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Services Marketing

Lecture 1

What is marketing?
 Marketing is a process by which companies create value for customers (needs + wants of target
market) & build strong customer relationships (to capture value from customers in return  gain $)
 4Ps (product, place, price, promotion) – Marketing mix
o But are they sufficient for all types of organizations?
 7Ps  physical env, process, ppl
 Physical env starts from outside the factory not just inside (poor neighborhood)
 impression = * b/c services are not tangible
 Why cover services separately?
o Services: intangible; activities; performance that cannot be seen/ touched
 Services = Experience; can be diff from each other (factory itself – have to enter factory
to experience)
o Product: tangible; can be seen or touched
 Product  u can test it out before buying (see what has been built after its been in the
 Why study services marketing?
o Ex: Apple store
 Prior to 2001  used other distributors to sell their products but companies can gain
more control of what to sell and how to sell (increasing competitive advantage); location
also creates value
 Good artists copy… great artists steal – Pablo Picasso
 We have always been shameless about stealing great ideas – Steve Jobs
Lecture 2 (part 1: intro to services marketing)

Why study services?

 Services dominate most economies and are growing rapidly:
o Almost all economies have a substantial service sector
 Services industries contributes to 63% of global GDP
 Manu = 31%, agriculture = 6%
 New employment mainly come from services
 Strongest growth area for marketing
o Understanding services offers you a personal competitive advantage

Port, tourism, economic centre (HK)

adds to why they focus on services
Bahamas  developed banking
CDN- rely on resources
High level, specialized products 
generate income  spend more on
services (Switzerland)
Services does not mean the country is
more developed

5 year job growth in G + S sector industries

 Goods decreasing except for construction
 Service increasing (mostly in the HC/ social assistance sector)
 Powerful forces are transforming service markets
o 5 main forces:
1. Gov policies
 ex: changes in regulations, privatization, new trade agreements
2. Social changes
 Ex: rising consumer expectations, more affluence, easier access to info, aging
pop, immigration
3. Business trends
 Ex: push to increase shareholder value, emphasis on productivity and cost
savings, outsourcing, growth of franchising
4. Advances in IT
 Most *** (ex: cloud tech, artificial intel, internet)
5. Globalization
 Ex: More companies operating on transnational basis, foreign competitors
invade domestic markets
o All of these 5 main forces contribute to:
1. New markets and pdt categories
2. Increase in demand for services
3. More intense competition
o Innovation in service pdt + delivery system = stimulated by improved tech
o Therefore, customers have more choices and exercise more power
o Success hinges on:
1. Understanding customers & competitors
2. Viable business models
3. Creation of value for customers and firm
4. Increased focus on services marketing & management

A marketing env analysis framework

 Must monitor 4 C’s to be successful business

o Changes that affect them are in the sky and they affect each company differently depending on
the company’s capacity to adapt to change
 Social – changing expectations of wants
 Affluent buy more experiences rather than products
 What are services?
o Services involve a form of rental, offering benefits WITHOUT transfer of ownership
 Temporary rights; time based use of pdt
 Popular b/c affluent wants to be entertained
 Marketing tasks for services =/= selling goods and transferring ownership
o Definition of services
 Econ activities offered by 1 party to another
 Usu do NOT take ownership of any of the physical elements involved
 most commonly employ time-based performances to bring about desired results
 In exchange for their money, time, and effort, service customers expect to obtain value
(benefits) from:
o 5 broad categories w/in non-ownership framework of which 2/+ can be combo
1. Labor, skills, expertise rentals: people are hired to perform work that customers either
cannot or choose not to do themselves
 Ex: car repair, med check up, management consulting
2. Rented good services: services that allow customers to obtain the exclusive temporary
right to use a physical object that they prefer not to own
 Ex: boats, fancy dress, construction equip
3. Defined space and facility: when customers obtain the use of a certain portion of larger
facility such as a building, vehicle or area; usually share with other customers
 Ex: seat on aircraft, storage container in a warehouse
4. Access to shared facilities: customers rent the right to share the use of a facility
 Ex: combo indoors, outdoors, virtual
5. Access to and use of networks and systems: customers rent the right to participate in a
specified network; services offer a variety of terms for access, use, depending on needs
of consumers
 Ex: telecom, utilities, banking, social online networks and games

Challenges posed by services

7Ps of service marketing: product, place, price and promotion, process, physical env, people  pg 18-21

Promotion and education

• 3 roles
• Providing necc info and advice
• Persuading target consumers to buy the service pdt
• Encouraging them to take action at specific times
• Services are often difficult to visualize and understand as intangible elements tend to dominate value
• Mental intangibility: difficulty in understanding the value & benefits of service b4 purchasing it
• Physical intangibility: what cannot be touched or experienced by other senses
• When customers can’t touch, smell, see, etc. it may be more difficult for them to assess
important services features before purchase or eval quality of service performance
• Customer-customer interaction affect service experience

• how a firm does things is as important as what it does
• It is necc to design and implement effective processes for the creation and delivery of services
• Operational inputs and outputs can very widely (customer service process management = challenge) 
effective service firms work to reduce variability by carefully designing customer service processes,
adopting procedures, equip, training, etc)
• Customers are often involved in co-operation (ex: consumer is expected to inform ibankers in what
they need and risks willing to take)
• Effective service management involves the balancing of demand and capacity, design of waiting
systems, management of impact of waiting on the customer’s psychology
Physical env
• Appearance of landscape, buildings, staff members’ uniforms, etc. can be visible cues that provide
tangible evidence of the firm’s service quality
• Many services will always need direct interaction b/w customers and service employees
• How diff b/w one service supplier and another lies in the attitude and skills of their employees
• Need good interpersonal skills and (+) attitude

Intangible = hard to compare

 Reduce level of risk by letting consumers know about the service ahead of time (MRI)
#4 input and output can change
Service providers  provide guarantees to make consumers feel better about purchasing service
Perishability is a problem when demand and capacity varies

 4 Broad categories of services

o Services can “process” people, physical objects and data and the nature of the processing can
be tangible or intangible.
 Tangible actions are performed on people’s bodies or to their physical possessions
 Intangible actions are performed on people’s minds or to their non-physical assets
o Based on diff in:
 Who/ what is direct recipient of service (people/possessions) & nature of service act
People Processing
 Customers must:
o physically enter the service factory (Service production and consumption are simultaneous)
o co-operate actively with the service operation
 Managers should think about process and output from customer’s perspective (ex: service location)
o To ID benefits created & non-financial costs: Time, mental & physical effort
Possession Processing
 Customers are less involved compared to people processing services
 Involvement may be limited to just dropping off the possession
 Production and consumption are separable (not simultaneous)
 Ex: broken smartphone screen, sending parcel to next city

