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BEM 120 - Summary Marketing Management

Marketing Management (University of Pretoria)

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Chapter 1: Service Marketing in Perspective

SERVICE MARKETING AS AN EXCHANGE PROCESS

Marketing exchange process: The complex process whereby the organisation identiÞes the expectations of their target market and Þnds innovative ways to satisfy
the important needs of their customers.
- Marketing is exchange
To be successful in competitive markets, service organizations use "environmental scanning" to scrutinize the wider market environment before launching into a
new business idea

Micro-environment Includes org. Mission and vision statement, its competencies, and capabilities (SWOT analysis)
Market environment Emphasis on org. Customers, competitors, suppliers, and intermediaries
Macro environment Changes may result from shifts in the economic, political, legal, social, natural, technological and/or international environment.
If sufÞcient info has been collected, the service marketer can proceed to the design of the service offering.
- Has to be developed within the context

Service marketing mix: set of tools available to the organization to help shape the service offering according to the needs of its targeted customers.

THE 7 PÕS
Product ¥ Technical outcome of the service.
¥ Service product: anything offered by the organization to potential customers (tangible/intangible)
o DifÞcult to standardize services

Physical Can use tangible evidence of the service such as brochures and documentation of the service offered to decrease the perceived risk of the
evidence purchase

People ¥ The staff of an org. Form an integral part of the process of service delivery
o They all act as marketers
¥ The customer makes up the other half of people decisions in service delivery.

Process ¥ Interaction can take place in any environment created

¥ Service process should be viewed as "how" the service is provided to satisfy customer needs.

Place Depending on the nature of the service and what customers value, several distribution channels can be utilised to distribute a service to
customers

Pricing Designed to cover costs and generate proÞts for the org, and include strategic and tactical decisions about the average price to be charged,
discount structure and terms of payment

Promotion ¥ Communicated with target audience to inßuence knowledge, attitude, and behaviour.
¥ Must active communicate the beneÞts of their service to their target audience by using appropriate types of communication channels
and media.

SIX EÕS OF SUCCESFUL SERVICE MARKETING

Ease of
Expection
Expectations Education Experience doing Equilibrium management
business
If all the elements of the service marketing mix are integrated and coordinated in a holistic marketing strategy, it is a powerful framework to create customer
satisfaction.

DEFINING SERVICES

Service failure: Service performance that fails to meet a customerÕs expectations

Services: An act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything
Its production may or may not be tied to a physical product.
¥ The primary difference between physical goods and services is the element of intangibility

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DEGREES OF TANGIBILITY
PURE TANGIBILE GOODS Such as toothpaste and salt, where the addition of services cannot
Enhance customer value
HYBRID SERVICE OFFERS Equal parts tangible products and intangible services. Such as a meal at Mugg & Bean
and
Sterkinekor
TANGIBLE GOODS WITH ACCOMPANYING SERVICES Tangible product that is supported by intangible services (products such as a car
Sold with a maintenance plan)
CORE SERVICES WITH ACCOMPANYING MINOR GOODS AND Airlines where customer purchases transport and gets meals and luggage services or
SERVICES storage facilities
PURE SERVICES Consists primarily of services and include medical/legal services example ADT.

CLASSIFICATION OF SERVICES
LEVEL 1: MEANS OF DELIVERY
Equipment-based services:
¥ Automated services and services provided by either unskilled/skilled provider.
¥ Quality of equipment & ability of staff to use equipment = crucial in determining quality of
org. Service
o Automated (ATM)
o Operated skilled providers (Airlines)
o Monitored unskilled providers Cinemas)
People-based services:
¥ Can be performed by unskilled/skilled/professional staff
¥ Quality = determined by the training, knowledge, motivation of staff.
o Unskilled labour (Garden services)
o Skilled labour (Computer services)
o Professional (Lawyers)
LEVEL 2: DEGREE OF DEPENDENCE ON CUSTOMER Such as medical surgery (very dependent on customer presence)
PRESENCE ¥ Must be a pleasant experience to ensure customers will evaluate quality based on that.
Car repairs (not dependent on customer presence)
¥ Services must best suit needs of its employees and operational process.
LEVEL 3: PERSONAL VERSUS BUSINESS USE ¥ Hairdressing = personal use for own beneÞt
¥ Goods bought by an org. To produce something else of economic beneÞt = business use

DISTINGUISING FEATURES OF SERVICES

1. INTANGIBILITY
Services are intangible as they are impossible to taste, smell, feel, hear.

PROBLEMS SOLUTIONS
¥ Cannot be stored ¥ Stressing tangible cues
¥ Cannot be patented ¥ Usage of personal sources of info by stimulating positive word of mouth
¥ Complicated the communication process ¥ Encouraging employees to communicate with customers
¥ No physical goods to determine cost from ¥ Creating a strong corporate image

2. INSEPARABILITY
Services are often produced, delivered and consumed all at once
Provided-customer interaction is crucial

PROBLEMS SOLUTIONS
¥ Service providerÕs physical connection to the service offered ¥ Effective selection and training of contact staff
¥ Involvement of the customer ¥ Effective customer management
¥ Interaction amongst customers ¥ Mass production
¥ Challenge surrounding mass production ¥ Support for frontline staff

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3. HETROGENEITY
Often difÞcult, if not impossible, to completely standardize service delivery
Main reason: Service is largely delivered and produced by a human being, not a machine

PROBLEMS SOLUTIONS
¥ DifÞcult to achieve service standardization and quality control ¥ Customisation (happens when the service offering is adapted according
to an individual customerÕs speciÞc needs/instructions) Trade-offs are
always associated with this.
¥ Standardization (occurs by training staff to deliver the service in
consistent, prescribed manner and by standardizing the service delivery
process and procedures.

4. PERISHABILITY
Services can be described as perishable, since inventory-holding in the same manner as tangible goods, is near impossible.

PROBLEMS SOLUTIONS
¥ Demand > supply DEMAND SIDE: SUPPLY SIDE:
¥ Demand < supply ¥ Differential pricing ¥ Hire part time employees to increase capacity
¥ Demand = supply ¥ Offering special promotions during lower demand periods ¥ Peak time efÞciency routines
¥ Develop complementary services during peak times ¥ Increased customer participation in service delivery
¥ Develop shared services
¥ Develop facilities for future expansion

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Chapter 2: Value: From Customer Service to Satisfaction

3 Key principles: Quality, service, value

ELEMENTS IN CUSTOMER SATISFACTION AND LOYALTY

Total perceived value =The Service Act + The Service Itself
Customer satisfaction =Customer Perceptions Ð Customer Expectations

BENEFITS OF PROVIDING BETTER SERVICE

Problem: A number of organisations offer virtually identical services to the same market

INCREASED MARKET SHARE Improved quality can entice customers of competitors to move over thereby increasing the org. Market share.
IMPROVED VALUE PROPOSITION Adding superior customer service to a technically superior service increases customer's perceived value
TO GAIN MARKETING BENEFITS Quality accreditation/awards are used by many service org to substantiate their marketing communication claims.
FINANCIAL IMPACT Improved Þnancial performance is the outcome of higher sales income as well as lower costs due to improved efÞciency

Value: The difference between the customer's perception of beneÞts received from purchasing and consuming the service, and the customer's perception of the costs
incurred in exchange for the service
¥ VALUE = Service itself + customer service act > customer expectations
¥ Customers will buy a service when:
o BeneÞts of exchange > costs of exchange
o The service offers superior value compared to other alternatives in the market
VALUE LEVELS
Described on two levels:
1. Value customer derives from the service itself.
2. Value customer derives from the quality of the supporting service act.
¥ In some cases the technical components (actual service) is more important and in others the functional component (customer service) becomes more
important

Evaluation qualities: indicate the qualities present in the service that can be evaluated by the customer.

SEARCH QUAITIES Attributes that customers can evaluate prior to purchasing a service (colour, price)
EXPERIENCE QUALITIES Attributes that customers can only evaluate during and after consumption
CREDENCE QUALITIES Attributes that customers Þnd difÞcult to evaluate after consumption (wonÕt know whether the service was of a good/poor quality)

THE ROLE OF CUSTOMER SERVICE IN VALUE CREATION

Organisations offering better customer services have a competitive advantage over others.
¥ Can use guidelines to develop a customer-centred culture amongst their employees

CUSTOMER SERVICE SYSTEMS

Most obvious difference between an org. With a customer-centred culture and others is their ability to design service delivery systems from the customer's point of
view.

CUSTOMER SERVICE COMANNDMENTS (not for exam purposes)

All employees must

Ask customers what they Have effective systems Under-promise and The awnser is always
have the authority to
want and give it to them in place over-deliver YES!
handle complaints

Encourage customers to
Incentives staff
communicate when Measure everything that Show respect to all Learn from other
according to their
service delivery goes influences customer times and be polite successful organisations
performance
wrong

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¥ All about attitude

¥ Treat customers and co-workers with respect
¥ Be hygienic
¥ Success lies in Þnding the right balance between providing the customer with the actual core service from a technical point of view and providing the
service in a professional manner

THREE CONSIDERATIONS

Expectations
Perceived
about the
quality of the
characteristics of
service delivered
the service

Perceptions of the actual

service delivered

INCREASING SATISFACTION
Service quality: the ability of an organization to correctly assess customer expectations and to deliver the service at a quality level that will at least equal those
expectations.
Customer expectations: the pre-service encounter beliefs a customer has about the delivery of a service and are used as the standard against which the actual
service performance is judged.

Adequate level Zone of tolerance

Ideal service (they wish
(minimum service level (represnets range of
for this, a scenario where Desired service
that customer will tolerate service performances that
everything works out (wants/hopes to receive)
and accept without being customer will consider
perfectly)
dissatisfied) accetable)

Predicted service
(customer's actual service
expectation)

Factors that could inßuence customers' expectations levels:

¥ Personal needs
¥ Self-perceived service roles
¥ Implicit service promises
¥ Word-of-mouth communication
¥ Past experiences

Keep these aspects in mind:

¥ Identify what is most important to customer
¥ Never raise expectation levels to unattainable levels
¥ Generate positive word-of-mouth

Customer perceptions: customer's experience of the service offering that shapes his decision to repurchase from the same organisation.

Perception: The process, by which an individual selects, organizes and interprets stimuli into a meaningful and coherent picture of the world

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TECHNICAL QUALITY Whether or nor the core service was performed as expected
FUNCTIONAL QUALITY How well the customer thinks the service was performed. (inßuenced by personal interaction)
CORPORATE IMAGE Surroundings in which the service takes place and the overall image conveyed by service providers

THE CUSTOMER SATISFACTION PROCESS

¥ Created by means of a combination of responses to the customer's views and needs, continuous improvement of the organization's offerings, as well as the
overall customer relationship
¥ Depends on the ability of an org to implicitly deliver on those expectations by means of a service delivery process that has been designed to address customer
needs.

CUSTOMER EXPECTATIONS Future Expectations

ÔObjectiveÕ Quality CUSTOMER ConÞrmation Satisfaction

PERCETTIONS

UNDERSTANDING CUSTOMER DISSATISFACTION

¥ Only 1 out of 26 unhappy customers complain, the other 25 will simply take their business elsewhere (switching behaviour)
¥ 1 unhappy customer tends to tell between 10 and 11 other customers/potential customers about their bad experience (negative word-of-mouth
behaviour)
¥ Use the above to calculate the cost of dissatisfaction

UNDERSTANDING CUSTOMER SATISFACTION

Three future behaviours will occur if a customer is satisÞed:
¥ Repeat purchases as long as positive experience continues
¥ Loyalty towards the organisation
¥ Positive word-of-mouth communication

Superior service quality more favourable behavioural intentions

Inferior service quality unfavourable behavioural intentions

CUSTOMER LOYALTY
Loyalty: A commitment to repurchase from the same supplier (or use the service) in the future, and the likelihood to purchase an organisation's products or services
at various price.

