MIDTERM EXAM REVIEWER 2000s.

For the 2010 to 2014 period, it posted a very

MEL 4143 – SERVICE MARKETING modest growth rate of 6.6%. Broad growth has taken
-------------------------------------------------------------- place in the sector as most of its sub-sectors have
also registered consistently rising growth rates over
CHAPTER 1.1 – CREATING VALUE IN THE SERVICE the years.
ECONOMY The 2010 to 2014 average growth rates of most of
the sub-components of the services sector have
Why study services? increased from their 1990s and 2000s values. The most
Services are the driving force behind the fast growth of notable increases have been manifested by the
an economy. construction, finance and real estate sub-sectors.
Meanwhile, the sub-sectors that have experienced a
Services Dominate the Global slowdown in average growth rate are private services,
transport, communication and storage. Nonetheless, it is
crucial to point that the recent average growth rates of
these two sub-sectors are still above 5%, indicating
modest growth performance.

Contribution of services industries to GDP globally

Most new jobs are generated by services

• Call center representative
• Bank teller
• Flight attendant
• Personal trainer How B2B services improve the productivity of individual
• Server firms and drive economic development?
• Wedding planner
• Restaurant manager Powerful forces that are transforming service markets
• Hotel manager • Government policies
• Accountant • Social changes
• Attorney • Business trends
• Physician • Globalization
• Advances in ICT
Pre-transaction
Transaction
Post transaction

Economic Contribution and Growth Performance

Since the 1990s, the services sector has been a
major source of economic growth for the Philippines. On
the average, the sector has grown
continuously, particularly in the last two decades, as its
growth increased from 4% in the 1990s to 5.3% in the
Outsourcing vs. Offshoring • In exchange for money, time, and effort, service
Difference between outsourcing and offshoring of customers expect value from access to labor,
services skills, expertise, goods, facilities, networks, and
• New communications technologies mean that systems. However, they do not normally
some service work can be carried out far from take ownership of the physical elements.
where customers are located. • The definition emphasizes that while customers
• Offshoring refers to services that are conducted in expect to obtain value from their service
one country and consumed in another. purchases in exchange for their money, time, and
• Prior to the turn of the century, offshoring was effort, this value comes from access to a variety
mostly confined to the manufacturing sector, of value-creating elements rather than transfer of
offshore services have since emerged as a ownership.
dynamic global sector over the past
two decades, driven by the rise of information Four Categories of Services - A Process Perspective
and communication technologies, the • There are major differences among services
international tradability of services, and the depending on what is being processed.
evolution of global business services models. • Services can "process" people, physical objects,
land data, and the nature of the processing can
be tangible or intangible.

Tangible actions vs Intangible actions

• Tangible actions are performed on people's
bodies or to their physical possessions.
• Intangible actions are performed on people's
minds or to their intangible assets.
• This gives rise to the classification of services into
four broad categories. They are people-
processing, possession-processing, mental
Arrow 1 - describes a firm’s decision to outsource stimulus , and information processing.
services domestically.
Arrow 2 - describes a situation where a firm switches
from a domestic supplier to a foreign supplier. In some
cases, firms make the decision to outsource and to
offshore to a foreign supplier simultaneously.
Arrow 3 - The fourth scenario is when firms source from
foreign locations by establishing a subsidiary abroad.
Arrow 4 – This is often referred to as “captive offshoring.”
Arrow 5 - combining outsourcing an offshoring implies
shifting the service provision from a foreign affiliate to
a foreign-owned supplier. People Processing
• To receive these types of services,
What are services? customers must physically enter the service
• Services are economic activities performed by system.
one party to another. Often time - based, • They are an integral part of the process
these performances bring about desired results and cannot obtain the desired benefits by
to recipients, objects, or other assets. dealing at arm's length with service suppliers.
 • In short, they must enter the service factory, Characteristics of services and the distinctive
a physical location where people or marketing challenges they pose
machines (or both) create and deliver service • Services tend to have different features from
benefits to customers. goods, including the frequently cited four
• Examples: dental cleaning, nail salon, restaurant characteristics of intangibility, heterogeneity
(variability of quality), inseparability of production
Possession Processing and consumption, and perishability of output 2 ,
• Often, customers ask a service organization to or IHIP for short.
provide tangible treatment for some physical
possession — a house that has been invaded by
insects, a hedge that has grown too high, a
malfunctioning elevator a broken screen of a
smartphone, a parcel that needs to be sent to
another city, or a sick pet.
• Examples: shoe repair, dry cleaning*

Mental Stimulus Processing

• These services touch people's minds and have
the power to shape attitudes and influence
behavior. Mental stimulus processing services
include education, news and information,
professional advice, and some religious
activities.
• Examples: movie theater, education

Information Processing
• Information can be processed by information
and communications technology (often referred
to as ICT), and/or by professionals who use their
brains to perform information processing and
packaging.
• Some services that are highly dependent on
the effective collection and processing of
information are financial and professional
services such as accounting, law, marketing
research, management consulting, and medical
diagnosis. Can we consider learning or understanding services
• Examples: life insurance, internet provider, legal offers as a personal competitive advantage?
services --------------------------------------------------------------

