Contemporary

Issues in
Marketing
Management
Diploma in Management Studies
Lesson 5 Marketing Mix in
Service Sector

What Is A Service?
A service is any act of performance that one
party can offer another that is essentially
intangible and does not result in the ownership of
anything; its production may or may not be tied
to a physical product.
Kotler & Keller Marketing Management

A valuable action, deed, or effort performed to

satisfy a need or to fulfil a demand.
http://www.businessdictionary.com

Services are intangible,

inseparable, variable, and
perishable.

Marketing of Services
Marketing of services faces new realities in the 21st Century due
to customer empowerment, customer coproduction, and the
need to satisfy employees as well as customers.
Services are intangible therefore, marketers must find ways to
give tangibility to intangibles; to increase the productivity of
service providers; to increase and standardize the quality of the
service provided; and to match the supply of services with
market demand.
In the past, service industries lagged behind manufacturing
firms in adopting and using marketing concepts and tools, but
this situation has now changed.
Achieving excellence in service marketing calls not only for
external marketing, but also for internal marketing to motivate
employees, as well as interactive marketing to emphasize the
importance of both high tech and high touch.

Marketing of Services
Success in marketing services involves: a strategic
concept, commitment to quality, high standards,
self-service technologies, systems for monitoring
service performance and customer complaints, and
an emphasis on employee satisfaction
Superior service delivery requires managing
customer expectations and incorporating self-service
techniques.
Customers expectations play a critical role in their
service experiences and evaluations.
Companies must manage service quality by
understanding the effects of each service encounter.

Characteristics of Services
Four distinctive characteristics that greatly affect the
design of marketing programs:

Intangibility

Unlike physical products, services cannot be seen, tasted, felt,

heard, or smelled before they are bought.
Purchasing of service is based on evidence of quality. Buyers
will draw inferences about quality from the place, people,
equipment, communication material, symbols, and price that
they see. Therefore, the service providers task is to manage
the evidence, to make tangible that which is intangible.

Inseparability

Services are typically produced and consumed simultaneously.

Because the client is also present as the service is produced,
provider-client interaction is a special feature of service
marketing.

Characteristics of Services
Four distinctive characteristics that greatly
affect the design of marketing programs:

Variability

Services are highly variable because they are dependent

on who provides the service, when and where they are
provided, services are highly variable

Perishability

Services are used once and cannot be stored.

Perishability is not a problem when demand is steady but
when demand fluctuates, service firms have problems.

Characteristics of Services
According to Lovelock and Wirtz (2004) there are
basic differences between goods and services:

Customers do not obtain ownership of servicesthey usually derive

value without ownership. An example is car rental the period of
the rental determines the price.
Service products are ephemeral and cannot be inventoriedservices
are transitory and perishable and are not stored.
Intangible elements dominate value creationShostack suggests
distinguishing between goods and services by means of a scale as
to whether it is tangible or intangible dominant. If more than half is
intangible, then it should be considered to be a service. In the case
of a restaurant, most of the added value comes from food
preparation and cooking, table service, environment, parking,
toilets etc.
Customers may be involved in the production processcustomer
involvement can take the form of self-service as in using an ATM, or
cooperating as with a hairdresser; this means customers could be
thought of as partial employees. Service organisations have much
to gain through making the experience more enjoyable.

Characteristics of Services
According to Lovelock and Wirtz (2004) there are
basic differences between goods and services:

Other people may form part of the productthe type of customers

who use a particular service can shape the nature of the service
experience for others. If you attend a sporting event, then the
behaviour of other fans can add to or detract from the excitement.
There is a greater variability in operational inputs and outputsthe
presence of employees and other customers makes it difficult to
standardise and control the quality in service inputs and outputs.
For services consumed as they are produced the operation takes
on real-time conditions which may vary from customer to
customer or from one time of day to another.
Many services are difficult for customers to evaluatethe
experience is only evaluated after or during consumption and
becomes particularly difficult to do when the customer lacks
expertise in that particular area of the service delivery. Service
providers are able to allay fears of customers by helping them and
educating them as to what to expect both during and after service
delivery, e.g. for a package holiday

Characteristics of Services
According to Lovelock and Wirtz (2004) there
are basic differences between goods and
services:

The time factor assumes great importance many services are

delivered in real time with customers present. Busy people
expect the service to be available to them at times that suit
them rather than when it suits the organisation. In response,
more and more organisations are offering extended opening
hours.
Distribution channels take different formsorganisations are
able to offer customers a choice of distribution channels. For
example, in banking this ranges from visiting the bank in person
to home banking on the internet. Electronic delivery of services
is expanding and any information-based component of a service
can be delivered instantly to anywhere in the world.

The Marketing
Mix
Seven Ps

The Marketing mix

Marketing mix is the set of controllable
tactical marketing tools that the firm blends to
produce the response it wants in the target
market
These are the controllable marketing variables
and it is up to the marketing manager to mix
these variables in such a way and in such a
proportion in order to achieve a specific
marketing objective.
Mix elements will vary in importance
according to the marketing situation.

