Contents
. Introduction 1
2. The Marketing Mix Paradigm 2
2.1. The 4Ps of the Marketing Mix 2
2.2. Emergence of Marketing Mix 5
2.3. The Nature of the Marketing Mix 5
3. What is Meant by Services? 6
3.1. Major Characteristics of Services 8
3.2. Goods and Services 9
3.3. Introduction to Services Marketing 10
3.4. Evolution of Services Marketing 11
3.5. The Breakthrough from Product Marketing 12
3.6. Paradigm Shift in Marketing 14
3.7. Model of Services Marketing - The 7Ps 15
3.8. Strengths and Weaknesses of 4Ps and 7Ps 20
3.9. Service Processes 20
3.10. Service Encounter 21
4. Relationship Approach as a Foundation of Marketing 21
5. Conclusion 23
6. References 25
List of Figures
Figure 1 : Components Of Marketing Mix 3
Figure 2: Customers Perspective - 4 Cs 4
Figure 3: The Tangible-Intangible continuum for goods and services (Source: Shostack, 'Breaking Free from Product Marketing', Journal of Marketing, Vol. 41, No.2, April 1977). 7
Figure 4: The Marketing Mix for Services 17
List of Tables
Table 1: Strengths and Weaknesses of 4Ps and 7Ps (Source: Rafiq and Ahmed (1995)) 20
Table 2: Transaction Marketing vs Relationship Marketing (Source: Payne (1993)) 22
. INTRODUCTION
The aim of this paper is to discuss the breakthrough from product marketing identified by Shostack (1977) and furthermore, introduce and analyze a new model of services marketing.
The paper begins with the discussion on the nature of the traditional marketing paradigm, marketing mix, and how the modern research into industrial marketing, services marketing and customer relationship management influence the development of a new approach to marketing. It suggests that the simplicity of the marketing mix paradigm has become a blindly followed path rather than an awareness that marketing is a versatile social process. As a result, customers are the victims of this traditional marketing theory.
Then the paper emphasizes on services, its characteristics and how they differ from goods. This discussion leads to the introduction of the new scope of marketing, the services marketing, to support some of the distinct characteristics of the services. In the paper we also go through the concept of emergence and importance of service marketing in comparison with the earlier existence of product marketing. The stages of the evolution of the services marketing are discussed in brief.
The paper then proceeds to discuss the current model of services marketing and how it differs from the traditional model. This development supports relationship marketing, based on relationship building and management, as one emerging new marketing paradigm of the future. It then concludes with discussing whether this model of service marketing is relevant in today's fast growing business environment where customer relationships play a very vital role.
2.
THE MARKETING MIX PARADIGM
Before proceeding to discuss the paradigms of marketing, it is essential to define what is marketing. The American Marketing Association defines marketing as the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organizational objectives.
The marketing mix is the organization's overall offer or value to the customer. The 'Marketing Mix' is a term used to describe the combination of tactics used by a business to achieve its objectives by marketing its products or services effectively to a particular target customer group. Businesses need to make sure they are marketing:
* The right product to
* The right person at
* The right price in
* The right place and at
* The right time
2.1. THE 4Ps OF THE MARKETING MIX
The concept of the marketing mix and its 4Ps were introduced by Professor Neil Borden in 1965. Soon they became the unchallenged basic model of marketing, totally overpowering previous models and approaches to the marketing concept. It is defined as the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. Lauterborn (1990), stated Borden (1965) proposed that there were twelve dimensions of marketing, however, McCarthy reduced the model so that it became known as the 4Ps: Product, Place, Price and Promotion.
Figure 1 : Components Of Marketing Mix
The figure 1 illustrates the Components of the Marketing Mix which consists of the 4Ps as described below. The particular marketing variables under each P are also shown in this figure.
Product means the totality of 'goods and services' that the company offers the target market. The Pizza Hut 'product' is food associated with "nutrition", "fun" etc. Pizza Hut offers several services, the main elements are food preparation is tangibly distinguished by the uniformity of environment, color, and style of graphics and apparel, and the consistency of delivery.
Place includes company activities that make the product available to the target customers. Pizza Hut maintains a body of independently owned franchise that sell the pizzas. They select the franchisee carefully and place it so that the consumers may have easy access to the product.
Price is what the customers pay to get the product. Pizza Hut suggests prices that each franchisee might charge for each pizza. They offer better services and quality to attract customers to bring the price into line with customer's perception of Pizza's value.