Can the marketing concepts and practices developed in CHAPTER 1.2 – CREATING VALUE IN THE SERVICE
manufacturing companies be directly transferred ECONOMY
to service organizations where no transfer of ownership
takes place? What are the P’s in Marketing Mix?
• The answer is often "no." Traditional Marketing Mix Applied to Services
• Product elements
 • Place and time
• Price and other user outlays
• Promotion and education

Extended Marketing Mix Applied to Services

• Process
• Physical environment
• People

(1) Product Elements

• Service products consist of a core product
that meets the customers’ primary need and
a variety of supplementary service elements
that are mutually reinforcing, and add value to
help customers to use the core product
more effectively.
• Supplementary service elements includes
providing information, consultation, order taking,
hospitality, handling exceptions, etc.
• Example: fast food chains, haircut salon, health
check-up, derma treatment

(2) Place and Time

• Service distribution may take place
through physical or electronic channels (or
both), depending on the nature of the service.
• Distribution of Core versus Supplementary
Services Can we sell time?
• Importance of the Time Factor
(3) Price and other User outlays
Distribution of Core versus Supplementary Services. • For customers, price is a key part of the costs
• Distinguish between its potential for delivering they must incur to obtain desired benefits.
information-based core products (those that • To calculate whether a particular service
respond to customers’ primary requirements) is “worth it,” they may go beyond just money and
and simply providing supplementary assess how much time and effort are involved
services that facilitate purchase and use • For Service marketers, therefore, must not
of physical goods. set only prices that target customers are willing
• Example: Banks (BPI, Metrobank, China bank, and able to pay, but also understand — and seek
BDO, etc..), PLDT home Wi-Fi to minimize, where possible — other
burdensome outlays that customers incur in
Importance of the Time Factor. using the service.
• Speed and convenience of place and time have • These outlays may include additional
become important determinants of effective monetary costs (such as travel expenses to a
distribution and delivery of services in the service location), time spent, unwanted mental
market.
 and physical effort, and exposure to negative • Nevertheless, the best service firms have made
sensory experiences. significant progress in reducing variability by
carefully designing customer service processes,
Most Service Products Cannot be Inventoried. adopting standardized procedures and
• If there is no demand, unused capacity is equipment, implementing rigorous management
wasted and the firm loses the chance to create of service quality, training employees more
value from these assets. During periods when carefully, and automating tasks
demand exceeds capacity, customers may be previously performed by humans.
turned away or asked to wait until later. A key task
for service marketers, therefore, is to find ways Customers Are Often Involved in Co-production
of smoothing demand levels to match
available capacity using dynamic pricing
strategies.
• Example: 15% off between 9am to 5pm for ride- Demand and Capacity Need to be Balanced
hailing applications. • For services, such buffering means having
customers wait in the service process. Therefore,
(4) Promotion and education areas closely related to service process
This component plays three vital roles: management involve the balancing of demand
• Providing needed information and advice and capacity, design of waiting and queuing
• Persuading target customers to buy the service systems, and management of the impact of
product waiting on the customer’s psychology.
• Encouraging them to take action at specific times
(6) Physical Environment
Services are Often Difficult to Visualize and Understand • The appearance of buildings, landscaping,
as Intangible Elements Tend to Dominate Value Creation vehicles, interior furnishings, equipment, staff
members’ uniforms, signs, printed materials, and
other visible cues provide tangible evidence of a
firm’s service quality.
• The service scape also facilitates service delivery,
Customer–Customer Interactions Affect the Service
and guides customers through the service
Experience
process. Service firms need to manage services
capes carefully, since they can have an impact on
customer satisfaction and service productivity.

(7) People
Extended Marketing Mix Applied to Services
• Despite advances in technology, many services
• Process
will always need direct interaction between
• Physical environment
customers and service employees (. You must
• People
have noticed many times how the difference
between one service supplier and other lies in the
(5) Process
attitude and skills of their employees.
• Smart managers know that where services are
• Service firms need to work closely with their
concerned, how a firm does things is as
human resources (HR) departments and devote
important as what it does. Therefore, creating and
special care in selecting, training, and motivating
delivering product elements requires design
their service employees.
and implementation of effective processes.
--------------------------------------------------------------
CHAPTER 2 – UNDERTANDING SERVICE CONSUMERS attributes such as reliability, ease-of-use, and
customer support.
Three-stage Model of Service Consumption • Credence attributes are characteristics
• Pre-purchase stage that customers find hard to evaluate even
• Service encounter stage after consumption. Here, the customer is forced
• Post encounter stage to believe or trust that certain tasks have
been performed at the promised level of quality.

Perceived Risks by Consumers

• Functional - unsatisfactory
performance outcome
• Financial - monetary loss, unexpected costs
• Temporal - wasting time, consequences of delay
• Physical - personal injury or damage
to possessions
Multi-attribute Model
• Psychological - personal fears and emotions
• Social - how others think and react
• Sensory - unwanted effects on any of the
five senses

How can we avoid this kind of risks?

