BUS 113 Week 4 - Marketing Channels for Services

Importance of Services

Services sector of the economy is more than twice the size of the manufacturing sector

Services account for more than half of all consumer expenditures

Almost 80% of all new jobs created over the past ten years have been in the service sector

A product is the need satisfying offering of the firm

Tangible good, service, idea, experience, or a combination of these

Digitization

Conversion of service to digital form and saving it to storage media

Digital goods are easier to store and transport

Pricing can be lower

Copyright or piracy may be issue

Automation

Conversion of human task to machine performed task

Faster, cheaper, accurate, handles repetitive or dangerous tasks

ATM

Characteristics of Services

Intangibility of services

Inseparability of services from service providers

Difficulty of standardizing services

High degree of customer involvement in services

Perishability of services

Inseparability of Services

Services are tied to service provider and do not exist as entities in and of themselves

Products are entities that exist apart from manufacturer

Implication of Inseparability for Channel Management (the inseparability of services from the provider means)

Service provider does not have the safety net available to the product manufacturer (whereby the product itself can make up for poor distribution)

All aspects of marketing channel with which consumer comes into contact are thus a reflection of the quality of service

Difficulty of Standardization

Services more difficult to standardize than products, variability associated with human element is more likely to creep into production of services

Product has high degree of standardization found in advanced economies

Implication of Difficulty in Standardization

Training is important for consistency and meeting expectations of customer about the desired service level

Expectations management

Expectations Management

A dissatisfied customer talks about experience to 3x more people than satisfied customer

Word of Mouth on Social Media

Many companies on social media

Provide news, promotions, discussion, advertising

Forum for customer feedback and complaints

Customers should be wary of fake PR news and shills

Customer Involvement in Services

Service customers more involved in creation of services than in production of products

Product customers involved mainly in consumption of product

Implication of Customer Involvement for Channel Management

In services channel, channel design should facilitate customer involvement

Some services require customer input to perform successfully

Perishability of Services

Services cannot be produced and then stored in inventory until purchased

Products can be inventoried and stored, even the most perishable products

Implication of Perishability

Channel must connect as efficiently as possible, those providing the service with those desiring to obtain it

Additional Perspectives on Marketing Channels for Services

Service channel tends to be shorter

Business format franchising can offer benefits of scale and entrepreneurial spirit (also the degree of control necessary to foster standardization of service)

For services requiring high degree of customization, local independent service providers are likely to continue to play a major role