BeneÞts of long-term customer relationships:

¥ Pay premium prices
¥ Try out new services from the org.
¥ Serve themselves and gives referrals

Customers can be divided into four groups:

Hard-core loyal: Split loyal:
Customers buying the same brand all the time Customers who buy two or three brands
Shifting loyal: Switchers:
Customers who frequently shift from one brand to another Customers who show no loyalty to a brand

RELATIONSHIP MARKETING
Based on two premises:
¥ It costs more to recruit a new customer than to retain an existing customer.
¥ The longer the relationship between the organisation and a customer lasts, the more proÞtable that relationship becomes for both parties.
LOYALTY PROGRAMMES
¥ Rewarding customers and they may be more likely to continue purchasing from the organisation in the future.
¥ Ideal mechanisms to obtain purchase info so that the org. Can tailor their products and services to customer needs.

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Mechanisms used by loyalty programmes to reward customers:

Discount or cash backs: Rewards currency programme:
Monetary rewards. (Pick & Pay) Not a reward, but a means to a reward (ebucks)
Soft beneÞts: Hybrid rewards:
Additional services or exclusive privileges (VIP invites) Offering a combination of all 3 above. (Clicks Clubcard)

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Chapter 3: Service Marketing Research

Technology has had a signiÞcant impact on how modern service organisations are being managed, mainly because of the volume and speed at which information has
become available to service organisations. The use of technology can enable the organisation to better understand their customers and to enhance the quality of its
service delivery.
Neuromarketing uses the tools of neuroscience to determine why consumers prefer certain products or services over others through the measurement of consumers'
sensory, cognitive, and affective responses to marketing stimuli.
OLD BUSINESS WAY NEW BUSINESS WAY
¥ Organising operations according to the product/ service units sold ¥ Organising operations according to customer segments served
¥ Focusing on proÞtable transactions ¥ Focusing on customer lifetime value
¥ Focusing on Þnancial information only ¥ Focusing on Þnancial and marketing information
¥ Focusing on customer acquisition ¥ Focusing on customer acquisition and retention
¥ Building brands through advertising ¥ Building brands through performance
¥ Marketing people are responsible for marketing ¥ Everyone and all business units are responsible for marketing
¥ Marketers create marketing activities ¥ Marketers and customers co-create marketing activities
¥ Hardly any customer satisfaction measurement ¥ In-depth measurement of customer satisfaction
¥ Over-promise and under-deliver ¥ Under-promise and over-deliver
¥ Theory-driven scientiÞc research ¥ Data-driven scientiÞc research

Marketing research is the process followed to collect information about the market to aid managerial decision-making.

Marketing research is used to:

¥ Identify and deÞne marketing opportunities and problems
¥ Generate, reÞne, and evaluate marketing actions or ideas
¥ Monitor marketing performance
¥ Enhance the quality of marketing decision-making

CRITERIA USED TO ASSESS THE QUALITY OR VALUE OF THE INFORMATION

The ACCURACY of the information in terms of its ability to reßect the realities of the situation. (realistic)
The TIMELINESS of the information in terms of whether or not the information is available when needed. (Right time)
The ADEQUACY of the information in terms of whether the information is sufÞcient to assist management in making better decisions. (enough)
The AVAILABILITY of the information at the point when and where it is needed. (access)
The RELEVANCE of the information in terms of its suitability with regards to the decisions that must be taken. (suitable)

Marketing research programs should be:

¥ Varied - a combination of qualitative and quantitative research techniques should be used
¥ Ongoing - due to the constantly changing nature of customer needs, expectations, and perceptions, service organisations need to measure these changes to
be able to respond in a timely manner
¥ Undertaken with staff - staff are in direct contact with customers and may have insight into problems and situations that may not be apparent to mangers
¥ Driven by a research committee - involving employees in the research process may incentivise them to implement the changes that the research results
call for
¥ Shared with employees - research results should be communicated with employees so that they understand what the customers expect of them and what
has been identiÞed as possible problem areas

RESEARCH USES IN SERVICE MARKETING

1 Research is used to capture customer data that can later be used to improve the organisation's service delivery performance from a customer's
perspective.
2 Research is used to solicit feedback from customers and employees. The constant interaction between the customer and the provider must be
evaluated to assess the degree of customer satisfaction.

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RESEARCH FOCUS AREAS

1. CUSTOMER RESEARCH
The purpose of customer research is to tailor the service offering to customer needs.

Customer research options:

(1) Researching customer needs - marketers Þnd information on consumer needs extremely valuable when planning new service offerings.
(2) Researching customer expectations - understanding and knowing what customers expect is the Þrst step in actually meeting and exceeding those
expectations.
(3) Customer perception studies - this can be conducted during or after the service delivery process and attempt to measure the level of customer
satisfaction
(4) Customer surveys - customers tend to feel more involved in the design of the service offering when they are given the opportunity to make a
contribution and express their opinions and share their customer-related experiences.
(5) Key customer studies - certain customers are of particular importance to an organisation, so it is worthwhile to ensure that they are satisÞed with the
service being offered.
(6) Customer/ consumer panels - consist of individual customers who have agreed to regularly participate in a speciÞc organisation's research projects.
(7) Observational monitoring of service delivery - measures the technical aspects of the service delivery process.
(8) Mystery shoppers - investigators pose as customers to evaluate the performance of unsuspecting employees in the service encounter.
(9) Analysis of complaints - complaints should be seen as a source of primary information and if used correctly can assist management and employees in
preventing a repeat of these unfortunate incidents
(10) Research among potential customers - can help uncover inhibitors or barriers and help identify ways of making the service more accessible
2. EMPLOYEE RESEARCH
Employee research links closely with internal marketing programmes. The importance of employees in service organisations cannot be overestimated, as the
interaction between the employee and the customer largely inßuences the ultimate success of the service delivery process
3. ORGANISATION RESEARCH
Organisational research options:
(1) Similar industry studies/ benchmarking - comparing and identifying best practices and widening their opportunities by studying related and
even unrelated industries.
(2) Researching service intermediaries - intermediaries are in direct contact with the end customer and provide insight into customer needs and
wants.
(3) Social media monitoring (SMM) - is a platform for 'listening' to social media users.
The primary function of SMM is to track the number of times your brand, product or service has been mentioned, to track observations about competitors and
monitor competitor actions, and to identify trends in what consumers are discussing.

Proper management and measurement of social media activity allows marketers to be more pro-active, identify opportunities, enables them to leverage success,
and deal appropriately and timely with potential threats.

E.g. Socialmention.com - a tool that indicates different social media scores of the brand
a) Strength - likelihood that the brand is being discussed on social media
b) Sentiment - ratio of positive vs negative comments about the brand
c) The reach of the brand - quantiÞes the number of people referencing the brand dividend by the total number of times the brand was mentioned
d) Passion - likelihood that the people mentioning the brand will do so repeatedly

E.g. Howsociable.com - a tool that provides a magnitude score for a brand, which indicates the degree of brand visibility. This score is useful in that brand
managers can see which social media platform is used most often by consumers for the discussion of the brand at a given time and marketers are able to join the
conversation about their brands or respond quickly to comments if necessary.

E.g. Google analytics - a tool used to measure trafÞc to a company website or blog.

SERVQUAL is an instrument used to evaluate and measure service quality perceptions of service customers.

SERVQUAL offers organisations a fairly simple way of focusing their employees' attention on whatever is important to the customer. This focus on what is important to
customers should improve the competitiveness of the service organisation and improve its ability to retain its customers.

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SERVQUALÕS DIMENSIONS OF SERVICE QUALITY

DIMENSIONS DEFINITION QUESTIONS THAT CUSTOMERS MAY RAISE
Tangibility Appearance of physical facilities, equipment, ¥ Does the organisation offer tangible evidence of the quality of the
personnel, and communication material service provided?
¥ Does the organisation make use of modern equipment?
¥ Are the organisationÕs facilities, personnel, and communication
materials attractive to the customer?
Reliability The ability to deliver the promised service ¥ How dependable is the organisation?
(most important service dependably and accurately ¥ Does the organisation preform its services right the Þrst time?
quality) ¥ Does the organisation deliver on time?
¥ Does the organisation maintain accurate records pertaining to its
transactions with customers?
Responsiveness Willingness to help customers and provide prompt ¥ How responsive is the organisation to customerÕs service requests?
service ¥ Does the organisation inform the customer exactly when the service will
be performed?
¥ How willing are employees to assist customers?
Assurance Knowledge and politeness of employees and their ¥ Does the organisation instil a feeling of conÞdence and security in
ability to convey trust and conÞdence customers?
¥ Are the organisationÕs employees courteous, and are they
knowledgeable as to the organisationÕs offerings and possible
problems?
Empathy Caring, individualised attention provided by the ¥ Can the organisation be regarded as sensitive towards the unique
organisation to its customers needs of its customers?
¥ Does the organisation service its customerÕs best interests?

SERVQUAL MEASURMENT MODEL

TANGIBLES 1. The technical equipment is completely up to date
2. The physical facilities are visually appealing
3. The employees are well dressed and appear neat
4. Tools and instruments used to provide the service are attractive
RELIABILITY 5. Promises to perform the service within a certain time are always kept
6. Complaints and problems are solved with great concern and sympathy
7. The service is delivered correctly the Þrst-time round
8. The service is delivered at the time agreed upon
9. Record keeping such as orders and accounts are accurate
RESPONSIVENESS 10. One cannot expect employees to inform customers as to the exact time of delivery
11. It is not realistic to expect prompt service from the employees
12. Employees are not always willing to help customers
13. It is acceptable that employees are too busy to help customers immediately
ASSURANCE 14. The employees can be trusted
15. Feeling safe in transactions with the employees
16. Friendly and courteous employees
17. Employees have the knowledge to answer the customer's questions
EMPATHY 18. Employees pay attention to each customer individually
19. Employees pay personal attention to each customer
20. Employees understand the speciÞc needs of the customer
21. Employees have the customer's best interests at heart
22. The organisation has convenient shopping hours

The Þrst part of the SERVQUAL questionnaire focusses on the level of service the customer will expect from an ideal service organisation within a speciÞc industry
(expectations). The second part of the SERVQUAL questionnaire focusses on the customer's evaluation of the actual service performed by the organisation under
evaluation (perceptions)

FORMULA
¥ expectations > perception
= poor perceived service quality leading to customer dissatisfaction
¥expectations < perception
= excellent perceived service quality leading to customer satisfaction and delight
¥expectations = perception
= good perceived service quality leading to technical satistaction

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The SERVQUAL method of measuring service quality is also called 'gaps model' of perceived service quality. To improve the organisation's performance,
management can either attempt to improve performance on particular dimension, or they can actually lower the customer's expectation level on this
dimension. The organisation should, however, keep in mind that too low customer expectations may be a risky option as it may convince the customer to rather make
use of a competitor's services.

CRITICISM AGAINST THE SERVQUAL INSTRUMENT

¥ The length of the questionnaire - answering 22 statements can be quite tiring and frustrating to the respondent
¥ The validity of the service quality dimensions - there are many service quality dimensions that are not captured by the SERVQUAL instrument
¥ The predictive power of SERVQUAL - some researchers believe that one only needs to consider the perceptions evaluations of customers and ignore the
expectations part

Sacsi (South African Customer Satisfaction Index) enables us to measure customer satisfaction of South African consumers by ranking South African household-
consumers' satisfaction with products and services provided by South African companies with those of other countries that use the same methodology.

The national customer satisfaction score is calculated using the ACSI (American Customer
Satisfaction Index) methodology.

