Exam 1 Flashcards
Characteristics of services
1 Time dependent
2 Place dependent
3 Presence of consumer in service production place (i.e. in the service “factory”)
4 Cannot be inventoried
Marketing mix (7 P’s)
Product Price Place Promotion People Physical evidence Processes
What is a service?
- an act or a performance offered by one party to the other
- may be tied to a physical product but is intangible
- something that may be bought or sold, but which cannot be dropped on your foot
What makes services different from products?
The service experience is created in real-time
Explain: Services are time dependent
- real time delivery; wait-time issues; time of service (24/7?)
- fluctuating demand, problems in capacity utilization
- Perishability and lack of inventory exacerbate the problem
Explain: Services are place dependent
- where the service takes place is largely dependent on the consumer
- mass production of services must be broken down into “factories in the field”
- – or limited to one or few locations
- – services on the wheels
- ex: can’t open a lot of Mayo Clinics because they are so specialized
Why could multiple production sites be challenging?
it makes quality control difficult
What role do consumers play in the factory?
Consumers are almost always involved in the factory
- changing the factory requires changes in consumer behavior (changing from full service to self service gas station)
benefit concept (def)
the sum of the bundle of benefits in a consumer’s mind which a particular product or brand delivers.
-For example, for some plane travelers, the benefit concept of a particular airline might be simply speedy arrival at the desired destination, while for others it might include safety, in-flight entertainment and superior service
How does changing the benefit concept impact the factory?
this requires the factory to change as well (such as a barbershop to a hair salon - customers are going to expect a different experience from a hair salon than from a barbershop)
Who is delivering the service?
Everyone who comes into contact with the consumer
- greater variance and unhappy employees can ruin a service
- do you go to McDonald’s or Starbucks for your coffee?
What is delivering the service?
Everything that comes into contact with the consumer (facilities, equipment, etc)
- high variability
- is there a bug in your food? is the machine broken?
Services cannot be inventoried
- spare capacity cannot be saved
- services are consumed at the point of production
- the lack of inventory hampers statistical quality control
- Marketing and operations are constantly intertwined
What is a challenge to the lack of inventory?
it hampers statistical quality control
What is the relationship between marketing and operations?
they’re constantly intertwined (see exhibit 1 and fill in later)
7Ps: People
- frontline staff interacting with consumers creates experience called service
- – people are critical; employees play a key role
- – job design, re-design, selection, training, leadership, reward system, and other HR policies acquire added significance in services (b/c employees can’t be inspired to be customer-oriented via slogans
- – need internal marketing (as opposed to external)
External marketing
setting up the promise
internal marketing
enabling the promise
interactive marketing
delivering the promise
7Ps: Physical Evidence
- products are self defining but services are not
- services are partially defines as servicescapes (physical facility, looks, dress, demeanor, ambiance, etc)
7Ps: Processes
- Real-time production
- The customer is present and experiencing it
- how production process unfolds is critical
- Who would care more about production process: a person buying a PC or a person buying a restaurant meal? (the one buying the meal)
Halo effect
employers rate the performance of certain employees more highly than others based on their overall positive impression of those employees
- some people are famous just for being famous (the Kardashians)
Placebo effect
patients experience treatment effects based on their belief that a treatment will work
- they are given sugar pills but since they are told that the pills will help their symptoms they start to feel better anyway (obviously the sugar pills aren’t actually helping)
Demand Characteristics (def)
participants in an experiment or interview provide responses and act in ways that they believe are expected by experimenter or interviewer
Hawthorne effect
employees are more productive based on their belief that changes made to the environment will increase productivity
- moving from Summerfield to CapFed increased the productivity of the people who worked in those offices
Pygmalion effect
Students perform better or worse based on the expectations of their teacher
- ACT scores are an example – girls are often told they’ll do worse on STEM areas and Asians are often told they will do better on these areas based on stereotypes and then they tend to fulfill the prophecy
Rosenthal effect
teachers treat students differently based on their expectations of how students will perform
When are services evaluated?