Promotion means activities that communicate the merits of the product and persuade target customers to buy it. Pizza Hut spends millions on advertising each year to tell consumers about the restaurant and it's food. Pizza Hut assists potential consumers and persuades them that it is the ideal place for them to enjoy the meal. Pizza Hut and it's Franchisee's offer special deals on meals -buy one get one free, $9.99 one large pizza with cheesy bread, etc- as added purchase incentives.
The 4Ps represent the seller's view of marketing tools available to influence the consumers. From a customer point of view, a marketing tool must deliver a customer benefit. According to Lauterborn (1990), the 4Ps model was altered by Brunmer (1989) and became the customer's 4Cs: Customer needs and wants (to replace product), Cost to the customer (to replace price), Convenience for the buyer (to replace place) and Communication (to replace promotion) as seen in the figure 2.
Figure 2: Customers Perspective - 4 Cs
2.2. EMERGENCE OF MARKETING MIX
To understand the basic concept of marketing is very simple. For instance, the hawker woman who sells vegetables from door to door - if you ask her how she decides on the assortment of vegetables, she can give a clear description of her customers and their preferences. She can even tell what her customers would buy when, as she knows the food-habits of the households she serves. The point here is that marketers should understand the customers' needs and satisfy them.
The STP (Segment, Target, Position) model has dominated marketing thinking for more than five decades. Here, the idea is that the needs of different people are different and a marketer cannot satisfy the needs of all the people. However, it is possible to identify groups (Segment) of people with relatively homogeneous needs and preferences. The marketer should then choose a segment (Target) that can be profitably exploited by the company by offering a product needed by the group at a price affordable and make it available in places that are convenient for the target customers and promote (Position) the product as meeting a specific need of the target group. Hence, the concept of 'Marketing Mix' emerged. The 4Ps are the controllable marketing-mix variables that a marketer can manipulate to get the desired results. The marketer plans various means of competition and blends them into a "marketing mix" so that a profit function is optimized, or rather satisfied.
The 4Ps approach gave a good frame-work for understanding the marketing process. It is particularly very appealing to consumer products marketing. Hence it led to the entire research efforts getting focused around the 4Ps.
2.3. THE NATURE OF THE MARKETING MIX
A Marketing Mix must be well structured to fulfill the marketing concept. It must fit to the idea that the firm is best off by designing and directing its activities according to the wants and needs of the customers within the segmented market.
The problem with the marketing mix paradigm is of the theoretical nature. The 4Ps of the marketing mix don't have a strong foundation. One can say that the mix lacks any formal and precise specification of the properties or characteristics according to which marketing mix elements should be classified. Many marketing-related phenomena are not included.
It is arguable that the 4Ps of the marketing mix are not well able to fit to all the requirements of the marketing concept. Dixon and Blois (1983) support this point by stating that, "indeed it would not be unfair to suggest that far from being concerned with a customer's interests (i.e. somebody for whom something is done) the views implicit in the 4Ps approach is that the customer is somebody to whom something is done!". To put in other way, the marketing mix and its 4Ps constitute a production-oriented definition of marketing, and not a customer-oriented one.
The 4Ps model was suitable in most cases and was originally developed for consumer packaged goods marketing where transaction marketing is most appropriate. The marketing mix becomes too restrictive for a firm that is involved in interactions with the customers. The elements of the marketing mix are important here but to a much lesser degree, just to support interactive marketing activities. The model itself does not include any interactive elements nor does it indicate the nature and scope of these interactions.
3. WHAT IS MEANT BY SERVICES?
One of the chief trends in our modern economy in the past few decades has been the dramatic growth of services. The marketing discipline had been primarily concerned around goods. Gradually services began to claim an increasing share of customer's income. Kotler, Bloom (1984) defines service as any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Renting a hotel room, depositing money in a ...
This is a preview of the whole essay
3. WHAT IS MEANT BY SERVICES?
One of the chief trends in our modern economy in the past few decades has been the dramatic growth of services. The marketing discipline had been primarily concerned around goods. Gradually services began to claim an increasing share of customer's income. Kotler, Bloom (1984) defines service as any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Renting a hotel room, depositing money in a bank, traveling on an airplane, having a hair cut, having a car repaired, seeing a movie, getting an advice from a lawyer are all examples that involve buying a service.
Until few years ago services were not given much importance. Many retailers and manufacturers used to think only in terms of tangible goods and very few expanded their concept of product to include services. Rathmell (1966) differentiates between a good and a service as - a good is a thing whereas a service is an act. A good is an object or an article or a device which when purchased, becomes an asset for the buyer. On the other hand, when a buyer purchases a service, he or she incurs an expense.
