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  1. CHAPTER TWELVE SERVICES AND NONPROFIT ORGANIZATION MARKETING Prepared by Jack Gifford Miami University (Ohio) 2000 South-Western College Publishing

  2. IMPORTANCE OF SERVICES • A service is the result of applying human or mechanical efforts to people or objects • Services involve a deed, a performance, or an effort that cannot be physically possessed HOSPITALS BANKS THEATRES AIRLINES BARBER SHOPS CRUISES UNIVERSITIES DRY CLEANERS 2000 South-Western College Publishing

  3. IMPORTANCE OF SERVICES SERVICE WORKERS More than 8 of 10 workers currently labor to produce services The service sector accounts for 74% of the U.S. Gross Domestic Product 2000 South-Western College Publishing

  4. Intangibility Inseparability Heterogeneity Perishability They cannot be touched, seen, tasted, heard, or felt or stored. Few search qualities (characteristics that can be easily assessed before purchase) More experience quality (can be assessed only after use) Credence quality (difficult to assess even after purchase; i.e. medical services) HOW SERVICES DIFFER FROM GOODS 2000 South-Western College Publishing

  5. Intangibility Inseparability Heterogeneity Perishability Production and consumption activities are inseparable Airline and flight from A to B Surgeon and patient Services cannot normally be produced in a centralized location and consumed in decentralized locations Your hotel room and you must be in the same physical location Service quality is largely dependent upon the quality of employees HOW SERVICES DIFFER FROM GOODS 2000 South-Western College Publishing

  6. Intangibility Inseparability Heterogeneity Perishability Services tend to be less standardized and uniform than products due to their dependence upon the performance of individual employees/individuals Some level of consistency is gained through training, standard operating procedures, and mechanization of support areas Airport X-ray surveillance Automatic coin receptacles on toll roads HOW SERVICES DIFFER FROM GOODS 2000 South-Western College Publishing

  7. Intangibility Inseparability Heterogeneity Perishability Services cannot be stored, warehoused or inventoried An empty seat in a theatre cannot produce revenue later A car not rented results in no revenue for that day This condition of perishability results in discount pricing of services at almost any price greater than their variable cost. HOW SERVICES DIFFER FROM GOODS 2000 South-Western College Publishing

  8. SERVICE QUALITY • Business executives and consumer rank the improvement of service quality as one of the most critical challenges facing them today. • Quality is normally judged on the basis of… • Reliability • Responsiveness • Knowledge, courtesy and trust (Assurance) • Empathy • Tangibles (physical evidence of the service, such as uniforms, diplomas, office ambiance, etc.) 2000 South-Western College Publishing

  9. Managing service quality • The effective marketing of services requires that managers learn what customers want and expect in their interaction with the service provider (service encounter). If expectations do not equal experience, a gap exists. EXPECTED SERVICE-PERCEIVED SERVICE GAP ANALYSIS 2000 South-Western College Publishing

  10. GAP ANALYSIS Mgt. expectations of customer expectations Customer expectations • Knowledge gap • Standards gap • Delivery gap • Communications gap • Service gap Standards specifying services to be delivered Retail communications about services Actual services delivered Customer perception of service DISCUSS 2000 South-Western College Publishing

  11. MARKETING MIXES FOR SERVICES • Elements of the marketing mix (product, distribution, promotion, and pricing) need to be adjusted to meet the special needs created by the unique characteristics of services just discussed Two hour repair service guarantee for business computers by... 2000 South-Western College Publishing

  12. MARKETING MIXES FOR SERVICES: Product • Product (Service Strategy) • People processing (transportation services, health clubs) • Possession processing (lawn or car repairs) • Information processing (accounting, training, financial services) • Core and supplementary services • Core Federal Express services = overnight delivery • Supplementary services = package tracking and capturing the signature of the recipient 2000 South-Western College Publishing

  13. CORE AND SUPPLEMENTARY SERVICES • On hangers or folded • Level of starch • Bagged in plastic or boxed • Drive-through pick and drop off Clean clothes 2000 South-Western College Publishing