During and after their use
Types of customer expectations
- Will expectations
- Should expectations
- Zone of tolerance
Will expectations
predicted level of service “what will be” (adequate/acceptable)
– average
Should expectations
desired level of service “what CAN or SHOULD be”
— desired
Zone of tolerance
level below “adequate” that customer will NOT tolerate
5 Dimensions customers evaluate services on
Reliability Responsiveness Assurance Empathy Tangibles
Customer expectation (and therefore, the zone of tolerance) varies from:
- Customer to customer
- Transaction for the same customer
- Across the five dimensions
Reliability
dependable and accurate
Respobsiveness
willing and provide prompt service
Assureance
knowledgeable, courteous, convict trust and confidence
Tangibles
the ambiance
Tangibles
the ambiance
Which dimension is the zone of tolerance the narrowest for?
Reliability
– relates to “core” of service - whether the service will be delivered
Which dimensions is the zone of tolerance broader for?
Tangibles, Empathy, Assurance, Responsiveness
– relates to the “process” or how service is delivered
How do expectations of desired service level change over time?
They usually go up because if you do something that I really liked then I’ll expect that from you (Will expectations) and I’m just going to want more from you the next time (should expectations)
Factors affecting customers’ expectation levels and tolerance zones:
- Enduring Service Intensifiers
- Personal needs
- Transitory service intensifiers
- Perceived service alternatives
- Self-perceived service role
- Explicit service promises
- Implicit service promises
- Word-of-mouth communication
- Past Experience
Enduring Service Intensifiers
factors that intensify the customer’s sensitivity to service on an ongoing basis
- expectations of an affiliated party such as the customer’s customer
- Dr. has x-ray machine in office to make it more convenient
Personal needs
individual requirements dictated by customer-specific physical, psychological, social, or resource characteristics
- individuals with disabilities vs. those without
Transitory service intensifiers
factors that heighten the customer’s sensitivity to service on a temporary basis
- personal emergencies, problems with the initial service
Perceived service alternatives
customer’s perceptions of the degree to which they have options in obtaining the service
Self-perceived service role
customer’s perceptions of the degree to which they themselves influence the level of service they receive
- do your job as a student; communicate to the hair dresser what you want
Explicit Service Promises
company statements about customers
- advertising, personal selling, contracts
Implicit Service Promises
service-related cues promises that lead to inferences about what the service should or will be lime
- price, tangibles associated with the service
- higher expectations from a 5 start hotel
Word-of-mouth communication
Statements made by parties other than the company about what the service will be like. These statements may come from bother personal (friends) and expert (consumer report) sources
- positive experience raises expectations
- negative experience lowers expectations
Past experience
customer’s previous exposure to service that is relevant to the present service
- positive experience raises expectations
- negative experience lowers expectations
Understand customer needs to understand and manage customer expectations
- Go beyond demographics: life-cycle, lifestyle, purchase patterns, etc
- Watch migration patters of customers:
- Life Line Screening: customers move from hospital to van b/c price and convenience
- H&R Block
- Local auto mechanic vs. auto dealer
- LegalZoom
- Urgent care clinics, surgery centers - Identify and address perceived risks
- services have higher perceived risks than physical products
Heterogeneity
difficult to replicate and therefore less predictable outcome; not totally mechanical
Goods and services differ on
- search attributes
- experience attributes
- credence attributes
Most goods have:
- search attributes
- experience attributes
- credence attributes
- high search attributes
- high experience attributes
- low credence attributes
Most services have:
- search attributes
- experience attributes
- credence attributes
- low search attributes
- high experience attributes
- high credence attributes
Consumers reduce perceived risk by
- being BRAND and STORE loyal
- relying on REFERRALS or WORD OF MOUTH
How to Manage Customer Expectations?