DRIVERS OF CUSTOMER SATISFACTION

CUSTOMER Customer expectations can be deÞned as the pre-service encounter beliefs a customer has about the delivery of a service and are
EXPECTATIONS used as the standard or reference against which the actual service performance is judged.

Expectations represent both prior consumption experience and some non-experiential information like advertising, word-of-mouth, and
the expectation that an organisation will make mistakes in the future
PERCEIVED VALUE Perceived value is a measure of quality relative to price paid.

Value can be deÞned as the difference between the customer's perception of beneÞts received from purchasing and consuming the
service, and the customer's perception of the costs incurred in exchange for the service.
PERCEIVED QUALITY Perceived quality is determined by measuring the customer's evaluation of a recent consumption experience of the quality of an
organisation's products or services.

Quality is measured in terms of both customisation and reliability.

Customisation is the degree to which a product or service meets the customer's individual needs. Reliability is the frequency with
which things go wrong with the product or service

OUTCOMES OF CUSTOMER SATISFACTION

CUSTOMER Customer complaints are the percentage of respondents who indicate they have complained to an organisation directly about a
COMPLAINTS product or service within a speciÞed time frame
CUSTOMER Customer loyalty is a combination of the customer's commitment to repurchase from the same supplier or use the service in the future,
LOYALTY and the likelihood to purchase an organisation's products or services at various price points.

Customer Relationship Management (CRM) can be deÞned as the process behind the identiÞcation and selection of target customers by utilising information
technologies to better deliver and extract customer value. The purpose of a CSM programme is to collect information about customers and use the information in
innovative ways to best serve the needs of those customers.

BENEFITS OF CRM TECHNOLOGIES

¥ Improved proÞts owing to the better utilisation of resources based on real-time market information
¥ Reduced costs owing to decreases in wastage based on better targeted strategies
¥ Access to new customers based on the continuous collection of information and insights on current customers
¥ Development of new business ideas and strategies based on inefÞciencies uncovered in systems or based on new market information that may reveal
new business opportunities
¥ Improved customer satisfaction and retention by having a better understanding of individual customer needs and tailoring the customer experience to a
larger extent than was possible in the past
¥ Improved employee satisfaction and retention owing to a closer link to employees and better support systems helping employees to realise their own
goals as well as those o the organisation

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TYPES OF CRM TECHNOLOGIES

ANALYTICAL CRM
Analytical CRM involves collecting information and analysing it to understand all aspects regarding the past, current, and future customer.

TOOLS
¥ Data mining and analysis - are a series of tools developed to extract, categorise, link, and analyse information from a broad spectrum of data sources
¥ Data warehousing - enables organisations to not only do data mining, but also to store this information in a 'warehouse' where users can easily access
and retrieve the information in a format that is easy to use
¥ Performance measurement systems - enable an organisation to deÞne expected levels of performance and then notify the appropriate parties should
performance falls below the speciÞed level
¥ Customer intelligence systems/ expert systems - monitor a broad spectrum of customer information
¥ Competitor intelligence tools - enable the user to collect, analyse, and monitor the competitive horizon.

STRATEGIC CRM
Strategic CRM is the process of identifying new business opportunities, possible risks, and ways of increasing proÞts, reduce costs, or improve customer
satisfaction

TOOLS
¥ Modelling and simulation - are expect systems which enable organisations to virtually stimulate real-world situations
¥ Decision support systems - are systems dedicated to enable users to play out 'what if' scenarios when formulating strategies
¥ Customer proÞtability systems - help organisations decide which customers to target and which to retain

OPERATIONAL CRM
Operational CRM covers a broad spectrum of technologies to secure the company's competitive edge by providing the customer with a differentiated experience.

TOOLS
¥ Help-desk systems - are knowledge bases where the contact person can easily Þnd the required information to assist a customer either directly,
telephonically, or electronically
¥ Call centres - can be seem as elaborate helpdesks which will not only provide assistance, but also enable customers to place orders, inquire about their
account status, or decide for service delivery
¥ Caller identiÞcation technology - a tool that recognises the telephone number from which a customer has dialled and links that number to the
customer's information in the database
¥ System integration technologies - enable the organisation to integrate business systems for purposes of validation and seamless information
provision
¥ Web casting - is a technology through which millions of customers can be cost-effectively reached to ensure continuous contact and relationship-
building
¥ Short messaging services (SMS) - via cellular phone networks can be used to provide customers with information
¥ Mobi-sites - are web sites designed for the small screens of mobile phones

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Chapter 4: Product

THE NATURE OF THE SERVICE PRODUCT:

A product can be deÞned as anything that can be offered to a market for attention. Acquisition. Use or consumption and that may satisfy a want or need. It includes
physical objects, services, persons. Places, organisations, and ideas.

A service product usually forms the heart of the organizations effort to satisfy the needs of its customers - although most of them are usually a combination of both
products and services. Service products speciÞcally are bought and used for beneÞts offered and the total satisfaction provided.
Besides the beneÞts consumers expect from a service, they also expect a certain service level.

SERVICE PRODUCT LEVELS:

THE DIFFERENT SERVICE PRODUCT LEVELS ARE INTEGRATED TO FORM ONE TOTAL SERVICE PRODUCT.
CORE SERVICE Related to the basic (core) beneÞt the customer expects from the speciÞc service. The core
Service is thus the basic service product and is the essential function of a service. The core
Service should always be developed with the customers basic needs in mind
EXPECTED Consists of the core service altogether with the minimum expectation that needs to be met
SERVICE: And involves a combination of tangible and intangible elements

DESIRED The expected service plus the additional services and beneÞts. It is the nice to have and it includes elements that the service organisation can
SERVICE use to distinguish itself from competitors

SEGMENTATION AND TARGETING

Market segments are groups of buyers who share common characteristics within the segment but difter between the segments. This approach attempts to bridge the
gap between diverse customer needs and limited organisational resources. By encouraging distinct service offerings to be developed to suit the requirements of
different customer segments

Segmentation can lead to more satisÞed customers because it offers certain beneÞts such as
¥ Deeper understanding of customer needs
¥ Effective resource allocation
¥ Clearer identiÞcation of market opportunities
¥ Products created and priced for the target audience
¥ Easier choice of distribution and communication channels
¥ Better-positioned marketing programmes

Once the marketer has segmented the total market. A target segment can be selected. A target market consists of customers who will be satisÞed by the service offering
and will be proÞtable to the organization. It is important for all service organizations to consider the following criteria before making a Þnal target market decision.
¥ Sales- and proÞt potential
¥ Growth potential
¥ Organisation's ability to service the segment
¥ Organisation's ability to compete with other organisations' offerings in the same segment

Once service organizations have identiÞed their target segments, they should determine how they would prefer customers to perceive their organization and its service
products, know as positioning. Positioning is of particular signiÞcance in services sector as it places an intangible service within a more tangible frame of reference.

SERVICE POSITIONING
Positioning is an activity concerned with the identiÞcation, development, and communication of a differentiated advantage. Which gives the perception of the
organisation's products and services as superior to and distinct from those of its competitors in the mind of its target

IMPORTANCE OF POSTIONING:
Competition is intensifying in the service sector and as a result it is becoming more important for service organizations to differentiate their service products in
meaning ways

BeneÞts of positioning
¥ Provides an organization target segment with a reason for buying their services
¥ It makes it easier for all customers to see why an organization position by identifying where it wants to be and by specifying what actions are needed to attain
such position
¥ It identities market opportunities not addressed by competitors
¥ A clearly deÞned positioning strategy can make market penetration possible
¥ Offers guidelines for the development of a marketing mix, structuring each element of the mix to be consistent with the positioning strategy)

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Positioning criteria:
¥ It should be meaningful and desirable to the target segment
¥ It must be believable and not make unattainable claims
¥ It must be uniquely differentiated from the competitions
¥ It must be uniquely differentiated from the competition, in a way that is important to customers
¥ It must be sustainable and proÞtable over the long term

SERVICE PRODUCT STRATEGIES

Most organizations offer not only one service but rather a mix of services know as the service product mix. To understand the nature of the service product mix, the
following terms must be clariÞed:
¥ Service item: the individual service item offered to customers
¥ Service line: a group of related service items
¥ Service mix: All of the above and is the combination of service lines service depth: The number different service items in a service line
¥ Service width: The number of service lines in a service mix

Sometimes an organization needs to widen or contract the service mix to remain competitive. These decisions are made continuously to provide more effective and
efÞcient services. The service life cycle is a strategic tool to indicate changing patterns of services within the organizations service product mix.

SERVICE LIFE CYCLE:

Services have life cycles that graphically depict the changing patterns of demand for services within the organizations service product mix. The Lifecyle denotes the
sales of a service during the lifetime of that service. It further indicates now these sales ßuctuate according to some pattern during the services life.

INTRODUCTION During this initial phase of development, sales tend to be slow, and proÞts are either limited or non-existent. This is because the
PHASE introduction of new services is costly, especially in terms of the promotional costs involved in raising awareness about the new service. The
intangible
Nature of a service may cause customer resistance due to the creation of a primary demand for the service. The organization should focus on
attracting customers who are prepared to take risks (the innovators). With low initial prices and special offers.
GROWTH PHASE During this phase more, customers follow the lead of innovators and sales start increasing rapidly. This sales growth is then seen as an
opportunity by others, and it encourages competitors to enter the market. ProÞt margins start to increase as problems are resolved,
increasing the production of a service, which in turn leads to reduced unit costs. Promotional expenditures are also spread over larger sales
volumes which lower unit costs even further.
MATURITY PHASE Most customers at this phase have used the service, and sales growth starts to slow down. ProÞts decline mainly due to increased
competition and lower levels of net income due to expenditure such as sales promotion incentives. Owing to the large numbers of
Competitors in the market during this phase severely restricts further sales growth. Some organizations stretch the lifecycle by entering new
market segments, increased consumption rates due to effective marketing and service innovations
DECLINE PHASE Some competitors drop out of the market due to a declining demand, accompanied by technologically advanced substitute services.
Declining sales lead to reduced proÞt margins and price cutting becomes the norm. Too many competitors Þght for the remaining market
while marginal competitors continue to drop out of the market. Some organizations modify the service to initiate a new life cycle.

NEW SERVICE PRODUCT DEVELOPMENT:

Includes:
¥ Major service innovation: a new core service product with new service characteristics and processes for the markets that have not been previously targeted
¥ Major process innovation: This change consists of delivering existing core service products in new was and with new processes
¥ Product line extensions: this 1s when an existing organization adds a new service product to its current product service product line. This is to offer a wider
variety of services
¥ Process line extensions: Represent a new way to deliver existing service products. The objective can be to offer customers greater convenience, a different
experience or to attract new customers
¥ Supplementary service innovations: new facilitating or enhancing service elements are added to existing core services. This innovation can also be when
existing supplementary services are signiÞcantly improved
¥ Service improvements: this is the most common type of innovation and often takes the form of modest changes in the performance of current products. This
can include improvement to the core service product or the supplementary service.
¥ Style changes: These changes represent the most basic types of innovation and typically involve no changes in either processes or performance. However. The
changes are very often visible, create excitement and may serve to motivate employees

SERVICE ELIMNATION:
When a particular service product is no longer proÞtable, the service should be eliminated. The following can be signs of a service in need of elimination:
¥ Irregular demand for the service and decreased proÞtability
¥ A disproportionate amount or management time spent or the service
¥ When frequent price adjustments are needed

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Options to eliminate a service:

¥ Immediate eliminator
¥ Price increase
¥ Reduce promotion
¥ Inform customers
¥ Reassign resources
¥ Legal implications

SERVICE PRODUCT/MARKET STRATEGIES

MARKET The purpose of this strategy is to increase sales from existing customer segments with their existing services. This penetration can be
PENETRATION: achieved by an increased consumption rate amongst existing customers. An increased consumption late is often made possible by
encouraging customers to use available services more frequently.
MARKET A service organization can extend its market attracting new types of customers for its current services. The market has thus widened to
EXTENSION: include other customers together with current customers. This strategy may require in-depth market research to ensure that the needs of
new customers are understood and meet completely
SERVICE The organization develops new or modiÞed service products for the current market. This strategy is risky as the organization dealing with
DEVELOPMENT: a new service product may lack the capabilities or resources to produce this new service product

DIVERSIFICATION: With this strategy new markets are catered for by offering new service products. This strategy holds the greatest risk since the new
organization becomes involved with new services and new markets simultaneously and there may be no existing resources available to
execute such a strategy. The strategy is most typically adopted within a mature service industry where growth cannot be realised in any
other way

BRANDING STRATEGIES:
Choosing a speciÞc brand is a strategic matter. The purpose of branding is to identify services as belonging to a particular organization.

