What are Marketing Service Methods

Service marketing

Table of Contents

  1. Service Marketing Basics
    1. Development of service marketing
    2. Concept of service marketing
    3. Types of service marketing
  2. Services as an object of service marketing
    1. term
    2. particularities
  3. Measurement of service quality
  4. Service marketing tools
    1. Performance policy
    2. Pricing policy
    3. Distribution policy
    4. Communication policy
    5. Personnel policy
  5. Future prospects of service marketing

Service Marketing Basics

Development of service marketing

Modern industrialized countries have been undergoing a structural change from an industrial to a service society since the 1970s. This so-called tertiarization goes hand in hand with an increase in employment in the service sector, so that more than 70 percent of gainful employment in Germany is now in service professions. The increase in the importance of the service sector, which has been ascertainable since the beginning of statistical recording, also challenges marketing: The scientific discipline of service marketing has its origins in the late 1970s, when it was established that classic marketing concepts are only suitable to a limited extent for marketing services. The rapid increase in the importance of service marketing can be seen in practice, above all, in an intensive examination of the relevant issues (e.g. measurement of service quality, motivation of service employees) and in science in an explosive increase in relevant publications and the ongoing establishment of service-specific educational and research institutes.

Concept of service marketing

Service marketing is understood to mean the analysis, planning, implementation and control of all activities of a service company that serve to align the service program and the business relationship with the customer.

Types of service marketing

Basically, a distinction can be made between functional and institutional service marketing according to the service providers. While functional service marketing is understood as a secondary function in material goods companies (material goods companies also offer services), institutional service marketing deals with the marketing of pure service companies, such as banks, management consultancies, etc.

Services as an object of service marketing

term

The prevailing definitions of services in the literature can be determined on the basis of three dimensions:

Potential dimension: Services are seen as the potential or capabilities of a service provider created by humans or machines to provide specific services.

Process dimension: The service is interpreted as an activity with a material or immaterial effect, which serves to meet the needs of third parties and is characterized by a synchronization of production and sales (Uno-Actu principle).

Result dimension: Services are understood as the intangible result of a service provision process.

A comprehensive definition of the term service results from the merging of these three dimensions. Accordingly, services are independent, marketable services that are associated with the provision (e.g. insurance services) and / or the use of performance capabilities (e.g. hairdressing services) (potential orientation). External factors, i.e. those that are beyond the service provider's sphere of influence, are combined with internal factors (e.g. staff, equipment, business premises) during the creation process (process orientation). The combination of factors of the service provider is used with the aim of achieving beneficial effects (e.g. inspection of the car) on the external factors, on people (especially customers) and their objects (e.g. the customer's car) (result orientation).

particularities

Compared to services in kind, services have three central characteristics.

Performance of the service provider: To create a service, specific human (e.g. know-how or physical skills) or automatic capabilities (e.g. function of a car wash) are required.

Integration of the external factor: A service can only be created when the customer or his objects of disposal are present. However, due to the variety of services, the type and intensity of this interactive event can vary greatly between service provider and consumer (e.g. participation in a training course versus a fast food snack bar).

Immateriality: A service is generally not material, not physical, and consequently not materially measurable. The characteristic of immateriality results in two so-called accessory peculiarities, the non-storability and the non-transportability of services.

Measurement of service quality

Due to the special features of services, such as the integration of the external factor or immateriality, service companies have a harder time guaranteeing consistently high quality than manufacturers of goods. In addition, for many services that are characterized by a high proportion of experience and trust characteristics, the quality assessment in advance of the use by the customer is not possible, which means that the perceived purchase risk on the part of the customer is higher than that of purchasing tangible goods . Therefore, building trust through high quality of service is one of the central tasks of service marketing. Another special feature is that the service quality, due to the integration of the external factor in the service creation processes, leaves the provider's sphere of influence to a certain extent and, as a result, can be subject to fluctuations that cannot be influenced by the provider (e.g. therapy).

Ensuring a high quality of service is consequently a central task of service marketing, which cannot be guaranteed without continuous measurement. While the constant quality of material goods can be guaranteed through the same size, shape, color, manufacturing process, etc., in service companies only - as shown - the potential factors (e.g. equipment, rooms or employees) can be controlled autonomously. In science and practice, various approaches to measuring service quality have become established, which can be differentiated into customer and company-oriented measurement approaches.

Customer-oriented measurement approaches are used to measure from the customer's point of view, while company-oriented measurement approaches are used to measure from the point of view of company members, either from the point of view of management or employees. Since the customer is at the center of service marketing, customer-oriented measurement approaches have first priority, whereas company-oriented measurement approaches only have a supplementary character. On a further level, objective and subjective approaches can be differentiated. The subjective, customer-oriented procedures can also be subdivided into feature, event and problem-oriented methods. While feature-oriented methods are based on the assumption that the quality assessment of customers is based on the evaluation of various quality features of a service, event-oriented methods relate to the consideration that customers perceive certain experiences from the multitude of situations during a service process as being particularly relevant to quality. Problem-oriented procedures examine the problem areas that are critical from the customer's point of view in the context of the provision of services. An overview of the procedures is shown in the figure "Approaches to measuring service quality".



Service marketing tools

As in material goods marketing, marketing instruments can also be systematized in service marketing into the four mixed areas, the so-called "4 Ps": service, price, distribution and communication policy or, in English, product, price, place and promotion. In addition, due to the intensive contact between employees and customers, it makes sense to integrate personnel policy as the fifth P in the marketing mix. The figure “Service Marketing - Marketing Mix of Service Companies” gives an overview of the marketing instruments of a service company, whereby it is important to specify the specific design and coordination of the marketing mix, depending on the type of service and strategic orientation.