- Make Realistic Promises - don’t over promise
- Be Reliable - perform the promised service right the first time
- Communicate with the customers / be proactive
Communicate with the customers / be proactive
- goodwill and increased tolerance zone
- adds value to service
- conveys a feeling of partnership/builds relationship
Make Realistic Promises
- Explicit promises: advertising/personal selling (ex: “Delta is ready when you are”; “Holiday Inn: No Excuses, Guaranteed”)
- Implicit Promises: Price of service; Appearance of service facility
- over-promise lowers customers’ tolerance and trust and raises expectations
Be Reliable - perform the promised service right the first time: Requirements for delivering quality service
- Service Leadership
- Thorough pre- and post-launch service testing
- Organizational infrastructure
How to foster effective communication?
- Make employees accessible to customers
- Encourage customers to contact the company
- Initiate the contact and follow up regularly
- Train employees to provide personalized, responsive and caring service
- Reward employees for nurturing customer relationships
Exceeding Customer Expectations
- Excel in service delivery
- – on every customer contact point: excel - capitalize on service recovery
Measure of Service Adequacy
MSA = (Perceived Service - Adequate Service)
Measure of Service Superiority
MSS = (Perceived Service - Desired Service)
What is the goal for MSS and MSA?
Keep both POSITVE
Functional value
perceived utility/functional value derived from the service
- ex: eyeliner tattooing
Social value
perceived utility acquired from making a purchase decision that is associated with a particular reference group
- ex: sailors receive tattoos b/c its part of their tradition
Emotional value
perceived utility is received in feelings and emotions experienced by the customer
- ex: entertainment-type services; self-expression/rebellion in getting tattooed
Epistemic value
perceived utility acquired when a purchase decision received to satisfy a desire for knowledge, provide novelty, or arouse curiosity
- ex: senior citizens going back to college; a homemaker taking an arts course; visits to museums, historical sites, zoos, etc
Types of consumption values (not mutually exclusive)
- Functional value
- Social value
- Emotional value
- Epistemic value
Service purchase process
- Pre-purchase Phase
- Service Encounter
- Post-purchase Phase
* Customer spends more time in pre purchase and post purchase
Type of risk
- Performance risk
- Financial risk
- Time loss
- Opportunity risk
- Psychological risk
- Physical risk
- Social risk
Performance risk
lawn mowed to your satisfaction? dental work or hair care met your expectations?
Financial risk
loss incurred by the customer if service fails (accentuated b/c of a lack of guarantees)
Time loss
time lost by the customer due to the failure of the service
- ex: auto repair
Opportunity risk
when a customer must choose one service over another
- ex: go to a rock concert or a hockey game
Psychological risk
is the chance that the purchase of a service will not fit the individual’s self-concept? (education, entertainment, religious organizations)
- Ex: Don’t go to USC b/c their values don’t align with yours
Social risk
the probability that a service will not meet with approval from significant others (high-visibility services–restaurants and hair stylists)
- ex: won’t shop at Checkers b/c people might judge you as being cheap
Physical risk
chance that a service will actually cause physical harm to the customer (medical procedures, sun tanning salons)
Components of the service encounter
- Role theory
- Script theory
- Service environment
- Service personnel
- Support services
Post purchase phase
- Service quality (global evaluation of all past service experiences with provider)
- Customer satisfaction (episodic: relates to the last service experience)
- Attribution theory (service failure > attributed cause of service failure > customer dissatisfaction level)
Consumer behavior in services: key propositions
- Consumers seek and rely more on information from personal sources than from non-personal sources when evaluating services before purchase
- Consumers engage in greater post-purchase evaluation and information-seeking with services than with goods
- Consumers engage in more post purchase evaluation than pre-purchase evaluation when selecting and consuming services
- Consumers perceive greater risks when buying services than when buying goods
- The consumer’s evoked set of alternatives is smaller with services than with goods
- each service provider is unique, its harder with services than with goods - The delivery of service can be conceived as drama where service personnel are the “actors,” service customers are the “audience,” physical evidence of the service is the “setting,” and the process of service assembly is the “performance”
- Service encounters can be viewed as role performances
- negative departures from the customer’s expected script will detract from service performance (ruining a flight, movie, etc.)