When can you tell that you are a “satisfied customer”?

If you were the provider of a service, what would you do to Components of Customer Expectations
influence the target customer to come to • Desired service - a “wished for” level —
your store/shop? a combination of what customers believe
can and should be delivered in the context
Three Consumer Attributes in Service Evaluation of their personal needs.
• Search attributes – they are tangible • Adequate service - the minimum level of service
characteristics that customers can evaluate customers will accept without being dissatisfied.
before purchase. • Predicted service - the level of service
• Experience attributes – they cannot be that customers actually anticipate to
evaluated before purchase. Customers must receive. Predicted service can also be affected
“experience” the service before they can assess
 by service provider promises word-of-
mouth, and past experiences.
• Zone of tolerance - The extent to
which customers are willing to accept this
variation is called the zone of tolerance.
• If performance perceptions are worse than
Service Encounter Stage expected, it is called negative disconfirmation.
• If performance is better than expected, it is called
positive disconfirmation, and if it is as expected,
then it is simply called confirmation of
expectations.

Are Expectations Always the Right Comparison

Standard?

How Is Customer Delight Different From Satisfaction?

Levels of customer contact with service firms Service Quality

• High-Contact Services - there is direct contact Customer Satisfaction versus Service Quality
between customers and the firm throughout the • Both customer satisfaction and service quality
entire service delivery. are defined as contrasting customers’
• Low-Contact Services - involve little, physical expectations with their performance
contact if any, between customers and service perceptions.
providers.
Dimensions of Service Quality
The Servuction System 1. Tangibles (appearance of physical elements)
• Technical core — where inputs are 2. Reliability (dependable and
processed and the elements of the service accurate performance)
product are created. This technical core is 3. Responsiveness (promptness and helpfulness)
typically back-stage and invisible to the 4. Assurance (credibility, security, competence,
customer. (ex. kitchen at a restaurant) and courtesy)
• Service delivery system — where the 5. Empathy (easy access, good communications,
final “assembly” takes place and the product and customer understanding)
is delivered to the customer.

Role and Script Theories

• Role Theory - employees and customers act out
their parts in the performance according to
predetermined roles.
• Script Theory - service script specifies
the sequences of behavior employees
and customers are expected to learn and
follow during service delivery.

Post-encounter Stage
The Expectancy-Disconfirmation Model of Satisfaction.
 Developing a services marketing positioning strategy

Customer Loyalty
• Loyalty is a customer’s willingness to continue
patronizing a firm over the long-term, preferably
on an exclusive basis, and recommending the
firm’s products to friends and associates.
Customer loyalty extends beyond behavior and
Customer, Competitor, and Company Analysis (3CS)
includes preference, liking, and future intentions.
Customer Analysis
--------------------------------------------------------------
• The customer analysis is typically done first and
this includes an examination of overall market
CHAPTER 3 – POSITIONING SERVICES IN
characteristics, followed by an in-depth
COMPETITIVE MARKETS
exploration of customer needs and related
customer characteristics and behaviors.
Customer-Driven Services Marketing Strategy
• The market analysis tries to establish the
• As competition intensifies in the service sector, it
attractiveness of the overall market and potential
is becoming ever more important for service
segments within.
organizations to differentiate their products in
• The customer needs analysis involves answering
ways that are meaningful to customers.
a few questions. Who are the customers in that
• What makes consumers or institutional buyers
market in terms of demographics and
select — and remain loyal to — one supplier over
psychographics? What needs or problems do
another?
they have?

Service vs. Convenience

Competitor Analysis
• Terms such as “service” typically subsume a
• Identification and analysis of competitors can
variety of specific characteristics, ranging from
provide a marketing strategist with a sense of
the speed with which a service is delivered to the
competitors’ strengths and weaknesses.
quality of interactions between customers and
service personnel; and from avoiding errors to
Company Analysis
providing desirable “extras” to supplement the
• In an internal corporate analysis, the objective is
core service. Likewise, “convenience” could refer
to identify the organization’s strengths in terms of
to a service that is delivered at a convenient
its current brand positioning and image, and the
location, available at convenient times, or easy to
resources the organization has
use.
Segmentation, Targeting, and Positioning (STP) 4. Whether the individual is using the service alone
Segmentation or with a group, and if the latter, the composition
• Dividing the population of possible customers of that group
into groups. A market segment is composed of a
group of buyers who share common
characteristics, needs, purchasing behavior, Targeting Service Markets
and/or consumption patterns. • In marketing terms, focus means providing
Targeting a relatively narrow product mix for a particular
• Once a firm’s customers have been segmented, target segment.
the firm has to assess the attractiveness of each • Market focus is the extent to which a firm serves
segment, and decide which segment(s) would few or many markets, while service focus
most likely be interested in its service, and focus describes the extent to which a firm offers few or
on how to serve them well. many services. These two dimensions define the
Positioning four basic focus strategies
• The unique place that the firm and/or its service
offerings occupy in the minds of its consumers.

