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Service Marketing Management: 5 Challenges and 5 Strategies

Service Marketing Management: 5 Challenges and 5 Strategies

October 4, 2018

Strategies to Overcome the Biggest Challenges of Service Marketing

No business can survive in today’s marketplace without a robust services marketing strategy. Even physical products need to be supported by extraordinary services to become successful.

Are you doing everything you should to manage services marketing? Read on to find out.

ALL ABOUT SERVICE MARKETING MANAGEMENT

According to the CIA World Fact Book, services constitute 63% of the world economy, and the global market share of services is growing. Service giants like GroupOn, Uber, and AirBnB didn’t exist 15 years ago.  

Today they are thriving brands with billions of dollars in annual revenues.

For you, it’s good news. Services are hot! But be careful not to get burned--services can also make or break your business. You have to meet challenges of service marketing management.

THE CHALLENGES OF SERVICE MARKETING MANAGEMENT

Service Marketing Management emerged as a separate field of study only in the early 1980s, when the distinct characteristics of service marketing management finally dawned on marketers.

Simply put, service marketing management deals with the actions and processes that enable a service provider to deliver services to end consumers.

The services sector includes industries like banking, insurance, communications, consulting, non-profits, travel and transportation, and all other businesses that do not produce tangible goods.

Graphic representation of the five parts of service marketing--intangible, perishable, interactive, heterogenous, no ownership.

What, then, do these businesses produce?

There are some defining characteristics that distinguish services from physical products. We should be aware of these characteristics, which correspond to the challenges of service marketing management. Understanding the product will help meet those challenges.

1. INTANGIBILITY

Consumers can see and touch goods—they’re a physical product. They know exactly what they’re buying when they’re spending their money. They may even be able to carry the item away with them—although they have to drive off the lot when they buy a car.

This portability is not the case with services. The effects of services may not be apparent immediately, and what’s done is not always obvious. The client of a management consultant, for example, may have to wait for months (or years) before they can see the results.

Lack of Emotion: Physical products can trigger an emotional impulse compelling the customer to buy. Color, shape, and style are important for physical products—especially those aimed at the general public.

No such built-in emotional appeal exists in the intangible world of services. The consumer might have a hard time even imagining all the details involved in what is done for them by a service business.

No product or service can be completely tangible or intangible, of course. For example, a law firm selling legal services needs business cards, computers, and other tangible objects to practice law—but the firm’s clients aren’t paying for them. Similarly, a hardware store will need salespeople, guarantees, and operating manuals and lessons to sell drill machines or table saws.

Even so, it’s easy to tell the difference between a service business and a tangible goods business.

2. LACK OF OWNERSHIP

You can buy a product, take it home, own it for years, and perhaps even resell it. But you can’t do the same with a service. You can avail it only for a specific period of time and then it’s over--unless you pay again. The lack of physical ownership makes it harder to sell services.

Even companies don’t own and control services the way they can control tangible products. It’s because service delivery depends on human interactions between the service provider’s employees and customers.

3. PERISHABILITY

Another defining quality of services is that they are perishable. I don’t mean that they will spoil, but they are time-bound. You can’t build an inventory or store services like you can with physical products. Services are usually performed at specific times and on stated dates.

A dentist cannot start a procedure until the patient is in the chair. An airline cannot sell a seat on a flight that has already left the gate.

4. HETEROGENEITY

Services are heterogeneous. Service businesses operate through several diverse elements and interactions. A bank may offer customer service through a helpline or website and cash withdrawals through ATMs and counters.

In most industries, the service delivery process involves a lot of human interaction. As human behavior is subjective and unpredictable, no two sets of services can be identical in their details and results.

5. INTERACTIVITY

Service delivery depends on a chain of interactions between customer and service provider, as well as between the people working inside the service provider.  The customer is central to the whole process and all activities must aim at their satisfaction.

Prosumership: For the service to be delivered, the consumer needs to cooperate and coordinate with the service provider. For example, if you’re offering bill payment over the internet—the service—the consumer must have a valid payment method and a working internet connection, and be able to use both of them.

Service marketing experts call it “prosumership”. Service consumers (or prosumers) have to proactively participate in the service delivery process.

The degree of this cooperation will vary among different types of services. But it must be present to make service delivery possible. No such cooperation is required for delivering physical products.

STRATEGIES FOR SERVICE MARKETING SUCCESS

Service marketing requires a great degree of detail and deeper customer understanding. Planning is key. Here are a few service marketing strategies that can help you deal with the demands of service marketing , leading to the establishment of a successful service business.

1. START WITH YOUR CUSTOMERS

Maybe it’s been stated so many times that it’s become a cliché, but you have to start with your customers. There’s simply no other way to start building a service business.

Conduct extensive research. Take the time to analyze your findings and discover the real needs of your customers. Develop your ideal customer personas, and then customize your service concept to fit the needs of those personas.