- Customer compatibility is a factor that influences customer satisfaction, particularly in services where groups of customers are served in the same setting (regulate= post the rules)
- Consumers attribute some of their dissatisfaction with services to their own inability to specify or perform their part of the service
- Consumers may complain less frequently about services than about goods due to their belief that they themselves are partly responsible for their dissatisfaction
- Consumers adopt innovations in services more slowly than they adopt innovations in goods
- Brand switching is less frequent with services than with products
- go with the devil you know
Role theory
in purchasing service, buyers and sellers play certain roles (deviation from the role will create ambiguity and confusion / problems)
- ex: audiences play a role when watching a play - be quiet / no texting
Script theory
service personnel and customers have prescribed scripts that they are expected to follow
- v important especially when you want to standardize a service
- more experienced the customer (with a service firm), the more concrete the script eventually, so predictable routinized behavior sequence (customer is not eve aware of what is going on)
- altering scripts can be frustrating to customers – need to be educated
Scripts
are a learned sequence of behaviors obtained through experience or through communications with others
- ex: a script for visiting a dentists office
What comes with altering scripts?
- altering scripts can be frustrating to customers – need to be educated
- altering scripts can be frustrating to service personnel – educate and induce personnel to buy into the changed script
service quality
expected-perceived
- global/cumulative evaluation of all past service experiences with provider
customer satisfaction
episodic: relates to the last service experience
attribution theory
service failure > attributed cause of service failure > customer dissatisfaction level
(more upset about controllable factors)
Criteria for meaningful segmentation
- Measurability
- Accessibility
- Responsiveness
- Homogeneity
- Substantiality
- Stability
Measurability
the degree to which the size and purchasing power of the resulting segment can be measured
Accessibility
the degree to which resulting segments can be effectively reached and served (can you reach/serve them or is it too expensive?)
Responsiveness
the degree to which the resulting segment would respond favorably to changes in product and other marketing mix variables
- segmentation should lead to behavioral consequences in the market place
- when I make a change to my product the consumer should respond to these changes
Homogeneity
there should be maximum homogeneity within the segment and maximum heterogeneity between segments
Substantiality
the degree to which the resulting segments are large and/or profitable enough to be worth considering for separate marketing attention
Stability
the segments should be relatively stable (over time)
- you don’t want it to be just a fad
- value change and demographics
What is segmentation?
targeting specific group so that the product is more customized; segmentation is mass customization
Majority fallacy
don’t go after most attractive segments if its already crowded by other segments - you don’t want to compete head on right away
- ex: walmart opened in suburbs instead of in metro areas
Learn the characteristics of services and their marketing mix. How do the services’ marketing mixes differ from the products’?
Characteristics: Services are time dependent, services are place dependent, the presence of the consumer in the service factory, services cannot be inventoried
Marketing Mix: Product, Price, Place, Promotion + People, Physical Evidence, Processes
Explain servuction model. According to this model,
- What are the issues relating to: (a) services’ innovation (b) operational efficiency versus marketing effectiveness? (c) contact people as products, and (d) quality control problems.
- Why are typical growth strategies (e.g., innovating new product features, or expanding into new geographic territory) that work with products, pose problems in services?
- why do services require a different concept of marketing as an organizational function?
The model that illustrates the factors that influence the service experience; it includes visible and invisible parts that impact the service experience.
- Visible: inanimate environment, contact personnel/service provider, other customers. - Invisible: organization and system
- Services innovation: innovations are difficult to create and easy to copy
Operational efficiency versus marketing effectiveness:
Contact people as products:
Quality control problems:
-
Why do consumers perceive greater risk when buying services than when buying products?
They perceive a greater risk because services are intangible and the customer can’t look at/touch them before buying them; the first time they can experience the service is when they’re actually using it, so they can’t make a decision about it after they’ve seen it or experienced it.
What four steps should a manager take to ensure that the promised service is consistent with the delivered service?
- Solicit pre-campaign feedback from front-line operations personnel and customers about the perceived accuracy of proposed promotional messages
- Devote greater attention to managing the service evidence to project accurate cues about the service
- Resist the urge to mimic competitors who fall prey to the temptation to overpromise
- Conduct periodic research to assess the influence of their prices on customers’ expectation levels and price-value perceptions
What are the ingredients of effective communication with customers?