Basic focus strategies for services

1. Fully-focused: A fully-focused organization
provides a limited range of services (perhaps just
Segmenting Service Markets
a single core product) to a narrow and specific
Segmentation is one of the most important concepts in
market segment.
marketing. Service firms vary widely in their abilities to
2. Market-focused: In a market-focused strategy, a
serve different types of customers.
company offers a wide range of services to a
narrowly defined target segment
There are many ways to segment a market, and marketing
3. Service-focused: Service-focused firms offer a
experts typically combine and integrate several
narrow range of services to a fairly broad market.
approaches.
4. Unfocused: Many service providers fall into the
1. Demographic segmentation
unfocused category, because they try to serve
2. Psychographic segmentation
broad markets and provide a wide range of
3. Behavioral segmentation
services.
4. Needs-based segmentation

Principles of Positioning Services using Positioning

In addition, you need to recognize that often people have
Maps to Plot Competitive Strategy
different needs and their decision-making criteria vary
according to:
Service Positioning
1. The purpose of using the service
• Positioning refers to the way a service is perceived
2. Who makes the decision
by customers in relation to its competitors. It’s
3. The timing of use
 crucial for services because it allows businesses Mapping Future Scenarios to Identify Competitive
to differentiate themselves in a competitive Responses
marketplace. This differentiation creates a unique Scenario Planning: Predicting future trends allows hotels
value proposition that appeals to a specific to proactively position themselves. For instance:
segment of the market. • Sustainability: Growing demand for eco-friendly
accommodations. Hotels like The Circle Hostel
Principles Of Positioning Services Using Positioning are gaining popularity as they cater to eco
Maps conscious travelers.
• These maps are used to visually compare • Staycations: Post-pandemic, there’s been a rise in
services or products in relation to competitors, local travel, with more Filipinos looking for short,
typically along two key dimensions. For hotels, accessible getaways within the country.
these dimensions might be price and service
quality, which are critical factors influencing
customer decisions.

Example of Applying Positioning Maps to the Hotel

Industry:

Positioning Charts Help Executives Visualize Strategy

• Simplifying Strategy: For hotels like Seda Hotels,
positioning charts reveal potential for growth in
underserved segments. If they focus on regional
cities, they can tap into demand for high-quality
accommodations outside of major urban
centers.
• Guiding Decisions: Executives can use these
maps to make strategic decisions such as
adjusting their pricing models, targeting new
customer demographics (e.g., local tourists), or
Axes of Comparison: Common axes for comparing hotels adding services like digital check-ins to cater to
include price and quality of service. For the Philippines, tech-savvy travelers.
this helps highlight the distinction between budget-
friendly hotels and luxury accommodations.

Example Map:
• Luxury Hotels: High price, high quality (e.g.,
Shangri-La, Manila)
• Mid-range: Moderately priced, reasonable quality
(e.g., Seda Hotels)
• Budget Hotels: Low price, moderate quality (e.g.,
Red Planet Hotel)
Developing an Effective Positioning Strategy service, stripped of any supplementary features
Customer-Centric Approach or enhancements.
• In a market like the Philippines, where travelers For example:
are increasingly looking for affordable yet high- • In a hotel service, the core product is the
quality services, positioning strategies should be accommodation provided— a place to sleep and
aligned with these preferences. Go Hotels offers rest.
a model for this approach by providing essential • For a consulting firm, the core product is the
services at low prices, without compromising on expert advice and solutions offered to solve
guest experience. specific business problems.
Differentiation and Communication • In a healthcare service, the core product is the
• To effectively differentiate, hotels need to focus medical care and treatment provided to improve
on offering unique experiences—such as Filipino- health.
inspired hospitality or eco-friendly initiatives— The core product focuses on meeting the fundamental
and communicate these consistently across needs and expectations of the customer, which is central
marketing channels. Clear and consistent to the service’s value proposition.
communication helps reinforce their market
position in the minds of potential customers. Supplementary Services
-------------------------------------------------------------- • Supplementary services are additional features
or benefits that enhance the core service and
CHAPTER 4 – DEVELOPING SERVICE PRODUCTS AND improve the overall customer experience. These
BRANDS services support the main offering, making it more
comprehensive and attractive to customers. They
Creating Service Products can add value, differentiate the service from
• Creating service products means designing and competitors, and help build customer loyalty.
delivering intangible offerings that provide value Here are some examples of supplementary services:
to customers. Unlike physical goods, service • In a hotel: Besides the core service of providing
products are experiences or actions performed accommodation, supplementary services might
for the customer, such as consulting, education, include room service, concierge assistance, free
or maintenance services. The process involves Wi-Fi, a spa, or airport transfers.
identifying customer needs, developing a clear • In a restaurant: Supplementary services could be
and unique service offering, setting up efficient special dietary accommodations, valet parking,
delivery methods, training staff, pricing or personalized menus.
appropriately, and continuously improving based • In a healthcare service: Supplementary services
on feedback and market trends. Essentially, it's might include patient education, follow-up
about crafting valuable experiences that meet consultations, or telemedicine options.
customer demands and stand out in the These services are not essential to the core offering but
marketplace. can significantly enhance customer
satisfaction and contribute to a positive overall
What are the components of service products? experience.
Core Product
• The core product is the fundamental benefit or Delivery Processes
value that a customer receives from a service. It • Delivery processes refer to the steps and
represents the primary reason why the customer procedures involved in providing a service to
chooses to engage with the service in the first customers. These processes ensure that the core
place. Essentially, it's the essential purpose of the and supplementary services are delivered
efficiently, effectively, and in a way that meets or
 exceeds customer expectations. The delivery • Schedules/service hours
process is crucial for creating a positive customer • Price information
experience and maintaining service quality. • Terms and conditions of sale/service
• Advice on how to get the most value from a
The design of the service offering must address the service
following issues: • Warnings and advice on how to avoid problems
• How the different service components are • Confirmation of reservations
delivered to the customer. • Receipts and tickets
• The nature of the customers’ role in those • Notification of changes
processes. • Summaries of account activities
• How long delivery lasts.
• The prescribed level and style of service to be Order-taking – Once customers are ready to buy, a key
offered. supplementary element comes into play — order-taking.
Order-taking includes:
The Flower of Service • Order entry
• The "flower of service" is a concept that helps us o On-site order entry
understand how various elements come together o Mail/telephone/email/online/mobile app
to create a great customer experience. Think of order
the core service as the central flower and the • Reservations or check-ins
additional services as its petals. For instance, in a o Seats/tables/rooms
hotel, the core service is providing a place to stay, o Vehicles or equipment rental
while the petals are things like a smooth check-in o Professional appointment (Figure 4.7)
process, helpful concierge, or complimentary • Applications
breakfast. Each petal adds value and enhances o Memberships in club/programs
the overall experience, making it more memorable o Subscription services (e.g., utilities)
and satisfying for the customer. o Enrolment-based services (e.g., financial
credit, college enrolment)

Billing – Billing is common to almost all services (unless

the service is provided free-of-charge). Inaccurate,
illegible, or incomplete bills risk disappointing customers
who may, up to that point, have been quite satisfied with
their experience. If customers are already dissatisfied, the
billing mistake may make them even angrier. Billing should
also be timely, because it encourages people to make
faster payment. Billing can be:
• Periodic statements of account activity.
• Invoices for individual transactions.
Facilitating Supplementary Services • Verbal statements of amount due.
Know how facilitating supplementary services relate to • Online or machine display of amount due for self-
the core product. payment transactions.

Information – To obtain full value from any good or service, Payments – In most cases, a bill requires the customer to
customers need relevant information. Information take action on payment (and such action may be very slow
includes the following: in coming!). Exceptions include bank statements and
• Direction to service site
other direct debit payment services, which shows the weight loss can be sustained after the initial diet is
charges to be deducted from a customer’s account. A completed.
variety of payment options exist, but customers expect
them to be easy to use and convenient. They include: Hospitality – Hospitality-related services should ideally
• Self-service reflect pleasure at meeting new customers and greeting
o Inserting card, cash, or token into old ones when they return. Well-managed businesses try,
machine at least in small ways, to ensure that their employees treat
o Electronic funds transfer customers as guests. Courtesy and consideration for
o Mailing a check customers’ needs apply to both face-to-face encounters
o Entering credit card information online and telephone interactions. Hospitality elements include:
o Online payment systems such as PayPal, • Greeting
Google Wallet, or Bitcoins • Food and beverages
• Direct to payee or intermediary • Toilets and washrooms
o Cash handling or change giving • Waiting facilities and amenities
o Check handling o Lounges, waiting areas, seating
• Automatic deduction from financial deposits o Weather protection
o Automated systems (e.g., machine- o Magazines, entertainment, newspapers
readable tickets that operate entry gate) • Transport
o Pre-arranged automatic deduction for bill
payment through direct debit (e.g., for Safekeeping – When customers are visiting a service site,
bank loans and post-paid cell phone they often want assistance with their personal
subscription plans) possessions. In fact, some customers may not visit at all
unless certain safekeeping services are provided (such as
Enhancing Supplementary Services safe and convenient parking for their cars). Safekeeping
Consultation – Now we move on to enhancing includes caring for:
supplementary services, led by consultation. In contrast • Child care, pet care
to information, which suggests a simple response to • Parking for vehicles, valet parking
customers’ questions (or printed information that • Coat rooms
anticipates their needs), consultation involves a dialog to • Baggage handling
probe for customer requirements and then develop a • Storage space
tailored solution.
• Safe deposit boxes
• Customized advice
• Personal counseling Exceptions – Exceptions involve supplementary services
• Tutoring/training in service use that fall outside the routine of normal service delivery.
• Management or technical consulting Astute businesses anticipate such exceptions and
develop contingency plans and guidelines in advance.
Counseling – represents a more subtle approach to That way, employees will not appear helpless and
consultation because it involves helping customers to unprepared when customers ask for special assistance.
better understand their situations so they can come up
with their “own” solutions and action programs. This Special Requests: A customer may request service that
approach can be a particularly valuable supplement to requires a departure from normal operating procedures.
services such as health treatments, in which part of the Common requests relate to personal needs, including the
challenge is to get customers to make significant lifestyle care of children, dietary requirements, medical needs,
changes and live healthily. religious observance, and personal disabilities. Such
For example, diet centers like Weight Watchers use requests particularly are common in the travel and
counseling to help customers change behaviors so that hospitality industries.
Problem Solving: Sometimes normal service delivery (or these areas helps establish loyalty, attract new
product performance) fails to run smoothly as a result of customers, and drive long-term success.
accident, delay, equipment failure, or a customer having
difficulty in using a product. Branding Service Firms
Example: Consulting Firm McKinsey & Company
Handling of complaints/suggestions/compliments: This • Focus: McKinsey brands itself as a top-tier
activity requires well-defined procedures. It should be management consulting firm by emphasizing its
easy for customers to express dissatisfaction, offer deep industry expertise, high-profile client base,
suggestions for improvement, or pass on compliments, and a rigorous problem-solving approach. The
and service providers should be able to make an firm’s branding includes a clean, professional
appropriate response quickly. visual identity, thought leadership through
publications, and a reputation for delivering
Restitution: Many customers expect to be compensated impactful business solutions.
for serious performance failures. Compensation may take Example: Apple iPhone
the form of repairs under warranty, legal settlements, • Focus: Apple’s branding for the iPhone centers on
refunds, an offer of free service, or other form of payment- sleek design, cutting-edge technology, and a
in-kind. premium user experience. The brand uses
minimalist aesthetics, innovative features, and a
Managerial Implications strong emphasis on privacy and security to
Managerial implications are about taking key insights or differentiate the iPhone from competitors.
findings and turning them into practical actions that drive Marketing campaigns often highlight the product’s
a company’s success. This means making smart seamless integration with the broader Apple
decisions about strategy, operations, and resources ecosystem.
based on new information. Managers need to adapt their Example: Disney Theme Parks
plans to improve efficiency, structure, and employee • Focus: Disney brands its theme parks as
engagement, while also addressing financial, marketing, immersive, magical experiences for all ages. This
and risk considerations. Ultimately, it’s about using these branding is reflected in everything from the
insights to make informed choices that enhance enchanting park design and themed attractions to
performance, foster innovation, and ensure the the exceptional customer service and attention to
organization is well-positioned to meet its goals. detail. Disney’s branding aims to create lasting
memories and a sense of wonder, ensuring that
Branding Service Firms, Products, and Experiences every aspect of the visitor experience reinforces
Branding service firms, products, and experiences its reputation for magic and family fun.
involves creating a strong, distinct identity that resonates
with customers and differentiates a company from its Branding Strategies for Services
competitors. For service firms, branding focuses on Branded House
building trust and credibility through consistent quality, • is a strategy where more than one company’s
customer service, and reputation. For products, it’s about products are sold under one name/branding
crafting a unique value proposition and visual identity that umbrella. This approach is optimal if the master
highlights features and benefits, ensuring the product brand/company wants more control over the end
stands out in the marketplace. When it comes to product’s production, distribution, and cost.
experiences, branding is about creating memorable,
engaging interactions that leave a lasting impression,
often emphasizing the emotional connection and overall
satisfaction of the customer. Effective branding across all
Branding Strategies for Services Branding Strategies for Services
Sub Brand House of Brands
• are connected to a parent brand and get help and • The house of brands architecture plan, which is
support from it. As well as having traits that are also called pluralistic, is made up of a bunch of
similar to the parent brand, sub brands also have sub-brands that have nothing to do with each
traits that are unique to them. other. The master brands have nothing to do with
any of the sub-brands in this system. In other
words, you can't even see the name of the parent
company, and new brands are being made so that
each one has its own look.

Branding Strategies for Services

Endorsed Brands
• have some kind of synergy between the main
brand and the sub-brand. In this structure, the
main brand has some power over all the other
names. In other words, the master brand backs up
all of the sub-brands.

Tiering Service Products with Branding

There are many service industries that use branding to not
only set basic services apart but also make service levels
stand out. It's called "service tiering." It's popular in places
like hotels, airlines, car rentals, and tech support for both
hardware and software.
 greater millage for firms to face competition and win
consumers.