Think in terms of problems and solutions. More than demographic and psychographic attributes, you should understand your customers and services in terms of “jobs” that consumers need done and the people they hire for completing those jobs.

For instance, a company hiring an SEO agency wants more customers to visit the company’s website—the job that needs doing. You need to make sure that you are ready and able to complete the customer’s job.

Develop a positioning statement for your service. The statement describes how you want your customers to perceive your service. Obviously, every service provider would like their users to think their services are the best. The positioning statements defines how “your service is the best”.

Is it quick, reliable, entertaining, modern, or classic, or something else? Consider your competitors’ positioning and create a unique, valuable, relevant, and easy to understand positioning for your service. Your service positioning will determine the behavior of your people (employees) during service interactions. It will define the voice of your service brand” and guide the interactions that constitute your service offering.

B2B Services Marketing often involves multiple buyers and hierarchical layers. A typical B2B sales cycle can start with targeted emails and/or cold-calls. The odds that you’ll reach the decision maker in the first attempt are from slim to none. It takes an average of eight call attempts to reach a prospect.

Your first adversary might be the telephone operator, whose sole job might seem to be to stop you from reaching the person you need to follow up with.  If you succeed in beating the gate keeper and survive the red tape of ‘due process’, you can end up with a board or a committee that will make the final decision.

It’s a long road. You should be prepared for personal meetings and presentations, as well as develop other marketing tools. Create a lot of sharable informative content—presentations, PDFs, videos, webinars, whitepapers…the works!

Create your marketing arsenal to make it easy for your contact person to get everyone on board and keep them in the loop.

2. DEFINE YOUR SERVICE CONCEPT

Your service concept is the whole package that your customer is buying. For example, a consumer booking an appointment with a legal firm would expect the meeting to take place in a professional environment. A person opening a bank account expects ATMs and online access to their account.

Product marketers define the product concept as marketing mix or 4 Ps—Product, Price, Promotion, and Placement. They try to create the perfect marketing mix before they take the product to the market, so the customer would be more likely to buy it right off the shelf.

But in service marketing management, the real game starts after the consumer meets the service provider. This makes the job of service marketers much broader and expands the service concept beyond the 4 Ps.

Service marketing management includes 3 extra Ps, namely People, Process, and Physical Evidence.

  • People include the employees who deliver the service. Because no company ever made happy customers with unhappy or unable employees, you will need to train your staff well, and keep them satisfied in their work—including financially. Your people will have to work with the service consumers, who you should also treat as your people—remember, they participate in the service delivery process.
  • Process is the service delivery process that we’re going to create in the next step.
  • Physical Evidence is the environment in which the service is delivered. It includes the servicescape, or the physical facility where the service is produced and sold.

Basically, service consumers ask two key questions about a service:

  • What’s in it for me?
  • Do I have the ability to consume the service?

Answering these questions would require you to define your service benefits. Benefits are different from features, as the following comparison depicts:

Chart describing the feature, benefit, and compelling marketing message for Insurance, Software as a Service, and Legal Services.

Also, service marketing managers must take into account the concept of prosumership at all points of the service delivery process. You should empower customers and employees by providing self-help step-by-step guidance and instructions on how to receive and deliver the service—everyone needs to know what they are supposed to do, including the customer.

3. CREATE YOUR SERVICE DELIVERY PROCESS

Process, the sixth P, includes all the interactions involved in service delivery. These interactions occur between consumer and either service staff or technology. For example, a healthcare provider may book appointments via telephone during office hours as well as a mobile app.

Front- and Back-Office Elements: Some of the elements of service delivery will not be visible to the consumer. For example, the purchase of materials for and the creation of dental implants is not visible to the patients. These elements are called back-office elements.

Front-office elements are visible to the consumer at some point during the service process. To continue the dental example, the dentist’s administrative staff, waiting room, and rinse basin are all part of the front-office.

To create a smooth service delivery process, you must address all back-office and front-office actions. Prepare for the actions that your personnel will perform and the cooperation (prosumership) you’ll need from the customer.

You can create a service delivery process in a few simple steps.

Identify the stages in service delivery and divide the process into five to seven distinct stages. For example, a cargo services business can split all activities into the following broad categories:

  1. Order booking
  2. Loading
  3. Transportation
  4. Delivery
  5. Invoicing

Service delivery process in 4 steps as discussed in the text.

Next, list all the activities included in each stage. For instance, Order Booking may involve call handling, processing online bookings, and confirmation. Loading may include packing, loading and securing the shipment.

Assign responsibility for various tasks. Organize your human resources and devise a system for managing different back-office and front-office activities.

For example, it’s the responsibility of the Order Booking staff to speak to the customers and record their information—and send out confirmations. The Loading Staff have to pack and label all items, ensure that items are secure from breakage, and make sure the delivery vehicles are loaded.

Create a work flow chart indicating the sequence of different actions and ownership of different activities. For this purpose, you may use an Excel worksheet or Word document. Or, you may use more advanced tools for creating flow charts.