DIFFERENT APPROACHES ARE AVAILABLE TO VALUE A BRAND:

¥ Market comparative approach is used when the value estimate is based on prices from market transactions involving the sale of similar or comparable assets
¥ A cost approach is used when the value estimate is based on reproduction/replacement cost of the brand - adjusted for depreciation and obsolescence
¥ An economic income approach is used when anticipated economic beneÞts are converted into a present single amount

FUNCTIONS OF BRANDING
COMMUNICATION Brands have a communication function for the service provider
FUNCTION
REDUCTION FUNCTION Customers often prefer well-known brands to reduce search costs and to reduce the risk of buying an ineffective service. Brands
are frequently used by organizations to provide evidence of consistent service standards.
FACILITATION FUNCTION Service providers also use branding to facilitate new service introductions, promotions. Segmentation and premium pricing.
Familiarity with a well-Known brand name diminishes the risk customers may associate with services and makes it easier for the
organization to introduce new services
DIFFERENTIATION Branding can differentiate a speciÞc service from other similar services. Branding can thus assist the organization in avoiding
FUNCTION price competition and even enable them to charge premium prices in particular market segments

EXPRESSIVE OR SOCIAL- When a customer makes use of a speciÞc brand, he or she expresses a particular lifestyle or status. Customers of a particular
ADAPTIVE FUNCTION brand often imitate a particular lifestyle or want to identify themselves with a particular subgroup in society

SECURITY FUNCTION Due to the risk associated with buying services, emotional factors can play a decisive role in consumer buying decisions.
Familiar brand names provide trust and security concerning the quality of the service to the customer. It further conveys
reliability and consistency, which contribute to the perceived beneÞts
ASSOCIATIVE FUNCTION: The combination of various signals and symbols attached to the brand, results in associations customerÕs mind. Brand
associations can de com positive ana negative

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CHAPTER 5
PHYSICAL EVIDENCE
Physical evidence (servicescape) can be defined as the physical environment where the
service is delivered, including any tangible element used to support the role of the
service.
e.g. Attorneys offer advice as their service, but they enhance this intangible offering with
physical evidence such as documents that confirm what they have done, the décor in
their offices, degree certificates hanging on the wall, and brochures or other printed
information about their services.
The type of physical evidence used is determined by the utilisation and complexity of the
environment.

PHYSICAL EVIDENCE BASED ON UTILISATION

self-service In this environment, the customer performs most of the service
activities and only a few or no employees are involved. This
environment should be designed to enhance customer
satisfaction and attraction.
e.g. ATMs, movie theatres, online internet services
interpersonal service In this environment, the physical space is shared by both
customers and employees. The design should depend on how
the service environment affects the nature and quality of the
social interactions between and among customers and
employees.
e.g. a patient’s hospital room will be designed to enhance
patient comfort and privacy as well as to facilitate employee
productivity.
remote service In this environment, there is little or no customer involvement in
the service environment. This environment should be designed in
a manner to keep the employees motivated, productive and
satisfied.
e.g. mail order services, telecommunication services, financial
consultants, editorial services, google

PHYSICAL EVIDENCE BASED ON COMPLEXITY

basic environment A service environment that is very simple, with few elements,
few spaces, and few pieces of equipment. The design of these
environments is relatively basic, especially in a self-service or
remote environment in which there is no or little interaction
among employees and customers.
e.g. ATMs, post office kiosks, ticket offices
detailed environment A service environment that is complex, consisting of a variety
of different elements and forms.
e.g. banks, airlines, schools, hospitals, restaurants

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ROLES OF PHYSICAL EVIDENCE

packaging service packaging refers to the exterior, interior, and other tangible
elements of the service
e.g. the signage outside a bank
facilitating physical evidence is used to facilitate the interaction between both
customers and employees participating in the service process
e.g. barriers and signage to direct customers at an airport
socialising physical evidence has to convey the expected roles, behaviours and
relationships among employees and customers – the purpose of
socialising is to project a consistent and positive image
e.g. the uniforms worn by employees of fast-food chains support the
service strategy by representing a symbol that embodies the group’s
image
differentiation the physical environment can serve as a differentiator in signalling
quality to the target market, confirming the positioning of the
organisation, and conveying distinctiveness from competitors
e.g. well-designed facilities will be perceived as having an advantage
over poorly decorated alternatives
managing trust physical evidence can be used to reduce perceived risk and increase
the level of perceived quality
e.g. the type of office furniture and décor in a lawyer’s office and the
way they are dressed and present themselves will influence the
consumer’s belief about whether the lawyer is trustworthy or not

DIMENSIONS OF PHYSICAL EVIDENCE

AMBIENT FACTORS
Ambient factors refer to the air quality and temperature, smell, noise, lighting, music,
and other sounds in the building. These factors have a physiological effect on
customers and employees.

smells, air quality Some organisations use aromatic smells very effectively to lure
and temperature customers into their shops e.g. coffee shops, flower shops,
bakeries, perfume shops. Negative impressions about the service
organisation will be formed if foul and musty odours are present.
The smell in a service environment should be consistent with the
type of environment or service product in order to be effective. If
the temperature in the service organisation is too hot or too cold,
the employees may become irritable and customers will probably
resort to avoidance behaviour and not stay very long in the store.
music and other Some organisations believe that employees are happier and thus
sounds more productive when listening to background music. Shoppers
tend to spend less time in a store when music is played loudly.
noise Undesirable sounds detract from the organisation’s overall
atmosphere.
lighting Lighting can help too set the mood, tone, and pace of the
service encounter. Customers tend to talk more softly when lights
are dim. The lighting creates a formal atmosphere and it tends to
slow down the encounter. In contrast, brightly lit service
environments are perceived as informal, cheerful, and fast-
paced.
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DESIGN FACTORS
Design factors refer to the exterior appearance and architecture of the organisation’s
physical facilities, as well as the interior décor, layout, colour, furniture and equipment,
texture, and accessories.

EXTERIOR DESIGN FACTORS

The exterior appearance of the facility has to be consistent with the image of the
service organisation. When designing the physical facility, there needs to be a balance
between attractiveness, efficiency, and affordability. The larger the size of the
organisation and the more impressive its physical evidence, the more customers
associate the organisation with success, security, and stability – which tends to lower
perceived risk when purchasing the service. It could, however, be seen as impersonal
and sometimes uncaring. The organisation’s visibility is also essential in creating
awareness. Signage should attempt to indicate the who, what, where, and when of the
service offering. Entrances should be non-slippery, flat, and provide easy access. The
location of the organisation in terms of customer convenience, is also an important
factor influencing the customer experience.

INTERIOR DESIGN FACTORS

Interior design factors can include flooring, colour, fixtures, wall textures, layout, as well
as odour, temperature, sound, and lighting. These factors influence different emotions in
customers.

flooring Flooring contributes to the image customers have of an organisation

and should be consistent with the positioning of the organisation.
colour The colour of the service organisation’s communication material,
personnel, interior and exterior appearance, as well as the official
colours of the organisation all create the customer’s first impression of
the organisation. Warm colours such as red, yellow, and orange can
evoke feelings of comfort, friendliness, and warmth. Cool colours such
as blue, green, and violet can be perceived as cold and aloof. Light
colours tend to make a room look larger, whereas dark colours make
small spaces look smaller. Darker coolers attract customers’ attention.
Duller colours are perceived as softer and brighter colours as harsher.
fixtures The use of fixture such as pipes, plumbing, beams, doors, storage
rooms, display racks, and tables should be considered in terms of utility
and aesthetics.
wall textures The use of wall textures can enhance or diminish the atmosphere of an
organisation.
layout If displays and aisles are placed in a manner to generate straight traffic
flow (aisles in a rectangular fashion) customers can shop quickly, an
efficient atmosphere is created, and self-service is easy. However, if
displays and aisles are place in a free-flowing pattern, customers are
more likely to browse and make impulse or unplanned purchases
which can increase the profitability of the organisation.

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SOCIAL DESIGN FACTORS

Social factors concern the interaction between customers and service employees,
including factors such as the number of people involved, their behaviour, and
appearance. This means that the moods and behaviour of employees have an impact
on customers and in visa versa. It is important for service marketers to monitor the
behaviour of customers, as one customer can influence the perception of a service
experienced by others.

Social factors can influence customers to react to service organisations in two different
ways:
approach behaviour These behaviours include all positive behaviours that might
be direct at a particular organisation. For employees, it
includes a desire to affiliate, work, and express commitment.
For customers, it includes behaviours such as entering,
staying, spending money, and loyalty.
avoidance behaviour These behaviours reflect a desire not to stay, or explore, or
work or affiliate.
e.g. crowding has a negative effect on customers and may
result in customers avoiding service providers (time and risk
pressures increase the feeling of crowding)

COMMUNICATION DESIGN FACTORS

The service organisation’s communication to customers as well as to employees is
another dimension of physical evidence. Quality of materials used in artwork, presence
of certificates and photographs on the wall, floor coverings, and personal objects
displayed in the service environment can all communicate symbolic meaning and
create a sound overall aesthetic impression. Communication devices include
advertisements, invoices, statements, membership cards, and delivery vehicles.

REFERENCES – the above summary is made using the following textbook:

Y. Jordaan, J. Samuels. 2015. Grasping Service Marketing. Third Edition. Ant Production
Management CC. South Africa.

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CHAPTER 6
PEOPLE
A customer’s first impression of the service organisation is based on his or her first
interaction with the employees of that organisation.

The manner in which an organisation manages its employees impacts on its ability to
satisfy external customers’ needs.

TYPES OF SERVICE EMPLOYEES

SUPPORT Customers seldom come into contact with support personnel. The
PERSONNEL technical quality of the service delivery is determined by support
personnel. These employees thus represent the internal production
process of the service organisation. Their skills and competencies form the
backbone of the service organisation’s operational activities and can be
seen as the internal strength of the organisation.
e.g. the pilot of an aircraft, the caretaker of the hotel who cleans the
facilities
CUSTOMER- Customer-contact personnel are highly visible to the customers. They
CONTACT represent the interface between the service organisation and its
PERSONNEL customers, and they largely determine the functional quality of the
service. Customer-contact personnel are frequently referred to as
boundary spanners.
e.g. nurses at a hospital, air hostesses on a aircraft

BOUNDARY SPANNERS can be defined as personnel who interact with both the
organisation’s internal and external environments, thereby linking the organisation to the
outside world.

