality perception/(dis-) satisfaction After sales support Buying process of the customer (to be influenced by the service firm) Marketing process of service companies

29. Conclusion • Coordination of all marketing instruments • Achievement of marketing goals: • Service marketing offers several opportunities to balance customer expectations with customer perceptions • Customer satisfaction (service quality) is a main factor that impacts customer retention • Continuous and constant service quality accompanied by continuous, constant, and balanced communication efforts lead to the development of a strong brand image • Growing impact of service marketing on the whole marketing field

30. Case Study Questions Evaluate the Zipcar venture. What are the strengths, opportunities, weaknesses, and threats of the business model? How does the Zipcar idea fit the “Integrated Service Marketing Model”? Please apply the case to the several marketing instruments that are discussed in the model. What are the main drivers of customer satisfaction at Zipcar? Describe the process of co-creation at Zipcar! What are the success factors of Zipcar’s promotional strategy? Please consider also the impact of environmental issues on the marketing success of Zipcar. Imagine that Zipcar aims on entering the Chinese market. What factors have to be covered in an according market research study? Would you recommend China as target market? Please search for additional information to answer the case study questions!