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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 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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? Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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? Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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/ Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 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 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall