Chapter 2 Human Resource Planning & Strategy

Ibrahim Sameer (MBA - Specialized in Finance, B.Com – Specialized in Accounting & Marketing)

Define Service Marketing

What is Service Marketing?

THE IMPORTANCE OF SERVICES MARKETING

The American Marketing Association defines services

as - “Activities, benefits and satisfactions which are

offered for sale or are provided in connection with the

sale of goods.”


Typically the organisation that delivers the service is

complex.

Generally product - providing organisations may also

be dependent on services or services may be a

supplement to the product offering.


Unfortunately customers are not always happy with

the quality and value of the services they receive for a

number of reasons, e.g. late deliveries, unhelpful

service providers, long queues.

DIFFERENCE BETWEEN SERVICE & GOODS

CHARACTERISTICS OF SERVICES Services are said to have five key characteristics

which impact on marketing programmes:

CHARACTERISTICS OF SERVICES Intangibility

Services are intangible: they cannot be seen, heard,

touched, tasted or smelled and this can cause a lack

of confidence for consumers in the decision-making

process. Consumers therefore make decisions based

on a range of quality-based cues or stimuli (advertising

messages).

CHARACTERISTICS OF SERVICES Inseparability

Services are produced and consumed at the same

time, unlike goods that may be manufactured and

stored for later distribution. The service provider

becomes an integral part of the service.

CHARACTERISTICS OF SERVICES Variability/Heterogeneity

People make up the service offering the service will be

unique, and it is a problem for the organisation to try and

achieve consistency in service delivery. Training and

monitoring customer satisfaction can help to maintain the

standards of delivery, but it is very difficult to

standardise the delivery around the process blueprint.

CHARACTERISTICS OF SERVICES Perishability

Services are perishable because they cannot be

stored. For example an empty seat on a plane is a lost

opportunity. Once the plane takes off the seat cannot

be sold.

CHARACTERISTICS OF SERVICES Lack of Ownership

Services cannot be owned. As we have seen, there is no

tangible element involved in a service and so the service

terminates once the experience comes to an end. At

the end of a plane journey the passenger alights from the

aircraft and the experience, positive or negative, becomes a

memory. The seat on the plane has been "rented" for a

period of time for the price of the ticket.

THE SERVICES MARKETING MIX When developing strategies to market manufactured goods

marketers usually consider the four basic elements known

at the four Ps(product, price, place, and promotion). In

order to address the distinctive nature of service

performance the marketing mix is extended by adding

three elements associated with service delivery – process,

people and physical evidence. We will look at these

extended elements in more detail.

THE SERVICES MARKETING MIX

People

Many services depend on direct interaction between

customers and an organisation's employees. The

nature of these interactions strongly influences the

customer's perception of service quality. Successful

service organisations devote time and resources to

recruit, train and motivate their employees.


Customers will evaluate the employees' appearance

and social skills as well as their technical skills. Thus,

many organisations provide staff with uniforms to

standardise dress. Manuals are developed which

will help staff to understand how to deal with

customers under certain circumstances in an effort to

standardise communication.


Process

A process is a method and sequence of actions in

delivering the service performance. Service

processes that are not well designed can lead to slow,

ineffective service delivery and dissatisfied customers.


For example, it is necessary for a restaurant to monitor

its approach to customers from the time they enter the

restaurant through to the time they leave.


Physical Evidence

Service organisations should manage the physical

evidence elements carefully because they will have

an effect on customer impressions before, during

and after the experience.


The physical appearance of buildings, shops, gardens,

vehicles, interior decor, and equipment and other

visible aspects all provide a tangible perception of the

organisation's quality of service and can be an

enticement or a discouragement for the customer.

CREATING VALUE

Managers should be concerned with how they give

good value to customers, treating them fairly in all

elements of the extended marketing mix. Customers

regularly make decisions about whether to invest time,

money and effort to obtain a service that will satisfy

needs.

CREATING VALUE Service Encounters

There are three level of service encounter:

High Contact

Customers visit the service provider for personal

involvement throughout the delivery process (e.g.

banking).

CREATING VALUE Medium contact

Customers visit the service provider but do not

remain for the service delivery (e.g. dry cleaning,

accounting services).

CREATING VALUE Low contact

There is little or no contact between the customer

and service provider due to remoteness of delivery

(e.g. radio and television programmes).

CREATING VALUE Customer Relationships

Organisations need to focus not only on their relationships

with customers. They also need to focus on relationships

with the industry in which they operate and with

society, because such relationships can impact on the

organisation's long-term success. Quality service is the key

to customer retention through customer satisfaction.

CREATING VALUE Referrals

Another important influence on an organisation's

performance is the amount of business achieved

through customer referrals. This is particularly

important in services marketing where word of

mouth recommendation is a key factor in the

customer decision-making process.

CREATING VALUE Consumers can be reluctant to try a service without

first acquiring opinions from peers and family

members; a good experience at a restaurant

recommended by friends can be very effective.

SERVICE QUALITY AND PERFORMANCE

It will now be apparent that service quality is of crucial

importance to both customer and service providers.


Research has shown that the quality of the service

provided by a company or institution can be measured

by determining the discrepancy or ‘gap’ between

what the customer wants (customer expectations)

and how the customer experience the service

(customer perceptions).


Customer perceptions are formed by the customer

experiencing so called moment of truths. ‘Moment of

truth’ is the basic concept of service marketing and is

used to describe each episode in which a customer

comes into contact with any aspect of your

organisation.


Parasuraman, Zeithaml and Berry (1990) developed

the so - called SERVQUAL instrument which can be

used to measure the quality of service. They developed

the so-called ‘gaps model’ of service quality. The most

important gap, referred to as Gap 5, is the gap between

customer expectations and customer perceptions.


This gap is caused by the four other gaps as detailed in

the following figure:


Gap 1: represents the discrepancy between what the

customer wants (customer expectations) and what

management think they want (management

perceptions).

Gap 2: represents the discrepancy between

management’s perception of client expectations and

service quality specifications.


Gap 3: represents the discrepancy between the

service delivered and the service quality

specifications.

Gap 4: represents the discrepancy between the

promised service (external communication to

customers) and the service provided.


Parasuraman, Zeithaml and Berry developed a

methodology which is now widely used in the

measurement of service delivery and customer

satisfaction. The methodology is based on a series of

standard questionnaires in order to determine

whether the above gaps exist in an organisation.


The general idea is to be able to close the gaps,

especially Gap 5 which is the most important and

really cased by the other gaps in the model. These

questionnaires are applied to customers (Gap 5),

management (Gaps 1 & 2) and service contact

personnel (Gaps 3 & 4).


The above Servqual instrument and the Gaps

framework are good examples of how firms can

measure the effectiveness of their service offering

in relation to customers perceptions.


There are other methods such as standard qualitative

interviews but these tend to be less sophisticated than

the now well accepted Servqual/Gaps framework.

IMPORTANCE OF RM TO MARKETING ACTIVITIES WITHIN SERVICE INDUSTRY

The concept of relationship marketing is

particularly important in the area of services. Much of

the UK’s economy is service based in terms of gross

domestic product (GDP) output. Service offerings are

largely intangible.


Most service offerings have some actual tangible

product component and most products have some

service component. For example, a financial service

such as a bank account or an investment scheme is

largely intangible.


Because services are largely intangible it is more

difficult for the marketing firm to tell whether they are

providing what the customer wants. Service

satisfaction depends on the experience and the

perception of the customer. It is a largely subjective

thing.


Hence, it is vitally important for the marketing firm to

monitor their service offering to the customer and to

ensure that they are at least matching and possibly

even exceeding the customer’s service expectations.


Because of the nature of services the traditional

marketing mix is extended from the 4P paradigm to

the 7P model. We retain the existing so called 4Ps of

Place, Price, Promotion and Place and add to these

Processes, People and Physical evidence.