Performance policy

The range of services is a central element in profiling a provider vis-à-vis the competition in an increasingly competitive environment. The customer needs are at the center of the service policy of a service provider. Due to the process-like nature of services, the question of "how" plays a major role in their creation. After all, the market and customer-oriented orientation of the service creation process offers - in addition to the actual service - the first starting points for differentiation from competing companies. Due to the integration of the external factor, it is also important to consider within the scope of the service policy which activities of the provision of services are taken from the customer (internalization) or outsourced to him (externalization). In contrast to services in kind, the potential customer cannot be offered a material good that can be assessed in advance, but only an intangible service; consequently, confidence-building measures on the part of the service company are helpful for marketing. Against this background, it becomes clear that the brand has a high priority in service marketing as an anchor of trust for consumers.

Pricing policy

The specifics of services also have an impact on pricing policy. Due to the fact that services cannot be stored, capacity utilization is particularly relevant to success through price differentiation, which can be made according to spatial, temporal and customer-oriented criteria. A special form of temporal price differentiation is the profit-oriented price-volume control (yield management), which offers service providers with inflexible capacities and high fixed costs (e.g. airlines, transport and travel companies) advantages: Depending on the capacity utilization of the service provider (e.g. number of free seats) the current price of the service offered rises or falls. Another characteristic of services that also influences pricing policy is immateriality. Because a service is difficult to assess before it is actually used, customers often use the price level of a service as a quality indicator. Accordingly, the determination of a price-sales function for services is particularly relevant to success.

Distribution policy

The distribution policy includes all measures related to the delivery of services to the end user. However, due to the non-transportability, a service cannot be physically traded, but usually requires a service to be provided on site. Merely performance promises can be traded using a material carrier medium (e.g. insurance contract or admission ticket) through own or third-party sales organs. As a result, decisions regarding the location and the sales channel system are of particular importance in the service sector. With regard to the location, it is particularly important to ensure that the customer can access the place of performance. The provision of services can take place at the customer (e.g. home visit), at the provider (e.g. car repair) as well as at a neutral location (e.g. concert event). With regard to the choice of sales channels, there are basically both basic forms - direct and indirect - of distribution to choose from. However, due to the immateriality of services, when choosing sales partners (e.g. franchise partners), it must be ensured that they guarantee a uniform appearance for the service provider. After all, the sales agent often appears as a “co-producer” of the service in the perception of the customer, which is why performance deficiencies attributable to him are not infrequently projected onto the actual provider and can cause a loss of image there.

Communication policy

The communication policy of a service company includes measures of market-oriented, external communication (e.g. advertising), internal, internal communication (e.g. employee magazine) and interactive communication between employees and customers (e.g. consultation). In the context of service marketing, due to the integration of the external factor, it is sometimes difficult to differentiate between the communication policy measures and the actual service provision (e.g. service-guest relationship in a restaurant). A main task of communication policy in service marketing is to materialize or visualize the capabilities of the provider (e.g. presentation of a craftsman's master craftsman's certificate) as well as the service by highlighting tangible elements (e.g. presentation of pictures of a hotel room on the Internet) of the service as well as trust with the Build customers. The latter can be achieved, for example, by displaying satisfied customers in special communication media (e.g. in print advertisements, on the provider's website).

Personnel policy

Service personnel are of particular importance in service marketing. The employees of a service provider and their skills make up a large part of the performance potential of a provider. Their importance becomes particularly clear for employees of service providers with direct customer interaction. From the customer's point of view, the perception of the interaction phase between employee and customer (in the so-called 'service encounter') is often representative of the quality perception of the entire service and thus determines the satisfaction and repurchase behavior of customers and consequently the future success of a provider. Due to the high degree of interaction between employees and customers, it is important for service companies to pursue a systematic personnel policy based on internal marketing to internally safeguard externally directed marketing activities.

Future prospects of service marketing

The path to the service society will continue. The reasons for this include social changes such as the increased proportion of employed women, the tendency to extend working hours or the increase in life expectancy, which result in an increasing demand for care and leisure services. In addition, traditional consumer and industrial goods manufacturers will increasingly offer additional services (so-called value added services) such as transport services or advice to individualize their offerings. Accordingly, the demarcation between material goods and service companies will become more fluid in the future. In this context, a service-centered view of marketing (“Service Dominant Logic for Marketing”) is currently being postulated and intensively discussed in marketing science. The starting point of this new marketing perspective is that the view of market-based exchange processes is shifting from a pure exchange of goods using the marketing mix to an exchange of services in the form of special skills and knowledge, with physical goods now being viewed as pure “by-products” of a service. Even within the service sector, for example in financial and insurance services, traditional branch boundaries are diluting and the various branches are growing together. The new challenge lies in the interface and network management of this new range of services.

Another central challenge of service marketing lies in the integration possibilities of the customer, which result from the development of new communication and information technologies such as the Internet. A partial or complete substitution of personal interactions by electronic interactions can often already be determined in the context of the provision of services. In the future, it remains to be investigated what influence this substitution will have on the result and the course of service provision.

Digitization is considered to be of central importance for the future development of industries and companies. Digitization creates new opportunities and risks for service marketing. This applies both to communication with customers and to new service offers. The focus is on value-in-use, i.e. the value contribution and the benefit generated for the customer. This sometimes leads to a disruption of traditional service industries (e.g. in the taxi business by Uber, in the accommodation business by Airbnb). A platform strategy plays a special role here, i.e.An intermediary creates a platform for the participants in a trade, which brings advantages for all market participants. Due to the associated network effects, rapid scaling is achieved at low cost, which classic providers cannot achieve. All in all, it can therefore be expected that digitization will result in new value creation opportunities and new business models. Further offers in connection with Services 4.0 can also be expected (services in cyber-physical systems). Many service companies - similar to industrial companies - will go through a digital transformation.