It would not be wrong to say that, most goods require supporting services to be useful and most services require supporting goods in order to be useful. To distinguish goods from services, one can consider the notion of a "good - service continuum". Pure goods lie at one extreme of the continuum and pure services on the other. Most of them fall between these two extremes. Many of the products demonstrate the mixed nature. For example, if a product is purchased it is a good. But if it is rented, then the rentee is acquiring a service.
Figure 3: The Tangible-Intangible continuum for goods and services (Source: Shostack, 'Breaking Free from Product Marketing', Journal of Marketing, Vol. 41, No.2, April 1977).
Shostack (1977) has used the level of tangibility as a way of classifying services on a goods-services continuum. From the consumer point of view, the more tangible a product, the easier it is to evaluate in terms of quality, suitability, etc., whereas for the more intangible product the opposite is true. Figure 3 allocates products (both goods and services) on a product tangibility scale. For the products which are mainly services, the service provider needs to give more attention to the consumer's concerns about the product.
3.1. MAJOR CHARACTERISTICS OF SERVICES
Services have four characteristics that must be considered while designing marketing programs. Harris and Baron (1995) describe the following characteristics:
* Intangibility refers to the fact that large components of many services are immaterial or intangible and cannot be presented in a concrete manner to consumers prior to purchase. For example, a customer cannot touch an aerobic class prior to taking part and can only make a full assessment of the quality of the service offered after having attended the class. The customer has to have faith in the service provider. Different aspects of marketing become more important in service context. For example, a customer may rely more heavily on the advice of a friend when considering whether to take part in the aerobics class than a special price promotion which could more easily influence the sale of a tangible product.
* Inseparability refers to the idea that, in most service operation, production and consumption cannot be separated. That is, a service is to a great extent consumed at the same time as it is produced. It cannot be separated from its providers whether they are people or machines. For example, although the hairdresser may prepare in advance to carry out the service (gather the necessary equipments, undergo a specialized training, etc.), most of the hairdressing service is produced simultaneously as the customer consumes the service (sits in the chair). This characteristic raises various marketing problems primarily related to the fact that customers are involved in the production process. Service quality becomes difficult to measure and control.
* Variability or Heterogeneity is closely linked with inseparability as it is very difficult to apply quality standards to services to ensure an identical service output, when so much depends on who provides the service and when and where it is provided. For example, a travel agent may send two different customers to the same airlines flight to Spain, but receive contradictory feedback from different customers simply because one customer felt unwell just few hours before boarding the flight and it affected his overall perception of the quality of the experience.
* Perishability refers to the fact that unlike physical goods, services cannot be stored. For example, an appointment with a dentist at a given time on a given day cannot be stored and offered again to customers. If a customer cancels the appointment at the last minute or does not appear, that particular service opportunity is lost and the dentist will have lost his revenue. The problem of persihabilty is frequently compounded by the fact that the demand for many services is not steady. To overcome problems associated with perishability and uneven demand for services, careful attention is paid to production scheduling and demand forecasting. Pricing and promotion are used extensively to encourage customers to utilize services at a time convenient to the service operator.
3.2. GOODS AND SERVICES
The above characteristics of services are useful in differentiating goods and services. Services are distinctive due to its intangible nature. Intangibility is a state. Intangible products are often grouped up with the tangible products, but it is not possible to attain a physical ownership of intangibles in exchange for money. For instance, the automobile is a physical object, with a full range of tangible features and options. But it provides the service of transportation. Furthermore, economic concept of supply and demand and costs are difficult to apply to services because of their intangible nature. A service is rendered. A service is experienced. Unlike goods on the shelf of the shop, a service cannot be stored on a shelf, touched, tasted or tried on for size. Services are perishable and unlike goods, there are no inventories of services. Lack of ownership is a basic difference between a service and a good because a customer may only have access to or use of a facility for e.g. a hotel room. Payment is for the use of or hire of items. With the sale of the tangible good, the buyer has full ownership of the product. Goods are produced, sold and consumed whereas services are sold and then produced and consumed. Channels for distribution of services, where they exist, are short. It is difficult to define precise standard for services because of absence of mass production.
3.3. INTRODUCTION TO SERVICES MARKETING
In the early 1970s the marketing of services started to emerge as a separate area of marketing with concepts and models of its own based on the typical characteristics of services as discussed in the previous section. Because of these characteristics of the services, service marketing differs from goods marketing. The main difference between marketing goods and services was found to be the difficulty of developing a concrete, tangible service offering.
Palmer (1998) defines service marketing as a marketing activity which is focused on providing an identifiable service, rather than the generality of marketing decisions for tangible products of which service is just one element.