FUNCTIONS OF A BOUNDARY SPANNER

(1) information transfer – by collecting information from the environment and feeding it
back into the organisation, as well as communicating with the environment on behalf of
the organisation
(2) personal representatives – customer-contact personnel influence customer’s
perceptions, such as the organisation’s corporate reputation and image

Boundary spanners can be classified on a continuum where the two extreme roles are:
(a) subordinate service roles – represent the parts played by personnel working for
organisations where the customer purchase decisions are entirely discretionary
e.g. air hostesses, bus drivers, bank tellers, and others who function at the very base of the
organisation
(b) professional service roles – represent the parts played by personnel whose
professional qualifications give them a level of status independent of their position in an
organisation. In these roles, customers often do not consider themselves to be ‘superior’ to
the professional as they acknowledge the professional’s expertise.
e.g. doctors, dentists, accountants, management consultants

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DIFFERENT GROUPS OF CAPABILITIES

technical know-how Thorough knowledge of the latest organisational
about the organisation developments is a prerequisite in delivering superior service.
This demonstration of insight will not only impress the
customer but will also influence the technical quality of the
service quality.
ability to serve customers To cultivate a favourable service quality image, employees
well and maintain the have to be sensitive to the customer during the service
quality of the service encounter, be empathetic and responsive, communicate
with the customer, and make the customer feel valued.
ability to work as a team This requirement emphasises the importance of internal
communication and efficient administration procedures.

EMPLOYEE ISSUES
1. RECRUITMENT, SELECTION, AND TRAINING
Recruitment is the process by which an organisation secures and builds its human
resources. The goal of recruitment is to attract and retain the right employee for the
right job. Inadequate customer retention is often caused by poorly selected, inefficient
employees, lacking a service attitude towards the organisation ’s customers.

Selection is the process of choosing the right employee for the right job. Line managers
should be included in the selection and appointment process since they have a clear
understanding of the requirements of a specific job and can use their previous selection
experience to good effect.

Training refers to the acquisition of specific knowledge and skills that enable employees
to perform their jobs effectively. Training is used to build teams, change cultures, and
communicate the organisation’s values to new recruits.

Staff development is concerned with activities directed at the future needs of the
employee, which may themselves be derived from the future needs of the organisation.
2. MOTIVATIONAL JOB CHARACTERISTICS
After the most suitable candidates have been recruited and training has started, it is
important to take note of five guidelines to ensure that employees remain motivated:

(1) Employees who have jobs requiring a variety of skills and abilities tend to be more
motivated than employees whose jobs entail only tedious, repetitive tasks
(2) The more visible the outcomes of a given service are, the more motivational the task
tends to be
(3) The degree of impact an employee perceives his/her job to have on the lives of
others inside and outside the organisation also influences motivation levels
(often customer-contact personnel can see the influence of their jobs on customers but
support staff do not usually experience the impact of their efforts)
(4) The higher the degree of freedom and discretion/autonomy an employee
experiences in his/her work, the more motivated he/she will tend to be
(5) Feedback can be used to motivate employees as it will help them understand the
result of their efforts.

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DIFFERENT GROUPS OF CAPABILITIES

technical know-how Thorough knowledge of the latest organisational
about the organisation developments is a prerequisite in delivering superior service.
This demonstration of insight will not only impress the
customer but will also influence the technical quality of the
service quality.
ability to serve customers To cultivate a favourable service quality image, employees
well and maintain the have to be sensitive to the customer during the service
quality of the service encounter, be empathetic and responsive, communicate
with the customer, and make the customer feel valued.
ability to work as a team This requirement emphasises the importance of internal
communication and efficient administration procedures.

EMPLOYEE ISSUES
1. RECRUITMENT, SELECTION, AND TRAINING
Recruitment is the process by which an organisation secures and builds its human
resources. The goal of recruitment is to attract and retain the right employee for the
right job. Inadequate customer retention is often caused by poorly selected, inefficient
employees, lacking a service attitude towards the organisation ’s customers.

Selection is the process of choosing the right employee for the right job. Line managers
should be included in the selection and appointment process since they have a clear
understanding of the requirements of a specific job and can use their previous selection
experience to good effect.

Training refers to the acquisition of specific knowledge and skills that enable employees
to perform their jobs effectively. Training is used to build teams, change cultures, and
communicate the organisation’s values to new recruits.

Staff development is concerned with activities directed at the future needs of the
employee, which may themselves be derived from the future needs of the organisation.
2. MOTIVATIONAL JOB CHARACTERISTICS
After the most suitable candidates have been recruited and training has started, it is
important to take note of five guidelines to ensure that employees remain motivated:

(1) Employees who have jobs requiring a variety of skills and abilities tend to be more
motivated than employees whose jobs entail only tedious, repetitive tasks
(2) The more visible the outcomes of a given service are, the more motivational the task
tends to be
(3) The degree of impact an employee perceives his/her job to have on the lives of
others inside and outside the organisation also influences motivation levels
(often customer-contact personnel can see the influence of their jobs on customers but
support staff do not usually experience the impact of their efforts)
(4) The higher the degree of freedom and discretion/autonomy an employee
experiences in his/her work, the more motivated he/she will tend to be
(5) Feedback can be used to motivate employees as it will help them understand the
result of their efforts.

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Owing to the nature of the service delivery process, the employees of the organisation
and its customers have a direct influence on one another.

They feel that since they

They feel that in order to
are paying for the
deliver the service properly,
service, they want to
they need maximum
ensure they get the
control.
service they want.

They have an interest in

how the service is
performed and therefore
want to control employee
performance.

CONTROL STRATEGIES
can be used to increase organisational and service personnel control, as well as
perceived customer control
PHYSICAL CONTROL many service organisations use this type of control to
take charge of the service encounter
e.g. at the dentist, the customer is placed in a reclined
chair with a towel and instruments on his/her chest
CONTROL THROUGH EXPERTISE the service personnel take the lead in a situation or
demonstrate expertise in order to gain control
e.g. a surgeon can use a certain tone of voice when
telling a child not to walk on his injured leg
EDUCATING THE CUSTOMER the customer is educated as to what is expected of
him or her
e.g. when you rent a car, you receive instructions on
the refuelling policy to communicate to you not to
refuel the vehicle on return
CONTROL THROUGH REWARDS the customer can be controlled by being offered some
form of a reward
e.g. loyalty programmes to offer customers discounts if
they always choose the service organisation

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METHODS TO INCREASE PERCEIVED CONTROL

COGNITIVE This is when the customer believes that he or she has some control over
CONTROL the service encounter based on acquired knowledge or expertise.
Cognitive control focuses on the fact that customers tend to feel safer
when they have more knowledge of a given situation. This can be used
when the customer cannot gain behavioural control.
e.g. a computer company explains to a customer how a computer
works and why it has malfunctioned
BEHAVIOURAL This is when the customer is actually given the authority and the ability
CONTROL to change or modify the service. This technique works better for
customised services rather than standardised services.
e.g. an interior decorator asks the customer to choose colours and styles
before redecorating their house

Customers want to be offered a high level of service at the lowest possible price. Service
providers want to offer a high level of service but not at the expense of profit. These
contradictory objectives create a natural tension between employees and customers.
DISADVANTAGES OF CONFLICT
•increase employee stress levels which leads to health problems, absenteeism,
decrease in job satisfaction, and an increase in possible staff turnover
•decline in productivity and efficiency
•negative impact on organisational profitability

TYPES OF CONFLICT SITUATIONS

PERSON/ROLE A person/role conflict occurs when playing a specific role makes
CONFLICT another person uncomfortable.
e.g. customer-contact personnel are often required to smile and be
helpful even if they are not in a good mood
ORGANISATION/ The organisation/customer conflict arises when the customer
CUSTOMER requests or expects services that violate the rules of the organisation.
CONFLICT e.g. asking the waiter for a second loaf of curtesy-bread
INTER-CUSTOMER Inter-customer conflict refers to conflicts arising between customers.
CONFLICT e.g. when a waiter is requested to ask another diner to not be so
lord and disruptive

STRATEGIES TO REDUCE CONFLICT AND STRESS

reducing person/ role conflict by requesting employee input into how service roles
can be changed to reduce conflict
reducing organisational/ by ensuring that customer expectations are
customer conflict consistent with the capabilities of the service system
reducing inter-customer conflict by making use of segmentation to minimise the
chances that two or more divergent groups will share
the encounter

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DIFFERENT GROUPS OF CAPABILITIES

technical know-how Thorough knowledge of the latest organisational
about the organisation developments is a prerequisite in delivering superior service.
This demonstration of insight will not only impress the
customer but will also influence the technical quality of the
service quality.
ability to serve customers To cultivate a favourable service quality image, employees
well and maintain the have to be sensitive to the customer during the service
quality of the service encounter, be empathetic and responsive, communicate
with the customer, and make the customer feel valued.
ability to work as a team This requirement emphasises the importance of internal
communication and efficient administration procedures.

EMPLOYEE ISSUES
1. RECRUITMENT, SELECTION, AND TRAINING
Recruitment is the process by which an organisation secures and builds its human
resources. The goal of recruitment is to attract and retain the right employee for the
right job. Inadequate customer retention is often caused by poorly selected, inefficient
employees, lacking a service attitude towards the organisation ’s customers.

Selection is the process of choosing the right employee for the right job. Line managers
should be included in the selection and appointment process since they have a clear
understanding of the requirements of a specific job and can use their previous selection
experience to good effect.

Training refers to the acquisition of specific knowledge and skills that enable employees
to perform their jobs effectively. Training is used to build teams, change cultures, and
communicate the organisation’s values to new recruits.

Staff development is concerned with activities directed at the future needs of the
employee, which may themselves be derived from the future needs of the organisation.
2. MOTIVATIONAL JOB CHARACTERISTICS
After the most suitable candidates have been recruited and training has started, it is
important to take note of five guidelines to ensure that employees remain motivated:

(1) Employees who have jobs requiring a variety of skills and abilities tend to be more
motivated than employees whose jobs entail only tedious, repetitive tasks
(2) The more visible the outcomes of a given service are, the more motivational the task
tends to be
(3) The degree of impact an employee perceives his/her job to have on the lives of
others inside and outside the organisation also influences motivation levels
(often customer-contact personnel can see the influence of their jobs on customers but
support staff do not usually experience the impact of their efforts)
(4) The higher the degree of freedom and discretion/autonomy an employee
experiences in his/her work, the more motivated he/she will tend to be
(5) Feedback can be used to motivate employees as it will help them understand the
result of their efforts.

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Cognitive dissonance is the doubt that creeps into the customer’s mind as to whether or
not the right decision was made.
For satisfied customers, post-purchase actions include repeat purchases, customer
loyalty, and positive word-of-mouth communication. For dissatisfied customers, post-
purchase actions include negative word-of-mouth communication and possibly the
switching of vendors.

Marketing managers should pay attention to the following in this stage:

•aspects that are important to customers in evaluating the service offering
•understanding the concept of customer satisfaction
•investigating possible causes of the service failure

WAITING is a psychological experience where there is a relationship between the design

of a queue and the emotions and attitudes of people waiting. Waiting periods can
influence customer’s perception of the service quality as the waiting time can erode from
the value offered by the actual service.

PRINCIPLES OF WAITING
1. unoccupied waiting periods feel longer than occupied ones
2. pre-process waiting periods feel longer than in-process periods while post-process
ones feel the longest of all
3. anxiety makes the waiting period seem longer
4. unspecified waiting periods feel longer than specified ones
5. unexplained waiting periods feel longer than explained ones
6. unfair waiting periods feel longer than equitable ones
7. the more valuable the service, the longer the customer will be prepared to wait
8. solo waiting periods seem longer than group ones

MANAGING UNCOOPERATIVE CUSTOMERS

1. let the customers vent their feelings
2. avoid getting trapped in negative feelings towards the customer
3. briefly express empathy with the customer
4. begin with active problem solving
5. mutually agree on a solution
6. follow up on the case

REFERENCES – the above summary is made using the following textbook:

Y. Jordaan, J. Samuels. 2015. Grasping Service Marketing. Third Edition. Ant Production
Management CC. South Africa.

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11/4/24, 12:04 PM Chapter 7 Process - Great summaries for marketing analysis

CHAPTER 7
PROCESS
The service encounter occurs when the customer and the contact staff member meet in
order to deliver the service. It is the period during which the customer directly interacts
with the service product.
When the customer has to physically meet with the customer-contact personnel for the
service to be performed, the following aspects of the service delivery process become
important:
(a) quality control – due to the service being produced and consumed simultaneously,
the quality of the service depends entirely on the customer-contact personnel
(b) service location – location is an important driver of customer satisfaction. An
inconveniently located service provider will lose customers to better located providers.
(c) demand management – delays have a negative effect on high-contact encounters
as customers are frustrated by efficiency problems

Service blueprinting can be defined as a technique that uses a flowchart to provide

detailed knowledge of operations with which to analyse and manage complex
production processes. This flowchart can also identify new product or service
development opportunities as it involves information on flows, stocks, costs, and
bottlenecks within the service delivery process. One of the primary uses of service
blueprinting is to improve organisational productivity.

