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Services Marketing

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-Service: deeds, efforts, or performances
-Goods: objects, devices or things
-The distinction between goods and services is not perfectly clear
-A product can be classified as either a good or a service
-Scale of Market Entities: the scale that displays a range of products along a continuum based on their tangibility ranging from tangible dominant to intangible dominant -Tangible Dominant: goods that possess physical properties that can be felt, tasted, and seen prior to the consumer’s purchase decision -Intangible Dominant: services that lack the physical properties that can be sensed by consumers prior to the consumer’s purchase decision

-Servuction Model: a framework for understanding the consumer’s experience
1. Servicescape: the use of physical evidence to design service environments
-Ambient conditions: room temperature and music
-Inanimate objects: furnishing
-Other physical evidence: signs, symbols

2. Contact Personnel/Service Producers:
-Contact Personnel: employees other than the primary service provider who briefly interact with the customer
-Service Providers: the primary providers of a core service
-Waiter or waitress
-College instructor

3. Other Customers: customers that share the primary customer’s service experience -The presence of other customers can enhance or detract from an individual’s service experience
-Unruly customers in a restaurant or a night club
-Children crying during a church service
-Theatergoers carrying on a conversation during a play
4. Organizations and Systems: that part of a firm that reflects the rules, regulations, and processes upon which the organization is based -Service Economy: includes the “soft parts” of the economy consisting of nine industry supersectors

-Education and Health Services
-Financial Activities
-Leisure and Hospitality
-Professional and Business Services
-Transportation and Utilities
-Wholesale and Retail Trade
-Other Services
-The Opportunity for Ethical Misconduct in Services:
-Intangibility: complicated the consumer’s ability to objectively evaluate the quality of service provided -Heterogeneity: reflects the difficulty in standardization and quality control -Inseparability: reflects the human element involved in the service delivery process -Factor Contributing to Consumer Vulnerability:

-Few search attributes
-Technical and specialized services
-Time lapse between performance and evaluation
-Sold without guarantees and warranties
-Accepted variability in performance
-Outcome-based reward systems
-Consumer participation in production
-The Effects of Ethical Misconduct:
-Personal Effects:

-Job-related tension
-Ineffective performance
-Turnover intentions
-Lower job satisfaction
-Organizational Effects:
-Customer dissatisfaction
-Unfavorable word-of-mouth publicity

-Negative image for firm and industry
-Controlling Ethical Decision Making:
-Employee Socialization: the process through which an individual adapts and comes to appreciate the values, norms, and required behavior patterns of an organization
-Standards of conduct
-Corrective control: the use of rewards and punishments to enforce a firm’s code of ethics
-Leadership training
-Service/product knowledge
-Monitoring employee performance
-Stress long-term customer relationship
-Marketing Challenges and Solutions Pertaining to Intangibility

P: Services cannot be inventoried
S: Use of tangible clues to help “tangibilize”
-the physical characteristics that surround a service to assist consumers in making service evaluations, such as the quality of furnishings, the appearance of personnel, or the quality of paper stock used to produce the firm’s brochure

P: Lack of patent protection and can easily be copied
S: Use of personal sources of information
-Family, friends, and other opinion leaders to gather information about a service
P: Difficulty in displaying or explaining to customers
S: Creation of a strong organizational image
P: Difficulty in pricing strategies
S: Utilize an activity-based costing approach
-Costing method that breaks down the organization into a set of activities, and activities into tasks, which convert materials, labor, and technology into outputs -Marketing Challenges and Solutions Pertaining to Inseparability

P: Physical connection of the service provider to the service
S: Selecting and training public contact personnel
-Increased emphasis placed on the selection and training of public contact
personnel to ensure that the right types of employees are in the right jobs -Minimize the impact of inseparability by hiring and educating employees in such a way that the customer’s service experience is positive and the employees are properly equipped to handle customers and their needs

P: Involvement of the customer in the production process
S: Effectively managing consumers
-Facilitate a positive service encounter for all consumers sharing the same service experience
-Service factory must be built with the customer’s presence in mind
-Ex separating smokers from nonsmokers in a restaurant
P: Involvement of other customers in the production process

S: Use of multisite location
-offset the mass production challenges
-involving multiple locations to limit the distance the consumers have to travel and staffing each location differently to serve a local market
P: Special challenges in mass production of services
-Marketing Challenges and Possible Solutions for Heterogeneity
P: Difficult to standardize service and quality control
S: Customization
-Develops services that meet each customer’s individual needs -Taking advantage of the inherent variation in each service encounter by developing services that meet each customer’s exact specifications -Customers may not be willing to pay the higher prices

-Speed of service delivery may be an issue
-Customers may not be willing to face uncertainty
S: Standardization
-Reducing variability in service production through intensive training of providers and/or replacing human labor with machines -Marketing Challenges and Possible Solutions for Perishability
P: Demand exceeds supply
DS: Creative pricing
-Pricing strategies often used by service firms to help smooth demand fluctuations, such as offering “matinee” prices or “earlybird specials” to shift demand from peak to nonpeak periods -Used to target specific groups such as senior citizens, children, and their parents (families), college students -Price incentives to use the company’s web site

SS: Part time employees
-Employees who typically assist during peak demand periods and who generally work fewer than 40 hours per week -Lower labor costs
-Flexible labor force that can be employed when needed and released during nonpeak periods -Causes consumers to associate the firm with lower job skills and lack of motivation and organizational commitment