The Marketing mix: The

Four Ps
Product is the goods and services in
combination that the company offers to the
target market
Price is the amount of money customers
have to pay to obtain the product
Place is the company activities that make
the product available to target customers
Promotion is the activities that
communicate the merits of the product and
persuade target customers to buy it

The Marketing mix: The

Four Ps

Kotler and Keller, Markrting Management, 2012 Pearson Education

The Marketing mix: The Other

Ps
People : All human actors who play a part in
service delivery, and thus influence the
buyers perception; namely the firms
personnel, the customer, other customers in
the service environment
Process : the actual procedures, mechanisms
and flow of activities by which the service is
delivered
Physical : the environment in which the
service is delivered, colours, branding,
equipment ( anything tangible)

Marketing Mix
Example

Ryanair Example
Product or Service.

Low cost, no frills air travel to European

destinations.
There is no free food or drink onboard. Food and
drink are income streams. You buy them onboard, or
you don't - take your own food and drink if you like.
There are other income streams - or ancillary
revenue. The company has deals with Hertz car
rental, and a number of hotel businesses. So Ryanair
takes a commission on 'up selling' i.e. ancillary
revenue. Other examples include phone cards and
bus tickets. About 16% of profit is made this way.
This keeps costs lower.

Ryanair Example
Price

Ryanair has low fares.

70% of seats are sold at the lowest two
fares.30% of seats are charged at higher fares.
The last 6% are sold at the highest fare
Ryanair occasionally get in trouble with bodies
such as the Advertising Standards Authority
(ASA) in the UK over differences between
advertised and actual price - in fairness to
Ryanair these are rare mistakes.

Ryanair Example
Place

Ryanair does not use travel agents so it does not pay agency
commissions. It uses direct marketing techniques to recruit and retain
customers, and to extend products and services to them (i.e. Customer
Relationship Management). This reduces costs.
You book online over the Internet. This saves them 15% on agency fees.
They are based in Stanstead in Essex - which is known as a secondary
airport. It is new and accessible. It is cheaper to fly from Stanstead than
either Heathrow or Gatwick, and since it is less busy Ryanair can turn
aircraft around more quickly.
Many of Ryanair's destination airports are secondary. For example if you
fly to Copenhagen (Denmark) you arrive in Malmo (Sweden) - although it
is only a short coach trip over the border. Secondary airports, which tend
to be smaller regional airports, depend upon this single carrier - some (it
is rumoured) paying up to 100, 000 for each additional new route.
Costs are lower and aircraft can be turned around faster.
Keeping aircraft in the air as much as possible is another important part
of the low cost jigsaw. However, the company has been challenged by
the European Union in relation to anti-competition laws.

Ryanair Example
Promotion

They spend as little as possible on advertising.

They do not employ an advertising agency. Instead all of the
advertising is done in-house. In fact O'Leary himself oversees
much of the promotion of Ryanair. They use simple adverts that
tell passengers that Ryanair has low fares.
Ryanair employs controversy to promote its business. For
example in 2009, the company reasoned that passengers would
be charged 1 to use the toilets on board. O'Leary reasoned that
passengers could use the terminals at either the destination or
arrival airport. This would speed things up. It was reasoned that
this is what passengers wanted - since they did not want other
passengers leaving their seats and walking the aisles to go to
the toilet. O'Leary also argued that larger passengers should be
charged more since they took up more room - again it was
reasoned that this is what the majority of passengers wanted.
Some of their aircraft are decorated in the livery of advertisers
e.g. News of the World, Jaguar and Kilkenny (beer).

Ryanair Example
People

Pilots are recruited when they are young as pilot cadets. They
work hard and take early promotions and then move on after
10-years or so to further their careers.
Cabin crew pay for their uniforms to be cleaned. They invest in
their own training. They are mainly responsible for passenger
safety as well as ancillary revenues onboard.

Physical Evidence

They pay as little as possible for their aircraft. Planes are the
most expensive asset that an airline can make. They get big
discounts on aircraft because they buy them when other
airlines don't want them, for example after September 11th, or
on the invasion of Iraq and Afghanistan. Aircraft manufacturers
cannot simply stop a supply chain in minutes. If orders are
being cancelled or delayed, this is when to buy. It was
rumoured within the industry that Ryanair was buying Boeing
737s - list price around 40,000,000 (forty million pounds) with up to a 50% discount.

Ryanair Example
Process

There is no check in. You simply show your

passport and supply your reference number.
You cannot select a preferred seat. It is first
come, first served. This aids speed.
There are no air bridges (the tunnel that
connects to the side of the aircraft when to
board it). You walk or are bussed to the aircraft.
Baggage is deposited directly onto the terminal
- it's quick. However if your bag is broken don't
expect high levels of customer service.

Value And The

Marketing Mix

Value And The Marketing

Mix
Zeithaml (1988) researched the concepts
of perceived price, perceived quality and
perceived value and discovered that
customers thought of value in four ways:

Value
Value
Value
Value

is
is
is
is

low price;
whatever I want in a product;
the quality I get for the price I pay;
what I get for what I give.

Tony Proctor, Public Sector Marketing, 1st edition

Creating Value
The first stage involves discovering stakeholder
values and this involves:

Identifying stakeholders
Identifying what part of a programme or process adds
value for each stakeholder.
Determining each stakeholder value
Establishing what kinds of exchanges are required to
provide this value.
Establishing stakeholder expectations and contributions.

The second is a dynamic and interactive process

requiring :

The development of a value proposition i.e., an

approach to providing the required values.
The delivery of the promised values.