Exam Deck Flashcards
Demonstrate as much knowledge as possible
Define ‘service’
- any act, performance or experience that one party can offer another
- does not result in ownership of anything
- process that provides time, place, form, experience
Explain the 5 differences between goods and services
Intangibility = customer cannot touch, taste, smell or see a service so hard to evaluate. Introduces element of perceived risk. Inseparability = service provider and consumer co-produce (otherwise doesn't matter who's made it) eg. Deakin's multiple campuses Variability = difficult to maintain uniform standard of service quality (rotation of staff) Perishability = cannot be stored to be used later to satisfy demand (might have to turn people away one night but have barely any seats filled the next) Ownership= service personnel and their performance cannot be owned by the customer
Identify 5 differences between goods and services. Explain their implications and how effective marketing can address these.
- Most service products cannot be inventoried
- customers may have to wait or be turned away
- > advertise promotions, dynamic pricing and reservations
- > work with operations to adjust capacity - Intangible elements dominate value creation
- customers cannot see, hear, touch elements
- harder to evaluate and distinguish from competitors
- > put emphasis on physical cues
- > use concrete metaphors and vivid images in advertising/branding - People may be part of the service experience
- appearance, attitude, behaviour (service personnel and other customers) can shape experience and affect satisfaction
- > recruit, train and reward employees to reinforce planned service concept
- > target the right customers at the right time and shape their behaviour - Operational inputs/outputs vary widely
- harder to maintain consistency, reliability and service quality
- harder to lower costs through higher productivity
- difficult to shield customers from service failure
- > set quality standards based on customer expectations, redesign product elements for simplicity and failure-proofing
- > institute good service recovery procedures
- > automate customer-provider interactions - Distribution may take place through non-physical channels
- information-based services can be delivered through electronic channels eg. internet, but core products involving physical activities cannot (eg personal training)
- > seek to create user-friendly, secure websites or free access by telephone (ensure all information-based service elements easily downloaded)
Explain how services create value for consumers
- customers expect to obtain value in exchange for money, time and effort
- value-creating elements rather than ownership eg. more convenient location, moving furniture before painting, delivery
- firms must create and deliver services that are perceived (by customer) to provide value and communicate this effectively
Service Dominant Logic = customer is a co-creator of value. If they don’t bother using the gym membership then they are going to gain little value
How might a company manage the intangibility, variability, inseparability and perishability of its services?
Intangibility - introduce key members of staff - provide testimonials - explain schedule of fees - offer free no-obligation consultation - affiliations - appropriate office surroundings Variability - hire qualified, experienced staff - ongoing professional training (technical and interpersonal skills) - develop reward system - standardise tasks Inseparability - convenient location - staff training - implement service recovery programme - use of electronic delivery channels Perishability - reservation system - non-peak demand - flexible pricing - use casual staff and extend work hours when busy
Summarise the key components of the Marketing Mix for the Hilton Hotel
Price
- 5 star so more expensive, expect luxury facilities eg pool, gym, conference rooms
Product
- accommodation and experience, high quality, premium (clean rooms, luxurious bedding)
Place
- accessibility!! accessible 24hrs/day, close to CBD
Promotion
- WoM important, list on hotel sites, promote aspects to attract customers (eg. business facilities for business travellers)
Process
- ‘backstage’ needs to be very smooth so customer’s ‘frontstage’ is positive eg. check in/out, high quality service (room service, turndown)
Physical Evidence (servicescape)
- expect atmosphere, full bar, room with a view (differentiate from other hotels), reputable chain lowers guests perceived risk
People
- need people that will work hard to deliver high quality service
Briefly explain the hollowing out effect
Is the deterioration of a country’s manufacturing sector when producers opt for low-cost facilities overseas to reduce overheads
- loss of employment means people move to service industry
- eg. deregulation and privatisation (telecomms, banking)
- eg. social changes (aging popn=safety features, duel income families = less time cleaning)
Outline 5 differences between services
- Recipient of service
- directed at the customer or objects that belong to them (hairdresser vs cleaning), so may not consume the benefits until later - Customisation vs standardisation
- should all customers receive the same service or underlying processes and service features be adapted to meet individual requirements (eg. KFC vs private health insurance) - High vs Low contact
- experiences shaped by the extent they are exposed to tangible elements and how these are divided between people (employees, other customers) and objects (buildings, equipment) - Discrete vs Continuous
- regular contact (Uni) means customers develop realistic expectations of value and service performance vs discrete (hospital stay), customer has less experience and fewer concrete expectations -> harder to evaluate - Relationship with customer
- each transaction is individually acknowledged (membership, hairdresser), others the customers make unidentified, fleeting transactions (hotel) so must use loyalty programs to create ongoing relationship
Outline the service operations, delivery and marketing systems
Service operations system
- involve service personnel or involve physical facilities and other tangibles
- > customers evaluate production according to elements experienced and the perceived service outcome
- > if a process backstage fails, will impact the customer (range from high-low contact)
Service delivery system
- concerned with where, when and how service product is delivered to the customer
- > may entail exposure to other customers and may seek to reduce direct contact with customers (self-service), can create sense of impersonalisation and may not be acceptable to all
- > may require information campaign to educate customers and promote benefits
Service marketing system
- all the different ways in which the customer may encounter or learn about the service organisation
- > offers clues about the nature and quality of service product (inconsistency may weaken organisation’s credibility)
- > customer encounters sometimes random (driving past an erratic driver of a company car)
Outline features of each of the elements of the services marketing mix.