Mental Stimulus Processing

 Ethical standards required when customers who depend on such services can potentially be
manipulated by suppliers
 Customers required to invest time and mental effort to obtain full benefits from such services
 Physical presence of recipients NOT required
 Core content of services is information-based
o Can be ‘inventoried’’ (for consumption at a later date than their production)
 Ex: education, news and info, professional advice and some religious activities

Information Processing
 Information is the most intangible form of service output
 May be transformed into more permanent forms of service output
 Line between information processing and mental stimulus processing may be blurred.
 Ex: info and comm tech (ICT)
Lecture 3 (chapter 2: consumer behaviour in a services context)

***Evaluate experience by: compare perception of their experience in the post-purchase stage with their
expectations formed in pre-purchase stage***

A. Pre-purchase stage
1) Need awareness
• A service purchase is triggered by an underlying need (need arousal)
• Needs may be due to:
– People’s unconscious minds (e.g., aspirations)
– Physical conditions (e.g., chronic back pain)
– External sources (e.g., marketing activities)
• When a need is recognized, people are likely to take action to resolve it
– This source of motivation can be in/external
– Marketers try to understand unconscious needs (Freud – tip of iceberg analogy)
 you can see a small part of the iceberg but most are unaware of the bottom
of the iceberg, which is what marketers are trying to understand
2) Info search
• When a need is recognized, people will search for solutions to help narrow down what services
can be used to satisfy needs
• Several alternatives may come to mind and these form the evoked set
• Evoked set – set of possible services or brands that a customer may consider in the decision
• derived from past experience/ external sources like social media, online reviews, ads,
news stories, recommendations from peers
• different alternatives need to be evaluated before a final choice is made
• Only a few alternatives are seriously considered =consideration set
3) Evaluation of alternatives
• Service attributes (Multi-attribute model)

Explicit promise – things stated that

the firm will offer to the consumers
Multi-attribute model: consumers
use service attributes that are
important to them to eval and
compare the alternative offerings
of firms in their consideration set.
Each attribute has an importance

Food  Some argue that taste is in the eye vs.

• That’s why marketers use taste test –
convert food from experiential to
search attributes
Reputation is crucial in credence attributes,
explanation is crucial
- ex: HC, lawyers  how do you know if
they have the ability?

• Perceived risk

3 types of Service Attributes

• Search attributes help customers evaluate a product before purchase
– e.g., style, color, texture
• Experience attributes CANNOT be evaluated before purchase—must “experience” product to know
– e.g., vacations, sporting events, medical procedures
• Credence attributes are product characteristics that customers find IMPOSSIBLE to eval confidently
even after purchase and consumption
– e.g., quality of repair, maintenance work, health care
– Ex: organic foods  Walmart vs. wholefoods  trust whole foods more
– Ex: hygiene of the kitchen and quali of cooking ingredients
 Perceived risk is usu
greater for services that
are high in experience
and credence attributes,
and first time users are
likely to face greater
 Functional risk: Ex: how
well can they remove
stains? Achieve the
service the firm
 Financial risk: ex: cruise
 Temporal risk: go to
company that is
punctual and reliable

• Service expectations
• Customers evaluate service quality by comparing what they expect against what they
– Situational and personal factors also considered
• Expectations of good service vary from one business to another, and differently
positioned service providers in same industry
• Expectations change over time

Explicit and implicit, service promises, WOM, past experience influences directly and indirectly all levels of
3 types of expectations – components of custom expectations:
1. Desired service
• ” wished for” level of service – combo of what customers believe can and should be
delivered in the context of their personal needs
2. Zone of tolerance
• It is difficult to achieve consistent service delivery at all touch points
• The extent to which customers are willing to accept variations in service delivery
• Customers don’t pay explicit attention to service performance but when service falls
outside of range, customers will react either (+/-)
3. Adequate service
• Most customers understand that firms can’t always deliver the “wished for” level of
• Threshold level of expectations termed adequate service and predicted service level
• Adequate service: min level of service customers will accept without being dissatisfied
• Predicted service: Service level that customer believes firm will actually deliver
• Predicted affect how customers defined adequate service directly
• If good services is predicted, the adequate level will be higher than if
poorer service is predicted

4) Purchase decision

B. Service encounter stage

 Metaphors:
o “Moment of truth” from bullfighting shows the importance of contact points with
 In bullfighting, the life of either the bull or matador is at stake = the relationship b/w
the customer and the firm is at stake
o Theater as a metaphor for service delivery
 Understanding the creation of service experience thru the servuction system,
especially for high contact service providers
 Service delivery is a series of events experienced as a performance
 Service facilities: Stage on which drama unfolds
o May change from one act to another
 Personnel: frontstage personnel (members of the cast= actors and supported
by backstage production team)

Blue (1) can fluctuate consumer’s service desires --> can raise or lower desired service depending on the
blue (1)
Explicit – directly stated reputation of the organization
Implicit – indirectly stated reputation of the organization (high price means service must be good)
Predicted service depends on blue (1)
Adequate service: Minimum service expected
Situational factors – ex: going to the hairdresser on Sunday – busy so not as much time spent on hair cut 
lower quality
Adequate service high – do it myself, require more for one to purchase
Play with zone of tolerance
- Some companies narrow it b/c it would be hard for competitors to apply it (hard for competitors to enter)
 effectively compete with competitors
 Role theory: if we view service delivery from a theatrical POV then both
employees and customers act out their parts in the performance according
to predetermined roles
o Roles: Employees have roles to play like actors
 Script theory: just like in a movie script, a service script specifies the
sequences of behaviour that employees and customers are expected to learn
and follow during service delivery
o Script: Specifies the behavior of customers and employees
 Role and script complement each other Scripts
 Perceived control theory: holds customers have a need for control during the
service encounter
 The higher the level of perceived control during a service situation, the
higher will be their level of satisfaction
 Service encounters range from HIGH- contact to LOW contact
o Banking can be low to high contact institution  service they provide the same thing but
depends on how they interact and service elements  belong to diff part

• Distinctions b/w high-contact and low-contact services

• High-contact Services
- Customers visit service facility and remain throughout service delivery process
- Active contact between customers and service personnel (enter service factory)
- Includes most people-processing services (not inanimate obj)
– make experience appealing for customers in both physical env and interactions
with service personnel
• Low-contact Services
- Little/ NO physical contact with service personnel
- Contact usually at arm’s length through electronic or physical distribution channels
- New tech (e.g. Web) help reduce contact levels
• Medium-contact Services
- lie in b/w these 2
• The servuction system
• Servuction system: combine terms service & production to describe part of the service org’s
physical env that is visible to and experienced by customers – visible front stage and invisible
- Firms have to “engineer” all interactions to make sure that their customers get the
service experience they came for
• Service Operations system
- Technical core: where inputs are processed and service elements created – usu
backstage & invisible to customer (ex: kitchen of the restaurant or backstage/ office of a
- Includes facilities, equipment, and personnel
• Service Delivery System (front stage)
- Where “final assembly” of service elements takes place and service is delivered to
- Includes customer interactions with operations and other customers
C. Post-purchase stage

