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Marketing of Services Marketing for Engineers ELE 4EMT George Alexander [email protected] www.latrobe.edu.au/eemanage Lecture 11 16 April, 2007 Business plan development lecture – 20/3 Competition/niche market Identify your competitors and the way they do business.

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Marketing of services l.jpg

Marketing of Services

Marketing for Engineers

ELE 4EMT

George Alexander

[email protected]

www.latrobe.edu.au/eemanage

Lecture 11

16 April, 2007


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Business plan development lecture – 20/3Competition/niche market

  • Identify your competitors and the way they do business.

  • A unique business idea may mean little or no competition (Niche Market).

  • Lots of competitors means there is a market, but how would your business survive?

  • Identify any gaps in the market and show how you may fill them.


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Clarifying ‘niche market’

  • ‘No competition’ does not necessarily mean that we are dealing with a niche market.

  • A niche market is a very narrowly defined group of potential customers.

  • An example is specialised cleaning services.

  • Because of the narrow definition, there is a lower probability of there being competition.

  • It should be treated as a form of market segmentation and should be subject to the ‘meaningfulness’ tests of market segmentation.


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Meaningful Market Segment?

  • Distinctive characteristic?

  • Adequate market size potential?

  • Accessible? Distribution and promotion

  • Will respond to the marketing mix?


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Today’s topics

  • Defining service in its technical, specific sense.

  • Explaining the four basic characteristics of services.

  • Understand demand management strategies.

  • Examine strategies for standardisation & customisation.


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What is a Service ?

A service is an instrumental activity performed for a consumer or a consummatory activity involving consumer participation in, but not ownership of, an organisation’s products or facilities.


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Examples

  • Instrumental services, work performed by others to achieve a goal without their direct involvement in the task:

    • lawn mowing

    • car service, etc.

  • Consummatory services, the customer is directly involved and immediately gratified by use of the service:

    • hiring a video.

  • Taking a skiing lesson may be both instrumental and consummatory.


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The Characteristics of Services

1

Intangibility

2

Perishability

3

Inseparability

4

Variability


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Intangibility

1

  • Intangibility is a characteristic of services referring to the customer’s inability to see, hear, smell, feel, or taste the service product before buying.

  • Most services are intangible, even though the production of a service may be linked to a tangible product.

  • The element of intangibility makes the marketing of services different from the marketing of tangible goods.


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Marketing Approach

  • To help consumers understand and evaluate the nature of the offered services, a marketing strategy that makes the intangible tangible should be employed.

  • To make a service tangible the marketing strategy should stress symbolic clues and provide supplemental tangible evidence to indicate that the promises about the service quality will be kept.


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Examples

  • The service provided by:

    • Accountants (e.g. tax return)

    • Doctors

    • Lawyers

    • Consultants

    • Airline

    • Car hire


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Perishability

2

  • The services provided by humans cannot be stored, and hence services are perishable.

  • As an example of perishability, the airline cannot store the service equivalent of the empty seats on a particular flight for later sale.

  • In order to avoid problems associated with perishability, marketing managers implement demand management strategies.


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Demand Management Strategies

  • Because perishable services cannot be stored, service marketers plan and implement demand (or capacity) management strategies.

  • Effective demand management strategies require thorough understanding of the nature of services and accurate forecasting of the need for such services.

  • Selling services in advance and requiring reservations is an important aspect of a demand management strategy.


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Other Strategies

  • Two-Part Pricing is a strategy by which a service marketer charges a fixed fee plus a variable usage fee to adjust for losses due to the service perishability.

  • Two-part pricing strategy may be be applied for clubs, members pay an annual fee and a variable usage fee.

  • How about telephone services where subscribers (now known as customers) pay service and equipment fees and an additional fee per call (fixed + variable)?


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Inseparability

3

  • Inseparability is a characteristic of services that reflects the fact that the production often is not distinct from the consumption of a service.

  • Inseparability means that producer and consumer must be present in the same place and the same time for the service transaction to occur.


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Inseparability and the Exchange Process

Tangible

Product

Production

Sale

Consumption

Production

Intangible

Product

Sale

Consumption

Time


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Variability

4

  • Because many intangible offerings are closely tied to the supplier’s personal performance, there can be great variability, or heterogeneity, among the services provided.

  • Standardising services (i.e. reducing heterogeneity) is very difficult.

  • Variability leads service marketers to choose one of two alternative strategies:

    • Standardisation or

    • Customisation.


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The Strategy of Standardisation

  • The varied nature of services may be the reason to choose a strategy to standardise the service offered.

  • The strategy of standardisation emphasises the careful selection and training of personnel.

  • It is much easier to standardise service when the delivery mechanism involves machines.

  • It is mandatory that the service quality be monitored to discover if it falls below the established standard.


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Example – Service in the mobile network

  • Technicians’ competences and training clearly defined

  • Detailed procedures manual

    • Consistent approach to fault resolution

    • Defines necessary procedures.

    • Is continually updated with process improvements, leading to best practice.

  • Can be a powerful marketing tool


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The Strategy of Customisation

  • In contrast to standardisation, a customisation strategy requires modifying or customising a service for each individual customer.

  • Customisation strategy is not suitable for the mass market and is intended for individualised services.


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The Service Encounter

  • The Service Encounter is defined as the period during which a consumer interacts with a service provider.

  • Production of a service often requires a great deal of time beyond the service encounter.

  • For example, accountants may spend ten times as many hours working on a tax return as they do interacting with the client.

  • How about delivering a lecture ?


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Managing Service Quality

  • Service Quality is the degree to which the performance of service providers matches customer expectations.

  • Service Quality is the essential characteristic of a service that measures its excellence.

  • Marketers who wish to deliver high service quality must consistently conform to consumers’ service expectations.

  • How would rate the services quality of your ISP ?

  • With the mobile network service example, there is a high degree of monitoring and reporting of service performance – part of the SLA.


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Determinants of Service Quality

  • Access

  • Communication

  • Competence

  • Courtesy

  • Reliability

  • Credibility


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References

  • Zikmund, William G., d’Amico, Michael, Marketing, 5th edition West Publishing Company 1996 (Chapter 11).

Thanks for your attention


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