Share with your team. After creating a prototype of your service delivery process, you can share it with your team. Train your people to deliver the service and help the customer understand and use the service.

One note on the process—you’ll keep your staff happy if you’re open to their input on the process. Even the best-designed process may not work perfectly when implemented, and the people doing the work will help make it better. This will also help keep them happy.

4. ENGAGE YOUR PEOPLE FOR SERVICE DELIVERY

You and your people are the face of your organization. Motivated and engaged employees deliver high quality services. Disgruntled and unhappy employees deliver sloppy services. It’s that simple.

Take the following steps to engage and motivate your people.

Know your people. How can you expect your people to build relationships with customers when you don’t have a relationship with your employees? Spend time with them and get to know them better.

Provide basic training. Provide quality orientation and training for your employees. 83% of engaged employees say they have received training to do a quality job.

Develop their careers. Make the career path known and predictable. Develop their skills and help them achieve their aspirations and goals.

Recognize and reward. Offer recognition, praise, and/or reward whenever people achieve or exceed their work goals. Make the reward predictable so they would strive for it.

Build a customer-focused team. The customer is king, and your people ought to know that. Organize your staff to perform the front- and back-office processes while focusing on customer satisfaction—and that includes making sure that each task can be fulfilled by multiple people.

Minimize human interactions. Human interaction will always be necessary for creating trust—remember, service businesses are about relationships.  You should, however, automate as many customer interactions as you can without jeopardizing the customer’s experience.

Have you checked out the touch-screen tablets that have mushroomed in all kinds of service businesses? From banks to restaurants and from airlines to government offices, touch-screens are helping provide more efficient service to customers.  For example, airline check-in kiosks help flyers who are not checking bags get their boarding passes and to the gate sooner.

5. TRACK THE KPIs AND IMPROVE YOUR SERVICES

In addition to tracking your marketing ROI, you should also measure the quality of your services. Does your customer think your services are extraordinary or just ordinary?

Tamina Steil recommends six KPIs for measuring customer service effectiveness.

1. Customer Satisfaction Score (CSAT)

The CSAT measures the level to which the customers are satisfied with your services. It’s the customary 5-star rating system that you see virtually everywhere. Reviews will show up on Facebook, Google, Yelp, and other platforms.

Your CSAT (%) = Total number of 4- and 5-star ratings/Total number of responses X 100

2. Net Promoter Score (NPS)

The CSAT focuses on immediate satisfaction whereas the NPS invites the customer to take a broader view of your services by asking “How likely is it that you would recommend <business/service name> to a friend or colleague?” The respondent reply on a scale of 0 to 10, with 0 being least likely and 10 being extremely likely. The NPS is calculated as shown in the following illustration.

Net Promoter Score infographic with 0-6 as frowny faces, 7-8 as passive neutral faces, and 9-10 as smiley promoters.

3. First Response Time

According to Forrester Research, 45% of US customers would abandon an online transaction if their questions are not answered and concerns are not addressed quickly. You should aim for immediate response to all customer issues, even if it consists of a message that someone is working on the problem (which they better be!).

4. Customer Retention Rate

Your customer retention rate reflects how satisfied people are with your services. Retaining customers is 5 times more profitable than acquiring new customers, so this KPI indicates the odds of your service business success.

Customer Retention Rate = ((CE – CN) / CS)) x 100

Where CE = Number of customers at end of period; CN = Number of new customers acquired during period; CS = Number of customers at start of period

5.  SERVQUAL

It’s a multidimensional KPI that measures satisfaction against expectations in 5 key areas: reliability, assurance, tangibles, empathy, and responsiveness. Elaborate questionnaires or interviews are used to record and track the SERVQUAL. Take a look at a sample questionnaire here.

6. Employee Engagement

People are the most important element of a service business. You must keep your employees satisfied and engaged if you really want them to deliver quality services. Tracking employee engagement could be an article all its own, but remember—engagement is an emotional item, and sometimes depends on the little things as much as big ones (like money).

These are the KPIs that you should track regularly—at least annually, sometimes more often. Your services are improving as long as your KPIs are going up. But if you notice a KPI stagnating or showing a negative trend, you should take measures to find and address the problem.

CONCLUSION

Service marketing management is different from managing tangible product marketing in many ways. You’re trying to sell an intangible, perishable, interactive, and heterogeneous product without actually giving the buyer a right of ownership over a thing.

Your job is not just to bring together the service and the buyer, but also to manage what happens during those crucial interactions.

Your success lies in understanding your customers and defining a service concept that matches their expectations. Design a service delivery process that works like a charm and staff it with engaged and motivated employees. Track your performance and continuously improve the quality of your services. And that’s what service marketing management is all about.

Questions? Comments? We’d love to hear from you!

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Josh Meah

Hi, I'm Josh. I founded 4 profitable marketing companies currently serving clients in over 20 industries. Our one rule in assessing new client relationships is that you and your company must be very good at what you do.

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