Download I. Chapter Overview

Part 3: Create the Value Proposition
Chapter 10
Services and Other Intangibles:
Marketing the Product That Isn’t There
I. CHAPTER OVERVIEW
Is it possible to market something that cannot be felt, seen, or heard? Can you market something
that is not there? Many students may quickly answer “no” to these questions, but after studying
Chapter 10; their answer will soon change.
Chapter 10 explores the world of marketing services. Students learn how services differ from
goods and how marketers create and measure service quality. Marketing services may be more
difficult than marketing goods as services are intangible, perishable, variable, and inseparable.
Students also learn about marketing people, places, and ideas.
II. CHAPTER OBJECTIVES
1. Describe the characteristics of services and the ways marketers classify services.
2. Appreciate the importance of service quality to marketers.
3. Explain the marketing of people, places, and ideas.
III. CHAPTER OUTLINE
►MARKETING MOMENT INTRODUCTION
Suppose an airline was considering eliminating pilot uniforms (in favor of suits). As a member of
the airline’s marketing department, would you support or object to eliminating uniforms? Hint:
Ask students what “cues” they use to evaluate service providers. How does a passenger know if
the pilot of the airplane is actually qualified to fly the plane?
p. 273
1.
REAL PEOPLE, REAL CHOICES—HERE’S MY
PROBLEM AT PHILADELPHIA 76ERS
In order to serve its customer base better, the 76ers needed to
compile detailed information. The team’s management had access
to several data sources; these included some surveys, notes from
customer service representatives that recorded highlights of
conversations with fans, and a ticketing system (which showed
past purchases)—but this system only recorded a ticket buyer’s
name, address, length of being a season ticket holder, and any
miscellaneous notes that customer service representatives added
to the account. Lara knew that she needed a better system to
compile buying habit information to predict what Sixers fans
wanted, as opposed to the poorly organized “spray and pray”
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
strategy the team was currently using. Lara considered three
options:
1. Phase in a CRM database approach.
2. Send out several surveys to season ticket holders each
year.
3. Analyze the lifetime value of customers by projecting
how their spending habits over time will provide revenue
to the organization.
The vignette ends by asking the student which option he/she
would choose.
Lara chose option #1.
Use Website Here: http://www.nba.com/sixers/index_main.html to find information about the
Philadelphia 76ers.
p. 274
2.
MARKETING WHAT ISN’T THERE
Intangibles are services and other experience-based products that
we cannot touch.
p. 274
2.1
WHAT IS A SERVICE?
Services are acts, efforts, or performances exchanged from
producer to user without ownership rights. Like other intangibles,
a service satisfies needs when it provides pleasure, information, or
convenience.
Services are provided for consumers as well as organizations. The
market for business services has grown rapidly because it is often
more cost effective for organizations to hire outside firms that
specialize in these services than to try to hire a workforce and
handle the service themselves.
Use Website Here: http://www.mckinsey.com/ McKinsey & Co. Consulting Firm
http://www.deloitte.com/view/en_US/us/index.htm
Deloitte Accounting Firm.
p. 274
Figure 10.1
2.2 Characteristics of Services
Services share four characteristics:
Characteristics of
Services
 Intangibility
 Perishability
 Variability
 Inseparability
p. 275
Geico ad
2.2.1 Intangibility
Intangibility is the characteristic of a service that means
customers can’t see, touch, or smell good service. Services cannot
be inspected or handled before the purchase is made, making it
difficult for consumers to evaluate.
Because they are buying something that is not there, customers
look for reassuring signs before purchasing. Marketers provide
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Part 3: Create the Value Proposition
physical cues to reassure buyers such as the look of a facility, its
furnishings, logos, appearance of employees, etc.
►Marketing Moment In-Class Activity
Ask students to identify service industries (such as dentistry, real estate, education, etc.) How
might these different entities “tangibilize” their product for consumers? (Ex.—dentist gives you a
“free” toothbrush and floss after a checkup so you have something to show for your money)
p. 275
2.2.2 Perishability
Perishability refers to the characteristic of service that makes it
impossible to store for later sale or consumption.
Capacity management is the process by which organizations
adjust their services in an attempt to match demand. It may mean
adjusting the product or it may mean adjusting the price.
p. 276
2.2.3 Variability
Variability is the characteristic of service that means that over
time even the same service performed by the same individual for
the same customer can vary. It is difficult to standardize services
because service providers and customers vary.
p. 276
2.2.4 Inseparability
Inseparability is the characteristic of a service meaning that it is
impossible to divide the production of a service from the
consumption of that service. Although a firm can manufacture
goods before sale, a service can take place only at the time the
service provider performs an act on either the customer or the
customer’s possession.
p. 277
2.2.5 The Service Encounter
The central role-played by employees in making or breaking a
service underscores the importance of the service encounter, or
the interaction between the customer and the service provider.
The service encounter has several dimensions that are important
to marketers, such as social contact and physical environment.
Services are intimately tied to company employees who deliver
the service/ The quality of a service is only as good as the worst
employee is.
2.3
How We Classify Services?
We classify services in terms of whether the service is performed
directly on the customer or on something the customer owns, and
whether the service consists of tangible or intangible actions.
p. 278
Either tangible or intangible elements dominate some products,
such as salt versus teaching, whereas others such as a commercial
airline flight tend to include a mixture of goods and services.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Symphony
Orchestra ad
Table 10.1
Marketing
Strategies for
Different Service
Characteristics
Ripped from the
Headlines:
Ethical/
Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
Sustainable
Decisions in the
Real World
p. 278
2.3.1 Goods-Dominated Products
Companies that sell tangible products still must provide support
services. Automobile, major appliance and electronics firms can
realize a competitive advantage when they provide customers
with this support better than the competition. Services may be
even more important for marketers of business-to-business
tangibles.
p. 279
2.3.2 Equipment- or Facility-Based Services
Some products include a mixture of tangible and intangible
elements. Facility-driven services, such as automatic car washes,
health clubs, and zoos must be concerned with the following three
factors:
 Operational factors: clear signs and other guidelines
must show customers how to use the service. In
particular, firms need to minimize waiting times.
 Location factors: marketers of services such as dry
cleaning or retail banking make sure their service sites
are convenient and in neighborhoods that are attractive
to prospective customers.
 Environmental factors: service managers who operate
a storefront service requiring people to come to their
location realize they must create an attractive
environment to lure customers.
p. 279
2.3.3 People-Based Services
At the intangible end of the continuum are people-based services.
Because people have less and less time to get things done, the
importance of people-based services is increasing.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Amusement Park
ad
Part 3: Create the Value Proposition
Brand You Activity: Have students brainstorm about potential non-corporate careers from home
(i.e., what activities to they like to do that might be a benefit for a potential customer? Ex—
personal shopper, personal gift purchaser, transcriber, etc.)
►Marketing Moment In-Class Activity
In Chapter 3 of the textbook, we discussed the external environment and how it affects the
marketing of products via threats and opportunities. If more and more Americans forgo corporate
life for alternative work styles, what industries might see this trend as a threat? What industries
might see this trend as an opportunity? (I.e. shift away from corporate office furniture to home
office furniture (Office Depot), need for private health insurance, less expenditures on work
clothes, etc.)
p. 279
2.4
Core and Augmented Services
When we buy a service, we may actually purchase a set of
services. The core service is a benefit that a customer gets from
the service. To attract customers, a service firm often tries to offer
augmented services—additional service offerings that
differentiate the firm from the competition.
Discussion question: What are core and augmented services? How do marketers increase market
share with augmented services?
Activity: List and describe the core and augmented services of each of the following:
 A personal trainer
 An accountant
 A drycleaner
 A public swimming pool
 Your personal banker
p. 280
3.
PHYSICAL ELEMENTS OF THE SERVICE
ENCOUNTER: SERVICESCAPES AND OTHER
TANGIBLES
Because services are intangible, marketers have to be mindful of
the physical evidence that goes along with them. An important
part of this physical evidence is the servicescape: the
environment in which the service is delivered and where the firm
and the customer interact. Servicescapes include facility
exteriors—elements such as a building’s architecture, the signage,
parking, and even the landscaping. They also include interior
elements, such as the design of the office or store, equipment,
colors, air quality, temperature, and smells.
Marketers know that carefully designed servicescapes can have a
positive influence on customer’s purchase decisions, their
evaluations of service quality, and their ultimate satisfaction with
the service.
Nowadays, for many consumers the first tangible evidence of a
business (service or otherwise) is its website. Searchability is
important, as is paying attention to search engine optimization
(SEO): a systematic process of ensuring that your firm comes up
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
p. 281
p. 282
at or near the top of lists of typical search phrases related to your
business.
4.
HOW WE PROVIDE QUALITY SERVICE
If a service experience is not positive, it can turn into a disservice
with nasty consequences. Quality service ensures that customers
are satisfied with what they have paid for. However, satisfaction
is relative because the service recipient compares the current
experience to some prior set of expectations. That is what makes
delivering quality service tricky. What may seem like excellent
service to one customer may be mediocre to another person.
Marketers must identify customer expectations and then work
hard to exceed them.
4.1
Service Quality Attributes
Service marketers have to come up with creative ways to illustrate
the benefits their service will provide.
Search qualities are product attributes that the consumer can
examine before purchase. These include color, style, price, fit,
smell, and texture. Tangible goods, of course, are more likely to
have these characteristics, so services need to build them in by
paying attention to details such as the style of flight attendants’
uniforms or the decor of a hotel room.
Experience qualities are product attributes that customers
identify during or after consumption. For example, we cannot
really predict how good a vacation will be until we have it, so
marketers need to reassure customers before the fact that they are
in for a positive experience.
p. 283
p. 283
Credence qualities are product attributes we find difficult to
evaluate even after we have experienced them. For example, most
of us do not have the expertise to know if our doctor’s diagnosis
is correct. Largely the client must trust the service provider.
4.2
How We Measure Service Quality
Because the customer’s experience of a service determines if she
will return to the provider in the future, service marketers feel that
measuring positive and negative service experiences is the “Holy
Grail” for the services industry.
4.2.1 SERVQUAL
The SERVQUAL scale is one popular instrument to measure
consumers’ perceptions of service quality. SERVQUAL identifies
five dimensions, or components, of service quality: tangibles,
reliability, responsiveness, assurance, and empathy.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
The Cutting
Edge: Airlines
Introduce
Handheld
Devices
to Improve
Service
German
Insurance ad
Part 3: Create the Value Proposition
►Marketing Moment In-Class Activity
Suppose you are in charge of the mystery shoppers evaluating a fast food restaurant. What
would you ask the mystery shoppers to look for? (Hint: speed of service, number of pickles,
greeting, etc.)
Discussion question: You are currently a customer for a college education, a very expensive
service product. You know that a service organization can create a competitive advantage by
focusing on how the service is delivered after it has been purchased—making sure the service is