  14. MARKETING MIXES FOR SERVICES: Product • Product (Service Strategy) - continued • Customized services vs standardized services • Standardized • Economies of scale • Lower cost • More efficient • Customized • May better satisfy the needs of the customer • Higher cost and less efficient • Mass customization • The use of technology to deliver customized services on a mass basis. Major direction of the future of service marketing! 2000 South-Western College Publishing

  15. CONCEPT OF MASS CUSTOMIZATION • Relates to the ability of marketing service organizations to offer “packages” of services individually adjusted for each customer to a large target market. • Medical benefit packages • Travel and vacation packages • Airline service (time, food, music) 2000 South-Western College Publishing

  16. MARKETING MIXES FOR SERVICES: Service and Distribution • The Service Mix • Service organizations offer multiple services. Designing a service strategy means deciding what new services to introduce to which target markets, what existing services to maintain, and what services to eliminate. • Distribution Strategy • Number of outlets • Direct vs indirect distribution • Location(s) • Scheduling 2000 South-Western College Publishing

  17. MARKETING MIXES FOR SERVICES: Promotion • Promotion Strategy • Stressing tangible clues (You’re in good hands... with Allstate) • Using personal information sources (celebrity endorsements) • Create a strong organizational image (McDonald’s Golden Arches) • Engage in post purchase communication (call to make sure your car service repair experience was satisfactory) 2000 South-Western College Publishing

  18. MARKETING MIXES FOR SERVICES: Price • Pricing strategies might include: • Revenue-oriented pricing • Operations-oriented pricing • Patronage-oriented pricing • A combination of the above • Price Strategy • Pricing may be based upon a specific task accomplished, time consumed by the task, the consumption of goods, or the expertise of the service provider • Prices are sometimes bundled and other times a la carte. 2000 South-Western College Publishing

  19. MARKETING MIXES FOR SERVICES: Relationship Marketing • Involves ongoing interaction between the service organization and the customer. • Desire to create loyalty, mutually beneficial transactions, and a win-win environment • Pricing incentives, like frequent flier programs • Social incentives, like an online reminder to renew ones driver license (AAA) • A combination of the above, such as the no hassle Hertz rental program for frequent users. 2000 South-Western College Publishing

  20. INTERNAL MARKETING ENHANCES RELATIONSHIP BUILDING • Public relations efforts to own employees • Employee empowerment • Participative management “We love to fly and it shows! Delta Airlines 2000 South-Western College Publishing

  21. NONPROFIT MARKETING • A nonprofit organization is an organization that exists to achieve some goal other than the usual business goals of profit, market share, or return on investment. • Account for over 20% of the economic activity in the united States. The largest nonprofit entity by far in the United States includes federal, state and local government expenditures and purchases. 2000 South-Western College Publishing

  22. Is the effort by nonprofit organizations to bring about mutually satisfying exchanges with target markets through the following marketing activities: Identify customers they wish to serve or attract Specify objectives Develop and manage programs and services Decide on prices to charge (fees, donations, tuition, fares, fines, rates, etc.) Schedule events or programs and determine where they will be held or where services will be offered Communicate through signs, brochures, advertisement, or public service announcements WHAT IS NONPROFIT ORGANIZATION MARKETING? 2000 South-Western College Publishing

  23. UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES • Change opinions • Correct social problems • Provide ideas and beliefs • Objectives are very different • Target marketing differences • Product and Service decisions • Distribution decisions • Promotional decisions • Pricing decisions • Measures of success • Target individuals that may not desire their services or are not adequately provided for from other sources 2000 South-Western College Publishing

  24. UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES • Market complex behaviors or ideas • Sometimes weak benefits perceived • May involve low or high involvement messages • Objectives are very different • Target marketing differences • Product and Service decisions • Distribution decisions • Promotional decisions • Pricing decisions • Measures of success • Often marketed where and when the target market dictates 2000 South-Western College Publishing

  25. UNIQUE ASPECTS OF NONPROFIT ORGANIZATIONS MARKETING STRATEGIES • Volunteers • Sales promotion activities • Public service advertising • Licensing agreements • Objectives are very different • Target marketing differences • Product and Service decisions • Distribution decisions • Promotional decisions • Pricing decisions • Measures of success • Prices to support costs • Indirect payment through taxes • Payment through contributions • Below cost pricing • Number of persons helped • Attitudes changed or converted 2000 South-Western College Publishing