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Lamb, Hair, McDaniel

CHAPTER 12

Services and Nonprofit Organization Marketing

2010-2011

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LO 1 Discuss the importance of services to the economy

LO 2 Discuss the differences between services and goods

LO 3 Describe the components of service quality and the gap model of service quality

Learning Outcomes

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LO 4 Develop marketing mixes for services

LO 5 Discuss relationship marketing in services

LO 6 Explain internal marketing in services

LO 7 Discuss global issues in services marketing

LO 8 Describe nonprofit organization marketing

Learning Outcomes

4

Discuss the importance of services to the

economy

The Importance of Services

LO1

5

The Importanceof Services

10 20 30 40 50 60 70 80 90 100

81%

Services as a percentage of GDP

Services as a percentage of employment

ServicesDeedPerformanceEffort

DeedPerformanceEffort

~50%

10 20 30 40 50 60 70 80 90 100

LO1

6

Discuss the differences between services and goods

How Services Differ from Goods

LO2

7

How Services Differ from Goods

IntangibleIntangible

InseparableInseparable

HeterogeneousHeterogeneous

PerishablePerishable

No physical object makes it hard to communicate benefits.

Production and consumption are simultaneous, meaning the consumer takes part in production.

Services depend on their employees for quality, which makes consistency difficult to achieve.

Services cannot be saved, and it is challenging to synchronize supply and demand.

LO2

8

When Servicesare Assessed

Online

http://www.webmd.com

• Search Quality—applied to goods more often, assessed before purchase

• Experience quality—assessed after purchase

• Credence quality—assessed only with appropriate knowledge.

LO2

9

Describe the components

of service quality and the gap model of service quality

Service Quality

LO3

10

Components of Service Quality

TangiblesTangibles The physical evidence of a service.

The physical evidence of a service.

EmpathyEmpathy Caring, individualized attention to customers.Caring, individualized attention to customers.

AssuranceAssurance The knowledge and courtesyof employees.

The knowledge and courtesyof employees.

ResponsivenessResponsiveness The ability to provideprompt service.

The ability to provideprompt service.

ReliabilityReliability The ability to perform the service right the first time.The ability to perform the service right the first time.

LO3

11

The Gap Model of Service Quality

LO3

12

Develop marketing mixes for services

Marketing Mixes for Services

LO4

13

Product Strategies for Services

ServiceMix

Customization or

Standardization

Core andSupplementary

Process

LO4

14

Service as a Process

Mental StimulusProcessing

Mental StimulusProcessing

People Processing

People Processing

PossessionProcessing

PossessionProcessing

InformationProcessing

InformationProcessing

LO4

15

The Service Offering

CoreServiceCore

Service

SupplementaryService

SupplementaryService

The most basic benefit the consumer is buying.

The most basic benefit the consumer is buying.

A group of services that supportor enhance the core service.

A group of services that supportor enhance the core service.

LO4

16

Core and Supplementary Services for FedEx

Overnight transportation and delivery of

packages

Problem solving

Billing statements

TracingDocumentation

Order taking

Supplies

Pickup

Advice andinformation

LO4

17

Customization/Standardization

A strategy that uses

technology to deliver

customized services

on a mass basis.

MassCustomization

MassCustomization

LO4

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The Service Mix

Determine what new services to introduce

Determine target market

Decide what existing services to maintain and to eliminate

LO4

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Place (Distribution) Strategy

SchedulingScheduling

LocationLocation

Direct or indirect distribution

Direct or indirect distribution

Number of outletsNumber of outlets

ConvenienceConvenience

LO4

20

Promotion Strategy

Stress tangible cues

Use personal information sources

Create a strong organizational image

Engage in postpurchase communication

LO4

21

Price Strategy

Pricing Challenges for Services

Define the unit of service consumption

Determine if multiple elements are “bundled” or priced separately

LO4

22

Pricing Objectives

Revenue-OrientedPricing

Operations-OrientedPricing

Patronage-OrientedPricing

Maximize the surplus of income over costs

Match supply and demand by varying price

Maximize the number of customers by varying price

http://www.etrade.comhttp://www.tdameritrade.comhttp://www.schwab.comOnline

LO4

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PLACEPLACEPRODUCT

= SERVICE

PRODUCT =

SERVICE

Core and Supplementary

Core and Supplementary DirectDirect Personal

information

Personalinformation

Operationsoriented

Operationsoriented

Revenueoriented

RevenueorientedProcessProcess Number of

outlets

Number ofoutlets

Tangiblecues

Tangiblecues

Mass Customization

Mass Customization

StandardizationStandardization

PROMOTIONPROMOTION PRICEPRICE

IndirectIndirect

LocationLocation

Strong imageStrong image

Post-purchasecommunication

Post-purchasecommunication

Patronageoriented

Patronageoriented

Marketing Mixes for Services

LO4

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Discuss relationship marketing in services

Relationship Marketing in Services

LO5

25

2Social

Financial

1Financial

3Structural

SocialFinancial

Pricing incentives

Design services to meet customer needs

Creating value-added services not available elsewhere

RelationshipMarketing in Services

LO5

26

Explain internal marketing in services

Internal Marketing in Service Firms

LO6

27

Internal Marketing

Internal Marketing

Internal Marketing

Treating employees

as customers and

developing systems

and benefits that

satisfy their needs.

LO6

28

Internal Marketing in Services

LO6

29

Discuss global issues

in services marketing

Global Issues in Services Marketing

LO7

30

Global Issues in Services Marketing

• The U.S. is the world’s largest exporter of services

• The marketing mix must reflect each country’s cultural, technological, and political environment

LO7

31

Describe nonprofit organization

marketing

Nonprofit Organization Marketing

LO8

32

Nonprofit Organization

An organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment.

• Government

• Museums

• Theaters

• Schools

• Churches

LO8

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Nonprofit Organization Marketing

Market intangible productsMarket intangible products

Production requires customer’s presenceProduction requires customer’s presence

Services vary greatlyServices vary greatly

Services cannot be storedServices cannot be stored

Shared Characteristics

with Service

Organizations

Shared Characteristics

with Service

Organizations

LO8

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Nonprofit Organization Marketing Activities

Identify desired customersIdentify desired customers

Specify objectivesSpecify objectives

Develop, manage, eliminate programs and servicesDevelop, manage, eliminate programs and services

Decide on pricesDecide on prices

Schedule events or programsSchedule events or programs

Communicate their availabilityCommunicate their availability

LO8

35

Unique Aspects of Nonprofit Organization Marketing Strategies

• Setting of marketing objectives

• Selection of target markets

• Development of marketing mixes

LO8

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Objectives

Provide services that respond to the wants of :

Users Payers Donors Politicians

Appointed officials

Media General Public

LO8

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Target Markets

Apathetic or strongly opposed

targets

Apathetic or strongly opposed

targets

Pressure to adopt undifferentiated segmentation

Pressure to adopt undifferentiated segmentation

Complementary positioning

Complementary positioning

Unique Issues of Nonprofit

Organizations

LO8

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Product Decisions

Distinctions between Business and Nonprofit Organizations

Benefit complexity

Weak or indirect benefit strength

Low involvement

LO8

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Promotion Decisions

Sales promotion activities

Public service advertising

Professional volunteers

Online

http://www.adcouncil.com

LO8

40

Public Service Announcements

PSAs take many forms, but many organizations are using television and the internet to spread awareness.

• iava.org (Irag and Afghanistan Veterans of America) asks visitors to “become a fan” on Facebook to see their latest PSA

• Senior Citizens League PSA• NCAA PSA

– What messages are these PSAs sending? Are they effective?

LO8

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Pricing Decisions

Below-cost pricingBelow-cost pricing

Separation betweenpayers and users

Separation betweenpayers and users

Indirect paymentIndirect payment

Nonfinancial pricesNonfinancial prices

Pricing objectivesPricing objectives

Characteristics Distinguishing

Pricing Decisionsof Nonprofit

Organizations

Characteristics Distinguishing

Pricing Decisionsof Nonprofit

Organizations

LO8

42

TARGET

PRODUCT

PROMOTION

PLACE

PRICE

Professional

volunteersSales

Public ServiceAdvertising

Involvement

Benefitstrength

Benefitcomplexity

Specialfacilities

Nonfinancial

Indirect payment

Separation

Below costpricing

• Complementary positioning

• Apathetic or strongly opposed

• Undifferentiated segmentation

Nonprofit Organization Marketing

LO8