efficiently and comfortably delivered to the customer. Develop a list of recommendations for
your school for improving the delivery of its service. Consider both classroom and nonclassroom aspects of the educational product.
p. 283
Figure 10.2
4.2.2 Gap Analysis
Gap analysis is a measurement tool that gauges the difference
The Gap Model
between a customer’s expectation of service quality and what
of Service
actually occurs. By identifying specific places in the service
Delivery
system where there is a wide gap between what is expected and
what is received, service marketers can get a handle on what
Disney
needs improved. Some major gaps include the following:
Employees Photo
 Gap between consumer expectations and management
perceptions
 Gap between management perception and quality
standards set by the firm
 Gap between established quality standards and service
delivery
 Gap between service quality standards and consumer
expectations
 Gap between expected service and perceived service
p. 285
4.2.3 The Critical Incident Technique
The critical incident technique is another way to measure service
quality. The company collects and closely analyzes very specific
customer complaints. It can then identify critical incidents—
specific contacts between consumers and service providers that
are most likely to result in dissatisfaction.
p. 285
Some critical incidents happen when the expectations of
customers cannot be met by the service organization.
4.3
Strategic Issues When We Deliver Service Quality
Delivering quality is the goal of every successful service
organization. Firms work to maximize the likelihood that a
customer will choose its service and become a loyal customer.
Just as in goods marketing, the first step is to develop effective
marketing strategies.
Sometimes service quality does fail. The important thing, after a
failure, is that the firm takes fast action to resolve the problem.
Quick action means that the problem will not occur again
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Table 10.2
Marketing
Strategies for
Service
Organizations
Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
(hopefully) and that the customer’s complaint will be
satisfactorily resolved. The key is speed; research shows that
customers whose complaints are resolved quickly are far more
likely to buy from the same company again, than when
complaints take longer to be resolved.
p. 286
p. 286
To make sure that service failures are at a minimum and that
recovery is fast, managers should first understand the service and
the potential places where failures are most likely to occur and
then make plans ahead of time to recover. That is why the process
of identifying critical incidents can be so important. In addition,
employees should be trained to listen to complaints. They should
be empowered to take appropriate actions immediately.
5.
MARKETING PEOPLE, PLACE, AND IDEAS
Intangibles such as people, places, and ideas often need to be
“sold” by someone and “bought” by someone else.
5.1
Marketing People
People are products. A sizable number of people hire personal
image consultants to devise a marketing strategy for them, and
others undergo plastic surgery, physical conditioning, or cosmetic
makeovers to improve their “market position” or “sell”
themselves to potential employers, friends, or lovers.
Sophisticated consultants create and market politicians when they
“package”” candidates (clients) who then compete for “market
share” as measured by votes.
From actors and musicians to athletes and supermodels, the
famous and near famous jockey for market position in popular
culture. Agents carefully package celebrities as they connive to
get their clients exposure on TV, starring roles in movies,
recording contracts, or product endorsements. Like other
products, celebrities even rename themselves to craft a “brand
identity.”
Marketers use other techniques to sell celebrities. These include:
 A pure selling approach, in which an agent presents a
client’s qualifications to potential “buyers” until he
finds one who is willing to act as an intermediary.
 The product improvement approach, in which the
agent works with the client to modify certain
characteristics that will increase market value.
 The market fulfillment approach, in which the agent
scans the market to identify unmet needs.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Lady Gaga Photo
Celebrities in
Israel Promotion
Photos
Table 10.3
Strategies to Sell
a Celebrity
Part 3: Create the Value Proposition
►Marketing Moment In-Class Activity
Ask students to think about how marketing might influence political elections. Suppose you were
in charge of Mick Jagger’s presidential campaign. (This is a real stretch—assume that Mick is an
American citizen or substitute another candidate). What technique would you use to “sell”
Mick? What adjustments in his “marketing mix” would you suggest?
►Marketing Moment In-Class Activity
Based on information from The World Is Flat, ask students to brainstorm about services that with
increased technology, can be outsourced (for example, tax forms can be sent electronically to
India, completed there, and then filed in the US, MRIs taken at a local hospital can be sent
electronically and read by a Radiologist in China, etc.)
p. 288
Las Vegas Strip
5.2
Marketing Places
Place marketing strategies regard a city, state, country, or other
Photo
locale as a brand. Marketers use the marketing mix to create a
suitable identity so that consumers choose this brand over
competing destinations when they plan their travel. Because of
the huge amount of money tourism generates, the competition to
attract visitors is fierce.
p. 289
Safe Driving ad
5.3
Marketing Ideas
Idea marketing refers to strategies that seek to gain market share
for a concept, philosophy, belief, or issue. The marketing of ideas Non-Profit
can be even more difficult than marketing goods and services.
Organization ad
Consumers often do not perceive that the value received from
wearing seat belts or recycling garbage or even not driving while
drinking is worth the cost—the extra effort necessary.
p. 289
5.4
The Future of Services
As we look into the future, we recognize that service industries
will continue to play a key role in the growth of both the United
States and the global economy. In fact, in recent years the
accelerating impact of service as an integral part of any firm’s
value proposition has led some analysts to argue that there is now
a new dominant logic for marketing. This means that we need
to rethink our traditional distinction between services and goods.
Instead, we need to recognize that a service is the central (core)
deliverable in every exchange; any physical products involved are
relatively minor in terms of their contribution to the value
proposition.
Furthermore, several trends are important to consider. Following
is a list:




Changing demographics
Globalization
Technological advances
Proliferation of information
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Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
p. 291
REAL PEOPLE, REAL CHOICES: HERE’S MY CHOICE
AT PHILADELPHIA 76ERS

Lara choose option #1
Brand You: Corporate life is not for everyone. You can blaze a
trail to success in many different ways. Learn about the myths
and realities of the job market and how you can explore different
options for your career including being a contract employee with
flexible hours, a free agent with many clients and projects or even
pursue your personal passion while you are working.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Part 3: Create the Value Proposition
IV. END-OF-CHAPTER ANSWER GUIDE
Chapter Questions and Activities
CONCEPTS: TEST YOUR KNOWLEDGE
1. What are intangibles? How do basic marketing concepts apply to the marketing of
intangibles?
Intangibles are experience-based products that cannot be touched. The basic marketing
concept applies to many types of products, including those we cannot touch. The concept of
identifying needs and wants and developing goods/services which meet those needs and
wants is just as crucial for intangibles as it is for tangible goods. Branding is also important
when marketing intangibles.
2. What is a service? What are the important characteristics of services that make them different
from goods?
Services are products that are intangible and that are exchanged directly from producer to
customer. Generally, services are acts that accomplish some goal. They may be directed
either toward people or toward an object or possession. Important service characteristics
include 1) intangibility (they cannot be seen, touched, or smelled); 2) perishability (they
cannot be stored); 3) variability (they are never exactly the same); and 4) inseparability from
the producer (most services are produced, sold, and consumed at the same time). Goods are
tangible and examples include food or clothing, raw materials, tools, and machinery.
3. What is the service continuum? What are good-dominated services, equipment- or facilitybased services, and people-based services?
See Figure 10.2 for additional information and examples. It is sometimes difficult to separate
products and services because of their interrelationship. However, the service continuum is a
useful way of accomplishing this. Some products are dominated by either tangible or
intangible characteristics (such as teaching), although others tend to include a mixture of
goods and services (such as flying on an airplane). Challenges come in formulating
marketing strategy for product-related services, equipment-based or facility-based services,
and people-based services. There are three service positions that can be considered:
a. Good-Dominated Products:

The good dominates though services may be included.
b. Equipment- or Facility-Based Services:
A mixture of goods and services (tangible and intangible elements). Factors include:
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There



Operational factors—technologies must move customers smoothly through the
service (like in a car wash).
Location factors—important for frequently purchased services like dry-cleaning.
Environmental factors—an attractive environment must be created for customers.
c. People-Based Services:


At the intangible end are people-based services (like a massage).
Personal time is a reason for acquiring people-based services.
4. What are core and augmented services? How do marketers increase market share with
augmented services?
The core service is a benefit that a customer gets from the service. Augmented services are
additional service offerings that differentiate the firm from the competition. Marketers are
finding that because the augmented product is what gives a competitive advantage, much
time and effort must be spent on creating the right mix of augmentation that satisfies
customers better than competitive offerings.
5. What are the social and physical elements of the service encounter?
The social elements relate to the company employees who deliver the service. The employee
represents the organization; his actions, words, physical appearance, courtesy, and
professionalism—or lack of it—reflects the values of the organization.
The physical elements include the physical evidence of a service delivered as well as the
servicescape. Servicescape includes the exterior design of the facility, the signage, parking,
and the landscaping. It also includes interior elements such as the design of the office or
store, equipment, colors, air quality, temperature, and smells.
6. What are search qualities, experience qualities, and credence qualities?
Search qualities: attributes that the consumer can examine before purchase such as flight
attendants’ uniforms.
Experience qualities: Product attributes that customers can determine only during or after
purchase.
Credence qualities: attributes difficult to evaluate even after purchase.
7. What dimensions do consumers and business customers use to evaluate service quality? How
do marketers measure service quality?
Because services are inseparable in that they are not produced until they are consumed,
consumers and business customers find it difficult to estimate how good service will be until
it is purchased. Therefore, marketers come up with ways for to illustrate the benefits their
services will provide.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Part 3: Create the Value Proposition
Search qualities: attributes that the consumer can examine before purchase such as flight
attendants’ uniforms.
Experience qualities: Product attributes that customers can determine only during or after
purchase.
Credence qualities: attributes difficult to evaluate even after purchase.
Marketers measure positive and negative service experiences. They use a variety of
techniques. SERVQUAL is a scale that measures service quality across dimensions of
tangibles, reliability, responsiveness, assurance and empathy. Gap analysis is a measurement
tool that gauges the difference between a customer’s expectation of service quality and what
actually occurred. When using the critical incident technique, the company collects and
closely analyzes very specific customer complaints. It can then identify critical incidents,
specific contacts between consumers and service providers that are most likely to result in
dissatisfaction.
8. How should marketers respond to failures in service quality?
The important thing for marketers when service quality does fail is to take quick action and
resolve the problem quickly, making sure that the problem will not occur again and that the
customer’s complaint will be satisfactorily resolved. Managers should also be sure to
understand the potential points at which failure might occur. In addition, employees should
be trained to listen to complaints; they should be empowered to take action immediately.
9. What is the so-called “new dominant logic for marketing”? Why is it especially relevant to
someone just starting a career in business (either in marketing or otherwise)?
The new dominant logic for marketing is a reconceptualization of traditional marketing to
redefine service as the central (core) deliverable and the actual physical products purveyed as
comparatively incidental to the value proposition.
10. What do we mean by marketing people? Marketing places? Marketing ideas?
People are products and are marketed as such. A number of people hire personal image
consultants to devise a marketing strategy for them, others undergo plastic surgery, physical
conditioning, or cosmetic makeovers to improve their “market position” or “sell” themselves.
Place marketing strategies regard a city, state, country, or other locale as a brand and attempt
to position this location so that consumers choose to visit.
Idea marketing is about gaining market share for a concept, philosophy, belief, or issue.
 ACTIVITIES: APPLY WHAT YOU’VE LEARNED
1. Because of increased competition in its community, you have been hired as a marketing
consultant by a local bank. You know that the characteristics of services (intangibility,
perishability, variability, and inseparability) create unique marketing challenges. You also
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
know that these challenges can be met with creative marketing strategies. Outline the
challenges for marketing the bank created by each of the four characteristics of services. List
your ideas for what might be done to meet each of these challenges.
Services have four unique characteristics: intangibility, perishability, variability, and
inseparability. Students should consider how each of these applies to the specific activities
and customer expectation of a bank and how banks can develop strategies to address these.
The information in Table 10.1 on page 278 of the text provides some good ideas that will
stimulate student ideas. Below is a summary of the four characteristics.
a. Intangibility





Service intangibility means that customers cannot see, touch, or smell a service.
A service cannot be inspected or handled before the purchase is made.
Services are more difficult to evaluate than products.
Consumers look for reassuring signs before purchasing. The “look” is very
important (such as the service provider’s facility).
Physical cues could be uniforms, brand logos, and carefully designed websites.
b. Perishability



Service perishability means that a firm cannot store its services. It is a case of
“use it or lose it.”
Marketers try to avoid “perishability” problems by using the marketing mix to
encourage demand for the service during times when it would otherwise be low.
Prices can be reduced to match demand.
c. Variability



Service variability refers to the inevitable differences in a service provider’s
performance from one day to the next.
It is difficult to standardize services because service providers and service
customers vary.
One solution to the problem of variability is to institute total quality management
programs for continuous improvement of service quality.
d. Inseparability




A service can only take place at the time the service provider performs an act on
either the customer or the customer’s possession.
Services cannot be detached from those that provide them.
Employees are important in services.
To reduce the problems that might occur in the service encounter, service
providers are experimenting with disintermediation—eliminates the need for
customers to interact with people (i.e., self-service banks).
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
Part 3: Create the Value Proposition

