SERVICES MARKETING

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EXAM REVISION BAP - April 2008

Last updated April 1st 2008 Trn Tun Anh

Exam Details
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Date: Pls see the Facultys website postings Time: 2.5 hours Format:
Part A: 40 Multiple choice questions (60 marks) Part B:
1 long answers (20 marks) 2 short answers (10 marks each = 20 marks)
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 2

Chapter 1 Objectives
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Identify reasons for changes occurring in the economy Distinguish between goods and services Describe key tasks and challenges facing service marketers Explain expanded mix for services

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

Services Defined
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An act or performance (or experience) which is essentially intangible and does not result in ownership of anything Economic activities that add time, place or form utility (value) Something that may be bought or sold but cannot be dropped on your foot

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

Services as Performance
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Service delivery is like staging a play The service providers or personnel are the plays performers or actors The service consumers or customers are the audience

(Grove, Fiske and Bitner (1992)

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

Factors responsible for the transformation of the service economy (Figure 1.7)
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Internationalisation (e.g. Hollowing out effect,

Increased services trade, Global customers)

Government Regulation (e.g. Deregulation/

privatisation, New trade agreements in services)

Social Changes (e.g. Increased customer

expectations, Increased affluence and leisure time, More women in the workforce)

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

Factors responsible for the transformation of the service economy (Figure 1.7)
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Business trends (e.g. Relaxation of professional

association standards, Marketing emphasis by non profit organisations, Outsourcing of non-core services, Services quality movement, Franchising and service chains)

Advances in technology (Convergence of

computers and telecommunications, Miniaturisation, Digitalisation, Enhanced software)

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

Difficulties in Evaluating Service Quality

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Physical goods are rich in search qualities (qualities perceived from tangible cues) Services are poorer in search qualities than physical goods
Search qualities Experience qualities Credence qualities
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 8

The Traditional Marketing Mix (four Ps)

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Product Price Promotion Place

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 9

Figure 1.12 An expanded marketing mix for services

People Place, Place & CyberTime space & Time

Product (Service)

Process
Price Price

Customers Customers customers

Promotion Physical Evidence

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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The Additional Marketing Mix Elements for Services

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People: direct contact between customers and service personnel, some services involve high levels of contact, high levels of trust and dependency. Physical evidence: this may be an actual physical component or a cue to indicate or represent the existence quality of the service purchased (often referred to as Servicescape). Process: the order and/or system of service delivery.

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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The Actions of Efficient Companies

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Evaluate and select market segments. Research customer needs and preferences. Monitor competitors performance, strategies, strengths and weaknesses. Tailor the product to suit the chosen market segment

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Chapter 4

Customer Satisfaction and Service Quality

Chapter 4 Objectives
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Define customer satisfaction and quality in service industries Explain the significance of customer satisfaction in achieving a competitive advantage Describe various models of satisfaction and service quality List the major drivers or determinants of satisfaction and quality in services Describe how to measure and monitor satisfaction
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 14

Defining Customer Satisfaction

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Satisfaction is derived from Latin satis (good enough or sufficient) and facio (to do or make). Satisfaction is a post-purchase evaluation of the overall service experience. Satisfaction is an emotive state or feeling reaction
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 15

Figure 4.3 Benefits of Customer Satisfaction and Service Quality

Insulates customers from competition Encourages repeat patronage & loyalty

Can create sustainable advantage

Customer satisfaction (& service quality)

Enhances/promot es positive WOM

Reduces failure costs

Lowers costs of attracting new customers

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Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

Other Influences on Satisfaction

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Prior attitudes towards brands are thought to influence expectations Attribution theory

Causal: who is to blame for satisfaction or dissatisfaction? Control: is the cause of dissatisfaction in the control of the company? Stability: is the satisfaction or dissatisfaction likely to recur?

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Other Influences on Satisfaction

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Equity theory is concerned with perceived fairness or a comparison of the ratio of the buyers inputs to the outputs received Personal Involvement: the degree of the customers involvement with the service will affect their expectations and evaluation

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Expectations
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Provide a standard of comparison- this may be purely subjective or based on collective previous experiences Are dynamic- they will change with new experience and information Must be managed- it is critical for an organisation to predict, understand and manage their consumers expectations
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 19

Chapter 5

Handling Customer Complaints and Managing Service Recovery

Chapter 5 Objectives
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To outline the courses of action open to a dissatisfied customer Explain the factors influencing complaint behaviour Identify the principles of an effective service-recovery system Explain the techniques for identifying the root cause of service failures
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 21