Product
- performance characterstics, right product being sold in the right market, product mix
Price
- establishing the selling price to customers, trade margins or credit terms, low price tends to mean inferior goods
Promotion
- how to communicate to the audience, PR, adveritising, promotions
Place
- select the types and locations of outlets (cyberspace, physical), position and distribute somewhere accessible to consumers
People
- direct, personal interaction, those that believe in the product will perform better
Process
- how to make and deliver service, procedures to deliver (eg. script), systems/processes affecting execution
Physical Evidence
- tangible cues (servicescape - layout, ambience, furnishings)
- evidence service was delivered, how the business is perceived in the market place
Briefly outline the service management trinity
Marketing function
- segmentation, targeting, positioning, loyalty
Operations function
- creation and delivery of service product, implementation of productivity and quality improvement, technological infrastructure
HR function
- job definition, recruitment, training, rewards, engage in design and monitoring of all service delivery processes involving employees
Describe the steps of the customer decision process
- PRE-PURCHASE
* need arousal
- unconscious identity and aspirations
- physical conditions (hungry so went to Maccas)
- external sources (advertising)
* information search
- once need recognised, motivated to find solution
- alternative solutions might involve deciding between different approaches to solving same problem eg. go to the movies, rent a movie, download a movie. These alternative brands that come to mind are the evoked set
* perceived risk
- risk with making a purchase, factors may enhance risk and uncertainty
- > highly intangible
- > relatively new (no past experience)
- > complex
- > customised
- > customer is relatively inexperienced so lacks knowledge and confidence
- > purchase is important
* evaluation of alternatives
- search qualities (qualities customer can access)
- experience qualities (evaluated after the purchase eg. taste, style, treatment)
- credence qualities (even after use hard to evaluate eg. medical services) - SERVICE ENCOUNTER (purchase/consumption)
* service expectations (high, medium, low contact)
- factors influence customer desired and adequate expectations (zone of tolerance - may broaden, tighten depending on situation)
- desired service takes into account individual needs/belief
- relies on situational factors (minimum we’ll tolerate)
- based on past experience, WoM, competing brands
* mood states
- emotions part of affective domain (greater intensity than mood and include boredom, aggression and joy)
- moods temporary states that alter and vary in duration (mild, positive or negative, independent of buying situation)
* consumers in a positive mood
- process information more efficiently, less argumentative and easier to serve, enhanced experience
* cultivation of positive mood
- ambience, reception area, manner of staff, delivery process
* script and role theory
- role = social cues that guide and direct behaviour -> defines behaviour customers expect and feel comfortable with (congruence = consistent with expected roles, ambiguity = what the role entails (table service/pay at counter), conflict = uncomfortable with role)
- script = cognitive structures guiding service transactions and specify alternatives to minimise complaints
* control theory
- behavioural (actual control) vs cognitive (predictibility and perceived control) eg. flight is delayed, by how long, can I go toilet? Can be resolved by making an announcement
* understanding psychological needs and values
- security (unthreatened, avoidance of physical/financial risk)
- respect (made to feel important)
- esteem (self esteem and ego maintained -> saving face
- fairness (how customers feel they’re being treated in terms of justice, equity; distributional (perceived fairness of the outcomes) vs procedural (perceptions of whether procedures are fair)
* critical incidents
- lead to significant customer (dis)satisfaction depending on how they’re handled
- employee response to delivery system failure (slow or unavailable service)
- employee response to customer needs and requests (special needs, preferences, error)
- umprompted/unsolicited employee actions (attention paid, behaviour, cultural norms) - POST-PURCHASE
* disconfirmed expectations
- during decision-making process, customers assess attributes and risks relating to service offering (expectations, zone of tolerance)
* customer satisfaction
- confirmation (or not) of pre-consumption expectations
- will be satisfied as long as experience falls within zone of tolerance
- delight results from high performance, arousal and positive affect
Explain 3 influences of culture on consumers.