 In the post encounter stage, customers eval the service performance they have experienced and
compare it with their prior expectations
o The expectancy-disconfirmation model of satisfaction: satisfaction is a judgement that follows
a series of consumer product interactions
o In this model, confirmation/ disconfirmation of pre-consumption expectations is essential
determinant of satisfaction
o Zone of tolerance may be narrow and firm if expectations are related to attributes that are
important to the DM process
 Ex: if customer pays a premium of $350 for a direct flight instead of choosing one that
has a 4 hour stopover, then they will not take it lightly if there is a 6 hour flight delay
 Customer satisfaction = central to marketing concept
o Customers have expectations prior to consumption, observe service performance, compare it
to expectations
o Satisfaction judgments are based on this comparison
 Positive disconfirmation if better than expected
 Confirmation if same as expected
 Negative disconfirmation if worse than expected
o Can be +/- disconfirmation  disconfirm a (-) experience that would be good (exceed level of
 Satisfaction vs. service quality
o Both customer satisfaction and service quality are determined by comparing customers’
expectations with their performance perceptions.
o Satisfaction vs. service quality
 Satisfaction = eval of a single consumption experience
 direct and immediate response to experience – fleeting judgement
 Service quality = relatively stable attitudes and beliefs about a firm
 Ex: visit your fav Starbucks outlet and dissatisfied with a particular visit, still think
café is fantastic and offer excellent service
o Excellent Service quality is defined as the high standard of performance that consistently meets
or exceeds customer expectations. (customer  loyalty*)
 *Loyalty is a customer’s willingness to continue patronizing a firm over the long term on
an exclusive basis.
 Customer delight: going beyond satisfaction
o Research shows that delight =fxn of 2 components:
I. Unexpectedly high levels of performance
II. (+) affect – Pleasure/Arousal (e.g., joy, happiness, surprise, excitement)
o Once customers are delighted, their expectations are raised
 If service levels return to previous levels, this may lead to dissatisfaction and it will be
more difficult to “delight” customers in future
 Dimensions of service quality
o Tangibles: Appearance of physical elements
 Can make inferences to eval other aspects on things that we don’t have knowledge on
 Ex: Starbucks – mistakes on the board  makes it look less classy (note interpreted
negatively by consumer)
o Reliability: Dependable & accurate performance
 Meeting promises (in/explicit)  ex: laundry – return laundry spotless, if returned with
dirt then company did not keep promise
 Accuracy – ex: when server gives you the wrong bill
o Responsiveness: Promptness & helpfulness
 Ex: when companies make you wait  not prompt  interpret as not responsive
o Assurance: Competence, courtesy, credibility, security
 Popular with credence attributes
 Ex: Cannot verify if doctor is making right diagnosis  may not be able to
evaluate even after service is given
o That’s why docs post their diplomas
o Empathy: Easy access, good communication, understanding of customer
 Acknowledging consumers  ex: hotels –doorman opens the door and says Mrs. Smith

The GAP Model (14.3) – A conceptual tool to ID and correct service quality problems (6 service quality gaps)
• Diagnostic system to company not meeting needs  must know where firm is failing
o Don’t want to spend on something that wont help with customer satisfaction
o What management want and customer wants
• Gap 1: knowledge gap (listening gap)
o Do research on customers, ask exec to be part of the production process and learn what makes
consumers happy, ask employees to be part of the DM process (management and these
employees are often separated)
• Gap 2: The policy gap
• Gap 3: delivery gap
o Depends on how standards are developed and how they are followed
o Why does this happen?
 Employees can’t deliver b/c they are not trained, not motivated, hired the wrong ppl?
 Balance demand with capacity
 Part of franchise? – no control
• Gap 4: Communication gap
o Oversell to consumers and
make promises that company
cannot keep  expectations
may go up therefore creating
gap b/w what is expected and
what is perceived
• Gap 5: Perception gap
o Why? – credence attributes?
Too many things to eval?
• Gap 6: The service quality gap
o comparing expected and
perceived service  gap
means its (-)  expectations
not met
Lecture 4 – chapter 3: positioning services in competitive markets

To delight customers focus on the 4Cs  customer, competitor, company and corporate partners

Internal corporate
analysis  see how
much assets/
resources a firm has

• Who are our customers and how are we going to satisfy them? How we position ourselves and define
our brand? Must communicate vision clearly to consumers (3Cs, STP)
o Use STP  ID suitable market position and develop strategy to reach them (elements of
positioning strategy)
• Segmentation  those who are willing and able to buy our services (needs, demographic, geographic,
o Ex: Wholefoods  Health conscious, middle to upper class individuals
 Adapting to consumers  people are busy  Ready-made food
o Easier to go after segments that are not already served (reduce competition)
• TARGET: Focus strategies - how narrow the segment is going to be? Which segment is most interested
in its service?
• POSITION: How are you going to serve the consumers, is it easy to address?

Starbucks failed in Australia

• Why?
o Grow the empire too fast
o Instead of slowly integrating into the society
o Didn’t give consumers time to absorb info and grow taste to the brand
o Too available
o No need
o Not organic growth
o Failure to adapt to consumer’s café and coffee culture
o They came back to Australia – hoping to attract tourists more than locals  keeping them
afloat (target tourists rather than locals)
• Firms vary widely in ability to serve different types of customers
• Adopt strategy of market segmentation, identifying those parts of market can serve best
• A market segment is composed of a group of buyers sharing common needs, purchasing
behavior, consumption patterns, and other characteristics.
• Various ways to segment markets:
• Demographics ― on its own will not result in meaningful segments
• Geographical
• Psychographic segmentation – useful for strengthening brand ID and creating emotional
connection (reflect on ppl’s lifestyle, attitudes, aspirations)
• Critics  overused (can’t base service off of this but can only advertise  communicate
• Behavioral segmentation – focuses on observable behavior
• Ex: light users, moderate users, non-users
• Needs-based segmentation – focuses on what customers want(!)  most important!!!