BASIC REQUIREMENTS OF SERVICE BLUEPRINTS

•the blueprint must show time dimensions to indicate how long each activity in the
flowchart takes
•blueprints must identify errors, bottlenecks, repetitions, etc
•the blueprint also needs to define the degree to which the process is allowed to
deviate from the standard before it could negatively affect the customer’s experience

e.g. a service blueprint of a take-away restaurant

VISIBLE TO CUSTOMER
give
receive prepare collect put order
take order customer
payment drinks food together
(30 sec) order
(30 sec) (20 sec) (20 sec) (15 sec)
(5 sec)
NOT VISIBLE TO CUSTOMER

receive order and prepare food

(70 sec)

Critical incidents can be defined as specific interactions between the customer and the
service provider that are especially satisfying or dissatisfying. Critical incidents should be
viewed as opportunities where the service organisation has to prove its ability to deliver
according to customer expectations.

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The operational system of a service organisation can be described in terms of its

complexity and divergence.
complexity a complex service will have a large number of steps and sequences
e.g. brain surgery
a service with lower complexity will have fewer steps and sequences
e.g. filing a car’s petrol tank
divergence a service high in divergence can be executed in many different ways
e.g. giving a sermon at a church
a service low in divergence will only have one or very few ways in which
the service can be executed
e.g. replacing a flat car tyre

The higher these levels, the more costly the operation tends to be. Reducing divergence
standardises the service product and reduces production costs, whereas increasing
divergence enables service providers to tailor their products to individual customer needs.
Reducing complexity is consistent with specialisation strategies, while increasing
complexity is appropriate for organisations pursing a penetration strategy.

Role-playing/ customer scripts can be defined as a set of behavioural patterns that are
learned through experience and communication and is performed by an individual in a
certain social interaction to maximise effectiveness. It is important that roles are clearly
defined, and that the role-player understands what is expected to be done or not to be
done.
Managing customer queues and waiting periods is another important aspect to ensure a
smooth service delivery process. Waiting and queuing are frustrating to the customer and
so the organisation should determine the acceptable or expected customer waiting time.
The expected waiting time is affected by several factors:
(a) the importance of the service to the customer – the more important the service is to
the customer, the longer they will be willing to wait
(b) how busy the customer perceived the provider to be – people tend to understand
that they will have to wait longer if the service provider is very busy
(c) the time of day – people are more impatient during their lunch breaks than during
other times

TECHNIQUES TO MANAGE CUSTOMER WAITING AND QUEUING

operation The purpose of operational management is to reduce the actual
management amount of waiting time by changing the service delivery process.
Shorter or faster queues can help address this problem and improve
evaluations of the service experience.
•Technology enables many organisations to provide their
customers with alternatives to waiting in line for service delivery.
•Encourage customers to make use of service delivery facilities
during off-peak periods
perception Perception management alters the customer’s perceived waiting
management time without changing the actual waiting time. This technique works
on the premise that unoccupied waiting time feels longer than
occupied waiting time and that keeping customers busy whilst
waiting will reduce the perceived waiting time.

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The purpose of service recovery is to perform the service really well the second time to
avoid losing a potentially loyal customer and to prevent negative word-of-mouth
communication.

Although service recovery cannot change the reality of the initial service failure, it will
demonstrate the organisation’s commitment to service excellence and its desire to satisfy
its customers needs.

The extent to which service recovery is possible depends on two principal factors:
(a) customer-contact personnel must be able to empathise with customers
(b) customer-contact personnel need to be empowered to take remedial action at the
right time

The primary source of identifying service recovery opportunities is customer complaints.

REASONS FOR CUSTOMERS NOT COMPLAINING

•customers feel that it is not worth the time and effort
•customers feel that no one would be concerned about their problems or interested in
rectifying it
•customers feel that they do not know where to complain or what to do
•customers from lower-income households are less likely to complain
•older customers feel uncomfortable to complain
•low problem severity
•importance of the purchase to the customer is low
•low extent of financial loss suffered

Responsive service organisations view complaints from two perspectives:

(1) as a rich source of feedback and information that can be used to judge service
delivery and to suggest improvements to service design and execution
(2) as a series of individual customer problems requiring a resolution

Information about complaints, suggestions and inquires can be identified by:

•talking to or researching the customers of the organisation
•discussing service-related problems with the organisation’s own employees
•interacting with intermediary organisations acting on behalf of the original supplier
•analysing suggestion and complaint cards mailed or placed in a box
•analysing complaints to third parties, such as customer groups, legislative agencies,
trade organisations and other customers

REFERENCES – the above summary is made using the following textbook:

Y. Jordaan, J. Samuels. 2015. Grasping Service Marketing. Third Edition. Ant Production
Management CC. South Africa.
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11/4/24, 12:06 PM Chapter 8 Place- Distribution

The purpose of distribution is to add time and place utility to the service product by
making the service offering available and accessible to customers where and when they
need it.
THE NATURE OF DISTRIBUTION

Distribution can be defined as the availability and accessibility of a service to customers.

Availability means that the service is available to the customer whenever he or she wants
it. Accessibility refers to the relative ease with which the customer can conduct a
transaction with the service provider.

DISTRIBUTION OBJECTIVES
indicate the nature of the service delivery process
coverage If the service organisation decides on exclusive distribution, the number
of locations will be limited to one or only a few in any geographical
area. When convenience in services is deemed important by customers,
wider distribution coverage is desirable.
contact The nature of the customer contact varies by industry and type of
organisation. High-contact services are more likely to take place in
locations that are geographically close to the customer.

When a service is provided, the service provider and the customer can
meet each other in three different ways:
(1) the customer can go to the service provider
(2) the service provider can visit the customer
(3) there may be no physical contact at all
reservation Reservation facilities reduces the need for the immediate availability of
facilities the service.
actual The delivery of services can be done individually or collectively. An
delivery individual and personal delivery of a service requires a high number of
outlets. A customised service can only be provided if the sales area
remains local or regional.

Accessibility strategies are designed to meet the following objectives:

•to gain market share for an existing service in an established market
•to gain entry to a new market
•to prevent penetration of an established market by competitors

DISTRIBUTION FUNCTION

The distribution function attempts to balance supply and demand. This balancing act is
more complex for services due to the perishability and inseparability of the service
offering.

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DISTRIBUTION PROBLEMS
•an excess of production capacity in one time period cannot be transferred to another
period when there is a shortage
•excess demand in one geographical area cannot be met by excess supply located in
another area – advised to match supply and demand for services both temporarily and
spatially

DEMAND SITUATIONS
negative This occurs when customers have negative feelings towards the
demand particular service, despite the fact that they benefit from it.
e.g. dental services

Marketers should try to counter these negative feelings with positive

marketing actions such as friendly personnel, a relaxing interior design,
and smoothing background music.
no This occurs when a service is perceived by some as having no value.
demand e.g. young people do not see savings and life insurance policies as
being of value to them

Marketers should reformulate the service offering and promotional

methods to appeal to the specific target market.
latent This occurs when the need for a service exists, but there is no affordable
demand service available.

Marketers can turn latent demand into actual demand developing new
services or methods to deliver the service at an affordable price.
declining This occurs when there is a steady fall in sales.
demand
Marketers should identify the causes of the decline and develop a
strategy to revive demand.
irregular This occurs when there is an uneven distribution of demand through
demand time.

Marketers can reduce prices during slack periods.

full This occurs when demand is at a desirable level.
demand
Marketers should focus on improving quality and not on increasing the
volume of demand.
overfull This occurs when there is excess demand for a service.
demand
unwholesome This occurs when an organisation experiences demand for a service
demand that it would prefer not to have.

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STRATEGIES TO BALANCE SUPPLY AND DEMAND

•equipment can be switched for alternative uses to accommodate different patterns
of demand
•personnel can be cross trained to perform different jobs at peak periods
•capacity can be increased in the short-term during periods of peak demand
•operations can be organised to do some of the work during periods of lower demand
to avoid a potential bottleneck during peak periods of demand

DISTRIBUTION STRUCTURE

Location refers to the decisions a service organisation makes about where its operations
and staff will physically be situated.

The importance of location for a service organisation depends on the type and degree
of interaction required:
(1) the customer can go to the service provider – the social environment and
accessibility of the service provider is important in the location decision
(2) the service provider can visit the customer – location becomes a much less
important managerial decision
Material-orientated service providers have to visit the customer’s premises to provide
the service e.g. plumbers, interior decorators, garden services.
People-orientated service providers can use their discretion in deciding whether to offer
their services at the customer’s premises or their own premises. These service providers
are more focused on the convenience and comfort of the customer e.g. tv repair
services, pizza delivery.
(3) no physical contact between the customer and the service provider

The distribution channel can be defined as the course taken in the transfer of the service
from its original source of supply to its ultimate place of consumption. Service
organisations utilise channels to ensure that the right service product gets to the right
place at the right time. Distribution channels are usually shorter for services than for
physical goods.
CHANNEL CHOICE OPTIONS
direct channels This channel is characterised by the absence of intermediaries, with
the original service supplier delivers the service to the end-user
directly. It is often used when the service offering is complex and
variable and where legal constraints make the involvement of
intermediaries difficult e.g. beauty parlours, photographic studios,
professional services, security services, consultants.
indirect channels This channel consists of one or more intermediaries in order to bridge
the distance between the service provider and the customer. These
distances can result from geographical, social, or psychological
factors.
multi-channels This channel option utilises two or more channels to reach one or
more market segments. This option can lower the costs of distribution
and increase market coverage. Multiple channels can offer more
choices to customers e.g. customers can purchase directly form the
airline or through travel agents.

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DISTRIBUTION COVERAGE
exclusive This is where only one or a limited number of outlets sell the service
distribution product. These service products are generally high-priced. It is used when
the service organisation needs to maintain a high level of control over the
functions of the intermediary. Exclusive distribution is used when the
service is complex and requires specialised personnel who can provide
complex information and help educate the customer in the use of the
service.
selective This is where only a few intermediaries are used. This arrangement can
distribution reduce the costs of distribution but allows wider availability than the
exclusive distribution strategy. It is used when the service product is sold at
a few high-end outlets, rather than distributing to supermarkets and
discount retailers.
intensive This is where many service outlets are used. By utilising more outlets, a
distribution service organisation increases accessibility and the number of customers
it can serve. It is often used when customers have a range of acceptable
brands to choose from. The disadvantage of intensive distribution is that
the chances of service failures are much higher and is thus more complex
to manage.

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Intermediaries act as middlemen on behalf of other service organisations. Service

intermediaries differ in terms of their size, structure, legal status, and relationships.

