The marketing of services

On his deathbed, Albert Einstein was still puzzling over the problem of a unified theory which allowed for the physical laws of the macro universe and the frankly bizarre behaviour found in quantum theory.  He never completed his theory and to this day physicists are still trying to unify the two sectors of physical science.

In marketing theory, there is a similar split between academics: those that believe that goods and services can be marketed in the same way and those that believe that there are crucial differences in how services and goods are marketed.

Marketing theory for many years was focused on the sale and supply of goods.  That reflected the prominent position that manufacturing had in advanced economies.  Today, certainly in the UK, the economy is focused on service provision (UK economy is 80% services-based).  Today when you buy goods, they also tend to come with a services element.

Philip Kotler developed the concept of the marketing mix in the 1960s.  Kotler’s mix contained four elements; product, price, promotion and place.  This mix sat well in economies based on goods manufacturing.  it doesn’t fit so well in the provision of services.

Other academics have extended Kotler’s marketing mix to match a services environment.  they have added three further ‘Ps’; process, people and physical evidence.  This creates a seven ‘P’ marketing mix for service providers.

The fact that in today’s markets, every product, including goods can provide a services outcome.  When you buy a drill, you buy a hole boring service. When you buy a music download or a DVD, you buy an entertainment service.

There is a marketing continuum for services ranging from basic goods, such as builder’s sand, which may have a service element in its delivery, to pure services such as life insurance, where the physical element of the product is an email document.

For products at the services end of that continuum, the following characteristics are often exhibited:

  1.  Intangibility:  The service product cannot be touched.  This makes them difficult to evaluate prior to purchase.  Services tend not to allow consumers to try before they buy and the cannot be sold on.
  2. Inseparability between production and consumption:   These happen at the same time: you watch a concert as the performance is being made.
  3. Variability:  Services tend to be produced on an individual basis so they are often variable in their nature.  This can be an advantage to the consumer e.g. the ability to vary the cooking of a steak from rare to well done.  The service can be varied at the request of the customer.  But what if the service provider is having a bad day?  The chef who overcooks the vegetables of the singer with the sore throat.
  4. Perishability:  Services cannot be stockpiled. Once a plane taxis out onto the runway, no more passengers can be put on board.  That flight can no longer be provided.  Manufacturing is also changing with Just in Time stock control and consumers being able to design their own version of a product (trainers, bicycles or cars).  This adds an element of perishability to their manufacture.

The planning and marketing of services requires the input of your employees.  They are the people who are tasked with delivering them.  They must buy into the marketing process.

You must also take into account the loading element of the demand on service delivery.  This must be managed.  Low cost airlines use variable pricing strategies to ensure that every plane leaves its gate full of passengers.  Such tactics can also be used to managed demand at peak times or to increase demand at off-peak periods.

The reason that the three further elements, process, people and physical evidence were added is the additional degree of contact between the service provider and the consumer.  Your brand name can also affect how consumers see your product e.g. Speedy Plumbers.

There are four characteristics needed for a successful brand name:

  1.  Distinctiveness:  It must immediately describe your service in the minds of consumers and distinguish your company from competitors.
  2. Relevance:  It must communicate the nature of the service and the benefits of the service.
  3. It must be memorable:  Brand names must be easily understood and remembered.
  4. Flexibility:   A service brand name must fit with existing service provision but be flexible enough to account for expansion into new service areas.

Word of mouth between consumers is crucial to the marketing of services because of their experiential nature.  Often personal influence will be crucial in who consumers choose to purchase services from.

There are four approaches to developing word of mouth.

  1.  Allowing satisfied customers to inform others of their satisfaction e.g. the use of testimonials
  2. Developing materials that consumers can pass to one another
  3. Targeting opinion leaders through advertising
  4. Getting potential customers to talk to existing customers.

Berry describes a seven point model for successful services marketing:

  • Marketing should happen at all points in your organisation from product design to after-sales service.
  • Service flexibility must be introduced.  You must customise services to meet individual consumer needs.
  • You must recruit high quality staff.  And you must communicate clearly with them.
  • Ensure that existing customers increase their uptake of your services.
  • Develop a quick response facility to rapidly deal with consumer issues and complaints.
  • Use new technology to improve service efficiency and to lower costs.
  • Use branding to differentiate between different services and to differentiate your services from those of your competitors.