A Hierarchy of New Service Categories

1. Major service innovations –New core products for
previously undefined markets
2. Major process innovations –Using new processes
to deliver existing products with added benefits
3. Product-line extensions –Additions to current
product lines
4. Process-line extensions –Alternative delivery
procedures
5. Supplementary service innovations –Addition of
new or improved facilitating or enhancing
elements
Building Brand Equity 6. Service improvements –Modest changes in the
To build a strong brand, we need to understand what performance of current products
contributes to brand equity. Brand equity is the value 7. Style changes –Visible changes in service design
premium that comes with a brand. It is what customers or scripts
are willing to pay for the service, beyond what they are
willing to pay for a similar service that has no brand. Achieving Success in New Service Development
1. Company’s presented brand — mainly through 1. Market synergy: The new product fits well with the
advertising, service facilities and personnel. firm's image, expertise, and resources; it meets
2. External brand communications — from word of customers' needs better than competing
mouth and publicity. These are outside of the products because the firm knows how its
firm’s control. customers buy things and gets strong support
3. Customer experience with the company — what from the firm and its branches during and after the
the customer has gone through when they launch.
patronized the company. 2. Organizational factors: There is a lot of planning
4. Brand awareness — the ability to recognize and and cooperation between functions. People who
recall a brand when provided with a cue. work in product development need to know why
5. Brand meaning — what comes to the customer’s they are there and how important new goods are
mind when a brand is mentioned. to the business. Before the launch, employees
6. Brand equity — the degree of marketing need to know about the new product and how it
advantage that a brand has over its competitors. works, as well as specifics about the main
competitors.
New Service Development 3. Market research factors—Studies of the market
One of the serious challenges service firms face in recent are done early on in the growth process and are
times is new service process development. Customer carefully and scientifically planned. The
want new products and competitors do their best to researchers know what kind of information they
surpass the company. The increased level of competition, want to gather. Before outdoor surveys are done,
the rapid pace of change in technology and innovation, a good definition of the product idea is.
growing consumer awareness and heightened consumer --------------------------------------------------------------
expectation, established, beyond, doubt, the need for
introducing new services must faster than the CHAPTER 5 – DISTRIBUTING SERVICES THROUGH
competitors in the market. The faster offer provides PHYSICAL AND ELECTRONIC CHANNELS
What? How? Where? When? Customer Visit the Service Site
What? How? Where? When? Responses to these four Service Providers Go to Their Customers
questions form the foundation of any service distribution The Service Transaction is Conducted Remotely
strategy. They determine the customer’s service
experience, which is a function of how the different
elements of the Flower of Service are distributed and
delivered through physical and electronic channels.

What is Being Distributed?

If you mention distribution, many people will likely think of
moving boxes through physical channels to distributors
and retailers for sale to end-users. In services though,
often there is nothing to move. Experiences,
performances, and solutions are not physically shipped
and stored. Meanwhile, informational transactions are
increasingly conducted via electronic channels.
• Information and promotion flow — distribution of
information and promotion materials relating to
Channel Preferences Vary Among Customers
the service offer. The objective is to get the
• For complex and perceived high-risk services,
customer interestedin buying the service.
people tend to rely on personal channels. For
• • Negotiation flow — reaching an agreement on
example, customers are happy to apply for credit
the service features and configuration,and the
cards using remote channels, but prefer a face-
terms of the offer, so that a purchase contract can
to-face transaction when obtaining a mortgage.
be closed. The objective isoften to sell the right to
• Individuals with higher confidence and knowledge
use a service (e.g., sell a reservation or a ticket).
about a service and/or the channel are more likely
• Product flow — many services, especially those
to use impersonal and self-service channels
involving people processing orpossession
• Customers who look for the functional aspects of
processing, require physical facilities for delivery.
a transaction prefer more convenience. This often
Here, distribution strategy requires development
means the use of impersonal and self-service
of a network of local sites. For information-
channels. Customers with social motives tend to
processing services, such as Internet banking and
use personal channels.
distance learning, the product flow can be via
• Convenience is a key driver of channel choice for
electronic channels, employing one or more
the majority of consumers. Service convenience
centralized sites.
means saving time and effort rather than saving
money.
How should a Service be Distributed?
How should services be distributed? Here, a key question
Channel Integration is Key
is: Does the service or the firm’s positioning strategy
require customers to be in direct physical contact with its
Where should a Service Facility be Located?
personnel, equipment, and facilities?
Physical Site Location
• Investment of Money
• Long-term commitments
• Lease agreement
Two-step Approach
1. Strategic Location Considerations
2. Tactical Considerations
To Develop a Location Strategy Locating in Multi-purpose Facilities
• Understanding customer needs and expectations The most obvious locations for consumer services are
• Competitive activity close to where customers live or work. Modern buildings
• Nature of the service operation are often designed to be multi-purpose, featuring 1 not
Using Electronic Channels only office or production space but also services such as
• Flexibility a bank (or at least an ATM), a restaurant, a hair salon,
• Convenience several stores, and maybe a health club. Some companies
• Time even include a children's daycare facility to make life
easier for busy working parents.
Tactical Location Considerations Interest is growing in locating retail and other services on
Key factors that need to be considered include: transportation routes and in bus, rail, and air terminals.
• Population size and characteristics.
• Pedestrian and vehicular traffic. When Should Service be Delivered?
• Convenience of access for customers (public In the past, most retail and professional services in
transportation, availability of parking). industrialized countries followed a traditional schedule:
• Competitors in this area. traditional schedule: 40-50 hours a week
• Nature of nearby businesses and stores. Historically, Sunday opening was strongly discouraged in
• Availability of labor. most Christian cultures and was often prohibited by law.
• Availability of site locations, rental costs, and Today, the situation has changed. For some highly
contractual conditions (length of lease, legal responsive service operations, the standard has become
restrictions) and regulations (on zoning and 24/7 service - 24 hours a day, 7 days a week, around the
opening hours). world.

