Service Marketing the Service Experience

Service Marketing

The service experience is a central component of how an organization interacts with its customers. In many organizations, the ability to differentiate the service experience is a source of competitive advantage. This leads to the inclusion of the customer in the service delivery process. There are several advantages to this. One is that the customer can tailor the experience to suit their precise needs. This increases the odds that the customer will be satisfied with the outcome. Additionally, with greater control over the process the customer is able to feel a sense of ownership over the service delivery process. With a sense of ownership, satisfaction will increase. The greater the customer's involvement in the service design and standards, the greater these advantages will be.

However, there are some disadvantages as well. Customers are sometimes unable or unwilling to fulfill their role. For example, a customer at a hairdresser may only have a vague sense of what they want, or be unable to communicate this to the hairdresser, only to become dissatisfied with their haircut as a result. Another disadvantage is that the more control that is ceded to the customer, the less control the company has. This can impact the cost structure of the service, and it can take the service request beyond what the company can reasonably deliver.

2. The five parts of the value chain are inbound logistics, operations, outbound logistics, marketing & sales and service (QuickMBA, 2007). At Wal-Mart the inbound logistics is one of the most important components of the value chain. The company has adopted a low cost strategy. To support this, they have developed highly-efficient systems for logistics and take an aggressive approach to cost-cutting during the purchasing process. Operations in the Wal-Mart sense is minimal. They add no value to products at this stage. In terms of outbound logistics, Wal-Mart's store network adds value because of the locations of the stores and the traffic that they draw. This allows them to do the volumes required to succeed with the low-cost, high-volume strategy. Sales and marketing is the second major component to Wal-Mart's value chain. The company is an expert merchandiser. They track sales daily, and shift merchandise around their stores to generate the highest number of sales and the most traffic. Merchandising gives Wal-Mart high inventory turnover and a high average ticket. The service function is a lesser component of the value chain. Service at Wal-Mart needs merely to be functional and not turn customers off from shopping there. It adds some minor value but service is not the reason people shop at Wal-Mart.

3. There are four key elements to the service communications mix. They are personal selling, media advertising, publicity and public relations and sales promotions. Taking the example of an insurance company such as Geico, we can see how these different elements can be applied to services marketing.

Personal selling is a key component on the insurance business. Agents must not only identify customers on their own, but they must also convert the leads that come to them via other promotional means. The service itself is not personal in nature, but the relationship that the agent forges with the customer is critical not only to winning the business but to driving a new business.

Media advertising is a key element to the Geico strategy, with their multiple mascots and gimmicks. The company spends aggressively to promote its product and raise awareness of the product's benefits. Geico's media advertising is also geared specifically to win publicity as well. The company's mascots become celebrities in their own right, and win publicity for the firm. Sales promotions are also a potential component for Geico, although they are not commonly used in the insurance business. However, the company can offer lower rates if they so desired.

4. Customer satisfaction is critical to customer retention. In service firms, the key point of differentiation is the service offered. Thus, if the service is not satisfactory, the customer is likely to find another service provider or to find a substitute. However, satisfied customers will tend to develop brand loyalty. The risk of switching is too high for many services.

Unsatisfied customers, on the other hand, are less likely to remain customers. The cost of attracting new customers is greater than the cost of retaining old ones, so service firms need to pay special attention to their existing customers. Moreover, if a customer is dissatisfied, this creates an opportunity for service recovery. Successful service recovery results in higher satisfaction and correspondingly higher retention.

The final dimension of the relationship between customer satisfaction and retention is that mere satisfaction often leaves the customer open to new opportunities. Thus, the customer's satisfaction level must be high enough to engender loyalty. This involves going beyond the satisfaction of basic needs, preferably to the point where the company is satisfying needs the customer did not expect nor request to be satisfied.

5. Core competencies are the source of competitive advantage for firms. They are those actions or skills that the firm does best. When those actions are better than those of their competitors, the competency becomes a competitive advantage. Core competencies tend to arise from skills that have developed over time and honed by management. Sometimes, the competency can be developed deliberately to provide advantages. Effective businesses also are able to apply their core competencies to different functions, enabling them to compete in a wider range of businesses.

As an example, H&R Block is a large service firm that has developed a competitive advantage in tax planning and tax return preparation. Their advantage is in their name and their ability to set up thousands of temporary offices nationwide. Competitors cannot match this ability to expand and contract with the seasonality of the work.