TYPES OF INTERMEDIARIES
agents An agent is someone who acts on behalf of a service producer
and has the authority to create a legal relationship between the
customer and the service provider.
service wholesalers Service wholesalers are intermediaries who buy the right to a large
volume of service transactions and then break these down into
smaller units for retailers to handle.
service retailers A retailer functions in a manner that does not create legal
relationships between the service provider and the final customer.
franchised service Franchising refers to a relationship between a franchisor and a
deliverers franchisee where the franchisor stipulates the manner of service
delivery to the franchisee. These requirements include prices to be
charged, accounting procedures, standards of service delivery,
availability, performance, and business hours. The franchisee is
licensed to deliver the service and in turn carries some share of
both the financial risks and rewards.

PROS OF FRANCHISING CONS OF FRANCHISING

•being part of an established brand •high franchise fees
•reduction of risks •ongoing royalty or management fees
•start-up assistance •rigid operating procedures
•on-going support •loss of freedom
•group benefits •sale restrictions

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CHARACTERISTICS OF SERVICES
•services cannot be owned, making it difficult to refer to the rights to service ownership
being transferred through distribution channels
•services are intangible and perishable and therefore no inventory can be stored for
later consumption
•the inseparability of most services requires that intermediaries basically have to
become producers of the service themselves

LOGISTICS/ PHYSICAL DISTRIBUTION

Integrated logistics is defined as the process of anticipating customer needs and wants,
acquiring and allocating the capital, materials, people, technologies, and information
required to meet those needs and wants, and optimising and utilising those service-
providing networks to satisfy customers’ needs and wants in a timely fashion.

The two major logistics activities include: supply chain logistics and service response
logistics.
Supply chain logistics is the movement and management of raw materials, in-process
materials, and finished goods inventories from the point of origin to the point of
consumption.

SUPPLY CHAIN FUNCTIONS

•transportation
•warehousing and inventory
•purchasing

Service response logistics is the process of co-ordinating the non-material activities

required for the delivery of the service in a cost-and-customer-service-effective way.
LOGISTICAL ACTIVITIES
information a rapid flow of information is needed to balance customer requirements
with inventory holding levels
order-taking this involves the receipt of applications, orders, and reservations
invoicing service organisations should ensure they do not disappoint customers
with an inaccurate, illegal, or incomplete invoice
payment customers expect easy and convenient payment options and
sometimes require access to credit facilities

REFERENCES – the above summary is made using the following textbook:

Y. Jordaan, J. Samuels. 2015. Grasping Service Marketing. Third Edition. Ant Production
Management CC. South Africa.

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11/4/24, 12:06 PM Chapter 9 Pricing - Great summaries for marketing analysis

CHAPTER 9
PRICING
A price is the financial medium facilitating exchange between service providers and their
customers. Exchange implies that money is paid by a customer to a service provider in
exchange for a service. This exchange will only take place if both buyer and seller believe
that there is sufficient value in the exchange for both of them. The art of successful pricing
is to find the price level that is low enough to represent good value to the customers, yet
high enough to allow the service provide to realise its financial objectives.

PRICING OBJECTIVES

•survival – used in unfavourable market conditions, where the pricing objective is to

attain desired levels of profitability to ensure the organisation’s survival
•sales maximisation – used in service industries where sales volume is important, by
using economics-of-scale benefits to gain a competitive advantage
•prestige – using high prices to position themselves as exclusive and prestigious
•social consideration – the price of services such as health care, electricity, and public
transport is often regulated by government and the price of the service is usually below
cost price
•stimulate patronage – a new service may have the objective of attracting new
customers using introductory price discounts
•match supply and demand – to ensure maximum use of their productive capacity at
any given time, organisations try to match supply and demand

FOUNDATIONS OF PRICING

The three elements that form the basis of price-setting are cost, competition, and
demand.

COST
A cost-based pricing strategy is used when the marketer sets prices by calculating the
cost of producing the service and then adding the desired profit mark-up to these
figures.

A service provider’s cost can take two forms:

(a) fixed – costs do not change with the quantity demanded and include costs such as
office equipment, buildings, insurance, administrative salaries.
(b) variable – costs change with demand, and include costs such as electricity,
postage, supplies, shipping, equipment rental.

Methods:
(1) cost-plus pricing – the service organisation determines the price by adding a given
mark-up to their costs to produce the service (ignores demand and competition)
(2) rate-of-return pricing – the overall rate of return of an organisation is the profit
yielded before interest and tax, divided by total assets utilised to generate the profit
(3) activity-based costing – traces the costs of services through all the service-
generating activities by analysing the service organisation’s past records to identify the
activities required to complete a specific project

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(4) break-even pricing – determines what sales volume should be reached before total
costs equal total revenue (no profits are earned and no losses are made)
COMPETITION
A competition-based pricing strategy is when the marketer sets prices in accordance
with those of competitors.

Competition occurs when the same service is offered at the same level of
standardisation and complexity. When setting prices, service organisations should focus
on competitors on all levels, and not only on their direct competitors.
DEMAND
A demand-based pricing strategy is used when the marketer sets prices after
researching customer desires and determines the range of prices that is acceptable to
the target market.

Price elasticity of demand refers to the percentage change in demand divided by the
percentage change in price. It refers to how sensitive demand levels are to price
changes.

PRICE SEGMENTATION

PRICING FROM THE CUSTOMER’S PERSPECTIVE

Successful service pricing depends on recognising the value a customer places on a
service, and then to price that service accordingly.
(a) Value – refers to the best combination of service product, price, service quality, and
organisational image and is based on the customer’s perceptions regarding the service,
past experience with the organisation, and what other competing service providers offer.
(b) Cost

FORMS OF CUSTOMER COSTS

monetary refers to the actual money paid by the customer to obtain the service
cost e.g. consultation fee paid after a visit to the dentist
physical refers to the physical energy spent by the customer to acquire the service
cost e.g. the inconvenience of sitting with your mouth open for half an hour,
travelling and parking expenses
time refers to the time the customer has to wait to acquire the service, such as
cost doing price comparisons and collecting information on the nature of the
service e.g. taking time off work to visit the dentist and waiting an hour at
the dentist for the appointment
sensory refers to the cost incurred when the customer has to put up with noise,
cost unpleased smells, uncomfortable seating, and visually unappealing
environments while receiving the service e.g. unpleasant hospital-like smell
in the examining room
mental refers to the evoked feelings of inadequacy, fear, and anxiety that a
cost customer experiences e.g. patient is anxious when they go to the dentist

(c) Risk reduction – customers often use price as a means of assessing the potential risk of
a buying decision.

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(d) Level of customer involvement and participation – pricing tends to be more inelastic
for high-involvement services, such as dentists. Low-involvement services, such as garden
services, prices tend to be elastic and customers are more likely to switch from one
service provider to another quite easily in response to a price increase.

SEGMENTATION APPROACHES FOR PRICING

Price segmentation can be defined as a pricing policy in which different prices for the
same service are set, depending on the needs of different market segments. Segmented
pricing is an approach based on the premise that different segments respond differently
to price changes.

SEGMENTATION APPROACHES
time-based customers in different markets may buy a service at different times
pricing e.g. holiday resorts charge higher rates during school holidays
purchase-based the prices of some services depend on the location where the
pricing service is delivered e.g. a computer firm will charge more for
repairing a computer at a consumer’s home than when the
customer takes the computer to the workshop
customer-based different customers may pay different prices for the same service
pricing e.g. hairdressers charge different prices for the haircuts of children,
adults, and senior citizens

PRICING STRATEGIES

price-skimming Price-skimming strategy is used when a high price is charged for a

strategy specific service targeted at a specific market segment that will value
the service more highly than other segments.

This strategy is very effective when the market is willing to buy the
service for its unique advantages. This strategy allows the marketer to
initially attract customers who are less price-sensitive before gradually
lowering prices to attract those who are more price-sensitive.
e.g. DSTV had initial high prices for their decoders, which are now
being lowered gradually.
penetration Penetration pricing strategy is used when a relatively low price is
pricing strategy charged for a service which is targeted at the mass market.

A low price will attract the largest part of a market and also
encourage customers who show little brand loyalty to switch service
suppliers. A possible disadvantage of this strategy is that an initially low
price may become a price ceiling and customers may resist further
price increases once that ceiling has been reached.

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price-quality Price-quality strategy refers to the positive relationship between price

strategy and quality. The higher the price, the higher the quality.

CRITERIA TO JUDGE PRICE-QUALITY RELATIONSHIPS

•referrals from friends and family
•the reputation of the service organisation and their experience
•physical evidence portrayed by the service organisation
•the image of the service organisation created by advertising
•the treatment of customers by the service employees

value pricing Value pricing strategy is used to reinforce the positioning of the
strategy service and the benefits the customer receives from the service.

This strategy can be used when the service organisation is familiar with
its costs, has efficient operations, and provides excellent service. This
strategy does not attempt to maximise profitability, but rather tries to
maximise the profit from each relationship.

PRICING TECHNIQUES

benefit pricing is used to reduce the amount of perceived risk and to structure the
price of the service in such a way that customers benefit by means
of a type of bonus or price reduction.
price bundling is used when two or more services are put together in a single
package at a single price. This pricing technique is used when the
combination of services is more valuable to the customer than any
of the service items would be independently.

Mixed bundling occurs when services can be bought as a package

but also separately.
(a) mixed-leader bundling – is a pricing technique used when the
buyer gets a discount off the price of a second service, if this is
bought together with a leader service
(b) mixed-joint bundling – is a pricing technique used when the
package price is lower than the total price of the individual services.
The one disadvantage of this technique is that it might limit the
customer’s choices. The services that are bundled together must be
complementary.
pricing discounts Cash discounts are offered to prompt early payment.
or reductions Quantity discounts are offered for bulk purchases.
Temporary price reduction is used to bring supply and demand
back into balance.
Short-term price reduction is when a new entrant threatens the
existing market.
Multiple-use discount is used for a fixed or unlimited number of uses
and/ or fixed or unlimited amount of time.

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contingency is used when the most important aspect of value is the result of the
pricing service. This pricing technique makes sense to customers who are
unfamiliar with the circumstances they find themselves in or the
professional expertise required to make an informed buying
decision. This pricing technique is beneficial to the customer as they
do not risk paying for a service that did not benefit them, but also
beneficial to the service provider who typically receives a higher
income than what a standard professional fee would have
generated.
behaviour- is used to get customers to take certain actions that will lower the
modification costs of the service organisation.
pricing
price increases sometimes service organisations are confronted with a situation that
compels a price increase and this usually results in customers
reacting negatively.

To minimise this negative response, service organisations will:

•wait until the competition increases their prices before they
increase their prices
•use a communication programme to explain the necessary price
increase to customers
•make no mention of a price increase in the hope the customers will
not notice it
•make several minor price adjustments over a period of time until
the whole price increase is reached
•modify the service offering or add a service feature that would
justify the price increase to the customer

REFERENCES – the above summary is made using the following textbook:

Y. Jordaan, J. Samuels. 2015. Grasping Service Marketing. Third Edition. Ant Production
Management CC. South Africa.

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CHAPTER 10
PROMOTION
The primary purpose of marketing communication is to inform, persuade, or influence
consumer behaviour. Customers need information as to where and when the service is
available (place), how much it costs (price), and what exactly the service entails
(product). Communication plays a key role in positioning an organisation and its services
in the market and can add value to the service itself.
OBJECTIVES OF MARKETING COMMUNICATION
•to build awareness and create an interest in the service product and/or service
organisation
•to differentiate the service offering from competitive offerings
•to communicate the benefits of the service offering and the positioning strategy
•to develop and enhance the brand and its image
•to build and maintain the overall image and reputation of the service organisation
•to persuade customers to buy or use the service
•to remind customers to use the service regularly

Marketing communication involves an ongoing process of communication between an

organisation and its target markets.