Grönroos (1980) proposed that the development of general theories for service marketing seems to have followed two quite different paths. According to one approach, the services offered by service providers ought to be changed in a more product-like manner, so that existing marketing theories could be applied. The other approach starts from a notion that services are different in comparison with physical products and holds that marketing concepts and models have to be developed in a more service-like direction.
The basic characteristics of services make the marketing situation and the customer relation of service firms quite different from that of a consumer goods company. For a consumer goods company, production and consumption have no contact with each other, and thus no influence on one another. On the other hand, a service consumer is a part of the production process of the service firm. Customer can be influenced by the production resources and the simultaneous consumption and production process. Customer's behaviour will also have an impact on the production process. So, the point here is that marketing of service is really important to initially pull the customer towards the organization, and later on by providing the amount of service expected by the customer should be offered in order to continue within competitive market. As a summary, it seems obvious that services do differ from goods as objects of marketing. Therefore, services cannot be treated like goods in marketing planning context.
3.4. EVOLUTION OF SERVICES MARKETING
Service organizations have moved through a series of stages in seeking to adopt marketing. Payne (1993), in a book describes the following main stages through which the service firms have evolved:
* Selling
* Advertising and communication
* Product and service development
* Differentiation and competitor analysis
* Customer service
* Service Quality
* Integration and relationship marketing
Banks are a good example to illustrate these developmental stages. Before 1960s banks did not much bother with marketing. As competition built up during 1970s they directed their efforts on selling, sales promotion and advertising. The emphasis here was on sales rather than customer satisfaction. In 1980s, emphasis shifted to the development of new products and new services. As a consequence of lack of patent protection in services, innovations were quickly copied and advantages from product development didn't last long enough. This resulted in similarities in bank products and a large and confusing range of products to sell.
During the early 1980s banks undertook more rigorous competitive analysis and developed more sophisticated marketing and strategic plans. They began to understand and implement positioning and market segmentation. They also started identifying strategic means of differentiation. In mid-1980s banks discovered the importance of customers and developed many customer orientated programmes. They aimed at making the service provider friendlier, and making the bank look warmer and attractive by changing its decor. This gave an initial advantage to early adopters of this approach but other banks quickly followed the same.
With the arrival of 1990s some banks reassessed their customer service programmes and began to practice service quality, based on identification of service quality issues and service quality gaps using a variety of techniques, including service blueprinting. This was accompanied by a controlled approach to customer and market research.
A new emphasis on marketing has emerged since last few years - relationship marketing. Relationship marketing draws heavily on the concepts of services marketing and also has applications to other sectors.
3.5. THE BREAK THROUGH FROM PRODUCT MARKETING
'Servitisation' is happening in almost all industries on a global scale. Companies are no longer making distinctions between goods and services and are involved to some extent in both. This is due the movement towards customer orientation and moving from old outdated focus on goods or services to the integrated bundles. The basic purpose of it is to place more emphasis on the service components in these bundles and less on the product. Swept up by the forces of deregulation, technology, globalization and fierce competitive pressure, both service companies and manufacturers are moving more dramatically into services.
Manufacturers have of course always been in services, but nowhere near the extent to which they are involved in them today. Mainly, industrial companies provided 'servicing'. Now there is a trend to create specialist services around the product they make, sell their expertise, and set up special companies and units for these new service activities.
Vandermerwe and Rada (1988) suggest that the servitisation of business has probably evolved in the following three overlapping stages:
Stage 1: Goods OR Services
In the old days the companies were being only goods oriented or service oriented. Basically, all the companies fit into one or other category.
Stage 2: Goods + Services
Then came advanced technology and other converging trends. It was obvious that most companies needed both goods and services. Manufacturers, in particular the computer companies, demonstrated the inseparability of goods and services. On the other hand, the classic service companies, like banks began to use more products to facilitate and deliver their services and take more control in the design specification of the products used to produce and deliver these services.
Stage 3: Goods + Services + Support + Knowledge + Self-service
Further enhancement was where the firms offered 'bundles' consisting of customer-focused combinations of goods, services, support, self-service and knowledge. Services dominated this era. Goods were the core in the hardware. Services are usually offered around the goods or delivered by the goods. Support ranges from training to remote maintenance systems. An important part of this is the support given to consumer to use products, produce their own services, co-produce and co-deliver services with the firm, or set up new operations. Knowledge is more than just data or information. It is know-how-enriched information like individual consumer problem solving activities. It is an accumulation of what is known by individuals within the company. Self-service has to do with having the facilitating technology with the object to deliver a better service.
Servitisation is largely driven by customers. In that sense it is no different from any other marketing driven approach. Previously, the focus was on the customer needs and satisfying these needs mainly through core business activities. Now the emphasis has moved from establishing and maintaining a relationship between the company and its customer base through broader offerings.
3.6. PARADIGM SHIFT IN MARKETING
From a management point of view the 4Ps may have been helpful at one time, at least for marketers of fast moving consumer goods. The use of various means of competition became more organized. However, the 4Ps were never applicable to all markets and to all types of marketing situations.
The 4Ps are well-known mostly because for its simplicity and its pedagogical vision that makes teaching marketing very easy. Researchers and marketing managers are also constrained by the simplistic nature of the 4Ps. As a result, the marketing theory and customers are the ones who are suffering.
Marketing is advancing in the direction where the concept of the marketing mix fits less well. In industrial marketing, services marketing, managing distribution channels and even consumer packaged goods marketing, a shift is clearly taking place from marketing to developing and managing relationships with existing and potential customers.
Grönroos (1997) stated that, even if marketing mix management is dying as the dominating marketing paradigm and the 4Ps model needs to be replaced, the concept of the Ps and others such as market segmentation and the marketing concept are still important. For example, advertising, distribution and product branding, are still needed, but they need to be supported with lot of other activities and resources. It can be said that what marketing ought to have is new perspectives, which are more market-oriented and less manipulative, and where the customer is the focal point as suggested by the marketing concept.
In fact, marketing mix as a general perspective evolved because at one time it was an effective way of describing and managing many marketing situations. Before the marketing mix there were other approaches. Now, as new approaches to marketing are developing, it has made this approach less helpful other than in some specific situations. Moller (1992), in an overview of the research traditions of marketing observes that, from the functional view of marketing "mix" management our focus has extended to the strategic role of marketing, aspects of service marketing, political dimensions of channel management, interactions in industrial networks; to mention just a few evolving trends.
In the early 1970s the marketing of services started to emerge as a separate area of marketing. Long-term relationships where both parties over time learn how to best interact with each other lead to decreasing relationship costs for the customer as well as for the supplier or service provider. To conclude, there is clear evidence that from a profitability point of view intelligent relationship building and management make sense.
New perceptions and new concepts in the marketing reinforced the need for change in the mainstream marketing approach. A new concept of marketing or a "new paradigm" with the basis of the 4Ps could be useful. It can be said that, the marketing mix of the 1960s is no longer applicable in the new era of the 21st century.
3.7. MODEL OF SERVICES MARKETING - THE 7 Ps
Products and services are different in many ways. Unlike consumer packaged goods, services are intangible and cannot be stored, transported or resold. In goods manufacturing, on the other hand, repeatability and systematically controlled production are the key variables of success.
Lovelock (1996) observes that the services marketing function in an organization is much broader than the activities and outputs of the traditional marketing department, requiring close co-operation between marketers and those managers responsible for operations and human resources. Therefore the traditional marketing mix has been expanded by the addition of three new marketing mix variables - people, processes and physical evidence.
The discussion on the 7Ps is based on the work of Booms and Bitner (1981) as they were the first to publish an article on the broadening of the traditional marketing mix to make provision for the intangible nature of services marketing. The variables of the marketing mix used for the services marketing are described below:
Product as a marketing mix variable for services comprises of the variables listed in figure 4. Lovelock (1996) viewed the service product as the technical outcome of the service. Churchill and Peter (1998) added that since services differ in the degree of tangibility and are highly influenced by the process and people involved when delivering the service, it is difficult to standardize services.
Service pricing - Lovelock (1996) defined price as one of the inputs used to form an expectation of a service before a customer makes a purchase decision. Price serves as a tangible signal that indicates what can be expected from a service provider. When determining a price, the service organization should also view it from the viewpoint of the buyer. Pricing decisions made without concern for the customer will usually result in a decline of customer satisfaction, sales and profits. Pricing as a marketing mix variable of services consists of the elements listed in figure 4.
Figure 4: The Marketing Mix for Services
Place - Lovelock (1996) described place as the distribution strategy for services needs to be efficient. Depending on the nature of the service and what the customers value, several distribution channels can be employed. The nature of the distribution channel employed depends on the type of service organization. Figure 4 lists the variables under place variable of the marketing mix.
Promotion - Lovelock (1996) said that the service organization communicates with its target groups with the aim to influence knowledge, attitude, and behavior. Thus, the face-to-face interaction of especially front-line staff with customers plays a very important role in promoting the service. Marketers should actively support and enhance a good service by communicating the benefits of that service to its target audience with the help of various types of communication channels and media. Promotion as a marketing mix variable for services consists of the variables listed in figure 4.
