Marketing Mixes for Services

Product, Placement, Promotion, and Price

Due to the nature of services, the implications of product, place, promotion and price are different than in the traditional marketing mix.

Learning Objectives

Describe the 7Ps in the services marketing mix

Key Takeaways

Key Points

  • In terms of product, with services there is scope for customizing the offering as per customer requirements so the customer encounter assumes particular significance.
  • Pricing of services is tougher than pricing of goods because in the case of services there are attendant costs–such as labor and overhead costs–that also need to be factored in.
  • Since service delivery is concurrent with its production and cannot be stored or transported, the location of the service product assumes importance.
  • Since a service offering can be easily replicated, promotion becomes crucial in differentiating a service offering in the mind of the consumer.
  • The essential elements of product, promotion, price and place remain in service the service marketing mix, but three additional elements–people, physical evidence and process –are included to the 7Ps mix.

Key Terms

  • noise: data that is not being used to transmit a signal, but is simply produced as an unwanted by-product of other activities
  • heterogeneous: Diverse in kind or nature; composed of diverse parts.
  • marketing mix: A business tool used in marketing products; often crucial when determining a product or brand’s unique selling point. Often synonymous with the four Ps: price, product, promotion, and place.
  • intangible: Incorporeal property that is saleable though not material, such as bank deposits, stocks, bonds, and promissory notes.

Introduction

To understand the services marketing mix framework, it’s necessary to understand the nature of services. According to Wolak, Kalaftis & Harris, the characteristics of services are:

  • Intangibility–the service cannot be touched or viewed, so it is difficult for clients to tell in advance what they will be getting.
  • Inseparability (simultaneity)–the service is being produced at the same time that the client is receiving it (eg during an online search, or a legal consultation).
  • Heterogeneity (variability)–services involve people, and people are all different. There is a strong possibility that the same enquiry would be answered slightly differently by different people (or even by the same person at different times). It is important to minimize the differences in performance (through training, standard-setting and quality assurance).
  • Perishability–unused capacity cannot be stored for future use. For example, spare seats on one airplane cannot be transferred to the next flight, and query-free times at the reference desk cannot be saved up until there is a busy period.

Each of these characteristics plays a role in the service marketing mix.

The Services Marketing Mix

Extending the 4Ps

The services marketing mix is an extension of the 4Ps framework. The essential elements of product, promotion, price and place remain but three additional elements – people, physical evidence and process are included to the 7Ps mix. The need for the extension is due to the high degree of direct contact between service providers and its customers, the highly visible nature of the service process, and the simultaneity of the production and consumption. Although it is possible to discuss people, physical evidence and process within the 4P framework (for example, people can be considered part of the product offering), this extension allows for a more thorough analysis of the marketing elements necessary for successful services marketing.

Product

In the case of services, the “product” is intangible, heterogeneous and perishable. Moreover, its production and consumption are inseparable. Hence, there is scope for customizing the offering as per customer requirements, and the actual customer encounter therefore assumes particular significance. However, too much customization would compromise the standard delivery of the service and adversely affect its quality. Therefore, particular care has to be taken in designing the service offering.

Pricing

Pricing of services is tougher than pricing of goods. While the latter can be priced easily by taking into account the raw material costs, in the case of services there are attendant costs–such as labor and overhead costs–that also need to be factored in.

A restaurant not only has to charge for the cost of the food served but also has to calculate a price for the ambiance provided.

Place

Since service delivery is concurrent with its production and cannot be stored or transported, the location of the service product assumes importance. Service providers have to give special thought as to where the service is provided. A fine dining restaurant is better located in a busy, upscale market as opposed to the outskirts of a city. A holiday resort is better situated in the countryside away from the rush and noise of a city.

Promotion

Since a service offering can be easily replicated, promotion becomes crucial in differentiating a service offering in the mind of the consumer. Service providers offering identical services such as airlines or banks and insurance companies invest heavily in advertising their services. This is crucial in attracting customers in a segment where the services providers have nearly identical offerings.

