Week 9 - Services and International Marketing Flashcards
What is a service?
Services are intangible goods and are in the form of deeds, activities or performances
What is service outputs
Service that is involved in the distribution of a good
What are consumer services
They are services purchased by individual consumers or households for their own private usage
What are Business-to-Businesses services
They are services purchased by individuals and organisations for use in the production of other products or for use in their daily business operations
What is the services marketing mix
Intangibility
Inseparability
Heterogeneity
Perishability
What is Intangibility
Service is an activity and not an object, it cannot be easily perceived by the 5 physical senses e.g. Consulting
However, pure services are rare, most products contain elements of both goods and services e.g. Fast food
Being intangible makes it more difficult to promote the features and benefits of service attributes
What are the 2 strategies to reduce the uncertainty over intangibility
Use tangible cues…
* Logos, uniforms, brands
* Servicescape/physical evidence.
Reduce the level of risk perceived by customers
through such techniques as…
* service guarantees,
* testimonials
* positive word‐of‐mouth.
What is Inseparability
For most services, it is impossible to separate the production of the service and the consumption of the service, presenting a significant challenge in the marketing and delivery of services.
Buyers and sellers of services are frequently ‘co-producers of the service, it can be very difficult to control quality and, hence, customer satisfaction.
Most professional service providers can not mass produce their services and limit how many patients or clients they have daily.
e.g. doctors
Heterogeneity
The inevitable variations in the service provided give services the characteristic of heterogeneity.
For service marketers, the challenge is to provide a product with a reasonably consistent level of quality that matches customers’ expectations thus making it important to measure and manage service quality
This should be done in a continuous process e.g. customer service surveys, online reviews, benchmarking
What are the key strategies for marketers to address heterogeneity
- To develop service delivery systems
- Manage customer expectations
- Invest heavily in staff training
- Select customers carefully
Perishability
Refers to the inability to store services for use at a later date - they are time bound
The challenge that perishability presents to marketers is to balance supply and demand over time in such a way as to maximise availability, demand and profitability
Key strategies to balance demand
- Manage demand over time (e.g. opal, peak hours cost more than off-peak)
- Stimulate demand (Cafe/Bar offers happy hour promotions at slower times)
- Restrict demand (Limited edition to create scarcity and exclusivity)
- Increase Supply/capacity ( hiring additional seasonal workers and expanding warehouse operations during holiday seasons)
Issues for Marketers
- Inability for customers to inspect and evaluate a product before
consumption - Inevitable variability in service quality
- Inability to store product
The extended services marketing mix
The unique characteristics of services suggest an additional range of variables to consider (along with the 4p’s) when formulating the marketing mix
These new variables make up the 7p’s of marketing framework and are:
- People
- Process
- Physical Evidence
People
The people are those coming into contact with customers who can affect customer’s experiences and perceived value.
The most influential and controllable factor in service delivery is the organisation’s staff
A key issue for the delivery of high standards of customer service is the concept of empowerment, which enables staff to respond to the particular needs of individual customers
Process
Refers to all the systems and procedures used to create, communicate, deliver and exchange a service offering
They key concern is that process delivers the service in way that at least matches thecustomer’s expectations
- Functional expectations
- Customer service expectations
It is generally advisable to be ‘efficient first and friendly second’.
Service providers should therefore rightly focus their attention
primarily on the delivery of effective and efficient service
Physical Evidence
The intangibility of services makes it difficult for customers to evaluate the quality and suitability of services.
Customers look to tangible cues (logos, staff uniform, architecture, and decor)
The physical environment should be designed to shape customers’ experiences, expectations and behaviour
Challenges in service marketing
Three key issues which make the marketing of intangible services more difficult to manage than tangible goods:
- Achieving a sustainable differential advantage in marketing services
- Managing profitable customer relationships
- Delivering consistently high levels of customer service
How to manage differentiation
Services do not usually enjoy the protection of legal patents or copyrights and can be more readily mimicked by competitors.
Sources of sustainable differentiation are also less.
A potential source of differentiation is in distribution coverage or quality
Delivering consistent customer service quality
The intangible nature of services makes it difficult for customers to evaluate some of the service they receive
Services can be evaluated in terms of:
- Search qualities
- Experience qualities
- Credence Qualities
Developing profitable customer relationships
For many service organisations, Long-term survival depends upon the ability to create and maintain profitable relationships with target customers or customer segments
The problem of high customer turnover, together with high average transaction volumes, but low transaction values, mean that many customers may never be profitable
The challenge is to measure the profitability of individual customers and, particularly, to develop close relationships with profitable customers
What 4 key issues need to be considered in delivering consistent customer service quality
- Understand customer’s expectations
- Establish service quality standards
- Manage customers service expectations
- Measure employee service performance
Fundamentals of international marketing fundamentals
A global village
o The global village/global citizen/global market concept is derived from globalisation.
o Globalisation is the process through which individuals, organisations and governments become increasingly interconnected.
o This has consequences for national identity, sovereignty, economic activities, laws and culture.
o Almost every aspect of our lives is touched by globalisation.