People - Lovelock (1996) viewed that the organization's contact personnel form an integral part of the process of service delivery. Palmer (1998) described that in the service industry all the staff act as marketers of the organization's offering because their actions have a direct effect on the output received by customers. If the customer feels comfortable with the particular service provider, and has trust and rapport with the service provider, it is a relationship that a competitor would find hard to break into. This makes the entire task of people planning extremely important in a service organization. People add value and a dimension to the marketing package way beyond the basic product offering. The people variable consists of an internal and external component. The internal people component includes various staff aspects such as training, discretion, commitment, incentives, appearance, interpersonal behavior and attitudes. The external component includes customers who may be asked to participate or interact actively in the process of service creation, delivery and consumption.
The service process - Lovelock (1996) said that the heart of the service is the experience by the customer of organizational policies, systems and procedures, which takes place in a real time. The marketer, therefore, has to plan the process of service deliver carefully, and plan what quality controls can be built in to ensure that customers are confident that about to expect each time they use the service product. This applies, for example, to banks, wholesalers, retailers and other dealers in financial services, fast food outlets; hairdressers and other service providers and even to professional services such as attorneys and management consultants. Brassington and Pettitt (2000) stated that processes can also involve queuing mechanisms, preventing customers from getting so impatient while waiting that they leave without buying; processing consumer detail and payment as well as ensuring high professional quality of whatever service they are buying.
Physical Evidence - According to Lovelock (1996) this marketing mix instrument is of particular relevance to dealers (of any particular product), or those who maintain premises from which a service is sold or delivered. Physical evidence for dealers includes some of the place-related elements - exterior elements such as parking and signage and interior elements such as design, layout, equipment and decor. In other service situations these elements will be different. For example, the physical evidence would relate to the hotel in which you stay, the stadium in which you watch a sport event or the lecture room in which you obtain a learning experience. Physical evidence is furthermore linked to the reputation of an organization, the physical state and appearance of office buildings, uniforms of personnel, furniture used in the offices, the organization's letter heads and modern technology.
In addition to the changes in the marketing mix variable the services marketing concept includes the recognition of a new role for marketing in service organizations as a result of the simultaneous production and consumption process and the resulting overlap in functional responsibility between operations, marketing and personnel. The services marketer must not only manage the exchange process and the variables of the marketing mix but must also be concerned with managing the total buyer-seller interaction process which encompasses other functional areas in the organization.
3.8.
STRENGTHS AND WEAKNESSES OF 4Ps AND 7Ps
4Ps
7Ps
Strengths
* More comprehensive, more detailed and more refined
* Broader perspective
* Includes people, process and physical evidence
* Signals marketing theory
* Simplicity and ease of understanding
* Good pedagogic tool, especially for introductory marketing
* Useful conceptual framework
* Ability to adapt to various problems
Weaknesses
* More complicated
* Extra variables can be incorporated in 4Ps
* Controllability of the three new variables
* Too simple, not broad enough
* Lacking people, process and physical evidence
* Lack of connection between variables
* Static nature of the 4Ps
Table 1: Strengths and Weaknesses of 4Ps and 7Ps (Source: Rafiq and Ahmed (1995))
3.9. SERVICE PROCESSES
The idea that "services are activities rather than things" leads Grönroos (1994) to a notion of services as processes. A service can be conceptualized as a process, rather than a thing, with a range of inputs, outputs and the substrate upon which they act. In many cases, people themselves are the elements being processed (the inputs), entering the system voluntarily to be transformed in some way by the service provider for example the hairdresser's customer. The output is the customer who has a haircut. Some services focus on processing information rather than people for e.g. accountancy services, with the output being the production of a set of accounts for the taxman. Because this type of service may not involve as much direct contact with customers, management attention would focus more heavily on backstage efficiencies - sophisticated computer systems and internal communications networks. A third category of services focuses on processing possessions rather than people or information, such as the car mechanic and dry cleaner, for example. The extent of direct customer involvement in the service delivery system might be limited to the physical delivery of the possession. The output would be the satisfactory transformation of the possession.
3.10. SERVICE ENCOUNTERS
The term 'service encounter' in services marketing is used most frequently to refer to the interpersonal relationship that develops between customers and service personnel during the service experience. Alternatively, Shostack (1977) provides a broader definition of the service encounter referring to it as the period of time during which a customer directly interacts with a service. This does not limit the encounter to interpersonal interactions but includes customer contact with physical facilities and other tangible elements. A single service encounter can affect a customer's total perception of a service organization. A service encounter can be an exchange between a service personnel and customer and to some extent also between two customers.
