Marketing Strategies For Service Firms

In addition to the traditional four Ps of marketing, service providers must pay attention to three more Ps suggested by Booms and Bitner for services marketing: people, physical evidence, and process.10 Because most services are provided by people, the selection, training, and motivation of employees can make a huge difference in customer satisfaction. Ideally, service employees should exhibit competence, a caring attitude, responsiveness, initiative, problem-solving ability, and goodwill.

Companies should also try to demonstrate their service quality through physical evidence and presentation. Thus, a hotel such as the Four Seasons will develop a look and observable style of handling customers that embodies its intended customer value proposition (in this case, luxury accommodations). Finally, service companies can choose among different processes to deliver their service. For instance, McDonald's outlets offer self-service, while Olive Garden restaurants offer table service.

A service encounter is affected by both visible and invisible elements (see Figure 4-4). Consider a customer visiting a bank to get a loan (service X). The customer sees other customers waiting for this and other services. The customer also sees a physical environment (the building, interior, equipment, and furniture) as well as bank personnel. Not visible to the customer is a whole "backroom" production process and organization system that supports the visible business. Thus, the service outcome, and whether or not people will be satisfied and ultimately remain loyal to a service provider, are influenced by a host of variables.11

In view of this complexity, Gronroos has argued that service marketing requires not only external marketing, but also internal and interactive marketing (Figure 4-5).12 External marketing describes the normal work to prepare, price, distribute, and promote the service to customers. Internal marketing describes the work to train and motivate employees to serve customers well. Berry has argued that the most important contribution the marketing department can make is to be "exceptionally clever in getting everyone else in the organization to practice marketing."13

Interactive marketing describes the employees' skill in serving the client. Because the client judges service not only by its technical quality (e.g., Was the surgery successful?) but also by its functional quality (e.g., Did the surgeon show concern and inspire

Figure 4-4 Elements in a Service Encounter

Figure 4-4 Elements in a Service Encounter

Elements Service EncounterTypes Marketing Service Industries

Figure 4-5 Three Types of Marketing in Service Industries fei^ifc -Jnterotm* W ;.jj|iIT


Figure 4-5 Three Types of Marketing in Service Industries confidence?),14 service providers must deliver services that are "high touch" as well as "high tech."15

Consider how Charles Schwab, the nation's largest discount brokerage house, uses the Web to create an innovative combination of high-tech and high-touch services. One of the first major brokerage firms to provide on-line trading, Schwab now provides millions of investors with Web-based financial and company information, account data, and detailed research. By offering high-tech services, Schwab has taken on the role of on-line investment adviser. Nonetheless, the on-line trading service does not entirely replace the personal service offered by Schwab in its local branches or via the telephone.16

In some cases, customers cannot judge the technical quality of a service even after they have received it, as shown in Figure 4-6.17 At the left are goods that are high in search qualities—characteristics the buyer can evaluate before purchase. In the middle are goods and services that are high in experience qualities—characteristics the buyer can evaluate after purchase. At the right are services that are high in credence qualities— characteristics the buyer normally finds hard to evaluate even after consumption.18

Because services are generally high in experience and credence qualities, there is more risk in their purchase. As a result, service buyers tend to rely more on word of mouth than on advertising when selecting a provider. Second, they rely heavily on price, personnel, and physical cues to judge quality. Third, they are highly loyal to service providers who satisfy them.

Given these issues, service firms face three key marketing tasks: increasing competitive differentiation, service quality, and productivity. Although these interact, we will examine each separately.

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