Developing right service concept for a specific segment

• Use research to ID and prioritize which attributes of a given service are * to specific market segments
• Individuals may set different priorities according to:
• Purpose of using the service
• Who makes decision
• Whether service is used alone or with a group
• Composition of that group
• Ex: business trip might be willing to spend more b/c right off vs. spending alone
• Timing of use (time of day/week/season)

Important vs. determinant attributes

• Consumers usually choose b/w alternative service offerings based on perceived differences b/w them
• Attributes that distinguish competing services from one another are not necessarily the most
important ones
• Determinant attributes: determine buyers’ choices b/w competing alternatives
• Service characteristics that are important to purchasers
• Customers see significant differences b/w competing alternatives on these attributes
• Ex: convenient departure times for business travelers = determinant attributes

Attributes should differentiate from competitors

• Airlines don’t differentiate on safety because it is a given and expected attribute
TARGETING service markets

Achieve competitive advantage through focus

Which position is the best?

• Fully focused is the best because full control of market and service

Considerations for using the focus strategies

• Fully focused (***)
o Limited range of services to narrow and specific market
o Developing recognized expertise in a well defined niche may provide protection against
competitors and allow firms to charge premium prices
o Ex: hospital that only performs hernia surgeries on helathy patients aged 40-60
o   expertise; standardize treatments; loyalty
o Risk: Demand; if market is too small then to get the volume of business for financial ; when
substitute of pdt enters the market
• Unfocused
o Broad markets with wide range of services raises concern of becoming a “jack of all trades and
master of none”
o Not a good idea, but many public utilities and gov agencies obliged to do it
• Market focused
o Narrow market segment with wide range of services
o Need to make sure firms have operational capability to do an deliver each of the different
services selected
o Need to understand customer purchasing practices and preferences
• Service focused
o Narrow range of services to fairly broad market
o As new segments are added, firm needs to develop knowledge and skills in serving each
o Work best if firm has unique set of capabilities and resources to deliver a particular service
exceptionall well or cost effectively
o Ex: Lasik/ Starbucks – largely standardized pdt

4 principles of POSITIONING strategy

Uniqueness comes from relationships  firms can be unique compared to their competitors
I. Must establish position for firm/ pdt in minds of target customers
II. Position should provide 1 simple, consistent msg
III. Position must set firm/product apart from competitors
IV. A company cannot be all things to all people - must focus its efforts
Developing an effective positioning strategy
• Segmentation, Targeting and Positioning integrates with Customer, Competitor and Company analyses
to give us a positioning statement
• 4 elements to writing a good positioning statement:
a. Target audience
• Specific group(s) of people that the brand wants to sell to and serve
• Ex: LinkedIn  professionals = primary target consumers and employers and advertisers
as secondary
b. Frame of reference
• Category the brand is competing in
• Can be defined by the industry, defining point of parity
• Ex: in social networking sapce
c. Point of difference
• Most compelling benefit offered by brand that stands out from competitors
• Ex: largest network of professionals and recruiters to help advance your career
d. Reason to believe
• Proof that brand can deliver the benefits that are promised
• Ex: our network is many times bigger than that of our closest competitor

Positioning of Belleville Hotels

***Positioning map = perception map (how conusmers perceives the firm – mind of consumers)***
Can warn us about opportunities and threats
• Service level vs. Price

• Location vs. Physical luxury

Why can the palace charge consumers so much even though it doesn’t have high service?
 b/c of its location advantage and no other hotels clustering around it
 new hotels (new grand) coming into the industry  might take over the palace so the palace must act on it
 not only may the palace lose customers but also employees
 Mandarin, continental are going to place them in the financial district and also offer high luxury so this puts
the palace into trouble
Using positioning (perceptual) maps to analyze competitive strategy
• Great tool to visualize competitive positioning and map developments of time
• Useful way to rep consumer perceptions of alternative products graphically
• Typically confined to 2 attributes, but 3D models portray positions on 3 attributes simultaneously
• Info about a pdt can be obtained from market data, derived from ratings by representative consumers,
or both

Positioning maps help managers to visualize strategy

• Positioning maps display relative performance of competing firms on key attributes
• Research provides inputs to development of positioning maps ― challenge is to ensure that
• Attributes employed in maps are important to target segments
• Performance of individual firms on each attribute accurately reflects perceptions of customers
in target segments
• Predictions can be made of how positions may change in light of future developments
• Simple graphic representations are often easier for managers to grasp than tables of data or
paragraphs of prose
• Charts and maps can facilitate “visual awakening” to threats and opportunities, suggest alternative
strategic directions

Lecture 5 – chapter 4: Developing Service Products: core and supplementary elements

4.1 The flower of service

Losing one of these petals can
A core product surrounded by cluster of supplementary services decrease the attractiveness of the

Core product (serve basic needs; it is

what customer is fundamentally
buying) – ex: 1 night hotel stay 
core service = accommodation and

Supplementary services– augment

core pdt by both (green + orange) 
differentiate from basic needs

 There are 2 kinds of supplementary services

a. Facilitating supplementary services ― either needed for service delivery, or help in the use of
the core product (essential)
b. Enhancing supplementary service ― add extra value for the customer
 In a well-designed and well-managed service organization, the petals and core are fresh and well-
 Market positioning strategy helps to determine which supplementary services should be included
Supplementary services
 Facilitating
o Info ― customers often require information about how to obtain and use a product or service
o Order-Taking ― Customers need to know what is available and may want to secure
commitment to delivery. The process should be polite, fast and accurate
o Billing ― Bills should be clear, accurate and intelligible
o Payment ― Customers may pay faster
and more cheerfully if you make transactions
simple and convenient for them
 Enhancing
o Consultation ― Value can be added to goods and services by offering advice and consultation
tailored to each customer’s needs and situation
o Hospitality ― Customers who invest time and effort in visiting a business and using its services
deserve to be treated as welcome guests
o Safekeeping ― Customers prefer not to worry about looking after the personal possessions that
they bring with them to a service site
o Exceptions ― Customers appreciate some flexibility when they make special requests and
expect responsiveness when things don’t go according to plan

4.2 Facilitating supplementary services


Examples of ORDER TAKING

Examples of BILLING

Examples of PAYMENT


Examples of HOSPTALITY

Examples of EXCEPTIONS

4.3 Enhancing supplementary Services

Managerial Implications
• Not every core product is surrounded
by supplementary elements from all
eight clusters
• Nature of product helps to determine
which supplementary services must be
• People-processing and high contact
services tend to have more
supplementary services
• Firms that offer different levels of
service often add extra supplementary
services for each upgrade in service

If they serve alcohol in Starbucks it can ruin the atmosphere  sets diff atmosphere for different target
consumers  two different segments to serve
Risk of losing existing loyal customers
4.4 Branding Service Products and Experiences

Product lines and brands

 Most service organizations offer a line of products rather than just a single product.
 They may choose among 3 broad alternatives:
o Single brand to cover all products and services
o A separate, stand-alone brand for each offering
o Some combination of these 2 extremes

Spectrum of branding alternatives

• Strong brands enable customers to better visualize and understand intangible pdts; reduced
customer’s perceived risks in buying services which are difficult to eval prior to purchase
• Branding strategies for services:
o Branded house: applies single brad name to multiple offerings in often unrelated fields
 Ex: Virgin Group
 risk: brand gets overstretched and weakened
o Sub-brands: the corporate/ master brand is the main reference point, but each pdt has a
distinctive name
 Ex: FedEx  FedEx ground, FedEx Express (rep by alternative color); different goals
o Endorsed brands: the product brand dominates but the corporate name is still featured
 For multi-brand strategy to succeed, each brand must promise a distinctive value
proposition targeted at a different customer segment; encourages customers to
continue buying from within the brand family
 Loyalty pts may be collected in one sub-brand on business travel and redeemed in
another leisure trips
o House of brands: using a separate stand-alone brand for each offering
 ex: Yum brands owns taco bell, pizza hut, KFC don’t mix the brands to preserve brands

Cheaper  corporate brand but it might confuse people when it offers different pdt lines
Building Brand Equity

*****EXAM: service branding model*****

Brand equity: value premium that comes with a brand; it’s the additional amount that customers are willing
to pay for a branded service over a similar service that has no brand; 6 key components:
• Company’s presented brand – mainly through advertising, service facilities and personnel
• External brand communications – from word-of-mouth and publicity. (helps brand awareness)
o Outside of the firm’s control
• Customer experience with the company – what the customer goes through when they patronize the
• Brand awareness – the ability to recognize and recall a brand when provided a cue
• Brand meaning – what comes to customer’s mind when a brand is mentioned
• Brand equity – the degree of marketing adv that a brand has over its competitors
o External communication can help create brand awareness, but its customer’s actual experience
with the brand that is more powerful in building brand equity

Offering a branded experience

 4 key ways to build strong brands
a. Dare to be different
 Ex: Zappos online shoe company profitable with free shipping
b. Determine your own fame
 Communicate what firm wants to be recognized as
 Ex: Zappos  good customer service
c. Make an emotional connection
 Beyond rational level, reach people based on psychological level, inspire feeling of
closeness and trust
 Ex: Redbull  giving energy, create association with lifestyle, high performance
(physically and mentally)
 Ex: Zappos  people element; dedicating time to each customer on the phone
d. Internalize the brand
 Ex: Zappos  shoe warehouse  bought by amazon
4.5 New Services Development (NSD)
A Hierarchy of New Service Categories
• Firms need to improve and develop new services to maintain competitive edge. The 7 levels in the
hierarchy of new service development are:
Usu no changes in service performance and processes

Process line extensions  add another channel to system. High contact services usu. Ex: bank (adding online
banking) delivering core pdt thru low contact services
- Ex: Shoppers adding self check out

Pdt line extensions  Starbucks adding fancy meals

Major process innovations  goal: create diff benefits (ex: lectures at school but adding parallel services
online to students)  ex: Amazon  having physical stores – bought sears – use amazon prime to buy

Lecture 6: Chapter 5 – Distributing services through physical and electronic channels

5.1 Distributing in a services context

 Delivering a service to customers involves decisions about: WHAT, HOW, WHERE, WHEN
o Where and when was always talked about in the context of manufacturing
 In a services context, we often move nothing
 Experiences, performances, and sol’ns are NOT being physically shipped and stored
 More and more info transactions are conducted through electronic and not physical channels
 Distinguishing b/w distribution of supplementary and core services  WHAT
o Most CORE services require physical locations
o Many SUPPLEMENTARY services are informational; can be distributed widely and cost
effectively thru other means (phone, internet)
 Addressing what is being distributed
o Info and promo flow: refers to distribution of info and promo materials related to service offer
o Negotiation flow: reaching agreement on the service features and configuration and terms of
offer so that a purchase contract can be closed
o Pdt flow: require physical facilities for delivery. Here distribution strategy requires the
development of a network of local sites
5.2 Distribution OPTIONS for serving customers  HOW

Determining the type of contact

 Options of service delivery/ nature of interaction b/w customer and service org
 Customers visit service site/ org (ex: theatre, car rental chain)
o Service location Convenience + operational schedules = * when customer has to be
physically present
o Convenience = key driver of channel choice
o Convenience of place and time become important determinants of effective service
 Consumers choose from:
 Personal, impersonal, self-service channels
o Channel preferences vary among customers
 Ppl tend to rely on personal channels when:
 Perceive services as complex + risky
 They have social motives
 Ex: when you do several transactions in the bank and are not
comfortable with doing it yourself
 Ppl tend to use impersonal + self service channels when:
 Indiv with greater confidence + knowledge about a service/ channel
 Electronic self-service channels tend to be most cost-effective
 Service providers go to customers (ex: house painting, mail delivery)
o Object of service is immovable
o Needed for remote areas
o Greater likelihood of visiting corporate customers than individuals
 Customer & Service org transaction is conducted remotely (email/ e-comm)  (ex: credit
card company, telephone company, repair services = possessions being shipped to
maintenance facility where it is serviced and returned by mail
o Customer never have to meet service personnel face-face when dealing w/
o Achieved with help of logistics and telecommunication

5.3 PLACE and TIME decisions – WHERE & WHEN

PLACE of service delivery
 Mini-stores
o Creating many small service factories to maximize geographic coverage
 Automated kiosks (ex: ATM machines)
o Separating front and back stages of operation
 Taco Bell – K-minus strategy involves restaurants w/out kitchens  meals are shipped
from central location to where food prep takes place
o Purchasing/sharing space from/with another provider in complementary field
 Dunkin Donuts with Burger King
 Wendy’s and Timmies
 Starbucks and chapters
 Locating in Multipurpose Facilities
o Ex: mall (combo of shops) vs. one shop
o Proximity to where customers live or work
 Service Stations
 Cost, productivity and access to labor are key determinants to locating a service facility
 Locational constraints
o Need for economies of scale
 Hospitals
 Need a great deal of space to build a hospital and this may be challenging in a
o Operational requirement
 Airports
o Geographic factors
 Ski Resorts
TIME of service delivery
 Traditionally, schedules were restricted
o Service availability limited to daytime, 40-50 hours a week
 Today
o For flexible, responsive service operations:
 24/7 service – 24 hours a day,
 days a week, around the world
 what changed?  social change, government change, economy
 return on investment  fixed cost so why not opened on the weekend too? 
use the facilities as much as possible