=> culture is the sum of learned beliefs, values and customs that create behavioural norms for a given society
- Collectivism/Individualism
- self image defined by ‘I’ or ‘we’
- personal satisfaction comes from admiration/respect of one’s group (fitting in with others or looking after oneself) - Uncertainty Avoidance
- individuals attitude and tolerance towards change, risk and ambiguous situations (low avoidance in western societies), high in eastern - Power Distance
- extent to which less powerful members of society expect and accept that power is distributed unevenly (relatively equal distribution in western societies)
Outline the 6 types of perceived risk with examples and solutions
Functional Risk (performance outcomes)
- will they service my car correctly?
- will this card be accepted everywhere I go incl overseas
+ servicescape (consistent signal of quality)
Financial Risk (monetary loss, unexpected costs)
- will I lose money if I go ahead with this investment
- will repairing my car cost more than quoted?
+ brochure of complete schedule of fees
Temporal Risk (wasting time, delay)
- will there be a long queue?
- will service be so slow I miss my meeting?
+ use a standardised script to help stay on schedule
Psychological Risk (personal fear, emotion)
- will the consultant understand I have little knowledge?
- will the lecturer understand English is my second language?
+ sensitivity when dealing with patients with poor oral hygiene
Social Risk (how others think/react)
- will my friends laugh at my new haircut?
- will my relatives approve of the restaurant I chose for dinner?
+ emphasis on pros of good oral hygiene
Sensory Risk (unwanted impacts on any of the senses)
- will I get a bad view from my room?
- will I be kept awake by the noise from other guests?
+ use of latest technology aimed at reducing pain and noise
What are 5 ways a customer can reduced perceived risk?
- seek more information (respected personal sources)
- rely on reputation
- look for guarantees/warranties/free trials
- look for physical evidence to assess quality
- ask knowledgable employees
Outline the four principles of competitive positioning. Provide one example.
- Establish position in customers’ minds
- position should provide one simple, consistent message
- position must set a company apart from competitors
- company cannot be all things to all people (must focus)
Cathay Pacific
- target: quality and service conscious travellers
- benefits: enjoyable pre and in-flight experience
- position: better value, superior customer service in a commoditised industry
Focus is providing relatively narrow product mix for a particular market segment - focusing on the customers it can service best. What are the four kinds of focus?
Fully focused
- limited range of services (or single core product) to a narrow, specific market segment
Market focused
- focuses on a marrow market but has a wide range of services (eg. insurance company for over 50s)
Service focus
- narrow range of services to broad market (need to be knowledge about each segment)
Unfocused
- try to serve broad market with range of services (eg. department stores but are failing to niche competitors)
What are the points of difference in services?
Relevance = customer must see PoD to be relevant and important Distinct = perceived as distinct and superior Believable = seen to be believable and credible
Outline the development of a marketing positioning strategy.
- Market analysis
- definition and analysis of segments
- selection of most appropriate target market segments
- articulation of desired position
- selection of which benefits to emphasise to customer
- competitive analysis
- analysis of possibilities for differentiation
- marketing action plan
What is the benefit of a positioning map?