The Internet has provided opportunities for disintermediation (especially in
financial services).
2. Assume that you are a physician. You are opening a new family practice clinic in your
community. You feel that you have the best chance of being successful if you can create a
product that is superior to those offered by competitors. Put together a list of ways in which
you can augment the basic service offering to develop a better product. List the advantages
and disadvantages of each.
To recap, the augmented service is additional service offerings that differentiate the firm
from the competition. As indicated in the question, one way to have services stand out is to
develop innovative augmented services that competitor’s lack. Some ideas to get students
started would be for the family practice clinic to offer: screenings (such as those for various
cancers), drug consultations for teens, well-baby care, home visits, prepaid health plans, preenrollment services for area hospitals, Internet counseling, etc.
3. You are currently a customer for a college education, a very expensive service product. You
know that a service organization can create a competitive advantage by focusing on how the
service is delivered after it has been purchased—making sure the service is efficiently and
comfortably delivered to the customer. Develop a list of recommendations for your school
for improving the delivery of its service. Consider both classroom and non-classroom aspects
of the educational product.
Before beginning this exercise, students should review chapter material on the physical and
social aspects of the service encounter. Some ideas to get students started, include examining
contact and admission services registration processes, graduation or exit processes,
classrooms, timing of classes, etc. (Answers to these will vary depending upon the school.) In
addition, extra services such as social, dorms, job placement, career counseling and
psychological and trauma services might all be included in the student’s assessment.
4. Assume that you work for a marketing firm that has been asked to develop a marketing plan
for a new up-and-coming rock band called Stalagmite, and their new CD, Slow Drip. Prepare
an outline for your marketing plan. First, list the special problems and challenges associated
with marketing people rather than a physical product. Then outline your ideas for product,
price, and promotion strategies.
As indicated in the opening pages of the chapter, many find that equating people with
products to be distasteful, however, some of the same important marketing concepts still
apply. To create a campaign for the Stalagmite rock band, the students may have to construct
a brand identity for the band. The students should also consider the strategies mentioned in
the chapter as they construct strategies. Strategies for selling a person shown in Figure 10.4
might include:
a. Pure selling approach—an agent presents a client’s qualifications to potential buyers
until he finds one who is willing to act as an intermediary.
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Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
b. Product improvement approach—the agent works with the client to modify certain
characteristics that will increase market value.
c. Market fulfillment approach—the agent scans the market to identify unmet needs.
5. Address the same issues in question #4 for a marketing plan for your hometown.
Marketing places is big business. Place marketing may require developing a brand identity
and considering the same selling strategies as listed above.
6. Assume that you have been recently hired by your city government to head up a program to
create 100 percent compliance with recycling regulations. Develop a presentation for the city
council in which you will outline the problems in “selling” recycling. Develop an outline for
the presentation. Be sure to focus on each of the Four Ps.
One way to begin this project is to do a key word search on the Internet for “recycling.” Find
some successful programs and use material for outlines from this data. Another approach is
to contact the website for the city’s existing waste disposal service. In some instances, this
waste management service is city-owned. In other cities it comes from a private contractor.
Again, information from this public data can be useful in constructing the outline. Next,
students should examine the problems that might be faced in achieving compliance. What do
citizens like and dislike about recycling? How does the city get citizens to take ownership of
this issue? How can profits be made from recycling? Will there be a cost to a citizen for
noncompliance? Have students consider these issues as they construct their strategies.
CHOICES: WHAT DO YOU THINK?
1. Why are first impressions we form about a service through the Internet so important? What
can a service firm do to ensure a favorable first impression online? (Hint: Consider issues
beyond the website itself.)
The first impression of an online search will determine if we are going to seek information or
services from that site. There are many options so if one does not satisfy; it is easy to move
to another. Students can have an interesting discussion about what they desire to see on a
website. It may be interesting to see if student ideas differ greatly from those of the
instructor.
2. Sometimes service quality may not meet customers’ expectations. What problems have you
experienced with quality in the delivery of the following services?
a.
b.
c.
d.
A restaurant meal
An airline flight
Automobile repairs
Your college education
What do you think is the reason for the poor quality?
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Part 3: Create the Value Proposition
The students should be encouraged to express their feelings and ideas about the above
services. Point out how the characteristics of services (intangibility, perishability,
inseparability, and variability) affect the perception of the service and its quality. Encourage
students to think about why these quality problems occur. Is it the fault of management, of
employee training, etc? What could they (as potential marketers) do to correct the wrongs
that they have expressed? Did the wrongs cost the service provider any money? If not, why
not?
3. Internet dating services, while becoming very popular, may present some dangers for those
who use their services. Who do you think uses Internet dating services? What, if anything,
should dating services do to protect their clients?
Many students will probably have strong opinions about who uses Internet dating services.
Some, in fact, may have tried Internet dating. This question should provide a lively
discussion about problems related to the characteristics of services. Students might compare
their perception of what is promised versus the actual date, the quality of the experience
promised by the dating service versus the actual experience. The concept of inseparability is
a tough one. How do you have a real dating experience without meeting the person in real
life? How can the dating service protect clients from potentially dangerous clients?
4. What “service” do providers such as Facebook convey? What core and augmented services
do they offer? How should we evaluate Facebook’s service quality?
Facebook has become the daily meeting place for millions of peoplewho are looking to keep
in contact with friends and acquaintances. Core service is the basic benefit of having the site
available for networking and the augmented service could include the ability for users to
develop groups of friends on the site. Service quality evaluation is done by a consumer prior
to purchase and could include word of mouth knowledge, what is written about the site,
friend referral and viewing the site before signing. The students could easily come up with
more service quality items.
5. There has been a lot of criticism about the way politicians have been marketed in recent
years. What are some of the ways marketing has helped our political process? What are some
ways the marketing of politicians might have an adverse effect on our government?
Most students should have some sort of opinion about the role of marketing in politics and
government. Critics point out that political marketing is deception at its finest. They claim
that candidates tell voters whatever they want to hear just to get their vote. Though perhaps
true in some sense, the voter still has the final vote on the credibility of the candidate.
Hopefully, bad candidates (like bad products) finish last. With more communication and an
attempt to understand the voting consumer, marketing may have brought the political process
out of the smoke-filled rooms and on to television and the Internet. One of the benefits of the
marketing application is the close inspection that the consumer is able to give the candidates.
Strategies become clear and usually have to withstand the test of daylight if the candidate is
to succeed.
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Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
6. Many not-for-profit and religious organizations have found that they can be more successful
by marketing their ideas. What are some ways that these organizations market themselves
that are similar to and different from the marketing by for-profit businesses? Is it ethical for
churches and religious organizations to spend money on marketing? Why or why not?
Marketing is just as important for non-profit organizations as it is for profit organizations.
However, contributors to non-profit organizations hold the organizations account for the
money they spend. Thus, it is important that they not spend too much money on “glitzy”
marketing. Discussions about churches and religious organizations can become heated and
should be monitored carefully. The deferring opinions of the students will be hard to form a
single view of advertising, but stick to the ethical aspects of money spent on advertising.
7. In the chapter, we mentioned that most of the airlines have transformed elements of their core
service (extra bags, pillows and blankets, etc.) into “extras.” They claim that this is better for
customers because they can now pay for only what they want instead of paying for a bundle
of services they do not even use. How do you react to their premise? Do you agree or
disagree?
Students will have various opinions about this practice. Many of us react very negatively
when services are taken away from us in a consumer situation where we do not perceive any
change (reduction) in the cost of that service. Now paying for the “extras” mentioned in the
question would obviously feel like the airline is “nickel and diming” us!
8. Many developed countries including the United States have in recent decades become
primarily service economies; that is, there is relatively little manufacturing of goods, and
most people in the economy are employed by service industries. Why do you think this has
occurred? In what ways is this trend a good and/or a bad thing for a country? Do you think
this trend will continue?
Students who have taken an economics course may have already studied this issue and will
provide valuable insight. Some students may feel that economies shift and evolve and the
U.S. economy may shift back. Others may talk about dependency on foreign nations and the
associated positives and negatives. Students also should consider fair wages, fair treatment of
workers, international leadership, and so on.

MARKETING METRICS EXERCISE
The consulting firm Market Metrix employs a metric it calls the Marketing Metrix
Hospitality Index (MMHI) to measure customer satisfaction with hotel, airline, and car rental
companies. The metric is based on 35,000 in-depth consumer interviews. The MMHI
includes most major brand hotels, airlines, travel industry websites, and car rental
companies—each rated on over 50 different dimensions. Subscribers to the quarterly report
can measure their company’s stand-alone performance and benchmark its ratings against
those of competitors and highly ranked companies within and across the other hospitality
industries. Go to the MMHI website (www.marketmetrix.com) then click on “Hospitality
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Part 3: Create the Value Proposition
Index.” Review the information on MMHI Winners, Brand History, and MMHI Brand List.
Based on recent results, how are your favorite brands faring on their index? Do you agree
with the results provided about your favorites?
Answers and opinions will vary. Start discussion by asking students to list what they expect
to see and experience in hotels and restaurants.
 MINI-PROJECTS: LEARN BY DOING
Mini-project 1
1. Select a service that you, as a customer, will purchase in the next week or so.
2. As you experience the service, record the details of every aspect, including the following:
a. People
b. Physical facilities
c. Location
d. Waiting time
e. Hours
f. Transaction
g. Other customers
h. Tangible aspects
i. Search qualities
j. Credence qualities
3. Recommend improvements to the service encounter.
The purpose of the mini-project listed in the chapter is to get students to analyze a service
they use and review the service encounter.
Through three specific questions (or exercises), individuals (or teams) are asked to review the
marketing practices of a local service provider. Students are asked to visit the service
provider and review all aspects of the service delivery process as seen by a typical service
recipient. Students conclude the exercise by recommending improvements to the service
encounter. Students should write a descriptive report of their findings and experiences.
Instructors may wish to extend the deadline for this assignment so students have many
opportunities to visit, write their report, and report their findings.
Mini-project 2
Theme and entertainment parks like Universal Studios fall in the middle of the goods/services
continuum—half goods and half services. To be successful in this highly competitive market,
these parks must carefully develop targeting and positioning strategies. Visit the websites of the
four top theme park organizations: Walt Disney World (http://disneyworld.com), Six Flags parks
(http://www.sixflags.com), Universal’s Orlando Theme Park (http://www.universalstudios.com),
and Busch Gardens (http://www.buschgardens.com). Thoroughly investigate each site.
1. How is the website designed to appeal to each theme park organization’s target markets?
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Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
To successfully answer this question, students should first evaluate just who might be in each
of the four theme parks target markets. Based on these thoughts, label specific cues to target
market matches.
2. How does each park position its product? How is this positioning communicated through the
website?
Theme parks such as those mentioned sell both tangible goods and service. Can the students
name the several services (some will be core and some will be augmented)? Each theme park
has different approaches to positioning. Can the students pick out the differences? Do the
national websites have much to do with local establishments and services? This should make
a good discussion question.
3. What changes or improvements would you recommend for each website?
Students are directed to visit websites of several popular theme parks. During these visits,
students are then asked to consider target markets and positioning strategies for the various
organizations. Once these sites have been visited (and associated text material reviewed),
students will be prepared to answer the questions above.
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Part 3: Create the Value Proposition
V. MARKETING IN ACTION CASE: REAL CHOICES AT
CLEAR AND SIMPLE
Summary of Case
Clear & SIMPLE™, founded in 1999, is one of a number of professional organizing companies
that meets the growing need for home and office organization skills. Professional organizers like
Clear & SIMPLE™ help clients to build a harmonized life and restore order to their homes and
workplaces. Clear & SIMPLE™ owners Marla Dee and Lisa Parsons try to convince
homeowners and businesses that “Getting Organized can be Fun, Simple, and Freeing!” The
company offers clutter-afflicted consumers a variety of services. Their two major systems, SEE
IT • MAP IT • DO IT and S.T.A.C.K.S.™ aim to train clients how to identity their problems
with clutter and chaos and then show them how to better organize their space.
Despite its current success, Clear & SIMPLE™ faces a number of challenges. The increasing
number of competitors in the industry and the growing number of Internet websites on
delivering organizing skills can have a direct impact on Clear & SIMPLE’s™ future success.
Consumers may question if help in organizing their space is a necessary expense in times of
economic recession. How can Clear & SIMPLE™ build on its current success for a sustainable
future that will endure economic difficulties? Even more important, what should Marla and her
colleagues do to make their brand stand out among their other “neat” competitors?
Suggestions for Presentation
This case could be assigned for various out-of-class or in-class discussion activities.
Out of class
Through an Internet search, determine how many companies presently exist that offer similar
services to Clear and Simple.
Determine the strengths and weakness of Clear and Simple; determine if Clear and Simple has
any strengths that make it stand out from competitors.
How can Clear and Simple build on its current success for a sustainable future that will endure
economic difficulties?
In class
Class discussion about what Marla and her colleagues should do to make their brand stand out
among their competitors.
Discuss the impact of economic difficulties in relationship to their business.
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Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
Suggested Answers for Discussion Questions
1. What is the decision facing Clear and Simple?
Students may come up with a number of different decisions that Clear and Simple might make
such as:


How can Clear and Simple brand themselves to stand out from the competition
Can Clear and Simple lower their prices when the economy takes a downturn
A more comprehensive decision statement would be
 Clear and Simple needs to develop a marketing strategy that will ensure long-term
success and profitability against the stiff competition in the marketplace.
2. What factors are important in understanding this decision situation?
The following factors are important in understand this decision situation:





Clear and Simple has been in business since 1999.
Products include workshops, individual consultation, skill books, kits, and self-study
courses.
Number of competitors is increasing.
Growing number of Internet websites that deliver organizing skills.
Need to make brand stand out from competition.
3. What are the alternatives?
Students might recommend a variety of different alternatives. Some possibilities are:



Clear and Simple can continue with the current strategy, hoping their success continues.
Clear and Simple needs to evaluate competitors’ power and influence, to see where they
stand in relation to their competition.
Clear and Simple can conduct a gap analysis of what might be needed to see if their
present services meet their market’s needs.
4. What decision(s) do you recommend?
Students may focus on several of the alternatives developed. They should be encouraged to
discuss which alternative actions are more critical.
5. What are some ways to implement your recommendation?
Students may make a variety of suggestions for implementation depending on their
recommendations. These may include specific promotion activities, specific pricing, research
activities and many others.
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Part 3: Create the Value Proposition
WEB RESOURCES
Virtual tours of the Hollywood, Orlando, and Japan resorts:
http://www.universalstudios.com/index.php
McKinsey & Co. Consulting Firm: http://www.mckinsey.com/
Deloitte Accounting Firm: http://www.deloitte.com/view/en_US/us/index.htm
Online dating: http://www.match.com/matchus/
Online dating: http://www.eharmony.com/
Nebraska tourism: http://www.visitnebraska.org/
Colorado tourism: http://www.colorado.gov
CRM Buyer: http://www.crmbuyer.com/story/32178.html
Eddie Bauer: http://www.eddiebauer.com/home.jsp
Market Metrix Hospitality Index: http://www.marketmetrix.com/hospitality.html
Orange County Clerk of Courts: http://www.myorangeclerk.com/
Amazon: http://www.amazon.com/
Online ridesharing community: http://www.nuride.com/nuride/main/main.jsp
Medical care inquires: http://www.askphysicians.com/
Medical care database: http://www.webmd.com/
Federal Express: http://www.fedex.com/
Priceline ticket sales: http://www.priceline.com/
Apple: http://www.apple.com/
Target: http://www.target.com/
Dell Computer: http://www.dell.com/
Sony: http://www.sony.com/index.php
JetBlue airline: http://www.jetblue.com/
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Chapter 10: Services and Other Intangibles: Marketing the Product That Isn’t There
Campaign to fight global warming: http://www.lickglobalwarming.org/
Philadelphia 76ers website: http://www.nba.com/sixers/index_main.html
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