P: Demand exceeds optimal levels of supply
DS: Reservation system
-Strategy to help smooth demand fluctuations in which consumers ultimately request a portion of the firm’s services for a particular time slot -Reduce customer’s risk of not receiving the service
-Minimize time spent waiting in line for the service to be available -Allow service firms to prepare in advance for a known quantity of demand -Someone must maintain the system which adds additional cost to the operation -Customers do not always show up on tie or fail to show up at all -Offer to the customer an implied guarantee that the service will be available, thereby increasing the customer’s expectation

SS: Share capacity with other providers
-a strategy to increase the supply of service by forming a type of co-op among service providers that permits co-op members to expand their supply or service as a whole
P: Lower demand than optimal supply level
DS: Shift to complementary services
-Services provided for consumers to minimize their perceived waiting time, such as driving ranges at golf courses, arcades at movie theaters, or reading materials in the doctor’s office
DS: Nonpeak demand

-Utilize service downtime to prepare in advance for peak periods, and/or to market to different market segments with different demand patterns
-Employees can be cross-trained during nonpeak demand periods to perform a variety of other duties to assist fellow personnel during peak demand periods -Can be developed to generate additional revenues by marketing to a different market segment that has a different demand pattern than the firm’s traditional segment

SS: Prepare for expansion in advance
-Planning for future expansion in advance and taking a long-term orientation to physical facilities and growth
SS: Utilize third parties
-A service firm utilizes an outside party to service customers and thereby save on costs, personnel, etc.
SS: Customer participation
-Increases the supply of service by having the customer perform part of the service, such a providing a salad bar in a restaurant Consumer Decision Process Model
-Prepurchase Stages:

-Stimulus: the thought, action, or motivation that incites a person to consider a purchase
-Commercial Cues
-Social Cues
-Physical Cues
-Problem Awareness: the consumer determines whether a need exists for the product
-Shortage (need)
-Unfulfilled desire (want)
-Information Search: the consumer collects information on possible alternatives

-Awareness Set: the set of alternatives of which a consumer is aware -Evoked Set: the limited set of “brands” that comes to the consumer’s mind when thinking about a particular product category -Consideration Set: of the brands in the evoked set, those considered unfit are eliminated right away and the ones left are termed the consideration set -Internal Search: a passive approach to gathering information in which the consumer’s own memory is the main source of information about a product -External Search: a proactive approach to gathering information in which the consumer collects new information from sources outside the consumer’s own experience -Evaluation of Alternatives: the consumer places a value or rank on each alternative

-Nonsystematic Evaluation:
-The use of intuition
-Simply choosing by relying on a “gut-level feeling”
-Systematic Evaluation:
-Multiattribute model
-Linear compensatory
-Lexicographic approach
-Consumption Stage:

-Buying the service
-Using the service
-Disposing of the service
-Postpurchase Evaluation Stage:
-Postpurchase Evaluation:
-Minimize the consumer’s cognitive dissonance
-Aftersale contact
-Reassuring letter in the package
-Warranties and guarantees
-Firm’s advertising

Special Considerations for the PREPURCHASE Stage:
Perceived Risk: actions are associated with higher levels of consequences and uncertainty -Consequences: the degree of importance/danger of the outcomes derives from the decision -Uncertainty: subjective possibility of occurrence of these outcomes 1. Financial Risk: the possibility of monetary loss if the purchase goes wrong or fails to operate correctly 2. Performance Risk: the possibility that the item or service purchased will not perform the task for which it was purchased 3. Physical Risk: the possibility that if something does go wrong, injury could be inflicted on the purchaser 4. Social Risk: the possibility of a loss in personal social status associated with a particular purchase 5. Psychological Risk: the possibility that a purchase will affect an individual’s self-esteem

-Reasons for Perceptions of Increased Risk
-Risk and Standardization (Heterogeneity): the involvement of the consumer in the production process also increases the amount of perceived risk -Co-Producer Risk (Inseparability)
-Information and Risk:
-Search Attributes: can be determined prior to purchase

-Experience Attributes: can only be evaluated during and after production -Credence Attributes: can’t be evaluated confidently even immediately after receipt
-Service consumers are more brand loyal
-Loyalty is based on the degree to which the consumer has obtained satisfaction in the past -Lowers perceived risk
-Switching costs are higher
-Search Costs: the time it takes to seek out new alternatives -Transaction Costs: costs such as time and money that are associated with learning new systems, such as new versions of software packages -Loyal Customer Discounts: discounts that are given for maintaining the same service over time, such as accident-free auto insurance rates. Such discounts are sacrificed when switching from one supplier to the next -Customer Habit: costs associated with changing established behavior patterns -Emotional Costs: emotional turmoil that one may experience when severing a long-term relationship with a provider. Emotional costs are particularly high when a personal relationship has developed between the client and the provider -Cognitive Costs: costs in terms of the time it takes simply thinking about making a change in service providers -Special Considerations Pertaining to the CONSUMPTION Stage:

-Consumption sequence differs:
-Goods [Produce – Buy – Use – Dispose]
-Services [Production – Acquisition – Use are entangles and Disposal is irrelevant] -Interactions between the customer and the company’s facilities and personnel are inevitable -Evaluation occurs during and after consumption

-Special Considerations Pertaining to the POSTCHOICE Stage:
-The Expectancy Disconfirmation Theory: consumers evaluate services by comparing expectations with perceptions
-Simplest and most powerful model
-Perceptions vs. Expectations
-Customer perceptions define reality
-The management of expectations and perceptions
-The Perceived Control Perspective: consumers evaluate services by the amount of control they have over the perceived situation -The basic premise is the higher the level of control over the situation perceived by consumers, the higher their satisfaction with the service

-Consumers exchange cash and control for benefits
-Behavioral control and cognitive control are important. However, it’s the perception of control, not the reality, that is important

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