5.4 Delivering services in cyberspace

Info and physical processes of augmented service pdt

Distributing of supplementary services in cyberspace

 5 of the supplementary services are info-based
 These services can all be distributed electronically. They are:
o Info
o Consultation
o Order-taking
o Billing
o Payment
 Distribution of info, consultation and order-taking has reached very sophisticated levels in global
service industries (e.g., hotels, airlines, car rental companies)
 Ex: Amazon go – virtual card; “just walk out tech”
o Convenience (no lines)  can still see the products, change your mind, and go after ppl that
don’t buy online (groceries usu buy in store)
Service delivery innovations facilitated by tech
 Technological Innovations
o Development of “smart” mobile telephones and PDAs (personal digital assistants), and Wi-Fi
high-speed Internet technology that links users to Internet from almost anywhere
o Voice-recognition tech
 Ex: google mini  allow multitasking
 Ex: IBM, Microsoft, Google (speech tech)  help DAB
o Smart cards
 Store detailed info about customer
 Act as electronic purse containing digital money
 Ex: banking cards, presto card
 Electronic channels can be offered together with physical channels, or take the place of physical
 Disney scared that they will become irrelevant so they used tech to convince today’s gen to come
o Ex: painful to waiting in line, carry things with them (psychological pain associated)
o Magical bands (censors)  track real time activities  so they can send staff to traffic busy
areas for help

E-commerce: move to cyberspace

 Among the factors luring customers to virtual stores are:
o Convenience
o Ease of search
o Broader selection
o Potential for better prices
 Less expenses for them (they don’t have overhead costs)
o 24-hr service with prompt delivery
Dynamic pricing  the practice of varying the price for a G/S to reflect changing market conditions, in
particular the charging of a higher price at a time of greater demand.
 Recent Dev: websites, customer management (CRM) systems, and mobile telephony
 Integrating mobile devices into the service delivery infrastructure can be used as means to:
o Access services
o Alert customers to opportunities/problems
o Update info in real time

Ex: Tesco  use smart phones to shop; posted pics of grocery items and blended them into consumer’s
everyday lives  subway station (ppl don’t have to go grocery shopping)
 New tech allow them to be #1 in market without investing in physical stores
o Having access to services at all times (mobile devices)  send notifications  alert consumers

Websites  hotels, planes (going thru company websites instead of physical stores)
Agents are all connected and make deals in real time
Normal distribution system
Tech changed nature of CRM  Hilton
 Know the profile of the guest with tech  track who is staying, what they need
o Ex: Kelly’s birthday  so staff knows and create good experience
o Keeps track and can customize people’s stay (personalized)
o Internally can communicate (staff-staff)
5.5 The Role of intermediaries

Splitting responsibilities for supplementary service elements

• Ex: despite increased use of phone centres and internet  cruise lines and hotels still use travel agents
to handle a significant portion of customer interactions

• Intermediaries are frequently used to add reach and generate business

• Many service firms have achieved brand equity aim to mitigate their customers and sales to lower cost
channels in order to circumvent/ remove intermediaries thru a process called disintermediation
• Role, benefits and costs of every intermediary have to be carefully considered when designing a firm’s
distribution strategy

Challenges for OG supplier

 Act as guardian of overall process
 Ensure that each element offered by intermediaries fits overall service concept

 Popular way to expand delivery of effective service concept, without a high level of monetary
investments compared to rapid expansion of company-owned and -managed sites
o Franchisor provides training, equipment and support marketing activities.
o Franchisees invest time and finance, and follow copy and media guidelines of franchisor
 Growth-oriented firms like franchising because franchisees are motivated to ensure good customer
service and high-quality service operations
 Study shows significant attrition rate among franchisors in the early years of a new franchise system
o 1/3 of all systems fail within 1st 4 years
o 3/4 of all franchisors cease to exist after 12 years
 Success factors of franchisors
o Larger size and more recognizable brand name
o Lower overhead per outlet
o Building cooperative rather than controlling relationship
 Disadvantages of franchising
o Some loss of control over delivery system and, thereby, over how customers experience actual
o Effective quality control is important but yet difficult
o Conflict b/w franchisees may arise especially as they gain experience
 Alternative: license another supplier to act on OG supplier’s behalf to deliver core pdt
o Trucking companies
o Banks selling insurance products
*Franchise whole flower of service (outsourced)
 Ex: enterprise rent a car (#1)  picked up customers (place element) – avoided airports (where they
pick up customers)
o Idea from customer  rent cars
Lecture 7 – Chapter 6: Setting Prices & Implementing Revenue Management

6.1 Effective pricing is central to financial success

2 focuses
1. Cover cost  max revenue
2. Build demand  Full house effect (want the place to look full)  willing to jeopardize revenue

6.2 Pricing strategy stands on 3 legs

The pricing tripod
Usually harder to determine the financial costs of creating process/ intangible real time
performance than of producing a physical good
Establishing the costs of providing service  estimated by fixed, semi-variable, variable costs
Price Implications of cost analysis
• Some firms promote loss leaders, which are services so if at less than full cost to attract
customers. It is hoped that these customers will then be tempted to buy more profitable
service offerings from the same org in the future. However, if all relevant costs are not
recovered, service businesses will have no profit at the end of the year and may even go
bankrupt. So, firms that compete on low prices need to have a very good understanding of
their cost structure and of the sales volumes needed to break even

Price floor vs. price ceiling
 Price floor (cannot go below that, have to cover the cost)
 Price ceiling (how much consumers are willing to pay)
 Competitors are in b/w the two
o Depends on the industry you are in
 Company itself (not covered in the tripod) – the objective of the company (mission

ABC  useful for high fixed costs and complex pdt lines with shared infrastructure
 More accurate way to allocate indirect costs/ overheads (look at resources needed to
perform each activity then allocates an indirect cost to the service based on the quantities
and types of activities required to create and deliver the service)