Locational Constraints Factors that Encourage Extended Operating Hours

Hospital • Pressure from consumers - The growing number
• Single location (very large facility) of two-income families and single wage-earners
• Medical specialists - as opposed to general who live alone need time outside normal working
practitioners, often find it convenient to locate hours to shop and use other services. Other
their offices close to a hospital because it saves customers like to enjoy the convenience to go
them time when they need to treat their patients. shopping and do their service transactions at any
Airport time of the day and the week. Once one store or
• Inconveniently located relative to: firm in any given area extends its hours to meet
• Traveler’s homes, offices, or destinations the needs of these market segments, competitors
because of noise and environmental factors. often feel the need to follow.
• Changes in legislation - Support has declined for
Innovative Location Strategies the traditional religious view that a specific day
Mini-stores (Sunday in predominantly Christian cultures)
LRT/MRT Station should be legalized as a day of rest for one and all,
• ex. LRT/MRT station helps passengers get to the regardless of religious affiliation.
city from the airport more conveniently. • Economic incentives to improve asset utilization -
Automated Kiosk A great deal of capital is often tied up in service
• Self-service machine that can be located within facilities. The incremental cost of extending hours
stores, hospitals and airports to pay bills/order. tends to be relatively modest, and if it reduces
crowding and increases revenues, then it is
economically attractive. There are costs involved
in shutting down and reopening a facility such as
 a supermarket, yet climate control and some Splitting Responsibilities for Service Delivery
lighting must be left running all night, and security
personnel must be paid 24/7. So, even if the
number of extra customers served is minimal,
there are both operational and marketing
advantages to remaining open 24 hours.
• Availability of employees to work during
"unsocial" hours - Changing lifestyles and a
desire for part-time employment have created a
growing labor pool of people who are willing to
work evenings and nights. They include students
looking for part-time work outside classroom
hours, people working second jobs, parents Franchising
juggling childcare responsibilities, and others A franchisor recruits entrepreneurs who are willing to
who simply prefer to work at night and relax or invest their time, effort, and equity in managing a
sleep in the day. previously developed service concept. In return, the
• Automated self-service facilities - Self-service franchisor provides training on how to operate and market
equipment has become increasingly reliable and the business, sells necessary supplies, and provides
user-friendly. Many machines now accept card- promotional support at a national or regional level. Local
and cellphone-based payments, in addition to marketing activities are typically paid for by the franchisee,
coins and banknotes. Therefore, installing but they must adhere to copy and media guidelines
unattended machines may be economically prescribed by the franchisor.
feasible alternative for locations that cannot Subway is a popular American fast-food franchise
support a staffed facility. Unless a machine
requires frequent servicing or is particularly Disadvantages of Franchising
vulnerable to vandalism, the incremental cost of • Loss of control over the delivery system.
going from limited hours to 24-hour operation is • Low level of customers experience the actual
minimal. In fact, it may be simpler to leave service.
machines running continuously than to turn them • Low employee performance.
on and off. • They may start to resent the various fees paid to
the franchisor.
Who should be involved in delivering which parts of the
service? Other Intermediaries
Other service distribution agreements can be contractual
The role of Intermediaries such as those used in financial services. Banks seeking to
• Information move into investment services will often act as the
• Negotiation distributor for mutual fund products created by an
investment firm lacking extensive distribution channels of
its own. Many banks also sell insurance products
underwritten by an insurance company. They collect a
commission on the sale, but are normally not involved in
handling claims.

The Challenge of Distribution in Large Domestic

Large domestic markets like US, Canada, or Australia are
less homogeneous than national stereotypes suggest.
Careful market segmentation, focusing on specific ***Review google forms quiz
segments, and balancing standardization and adaptation
strategies enhance a firm's chances of succeeding in
developing large national service penetration.

Factors Favoring Adopting of Transnational Strategies

• Market Drivers: Similar global customer needs.
• Competition Drivers: Intense international
competition.
• Technology Drivers: Advanced global
technologies.
• Cost Drivers: Pressure for lower costs.
• Government Factors: Favorable international
regulations.

How does the nature of a service affect international

distribution?

Regulation remains a major challenge for many services

as their markets are often highly regulated such as in the
air travel, healthcare and financial services however, new
business models in more mundane markets, such as uber
in the taxi and airbnb in the accommodation market also
face stiff regulatory hurdles around the world.

How to enter international markets?