Processes are concerned with the efficiency of the

process used in the delivery of the service, for example,

how well a travel firm booked and organised your

holiday.


Research has shown that it is five times more

expensive to win a new customer, than it is to keep an

established customer. Hence it is very important for

firms to retain existing customers, especially

potentially profitable key accounts.


Therefore, it is essential that marketing firms spend

time and energy to find out what customers really

want. In certain service marketing situations when a

firm loses a customer they are often ‘lost for good’.

This can also be the case for products but more so for

services.


For example, a man in his 50s might have been with

one of the high street banks since his university days.

He may still hold his account in his old university

branch.


Such a person is likely to be inundated with direct mail and

other personalised direct marketing messages e.g. on the

internet to try and persuade him to ‘switch’ his account to

another bank. If such a person ever did switch his account

then he would be very unlikely ever to return to his original

bank and from the bank’s point of view the customer would

be ‘lost for good’.


On the other hand if the same person switched his

loyalty from say Sainsbury’s supermarket to Asda

(Sainsbury’s and Asda are popular UK supermarkets)

because he thought Asda offered better sales

promotions, it might be possible to get him back.


Such a person is unlikely never to visit Sainsbury’s

again in his life. In such a situation such a customer

would be classified by Sainsbury’s as ‘always a share’.

The concepts of ‘Lost for good’ and ‘Always a share’

type customer situations are listed below:


Always a share - low transaction and switching costs,

if you lose a customer can always get them back.

Lost for good - if transaction and switching costs high

then when you lose a customer you are unlikely to get

them back.


Relationship Marketing is particularly important in

‘Lost for Good’ situations because once the firm has

lost the customer it is highly unlikely that they

will ever manage to get them back.


These are service marketing concepts and as can be

seen from the discussion above the concept of

relationship marketing is particularly important in a

service marketing context.

PAST PAPER REVIEW December 2008 / Q1

(a) Explain why many experts such as Christian Gonroos

(1994) suggest that the application of the ‘relationship

marketing concept’ is particularly important to firms

operating in service industries. (13 marks)

(b) Discuss how the quality of a firm’s service offering can

be appraised. (12 marks) (Total 25 marks)

PAST PAPER REVIEW December 2009 / Q7

(a) Examine the importance of applying the relationship

marketing concept to marketing activities within service

industries. Give examples to justify your answer. (13

marks)

(b) Giving examples, explain how marketing firms can

monitor and measure the quality of the service that they

offer to customers. (12 marks) (Total 25 marks)

PAST PAPER REVIEW June 2008 / Q7

(a) Explain why service industry experts consider the application

of relationship marketing concepts to be particularly important

for firms involved with services marketing. (13 marks)

(b) Explain how marketing firms can use the “GAPS model” of

service quality (Zeithaml, Parasuraman and Berry, 1990) to

evaluate and measure their firm’s success in delivering service

quality to their customers. (12 marks)

PAST PAPER REVIEW November 2011 / Q7

(a) Examine the importance of applying the relationship

marketing concept to marketing activities within service

industries. Give examples to justify your answer. (13

marks)

(b) Giving examples, explain how marketing firms can

monitor and measure the quality of the service that they

offer to customers. (12 marks) (Total 25 marks)

PAST PAPER REVIEW

Answer

(a) Refer slides 39 – 53

(b) Refer slides 28 - 38

PAST PAPER REVIEW June 2012 / Q8

(a) Briefly explain what is meant by services marketing in

today’s marketplace. (3 marks)

(b) You are the marketing manager of a local bank. Explain

how the three Ps of services marketing (Physical Evidence,

Process and People) can be used to deliver service at the

bank, giving examples to support your answer. (12 marks)

(15 marks)

PAST PAPER REVIEW

Answer

(a) Refer slides 39 - 42

(b) Refer slide 14 – 19 (and relate with a bank)

Chapter 2 Human Resource Planning & Strategy

Documents

Transcript of Chapter 2 Human Resource Planning & Strategy