Fixed cost (utilities and salary) and variable cost must be covered and have to know how to apply
that to the cost of the pdt
 Switch from traditional costing approach and apply ABC now  Directly and indirectly
contribute to the production of services
 Ratio of fixed to variable cost is diff in services
 Time based cost  pdt but for service we don’t have that (time spent depends on the
customer) therefore very hard to price
 Can we charge consumers based on?
o How service is provided?
o Simple and complexity of service?
1. Costs
 Costs based pricing
o Traditional costing approach
 Emphasizes expense categories (arbitrary overheads allocation)
 May result in reducing value generated for customers
o Activity-Based Costing (ABC) management systems
 Link resource expenses to variety and complexity of goods/services produced
 Yields accurate cost info
 Value based pricing
o Value exchange will not take place unless customer sees (+) net value in transaction
 No customer will pay more for a service than he/ she thinks is worth
 Must understand how customer perceive (needs + wants) service value in order to
set an appropriate price
 Ex: low price, w.e. I want in a pdt, is quality what I am paying for
Net Value = All Perceived Benefits to Customer (Gross Value) minus (-) All Perceived Outlays ($, Time, & Effort)
o Monetary price is not only perceived outlay in purchasing, using a service
o When looking at competing services, customers are mainly comparing relative net values
 Value based pricing: managing perception of value
o Since value is subjective not all customers have the skills/ knowledge to judge the quality
and value they receive – esp for credence services
 ex: specialized hospitals have to find ways to comm time, research, prof expertise
b/c invisibility of backstage facilities and labour makes it hard for customers to see
what they’re getting for their money (manage perception of value = *)
 don’t want to just decrease price  b/c price is also a benefit (price can add value to
consumer perception  higher price the place delivers higher quality pdts)
 cover other costs to decrease monetary value
o ex: offering babysitting services in gym facilities  don’t have to pay extra
o Increase perception of BENEFITS
 Effective communication and personal explanation to convey value
 Can use production channels – firm itself to add to benefit, other than using
traditional methods of ad (which can be costly)
o Reduce perception of COSTS:
1) monetary costs (searching, purchasing, using service)
2) non-monetary costs (4 distinct categories of non-monetary costs)
 Time Costs
 Ex: travelling to gov office and waiting
 Ex: gas price/ parking ticket
 Physical Costs
 Ex: effort, fatigue, discomfort (delivery thru self-service, long ques)
 Psychological (Mental) Costs
Effort  Ex: filling in forms requiring lots of details
 Ex: social embarrassments  way docs talk to patients
 Sensory Costs (unpleasant sights, sounds, feel, tastes, smells)
 Ex: waiting areas noisy, cold, messy?

A firm can create competitive advantage and increase consumer value by minimizing related monetary and
non-monetary costs
 Defining total user costs

 Trading off monetary and non-monetary costs

2. Competition
 Price competition intensifies when:
o Increasing # of competitors
o Increasing # of sub offers
o Wider distribution of competitors
o Increasing surplus capacity in the industry
 Price competition is reduced when:
o Non-price-related costs of using competing alternatives are high
o Personal relationships matter
o Ex: GP, hairstylist
o Time and location specificity reduces choice
o Switching costs are high
o Ex: takes time/ effort to switch providers, customers are less likely to take
advantage of competing offers (cell phone providers require contracts and charge
financial penalties for early cancellation of service)
o Ex: have to learn about preferences all over again (related to relationships)

3. Value to customer
6.3 Revenue Management

Maximizing revenue from available capacity at a given time

 Revenue management is price customization
o providing service at different price points based on price sensitivity (value segments)
 Most effective when:
o Relatively high fixed capacity
o High fixed cost structure
o Perishable inventory
o Variable and uncertain demand
o Varying customer price sensitivity
 Revenue management uses mathematical models to examine historical data and real time info to
o What prices to charge w/in each price bucket
o How many service units to allocate to each bucket

 Rate fences deter customers willing to pay more from trading down to lower prices (min consumer
o Rate fences allow customers to self segment on basis of service characteristics and
willingness to pay
 Help restrict lower prices to customers who are willing to accept restrictions on
consumption experience

Revenue Management: What it is and how it works

 key categories of rate fences: physical
o tangible pdt differences related to diff prices
 Key categories of rate fences: non-physical
o diff in consumption, transaction, buyer characteristics, but service basically the same
 Predict with reasonable accuracy how many customers will use a given serve at a specific time at
each of several diff price levels. It can then block the relevant amount of capacity at each level
(price bucket). Info used to predict periods of excess capacity

6.4 Ethical concerns in service pricing

Ethical concerns in pricing

 Customers are vulnerable when service is hard to evaluate as they assume that higher price indicates
better quality
o Many services have complex pricing schedules
 Hard to understand
 Difficult to calculate full costs in advance of service
 Quoted prices not the only prices
o Hidden charges
o Many kinds of fees
 Too many rules and regulations
o Customers feel constrained, exploited
o Customers face unfair fines and penalties

Putting service pricing into practice

 How much to charge?
o Overhead costs?, What are competitors charging?, customers sensitive to price?
Psychological pricing points customarily used ($4.95 vs. $5.00)?
 What basis for pricing
 Who should collect payment?
 Where should payment be made?
 When should payment be made?
 How should payment be made?
 How to communicate prices?
Lecture 8 – chapter 7: Promoting services and educating customers

7.1 Marketing communications planning – Checklist for marketing communications planning

The “5Ws” model (pg. 197)

Communication strategy Development

 Who is our target audience? (consumers, employees?)
o Ex: holiday Inn  those on the road
 What do we need to communicate and achieve (objectives)?
o Strategic and tactical objectives
o Ex: Holiday Inn  raise awareness  differentiate from competitors

Communication strategy implementation

 How should we communicate this?
o Emotional appeal/ rational appeal?
o Ex: Holiday Inn rational appeal – pay for something smart
 Where should we communicate this?
o 3 key sources: marketing communication channels (trad and online), service delivery channels
(employees), msg oriented from outside the org (WOM, social media)
 When do communications need to take place?

7.2 Marketing communications planning

Target audience: 3 broad groups

1. Prospects
o Employ trad comm mix (online ads, media ads, direct mail) b/c prospects are not known in
advance to marketers of consumer services
o Don’t have relationship with them yet

2. Users
o More cost-effective channels
 Ex: cross/ up selling efforts by front line employees, point of sale promo, info distributed
during service encounters, location based mobile apps
3. Employees
o Secondary audience for comm through public media
o Campaign targeted to consumers can shape employee behavior
o Part of internal marketing using company-specific channels
7.3 marketing communications planning – strategic and tactical service communications objectives (WHAT)

Strategic objectives:
 Building a service brand and positioning it and its service products against competition
 Persuading target customers that their service product offers a better solution for customer needs

Tactical objectives
 Focuses on shaping and managing customers’ perception, beliefs and attitudes during the 3 stages of
service consumption:
o Pre-purchase stage (need, perception, attributes, decision rules, etc.)
 AIDA Model: customers move from cognitive (Awareness) to affective (Interest and
Desire) and finally to behaviour (Action) responses.
 * not everyone is ready to buy services
 *** include cognitive, affective and beahviour in the individual assignment
 Cognitive – how we categorize things in our brain
o Encounter stage (perception, roles and scripts, etc.)
o Post-purchase stage (evaluation, WOM, referrals, repurchase, loyalty, etc.)