- geographically represents consumer perceptions of alternate offerings regarding important variables (can compare services on price, quality etc)
Outline the downfall of Starbucks in Australia
- brought coffee in a less threatening way to America (sweet, syrupy)
- created the ‘third place’ for people to visit and charged premium price for this experience
- saturated market with stores
- relied mostly on WoM rather than traditional advertising
- Australian coffee shops about convenient location and small, personalised feel
- have more sophisticated coffee tastes
- overestimated their PoD and customer perceived value of supplementary services
- implemented sales targets which degraded their service quality (what they were known for)
- didn’t tailor their products to the Australian market at all
- expanded too quickly and forced themselves on unwilling public
- unsustainable business model -> failed to communicate brand (advertise) and entered too late into competitive market
Objectives for establishing price
= Revenue and profit
- Seek profit (cover costs)
- > Make the largest possible profit
- > Maximise revenue from a fixed capacity by varying prices and target markets over time (eg. ski resorts, airlines - revenue management)
= Patronage and user-base
- Build demand
- > Achieve full capacity utilisation where other customers are important to the experience (eg. AFL match, nightclub)
- Build user base
- > Encourage trial and adoption of a service eg. Tiger $18 one-way flights to build interest immediately
- > Build market, especially if there are a lot of economies of scale that can lead to competitive ost advantage (eg. Cable TV)
= Non-monetary pricing
- Ensure fairness, equity and affordability for the markets served and focus on positive attidunial and behavioural response eg. legal aid, animal protection -> NFP
Explain the cost-based pricing strategy and some problems with using this strategy
- Number of units of input used, multiplied by cost per unit, plus profit margin eg. catering, accounting, legal, utilities
->Simple for many industries
->Trade and professional associations
..Contract stipulates final price based on costs incurred - Becoming less popular strategy, more revenue focused
Fixed costs => unchanging and incurred if no service provided (eg. permanent staff salaries, rent, insurance, security, cost of capital
Semi-variable costs => componenets of fixed and variable eg. telephone charges, staff overtime
Variable costs => fluctuate as direct consequence of what has been produced/sold eg. ingredients in a restaurant meal, casual staff
Marginal costs => incurred in making an additional sale
Contribution margin => difference between variable cost and price charged (covers overhead)
Problems
- Not considering actual demand
- Not considering that fixed and variable costs behave differently
- Only suitable fo profit objective
- Not taking competition into account
- Difficulties in calculating cost/unit
- Tedious record keeping
Explain the 4 types of value
- Functional/instrumental
eg. fast broadband - Hedonic/experiential
….Focus on emotional/sensual experience or social connectedness
Eg. Facebook, skydiving - Symbolic/expressive
…..Taking parnter out for anniversary dinner - Cost/sacrifice
How can companys reduce monetary/non-monetary costs
- Working with operations to reduce time required to complete the purchase, delivery and consumption (eg. AVIS - 100 steps involved in ordering and getting car, identified what was most important to customers)
- Redesign unpleasant and inconvenient procedures, retrain staff to be friendlier (pschological costs) (eg. electronic lockers that required people to remember pin numbers and numbers and hard to tell which were free, changed to electronic wristbands with locker number on it)
- Eliminating /minimising unwanted physical or mental effort, notably during search and delivery process (eg. carpet cleaning brand that offers to move your furniture)
- Decrease unpleasant sensory costs by creating more attractive visual environments, reduce noise, install more comfortable furniture
- Suggest ways in which customers can reduce associated monetary costs
Explain revenue yield management and when it is appropriate
= allocates perishable capacity units to existing demand in a way that maximises revenue not patronage
- Allocate capacity to highest paying customer segment first
- Concerned with obtaining best possible yield from each available unit of capacity (eg. airline seat, hotel bed, educational institution)
- Successful yield management depends on knowing the range of customers at any given time and then developing strategies that avoid selling each unit below what current customers would be willing to pay
= Appropriate when:
- Realtively fixed capacity
- Perishable inventory
- Different market segments or customers, who arrive or make reservations at different times
- Have low marginal sales costs and high marginal capacity change costs
- Product sold in advance
- Fluctuating demand
- Customers who arrive or reserve early are more price sensitive than those who arrive/reserve late
Explain what rates fences are and include 5 examples
- Rate fences deter customers willing to pay more from trading down to lower prices (form of pricing discrimination)
- *Physical Fences (product-related)
- basic product
- > eg. class of travel, size of rental car
- service level
- > eg. priority wait-list, separate check in counters, improved food/beverage selection, dedicated service hotlines
- *Non-physical Fences (transaction characteristics)
- time of booking/reservation
- > eg. discounts for advance purchase
- flexibility of ticket usage
- > eg.fees/ penalties for cancelling or changing reservation, non-refundable reservation fees
(Consumption characteristics)
- time or duration of use
- > eg. early bird special in a restaurant before 6pm, must stay over a Saturday night/at least 2 nights