COMMUNICATION PROCESS
1. OBJECTIVE The objective can be to inform, persuade, or remind customers of the
service offering provided by the service organisation.
2. SOURCE The service organisation that communicates the message is the
communication source or sender of the message. The source should
be credible.
3. MESSAGE The service organisation has to encode the message for the target
ENCODING audience by putting its ideas, thoughts, and objectives into words,
pictures, and symbols. The message has to grab attention, use an
understandable and acceptable language, focus on the needs of
the target market, and suggest how these needs may be met by
utilising the organisation’s services.
4. MEDIUM The message is transmitted through a communication channel or
medium, such as print media, broadcast media, interpersonal
communication, and outdoor advertising.
5. AUDIENCE Decoding is the process by which the audience assigns meaning to
DECODES the words, pictures, and symbols received. It is the interpretation of
MESSAGES the message by the target audience.
6. DISTRACTION Interference may occur between the encoding of the message by
the source and the decoding of the message by the target audience.
The target audience may pay attention to the message, understand
it, and remember it, but still interpret it differently than what was
intended.
7. AUDIENCE The audience response can be expressed in terms of quantity
RESPONSE purchased, frequency of the purchase, or even non-purchase.

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The communication mix refers to the combination of elements that an organisation uses
to communicate with its target markets. The communication mix elements include
advertising, sales promotion, personal selling, public relations, direct marketing, and word-
of-mouth. The service organisation should decide on an optimal combination of
elements, best suited to their target market, industry, and its own situation.
COMMUNICATION MIX
ADVERTISING
Advertising can be defined as mass, paid communication, which is used to transmit
information, influence attitudes, and induce some form of response on the part of the
audience. The purpose of advertising is to bring about a response by providing
information to potential customers.

Roles of service advertising:

•to introduce and describe the service organisation to the customer
•to build a personality for the service organisation
•to integrate the needs, values, and attitudes of customers with the capabilities of the
service organisation
•to motivate the service organisation’s personnel to support the marketing effort and to
serve customers appropriately
•to create an enabling environment by supporting sales representatives and
intermediaries to execute their responsibilities effectively

ADVERTISING APPEALS
rational provides the target audience with important, factual information and
messages usually emphasises benefits, price, quality, value, service guarantees,
service excellence, service availability, or service characteristics.
emotional attempt to evoke an emotional response from the target audience and
messages usually use humour, fear, sadness, pride, or happiness appeals.
moral elicit feelings of right and wrong from the target audience and may
messages often have a commanding or righteous tone.
competitive have the goal to position the service offering in the mind of the target
advantage audience in relation to competition.
messages

The service organisation should compile a media mix that is most likely to reach the
target market. Reach refers to the number of people exposed to an advertising
message or campaign. Frequency refers to the number of times an individual or target
audience is exposed to an advertising message.

TYPES OF MEDIA CHANNELS

newspapers local newspapers have the advantage of geographical segmentation
outdoor include billboards, posters, advertising on busses and taxis
advertising
television enhanced by its ability to appeal to the senses of both sound and sight,
and to use colour and movement, more expensive than other media,
limitation of not being able to segment audiences in terms of
geographical areas, can market to customers nationally

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radio makes local segmentation possible, lower production cost than

television, the audience can be involved in other activities while being
exposed to an advertisement
cinema promotes local services, useful for supporting press and television
advertising
transit is advertising that appears on the inside and outside of public transport
advertising vehicles and is often referred to as ‘moving billboards’, only effective if
the people in the vehicle are the organisation’s target market or if the
vehicle drives in the right area where the target market is
SMS and cost-effective, high reach, and high responsive rate mediums that can
email help businesses acquire and retain customers, sell, and promote
products, drive loyalty, and reinforce branding efforts
SALES PROMOTION
Sales promotion refers to a variety of activities with the common purpose of stimulating
customer buying behaviour, especially in the short term. It is an effective means of
getting customers to use the service for the first time or to be used for frequently bought
services with a low perceived risk.

Characteristics of sales promotion tools:

•are beneficial to both internal and external customers
•stimulate positive word-of-mouth communication
•provide tangible cues to the service offering
•help the customer to understand the service
•enhance the overall messages of the service organisation
•encourage customer loyalty

SALES PROMOTION TOOLS

coupons and Coupons are certificates entitling the bearer to a discount on the
groupons purchase of a specific service. Groupon is a middleman service that
promotes services on behalf of a service provider, for which
commission is earned whenever a customer has been referred
successfully.
sampling Sampling gives customers the opportunity to experience the actual
service free of charge – often in small quantities or for a short
duration, without purchasing the service.
premiums or Premiums are free merchandise or additional services offered when
give-away purchasing a particular service. The free merchandise or additional
items service often do not consist of the actual service product but may
be complementary to the service.
competitions Competitions can encourage trial and/or use, launch a new service,
smooth seasonal demand, raise awareness, and increase sales.
Competitions can attract new users or reward existing users.
price discounts Discounts and price reductions can also be used as a form of sales
promotion.
frequency Frequency programmes are long-term sales promotions targeted at
programmes current customers. These programmes are designed to build repeat
purchase behaviour and brand loyalty by rewarding customers for
their long-term patronage. They require multiple purchases over a
period of time according to a formal method of accumulating
points or credits for these purchases.

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bonuses and Sales bonuses can be used to stimulate sales among sales personnel
awards during periods of low demand or to develop loyalty among
intermediaries

PERSONAL SELLING
Personal selling is a promotional tool used by salespeople to engage customers using
skills and techniques to convince them to purchase the service by demonstrating the
ways in which the service will meet their needs. This form of communication usually
takes place via sales representatives who are the link between the customer and the
service organisation.

Differences between selling physical goods and selling services:

•service purchasing is sometimes a less pleasant buying experience
•customers’ perception of the service organisation is an important factor when
deciding to purchase a service
•customers attach particular importance to the level of support received from a
particular salesperson
•customers are influenced by personal recommendations to a greater extent than by
advertising
•customers may do fewer price comparisons when purchasing services
•customer involvement is of more importance when purchasing services

STAGES OF PERSONAL SELLING

STAGE 1: The first stage in the selling process is finding potential
preparation and planning customers.
STAGE 2: The next stage deals with the training of salespeople in
sales presentation effective sales and presentation skills. Salespeople should
be trained to ask questions and become active listeners
when dealing with prospective buyers. Care should be
taken to ensure that the customer is not overwhelmed by
too much detail or complex information.
STAGE 3: This stage deals with the handling of objections and
negotiations and closing closing. Salespeople should be trained to handle
objections and to use appropriate techniques to deal
with them. Closing the sale needs experience and skill
from the salesperson in terms of how and when to close.

Objections can be handled in the following ways:

•the salesperson can agree with the objection and then
qualify the agreement
•turn the objection into another selling point
•agree that the objection is valid and modify the
proposal
•delay answering the objection until a later stage
•show the objection to be invalid
•ask for further explanation of the objection
STAGE 4: A letter of appreciation for the business or a phone call
follow-up can help to reduce the buyer’s feeling of uncertainty
about the purchase (if they exist). The follow-up is often
neglected but is essential to ensure customer satisfaction
and repeat business.
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PUBLIC RELATIONS
Public relations is an indirect promotional tool with purpose of establishing and
enhancing a positive image of an organisation and its services amongst its various
stakeholders. These stakeholders are any groups of people and organisations that have
an interest in the service organisation.

STAKEHOLDERS/ PUBLICS/ AUDIENCES

intermediaries need reassurance about the organisation’s service offerings –
the organisation’s newsletters and favourable articles about the
organisation in trade journals or other media
suppliers need assurance that the service organisation will honour
contractual agreements – favourable annual reports, favourable
public reputation, credibility, and reliability of the service
organisation through testimonial-type advertising
employees public relations use tools such as in-house publications,
newsletters, and employee-recognition programmes
investors need reassurance that the organisation will realise its stated
objectives and its financial objectives such as profitability
government this communication may include lobbying with legislators and
sponsoring government initiatives and events
local communities the organisation can enhance its image and reputation by
means of charitable contributions, sponsorship of local events,
and by supporting actions to protect the local environment

PUBLIC RELATIONS TOOLS

events The service organisation can arrange different events to attract
media attention or to build its corporate image. Events can
include: press conferences, presentations, seminars, public
speeches, exhibitions, and the sponsorship of education and
training.
lobbying The service organisation can use lobbying to influence legislators
and government officials to promote or oppose legislation and
regulation. The purpose is to inform and influence key decision-
makers who may be critical in allowing elements of a marketing
plan to be implemented.
publications These include annual reports, brochures, magazines, newsletters,
posters, articles, and employee reports.
publicity Publicity is an objective source of information that is influential.
Good media relations can provide credible exposure in the eyes
of potential and existing customers, since the media itself is
unsponsored. Publicity has the potential of going viral when the
content plays on the emotions of customers, when the event or
story told is unexpected, and when people are able to share the
content or want to comment on the information.
sponsorship Sponsorship is an investment in events or causes.
crisis management A crisis can be a one-time event (e.g. a fire, product recall, etc)
or a long-lasting problem (e.g. labour strike, undesirable
publicity).

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Crisis management elements:

(a) the risk has to be described accurately in terms of how each
customer group may be affected
(b) the service organisation has to describe actions to be taken
to decrease the risk
(c) the cause of the risk has to be identified, followed by a
demonstration to the public that the service organisation knows
what the problem is and will rectify it
(d) responsible management must be seen to carry out the plan
of action
DIRECT MARKETING
Direct marketing is an interactive system of marketing which uses one or more media in
acquiring a measurable response at a given location. The purpose of direct marketing is
to create, build, and maintain a direct relationship between the service providers and
their customers.

With general advertising, it is difficult for organisations to know exactly how effective
their advertising is, whereas with direct marketing, the response to a specific call to
action will enable the organisation to know exactly how successful their efforts were.

TYPES OF DIRECT MARKETING MEDIA

telemarketing using a telephone for marketing to receive messages
(inbound telemarketing) as well as to transmit messages
(outbound telemarketing).
direct mail can be useful when targeting specific groups of private or
business customers. Direct mail requires a high degree of
creativity to be successful.
email marketing is an easy way to reach customers because it can reach a
wide audience in a short period of time. It is a very cost-
effective method and easy to measure by tracking the
open-up, click-through, and conversion rates of receipts.
direct response media are interactive forms of advertising that are primarily aimed
(print, radio, and at generating measurable responses. It is designed to evoke
television) an immediate response and compel prospects to take
some specific action.
mobile marketing by means of text messaging, allows businesses to reach
individual customers and send messages to large groups of
people at a time, at a low cost. SMS is ideal for those who
want to alert customers to a sale, link them to a website,
send a reminder, or personalise an offer.
social media marketing offers service organisations the opportunity to interact
directly with their customers. Social media marketing will
help promote the organisation to customers and help them
to better understand customer perceptions and attitudes. It
has the benefit that it can reach millions of people all
around the world, whilst still having the ability to target
particular groups.

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WORD-OF-MOUTH
Word-of-mouth is an unpaid form of promotion in which satisfied customers tell other
people how much they like a business, product, or service.

Word-of-mouth options:
•encourage current users to inform others of good service in return for a discount or free
gift
•use satisfied customers’ experiences as testimonials
•use public relations activities to identify opinion leaders and persuade them to
recommend your service
•provide loyal customers with promotional items such as t-shirts or umbrellas
•establish a formal complaints procedure to deal with dissatisfied customers’
complaints, but also motivate satisfied customers to share their experiences with their
friends and acquaintances

Viral communication is the spread of information about a product or service from one
person to another by harnessing the electronic connectivity through network effects of
the internet and mobile networks.

REFERENCES – the above summary is made using the following textbook:

Y. Jordaan, J. Samuels. 2015. Grasping Service Marketing. Third Edition. Ant Production
Management CC. South Africa.

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