4. RELATIONSHIP APPROACH AS A FOUNDATION OF MARKETING
The term 'relationship marketing' was first introduced during 1980s. Leonard Berry (1983) was credited with originating it and according to him relationship marketing is the attraction, maintaining and enhancing customer relationships. Cravens (1995) viewed it as a paradigm that places the customer at the center of all enterprise actions.
Relationship Marketing may be a relatively new term for most marketers but it represents a refocusing of traditional marketing with a greater emphasis on the creation of customer value. Grönroos (1990) provided that marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises. The main objective of relationship marketing is not only to acquire customers but to keep them as well. This is in contrast with the transactional marketing approach which is stressed on the individual sale (and hence short-term gains), and in which dealing with customers is viewed solely as the responsibility of the marketing department. Relationship marketing represents a move away from transactional marketing and table 2 contrasts these two approaches. In the relationship marketing approach, customer satisfaction becomes the responsibility of everyone in the organization. Kotler (1992) concludes that companies must move from a short-term transaction-oriented goal to a long-term relationship-building goal. Relationship marketing recognizes the importance of repeat buying and a high level of commitment to the buyer.
Transaction Marketing
Relationship Marketing
* Focus on single sale
* Orientation on product features
* Short timescale
* Little emphasis on customer service
* Limited customer commitment
* Moderate customer contact
* Quality is primarily a concern of production
* Focus on customer retention
* Orientation on product benefits
* Long timescale
* High customer service emphasis
* High customer commitment
* High customer contact
* Quality is the concern of all
Table 2: Transaction Marketing vs Relationship Marketing (Source: Payne (1993))
There are many excellent examples of firms which have used relationship marketing programmes to develop customer loyalty. One successful example is the air miles scheme provided by various airlines. Consumers enroll in the programme and airline companies award Air Miles to these members when they purchase specified products and services. When consumers earn enough mileage credit, they are able to obtain travel awards. By doing this, the companies increase customer loyalty to their organization. This programme is heavily advertised and its sponsors communicate with the consumers by a book of incentives of the various offers. The secret of the success of such a programme is the interactive relationship between the sponsor and the customer.
The fact that relationship marketing is gaining focus nowadays is because of the realization that it is more profitable to retain the existing customers than running after new customers is today's maturing and competitive markets. The higher profits from existing customers come from larger share of purchases, recommendations and price premiums. The longer a customer stays with a company, a larger share of his/her business is likely to come to the company. Due to the closer relationships developed over a period of time, the company can understand the needs of the customer leading to greater customization of products which command price premiums. The happier the customer, he/she is likely to recommend the company's products and services to more people. It was found out that even in services marketing closer relationship with the customers enabled service providers to customize their services to the exact needs of the customers.
Recognition of the importance of relationship marketing has increased rapidly in the last few years. Companies are finding that they earn a higher return from resources invested in retaining customers than from money spent to attract new ones.
5. CONCLUSION
The marketing mix management paradigm with its 4Ps is an approach, which makes the seller the active part and the buyer and consumer passive. The concept of the marketing mix and the 4Ps of marketing was implemented basically by the goods oriented companies. Soon they became the unchallenged basic model of marketing, totally overpowering previous approaches to the marketing concept. Later on because of the competition many companies decided to diverge it's product from goods oriented to service oriented. For this purpose, the 4Ps proved to be restricted to some extent. A need for a new marketing mix for a service oriented firm was identified.
The concept of service marketing led to the extension of the 4Ps to the 7Ps. In this new model the consumers were considered as kings. More emphasis was given to what people wanted, needed, and how they were treated. The marketing function shifted from prominence on product marketing to service marketing.
Shostack (1977) identified the need to breakthrough from product marketing because the concepts of goods marketing were inappropriate when applied to the service business. The evidence on the break in marketing within service sector is conflicting. On one hand it has been suggested that service dominant organizations are less market-oriented than manufacturing firms. On the other hand many service organizations have certainly been highly market oriented. It is unreasonable to suggest that all are ignorant of or opposed to marketing. Some extremely successful service organizations, like hire car companies, industrial cleaning service companies and hotel groups have used marketing practices. As consumers are the centre of the marketing process, companies divide the total market into smaller segments and select the segments it can best serve. Their success comes from quality, service, reliability or supplying higher-value products for specific market niches. It is obvious that companies are marketing driven, in that they provide superior service and quality. By doing that many companies have achieved success. The companies showed drastic improvement in their market share and their profitability, if they laid stress on selection and implementation of a good marketing strategy. As the paradigm of marketing shifted from goods based to services based, the outcome for the companies was positive. It also proved good from the consumer's perspective. The consumers were now the focus of the market. All the management decisions revolved around what would be best for the consumer. The break from highly matured goods market to a service oriented market has indeed been good from the consumer of the product (both goods and services) as well for the companies producing these products.