Customer Response to Service Failure

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Do nothing, but the service providers reputation is diminished Complain to the service firm Take action with a third party such as ACCC Defect and do not use the provider again

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Factors Influencing Complaining Behaviour

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Level of dissatisfaction i.e. does it seem worth it? Cost of complaining e.g. time and effort Benefits of complaining i.e. value of the outcome? Likelihood of resolution i.e. belief that the problem will/can be solved satisfactorily

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Factors Influencing Complaining Behaviour

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Available resources for making a complaint Access to a means of registering a complaint Knowing who is to blame for the problem Demographics e.g. younger and better educated people are more likely to complain

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Chapter 11

Managing Capacity and Demand

Chapter 11 Objectives
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Explain and use capacity management techniques to meet variations in demand Explain the patterns and determinants of demand Formulate demand management strategies and techniques

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Managing Capacity: The Challenge

Productive capacity may concern: z Physical facilities such as hotels, medical clinics, entertainment facilities, and transport z Service provision equipment such as telephones, hairdryers, scanners, and cash registers z People processing services in which the capacity to serve is constrained by the number, experience and expertise of personnel employed
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 27

Productive Capacity
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Physical facilities:
Medical clinics, hotels, entertainment facilities, transport (seats on a bus )

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Service provision equipment

Telephones, computers, scanners

Labor: refer to the number of staff, experience and expertise.

Labor constraints may include inadequate staffing level leading to overtaxed or unhappy staff The capacity of facility, service provision equipment and service personnel must be in balance.

Time

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Adjusting supply to meet demand

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Physical facilities: Tactics for high demand:

Rent additional space Share facilities Add seats (airlines, restaurants)

Tactics for low demand:

Decrease space (airline sublease planes)

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Service Provision Equipment

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High demand:
Hire/ outsource/ rent additional equipment

Low demand:
Hire/ outsource/ rent additional equipment to others

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Labour
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High demand:
Employ casual or part time staff Multi-skilling (cross-training) Increase working hours, overtime working Job specialization (cappuccino machine) Outsource another party Reduce interaction with staff

Low demand:
Schedule vacations, reduce working hours/ lay off staff, engage staff training, ask staff to work in varied job roles.

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Time
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Tactics for high demand:

Extending operating hours (restaurants, zoos). Increase customer participation Develop a peak hour operating schedule (banks, supermarkets)

Tactics for low demand:

Reduce operating hours Schedule downtime for maintenance
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 32

Creating Flexible Capacity

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Provide for additional capacity : some capacity has an elastic ability to absorb extra demand Increase the number of casual and parttime employees: hire extra staff during busy seasons such as Christmas Outsource facilities: rent facilities & equipment
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 33

Managing Capacity
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Create flexibility in what is offered: review what is offered at different times and consider what might be gained by offering more or less at those times Review the hours of business: consider extending or shortening hours

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Managing Capacity
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Schedule downtime in periods of low demand: carry out data-processing, repair and maintenance activities when demand is expected to be low Cross-train employees: employees who can perform several functions can be moved to bottle neck points when needed
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 35

Understanding the patterns and determinants of demand

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Does the level of demand for the service follow a predictable cycle? Does the cycle duration vary by the hour, day, week, month or season? What are the underlying causes of these cyclical variations? Employment schedules, payment dates, school holidays, public holidays, natural cycles?
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 36

Understanding the patterns and determinants of demand

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Do demand patterns seem to change randomly? Are the underlying causes due to weather patterns, health events, accidents, a force majeur? Can continual demand for a particular service be disaggregated by market segments to reflect such components as use patterns by a particular type of customer for a particular purpose or variations in net profitability of each completed transaction

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Using the Marketing Mix Elements to Shape Demand Patterns

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Product variations: high demand Modify the product offering (restaurant menu)
Reduce augmented products

Modifying the timing and location of delivery involving three basic options:
No change Varying the times when the service is available Offering the service to customers at a new location Increase the augmented products, add value, Modify the offerings to different segments

1. 2. 3. 4. 5.

Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia

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Using the Marketing Mix Elements to Shape Demand Patterns

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Pricing strategies:
Increase price, charge full price (high demand) Reduce price, price reductions (cinema tickets on Tuesday) effective pricing depends on the marketing manager having an understanding of how the demand responds to increases or decreases in the price per unit
Lovelock, Patterson, Walker: Services Marketing 3e 2004 Pearson Education Australia 39

Promotions
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High demand:
Advertise busy times, the benefits of nondemand usage

Low demand:
Advertise to stimulate demand Use short term promotions (cut off price, one for two, coupons )

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