People

People are a defining factor in a service delivery process, since a service is inseparable from the person providing it. A restaurant is known as much for its food as for the service provided by its staff. The same is true of banks and department stores. Consequently, customer service training for staff has become a top priority for many organizations today.

Process

The process of service delivery is crucial since it ensures that the same standard of service is repeatedly delivered to the customers. Most companies have a service blue print which provides the details of the service delivery process, often going down to even defining the service script and the greeting phrases to be used by the service staff.

Physical Evidence

Since services are intangible in nature, most service providers strive to incorporate certain tangible elements into their offering to enhance customer experience. Many hair salons have well designed waiting areas, often with magazines and plush sofas for patrons to read and relax while they await their turn. Similarly, restaurants invest heavily in their interior design and decorations to offer a tangible and unique experience to their guests.

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Hair Salon: When a business provides intangible services, it might incorporate certain tangible elements to enhance customers’ experience.

SIVA: Solution, Incentive/Information, Value, and Access

A formal approach to customer-focused marketing is known as S.I.V.A. (Solution, Information, Value, Access).

Learning Objectives

Describe S.I.V.A. model and its role in the marketing mix

Key Takeaways

Key Points

  • This system is basically the four Ps renamed and reworded to provide a customer focus.
  • Instead of placing ads, S.I.V.A. advocates simply giving consumers the information they need to determine whether or not the product or services offered is both valuable and accessible to them.
  • Instead of using economic theories to set price, S.I.V.A. advocates setting the price of a good or service based on the value a product offers to the consumers.
  • Based on the S.I.V.A. model, consumers access products and services when and where they want it instead of corporations dictating the place.
  • Based on the S.I.V.A. model, consumers access products and services when and where they want it instead of corporations dictating the place.

Key Terms

  • marketing mix: A business tool used in marketing products; often crucial when determining a product or brand’s unique selling point. Often synonymous with the four Ps: price, product, promotion, and place.

Introduction

A firm in the market economy survives by producing goods and offering services that people are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm’s future viability and profits.

Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. This is also known as S.I.V.A., or Solution, Information, Value, and Access. Generally, there are three ways of doing this:

  • the customer-driven approach;
  • the market change identification approach; and
  • the product innovation approach.

The Consumer-Driven Approach

In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer.

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Your Wish Is My Command: In the SIVA model, the consumer rules.

The rationale for this approach is that there is no reason to spend R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.

A formal approach to this customer-focused marketing is known as S.I.V.A (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.

The SIVA Model

The S.I.V.A. Model provides a demand/customer-centric alternative to the well-known four Ps marketing mix model (product, price, placement, promotion ) of marketing management. The idea behind it is to restate the four P’s in a way that reflects today’s marketing environment where the power of building brands has shifted from corporations to communities.

Based on this model:

  • Product→Solution;
  • Promotion→Information;
  • Price→Value; and
  • Place (Distribution)→Access.

Product Becomes Solution

Here, what is being sold is driven by what the consumer needs. The community defines the product instead of the corporation. It is marketing’s duty to understand what the consumer wants and explain this to the corporations so that they, in turn, can produce the products that satisfy the needs of the consumer. You aren’t simply providing a product, you are offering a solution that meets your customer’s needs. This is what services do on a daily basis.

Promotion Becomes Information

Instead of placing ads, simply give the consumers the information they need to determine whether or not the product or services offered is both valuable and accessible to them. Many services have always operated on this basis. Customers go for a “fact finding” appointment where they learn about the service offered (by a doctor or lawyer, for example) and its price. Based on this information, they decide whether or not to become patients or clients.

Price Become Value

Instead of using economic theories to set price, S.I.V.A. advocates setting the price of a good or service based on the value a product offers to the consumers. The price of services is often determined in this manner as services are intangible products that can’t be priced based on the input of raw materials.

Place Become Access

The whole idea behind this is giving consumers access to products and services when and where they want it instead of dictating where a consumer has to go to get it. These days even beauticians are willing to come to your home to do your hair. Other service providers provide information and services on the Internet as opposed to making you come to their office.