**just read this

Images on the side are important concepts to the stage
Important communication objectives:
 Promote tangible cues to communicate quality
o Customers may understand what service does, but hard to differentiate offerings from
 Firms can comm the high quality of their ppl, facilities, equip, process  qualifications,
experience, commitment and professionalism
 Service delivery system can provide tangible cues
 Add value through communication content
o see flower of service framework
 Facilitate customer involvement in production
o Use sales promo as incentives to make changes in customer’s behavior
o Inseparability
 Promote contribution of personnel and backstage operations
o Ads, brochures, Youtube videos can show what goes on “back-stage” to ensure good service
o Heterogeneity
 Stimulate or dampen demand to match capacity
o ex: increase promotions and deals when there’s less demand
 must overcome perishability
7.4 Challenges of service communications – advertising strategies for overcoming intangibility

 It is argued that in services, intangibility (i.e., its properties, such as abstractness, generality,
nonsearchability, and mental impalpability) influences the nature of communication tasks.
o Intangible nature of services presents problems to consumers
o Intangibility is considered as the root source of service advertising difficulty (may be difficult to
communicate service benefits to customers).

 Abstractness: No one-to-one correspondence with physical objects

 Generality: Items that comprise a class of objects, persons, or events
o Ex: airline seats – physical objects present, but services not specific enough
 Difficult for marketers to create a unique value proposition to comm what makes a
specific offering distinctly diff from and superior to competing offerings
 Non-searchability: Cannot be searched or inspected before purchase
o Ex: health club equipment can be checked b4 hand but experience working with trainers can
only be determined thru personal involvement
 Mental impalpability: Customers find it hard to grasp benefits of complex, multidimensional new

“In fact, many physical products also appeal to consumers with their intangible benefits and that advertising
professionals already have handled this challenge well.” - Mittel, 1999 (p. 99)

So, how to transform the abstract into the concrete, the general into the specific, the nonsearchable into the
searchable, and the mentally impalpable into the palpable?

Will appeal to psych in ads  effective? (bring out intended outcome)

How to overcome abstractness?
• Abstract  doesn’t correspond
with anything we know
o Ex: education  better
life by showing someone
getting a job
How to overcome generality?
• Chair  what kind of chair?
o Give measurement of
couch  provide leg
o Show benefits 
Non-searchable: cannot be evaluated
before services (credence attributes)
• Testimonials, rely on other’s
Mental Impalpable: MRI  show
Tangible cues & metaphors to overcome intangibility
 Use tangible cues in advertising
o Ex: schools convey that the alumni’s programs may offer career advancement, salary increase
and lifestyle (tangible)
 Use metaphors to communicate benefits of service offerings
o Ex: Merrill Lynch (wealth management) bull rep the firm’s strong commitment to the financial
performance of its clients

7.5 Marketing communications mix – marketing communication mix (tools) for services
 Channels can be categorized:
o Non-personal mass media
 Effective for creating awareness and positioning the service
o Personal communications
 Explain complex service info, reduce risk perceptions and persuade the consumer to buy
the service
o Direct marketing is highly cost-effective in the post encountered stage
 Encourages customers to come back and to recommend pdt to their peers

Messages can be transmitted thru different sources

 Traditional marketing channels
o Advertising
 Marketers are trying to be more creative with their advertising to make their messages
more effective
 Ex: when customers have low involvement with a service, firms should focus on
more emotional appeals and the service experience itself
 Online role playing games  dynamic ad if the games are connected to the
o Direct marketing
 Ex: mailings, emails, text msg
 Marketers possess a detailed database of info about prospects and customers
 Customer resistance to advertising gives rise to permission marketing
 Instead of annoying prospects by interrupting their personal time, permission marketing
allows customers to self-select into the target segments
 Build stronger relationship with their customers
o Sales promo
 Incentive; usu specific to time period, price or customer group
 To reach short term objectives  accelerate sales, motivate customers to use specific
service sooner
 Need to be cautious b/c associated with lower repurchase rates and lifetime values
o Personal selling
 Educate customers and promo pdt
 Face-face = expensive  now telemarketing (phone to reach customer)
o Personal relations
 Stimulate (+) interest in org
 Send out news release, holding press conferences, staging special events and sponsor by
third parties
 Wide exposure to public (ex: world cup, Olympics)

 Online marketing channels

o Company website
 Create consumer awareness and interst
 Provide info and consultation
 Allow 2-way comm with customers thru email and chat rooms
 Enable customers to place orders
 Marketer’s must address stickiness of website (revisit)
 A sticky site is: high in quality, easy to use, quick to download, updated
o Online advertising
 Banner advertising
 Firms pay to place advertising banners and buttons on portals (Yahoo, FB)
 Goal = draw online traffic to ad’s own site
 But if visitor doesn’t click through to the ad’s site  no sales
o Thus, now emphasis on ad contracts that link fees to marketing relevant
behaviour by these visitors and more internet advertisers only pay if
visitor to the host site clicks thru to the advertiser’s site
 Search engine advertising
 Search engines let advertisers know exactly what consumers want thru their
keyword search
 Very clear and measurable ROI
 Service delivery channels
o Service outlets
 Interior architect – posters, video screens = impersonal msgs
o Front line employees
 May serve as face-face, phone, email (personal experience)
 Can offer what’s in the flower of services
o Self service delivery points
 Ex: vending machines, ATM, service apps
 Must be user friendly (clear, step-by-step) to comm effectively
 Messages OG from outside org
o WOM  generally viewed as more credible to other customers compared to promo acts by
 Encourage this by initiating referral reward programs to existing customers
o Can also be spread online “word of mouse”

Production channels  theatre (ppl to communicate with the consumers)

Traditional marketing channels (ad)

7.6 Role in corporate design – strategies for corporate design

 Many service firms employ a unified and distinctive visual appearance for all tangible elements
o Ex: Logos, uniforms, physical facilities
o Ex: insurance company use umbrella to rep company  protection
 Useful in competitive markets to stand out, be instantly recognizable in diff locations, and strengthen
brand image
o Shell’s yellow scallop shell on a red background similar to McDonald’s “Golden Arches”
 Makes it more recognizable
 How to stand out and be diff?
o Use colors in corporate design
o Use names as central element in their corporate designs
o Use trademarked symbol rather than name as primary logo
o Create tangible recognizable symbols to connect with corporate brand names
 “great reflection of all the ways Google works for you across Search, Maps, Gmail, Chrome and many
others. We think we’ve taken the best of Google (simple, uncluttered, colorful [sic], friendly), and
recast it not just for the Google of today, but for the Google of the future.”
Simplicity can apply it to other methods that don’t offer the same amount of space