- Making company representatives easily accessible to customers
- Encouraging customers to contact the company
- Initiating contact with customers and following up regularly
- Training and facilitating employees to provide personalized, responsive, and caring service
- Rewarding employees for nurturing customer relationships
Pre-purchase Phase
risk and risk reduction strategies
Service encounter:
1) role theory;
2) script theory;
3) the service environment;
4) service personnel;
5) support services
What strategies can businesses use to reduce perceived risk for the customers?
Performance risk: certification of service providers; branding = standardization of quality (communicate quality of past performance/capability)
Financial risk: trial purchase; sampling; promotional incentives (early bird special)
Time loss/Opportunity risk: same as performance risk
Psychological risk/Social risk: branding/communications (testimonials)
Physical risk: instructions/communications (education on proper use of exercise equipment)
What are the components of a service encounter?
Role Theory Script Theory The service environment Service personnel Support services
What are “scripts” in the context of a service? Why are scripts important? What happens when scripts are significantly altered?
- Scripts are a learned sequence of behaviors obtained through experience or through communication w/ others
- Scripts are important because they help you to standardize a service (everyone is having relatively the same experience with your service when the script is followed)
- When scripts are significantly altered, it can be frustrating for the customers as they will need to be educated on the new script; altering scripts can also be frustrating for service personnel because they need to be educated and induced to buy into the changed script
What are the six criteria for meaningful segmentation? Why are the service segments narrower than the market segments?
Measurability, accessibility, responsiveness, homogeneity, substantiality, stability.
What is the meaning of fuzzy or conflicting segmentation strategies? Are they good or bad? Why?
Fuzzy or conflicting segmentation strategies are when the various segments you are targeting don’t really mesh well together; ex: children and adults at Disneyland – these two groups are difficult to target because they are quite different and since the service is an experience that they will be engaging with all together, it is tricky to make all individuals happy
They are not good because they make it challenging to accommodate all individuals who are being targeted by the segments
What types of advantages result by segmenting markets for a service? Consider segmentation’s impact on productivity and profitability; demand and supply; and undesirable demand
Improves productivity and profitability by helping to match supply and demand
- Offer different service levels
- Shift demand of some segments via incentives to off peak periods: electric co. offering incentives to do laundry during certain times
- Expand capacity by expanding customers’ role
- When capacity is short, top segments have first claim on the service
- Reveal undesirable demand (cats stuck in trees – fire dept. has to get them down)
There are a number of specific segmentation criteria discussed in the class. Know these criteria and the rationale for their use
- Size of the sale (give discounts – ex: buying season tickets);
- probability of repeat purchase (pay special attention, but the reverse is not true – pay special attention to your regulars but don’t ignore someone who may never come back);
- cost of serving various segments (ex: car insurance – more expensive to serve really young/old drivers);
- customers’ willingness to share in the service process (are you willing to bag your own groceries?);
- customers’ willingness to adjust demand to accommodate supplier (will you change when you do your laundry to get cheaper rates?)
Why does Sam’s Club want to be less like Wal-Mart?
Sam’s Club wants to be less like Wal-Mart because they are currently competing with themselves. They want to attract people who don’t ordinarily shop at Wal-Mart because when they are attracting Wal-Mart customers then they are taking away profits from Wal-Mart (which is essentially their own company just a different segment)
How is it trying to accomplish it? What obstacles does it face in this process?
Sam’s is going for a more regional feel like Costco; they are also trying to bring in products that are more likely to draw in higher income individuals
How are Costco’s segmentation and strategy different form that of the Sam’s Club?
Costco tends to be located more along the coasts and in urban areas which helps the draw in wealthier customers. Costco also got in early with the organic foods
Sam’s club is not the only focus of Wal-Mart and since it has changed hands (CEO wise) many times, it has been difficult for a strong strategy to be built. Sam’s club doesn’t have regional product buyers, all of theirs are based in AR.