Standardisation
refers to applying a uniform marketing mix across international markets, with only minor modifications to meet local conditions
- similarities between different countries/convergence
- economies in research and development
- economies of sale in production
- economies in marketing
- uniformity and ease of control of marketing approach
Customisation (adaption)
refers to carefully tailoring the marketing mix to the specific characteristics and wants of each market
- social, cultural, economic, political and legal differences between each countries
- Creation of competitive advantage
- Competition from local marketers in the foreign market
- Facilitation of innovation in the foreign market
Global trade
An organisation contemplating moving into the international markets will face numerous decisions and risks
The Australian Trade Commission (Austrade) is a government agency that provides advice, marketing intelligence and support to organisations to help them reduce the cost, time and risk involved in their international marketing efforts.
The New Zealand Trade and Enterprise agency performs a similar role.
The international marketing environment
A set of forces is at play in the international market:
- political
- economic
- sociocultural
- technological
- environmental
- legal
Ideally, international marketers should understand the
international market in the same way they would understand
their local market
What are the Political forces
Alliances and agreements
- some alliances favour trade between each country, enhancing the chances of success, while others can work against international marketing goals
e.g. Regional trade areas, Asia-Pacific economic cooperation, European Union
Country-specific political factors
- Marketers need to understand the political system of each target country and understand its influence on business and commerce
What are the economic forces
The global economy
- The economic conditions within any specific country are likely to be significantly influenced by the global economy
Country-specific economic factors
- The economic environment in a particular country will, to some degree, determine the relative attractiveness of that country as a potential target market
What are the Sociocultural forces
Sociocultural forces are among the most critical factors in the international marketing environment.
They are often forces that display the most subtlety and complexity, with each international market most likely having its sociocultural variations such as language, religion/beliefs, lifestyle etc
e.g. KFC slogan was translated to Eat your fingers off
What are the technological forces
Technology has created, revolutionised and destroyed entire industries. (streaming services have caused the fall of the video rental market)
A significant influence of technology in the sphere of international marketing is the infrastructure available in different foreign
markets
What are the environmental forces
International marketers neede to understand the relationship between their commercial activities and the environment
The Global Green Economy Index evaluates the efforts of
countries to create environmentally sustainable economies,
focusing on efforts to invest in clean energy technology,
sustainable forms of tourism and improved domestic
environmental quality
What are the legal forces
Marketing organisations must be aware of the laws in force in
the markets in which they operate to ensure their marketing mix
complies with all legal requirements
Some countries restrict trade practices through laws and
regulations. International marketers need to be aware of trade
barriers such as the following.
* Tariffs
* Quotas
* Embargoes.
Why organisations go international
Why
- It can be a profitable way of expanding a business
- help businesses become more efficient
- business increase their potential to gain new knowledge
- Diversifying risks is a potential advantage of internationalising.
- Internationalisation activities can help the wider community by
creating jobs and wealth for all partners in the business activity.
Selecting overseas market
The ‘easiest’ (i.e. lowest risk) international markets to enter are
those which share similar cultural and business practices and a
common language with the domestic market, and that are
geographically close
2-step process, screening finding best countries, then doing in-depth research
Methods of market entry
Choosing a market entry mode is a management function, but the marketer must understand the implication of each method of entry to devise the best marketing plan. the method depends on a wide array of environmental and organisational factors
Methods are:
- exporting
- contractual arrangements
- Strategic alliances and joint ventures
- direct investment
-born global
Exporting
exporting is an approach to interntional marketing involving the sale of products into foreign market while remaining based in home market
types of exporting
- direct
- indirect
Direct exporting
Approach to exporting in which the marketing organisation deals directly with the international market
Indirect exporting
allows marketing organisations to access the international market without having to develop the expertise and contacts required to successfully place products into what is often a relatively unfamiliar market
Contractual agreemetns
Licensing: a business in a foreign country manufactures and sells the products of the home country company (the licensor) and pays a commission for the sales it makes.
Franchising: a business (the franchisee) pays the franchisor a fee in return for the right to market the franchisor’s product.
Contact Manufacturing: a domestic business pays a foreign business to manufacture its product and market it in that foreign country under the domestic company’s name.
Strategic alliances and joint ventures
A business that does not wish or cannot make a direct investment in a foreign market may choose to form a strategic alliance with a company based in a foreign country.
In a joint venture, the two businesses will instead form a new business together in the target market and forge a new identity distinct from the parent business.
Direct Investment
Foreign direct investment involves outright ownership of a foreign operation
It involves a long-term commitment, considerable investment and acceptance of risks, and would usually only be pursued by an international marketer who is highly confident in success.
Most marketers would consider this approach once they have experience and success using other approaches to enter international market
Born Global
A business that views the whole world as its market from day one
Sourcing materials from the most efficient country, locating manufacturing operations in a country that provides optimum conditions, manages itself wherever it pleases and sell to anyone who wants its product worldwide.
This business model is not suitable to all industries or products.
Most born global marketing organisations are internet‐based,
e.g. eBay.
The international marketing mix
- The product mix needs to respond to customer preferences
- branding is also an important consideration
- pricing is a complex issue, as pricing is sensitive to the local conditions in each market, but it must also reflect the costs involved in the international marketing effort
- language barriers, advertising regulations, differing media infrastructure and differences in market maturity are factors that can require significant changes to promotional efforts in different markets
- International marketing introduces enormous distribution (place) challenges (e.g., the need to transport products over a much larger distance, exchange rate, fluctuations, and appropriate use of marketing intermediaries).