While product and service quality is becoming the minimum requirements, the quality of relationship with individual customers is emerging as a proper measure of success. Trust and relationship commitment lead to customer satisfaction and loyalty. Relationship marketing characterized as a major directional change in marketing theory and a fundamental reshaping of the marketing function. As on today this is the most relevant aspect of the marketing theory practiced by many successful organizations. To conclude, service marketing and relationship with individual customers formed the basis of modern marketing concepts.
REFERENCES
* Shostack, L., 'Breaking Free from Product Marketing', Journal of Marketing, Vol. 41, April 1977.
* Kotler, P., 'Broadening the Concept of Marketing', Journal of Marketing, Vol. 33, January 1969.
* Kotler, P., 'A Generic Concept of Marketing', Journal of Marketing, Vol. 36, April 1972.
* Johns, N., 'What is This Thing Called Service?', European Journal of Marketing, Vol.33, No.9/10, 1999.
* Bagozzi, R., 'Marketing As Exchange', Journal of Marketing, Vol. 39, October 1975.
* Grönroos, C., 'From Marketing Mix to Relationship Marketing - Towards a paradigm Shift in Marketing', Management Decision, Vol. 35, Issue 3/4, 1997.
* Van Waterschoot, W. and Van den Bulte, C., 'The 4P classification of the marketing mix revisited', Journal of Marketing, Vol. 56, October 1992.
* Dixon, D.F. and Blois, K.J., 'Some Limitations of the 4Ps as a Paradigm for Marketing', Marketing Education Group Annual Conference, Cranfield Institute of Technology, Cranfield, July, 1983.
* Baron, S. and Harris, K., Services Marketing - Text and Cases, 1995.
* Fisk, R. P., Brown S. W. and Bitner, M. J., 'Tracking the Evolution of the Services Marketing Literature', Journal of Marketing Research, Vol. 69, No.1, Spring 1993.
* Bitner, M. J., Booms, B. H. and Tetreault, M., 'The Service Encounter: Diagnosing Favourable and Unfavourable Incidents', Journal of Marketing, Vol. 54, January 1990.
* Cowell, D., The Marketing of Services, Heinemann, London, 1984.
* Payne, A., The Essence of Services Marketing, 1993.
* Vandermerwe, S. and Rada, J., 'Servitisation of Business: Adding Value by Adding Services', European Management Journal, Vol. 6, No. 4, 1988.
* Petrof, J. V., 'Relationship Marketing: The Wheel Reinvented', Business Horizons, Vol. 40, Issue 6, Nov/Dec97.
* Leonard L. Berry, 'Relationship Marketing', in L.L. Berry, G.L. Shostack, and G.D. Upah (eds.), Emerging Perspectives on Service Marketing, 1983.
* Booms, B.H. and Bitner, M.J., 'Marketing Strategies and Organizational Structures for Service Firms', in Donnelly, J.H. and George, W.R. (Eds), Marketing of Services, 1981.
* Grönroos, C., 'Relationship Approach to Marketing in Service Contexts: The Marketing and Organizational Behaviour Interfacei, Journal of Business Research, Vol. 20, January 1990.
* Grönroos, C., Service Management and Marketing: Managing the Moments of Truth in Service Competition, Lexington Books, Lexington, MA, 1990.
* Lovelock, C. H., Managing Services Marketing.
* Rathmell, J.M., "What Is Meant By Services?", Journal of Marketing, Vol. 30, October 1966.
* Brown, S.W., Bitner, M.J., Fisk, R.P., 'The Development and Emergence of Services Marketing Thought', International Journal of Service Industry Management, Vol. 5, No. 1, 1994.
* Grönroos, C., 'From Scientific Management to Service Management', International Journal of Service Industry Management, Vol. 5, No. 1, 1994.
* Lauterborn, R., 'New Marketing litany: four Ps passé; C-words take over', Advertising Age, 1 October 1990.
* Kotler, P. and Bloom, P., Marketing Professional Services, 1984.
* Kotler, P., Armstrong, G., Saunders, J. and Wong, V., Principles of Marketing, 1999.
* Lovelock, C. H., 'Managing Services to Gain Strategic Marketing Insights', Journal of Marketing, Vol. 47, Summer 1983.
* Lovelock, C. H., Managing Services Marketing, Operations, and Human Resources, 1992.
Marketing Management - M08BS
