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Service Retailing & Not Product Retailing


SERVICE RETAILING

This post focuses on the retailing of services rather than the retailing of products. The service section of every economy deserves special attention since individuals spend more than 50 percent of all personal consumption expenditures on services.

Hairdressers, automobile mechanics, rental agencies, and appliance repair shops are all in business to sell their services to the final consumer. Other retailers offer both products and services to the customer. In addition, many retailers who concentrate primarily on the sale of products offer related services as well. Department stores offer alteration, gift-wrapping, and credit services to their customers. Appliance and furniture stores deliver products to their customer’s homes. Exhibit 1: Illustrates forms of service retailers.

This post will specifically discuss the differences between the retailing of products and the retailing of services, describe the types of service retailers and their strategic planning process, the effect of the risk associated with services on the consumer’s purchase decision, explain customer loyally to service retailers, highlight some of the problems associated with service quality and their causes, and finally, explain the services marketing mix, including distribution channels, pricing and promotion strategies.

Forms of Retailer Involvement in Services:

Many marketing principles apply to the marketing of both   goods   and   services.     For  example,   segmentation strategies and an analysis .on customers’ needs are important for success in both areas. Elements of the marketing mix are also similar for both product and service retailing.   Some ways that service differs from products are described next, along with a classification scheme that provides insights into the types of services that are available.    .

CHARACTERISTICS   OF  SERVICE   RETAILING

Four characteristics of services that distinguish them from  product  must  be  taken   into  account in  planning strategies:    there    are    –    intangibility,    inseparability, perishability, and variability.

Intangibility: The first difference between products and i services is the intangible nature of services – they cannot be seen or traced. That is services can be consumed but not possessed. The intangibility of services has several implications for the retailer.” The actual service cannot be protected by patents, nor displayed in the retail store and it is difficult to provide guarantees. The intangible nature of services also makes communication difficult and influences customer’s purchasing behaviour. Services must be tangibilised to the extent possible by using all tools in the marketing mix. Location, promoting, pricing strategies, personnel, and equipment lead to inferences about service quality.

Inseparability: Inseparability of services from their source leads to less standardization and uniformity, making quality control more difficult for the service provider. However, inseparability enables the service provider to customize his service to the needs of an individuals customers. The hairdresser, for example, may use his or her professional skills to tailor a hairstyle to the customer’s needs or unique facial characteristics. Due to inseparability, in many service establishments, other customers ar^ involved in the production process and can ingenue service evaluation.

Since   service  is  inseparable  from  their  sources, managers of retail operations often must be both production [mangers and marketing managers. Although machinery can sometimes be substituted for human service providers,

service retailing is usually labour intensive, thus, illustrating the important of selecting and training customer contract personnel.

Perishability:  The production and consumption of services are simultaneous.  Hence, they are perishable and cannot be invented.    The inability to carry inventories means that services cannot be mass-produced for sale at a later time. I Therefore, it is difficult to balance supply and demand by meeting demand in peak periods and attracting customers in slow  periods. Strategies  for overcoming this problem include differential pricing, increasing demand during slow ..sales periods, and hiring more part-time employees during peak periods.

Because    services   are   produced   and   consumed simultaneously and cannot be invented, a smaller capital investment is often required to open and operate a service tailing   business. The   lower   capital   requirements minimizes barriers to entry and often attract entrepreneurs who have limited resources but want to be in business, also prohibits them from bringing bought and resold by traditional wholesalers and distributors, resulting in shorter channels of distribution.

Variability: Services retailers are confronted with the problem of variability, or inability to standardize the end result purchased by the customer, because different human being performs services at different times under different circumstances. Even though there may be a detailed instruction in the manual for employees to follow, the service will still be performed differently from one time to another. Variability can be decreased by controlling service quality through better personnel hiring and training practices and setting up a formal .system for obtaining feedback on customer satisfaction.

CLASSIFICATION OF SERVICE RETAILERS:

Consumer products traditionally have been classified as convenience, shopping, especially, and unsought goods. .Classification schemes also grouped according to relevant marketing characteristics as a basis for marketing strategies. One classification system includes:

People-based vs. equipment-based
Customer presence
Personal vs. business
Service provider’s motives
Degree of customer contact.
People-Based Versus Equipment-Based:

Service can be classified according to whether the service delivery is people-based or equipment-based, even though most services involve both elements to some degree. For example, the services of a dentist or a day care center are people-oriented. All those who are involved in providing the service must be adequately trained and evaluated.   On the other hand, the services of a computer centers are equipment-based. The equipment should function properly at all times. However, in the absence of car wash personnel, customers should be able to understand operating instruction and to obtain assistance if needed. While the services of an airline are primarily equipment-based (i.e.  airplanes, terminals), they  also  require  travel  agents,  pilots,  flight attendants, mechanics, and other people to perform the service. Customer’s Presence:       The     extent     to     which     the customer’s presence is necessary provides another basis of classifying services.   The   customer’s physical presence is necessary for barber’s services, exercise clinics, and surgery. The customer’s mental presence is necessary for education or broadcasting services. Conversely, the customer need not be present for dry cleaning services,  or automobile repair, although there may be brief contact with the movie theatre, but does not require contact with the service provider to enjoy the movie. The management implication is that where the customer must be physically present, the service performed in a “service factory”, where customer satisfaction is  influenced  by  service personnel,  facilities,  and oil customers. Personal Versus Business:

Services can be classified as to whether they personal or business services.   Some service provides for both type of clients.    An attorney may supply personal services such as divorces, wills, and estate planning, and business services such as contract and product liability litigation. Likewise, a professional cleaning service may Mean both private homes and office buildings. The two sets •of customers may be seeking different benefits, and may have different criteria for evaluating service quality.

  Strategic Retail Management

Some service providers choose to serve only one cliental.   A delivery service might find business-to-business delivery more profitable than business-to-customers.   A bus line may choose to serve only individuals travelers, rather than accept a contract with a business.

Service Provider’s Motives:       The    service    provider’s motives provide another basis for classification (i.e. public versus   private   and   for-profit   versus   non-profit).      The marketing strategy, and perhaps the customer base, will vary for the two types of service providers.

Degree of Customer Contact: Finally, service providers can be classified on the basis of degree of customer contact. Customer   can   have   personal   contact   with   the   service provider   without   being   physically   present.      A   remote encounter involves no human interaction. For example, credit card services require no human interaction except when billing problems arise and when the customer requires about an account. Even these infrequent human contacts require well-trained, service-oriented personnel in order to maximizes customer satisfaction.

Indirect     personal     encounters     involve     verbal interaction but not face-to-face contact between the customer and the service provider.   For example, telephone operators maintain    contact   with    their   customers   primarily   by telephone.   Direct personals encounter take place when the customer interacts with the service provider on a face-to-face basis.   Cosmetologists maintain a high degree of customer contact and personal interaction with their customers. If this case, it is difficult to separate the service provider from the service itself, and the evaluation of service quality becomes more complex.

3. SERVICE RETAILING STRATEGIES

In order to achieve high levels of service quality, the retailer must incorporate a number of factors into the firm’s ‘ overall strategy. These factors include a quality – oriented corporate philosophy, quality-oriented training and organizational support for employees, a focus on the customer, and development of a service marketing mix that [results in high levels of customer satisfaction.

CORPORATE PHILOSOPHY

Customer satisfaction is the key to success in service marketing maximization of customer satisfaction this requires total employee commitment and the development of “quality culture”. Several factors must work together to achieve a “quality culture” in a service-retailing business.

Strategies for Service Retailing

1.   Quality-Oriented Corporate Philosophy

*    Commit to maximizing Customer satisfaction

*    Avoid mistakes and defects

*    Do not confuse the marketing department with the marketing function.

*    Take a long-view of the business

2.   Training and Organizational Support

*    Market the performance of employees.

*    Provide training that stresses customer interaction techniques and consistency in providing services.

Reared employees for producing quality services

Retail and Wholesale Management

3.   Focus on the Customer

*    Educate the customer about services.

*    Communicate polices, procedures, and qualification] the services, procedures, and qualifications of the service provider.

*    Match service provider and customer.

*   Help customer establish evaluation criteria.

4,   The Service Marketing Mix

*    Provide evidence of service quality.

*    Choose optimal distribution channels

*    Determine optimal pricing strategy.

*   Use promotional mixes to tangibles service and convey service quality

Avoiding Mistakes and Defects: Services retailers must be willing to settle for nothing less than zero defects.   Product manufacturers    traditionally    have    accepted    a    certain percentage of defective products under the assumption that

100 percent perfection is too costly, and customer complains when the defects are not caught.

Accepting defects as part of doing business cannot work in service environment, because defective services cannot be retrieved once they are consumed. The personal nature of service delivery process makes it more serious to have a defective product that can be exchange for a new one with little efforts. A defective services, on the other hand, may be personally embarrassing to the customer and may not be correctable. The expense of lost sales and the administrative problems of dealing with dissatisfied customers can be for more expensive than the extra investment required doing the job right the first time.

Don’t Confuse the Marketing Department with the Marketing Function: If a quality culture is to be achieved,’ serve provider’s department with the marketing function. Even though the marketing department may be assigned certain marketing-related responsibilities, everyone in the organization must be responsible and accountable for customer satisfaction because marketing and production of services cannot be separated. Thus the successful service retail organizations must recognize the service employee as the key to success. Service employees often have the authority to commit the retailer to production deadlines, the service to the unique needs of the customers, make decision relating to the handling of customer problems, and counsel customers about the best ways to utilize the service. Employees who are responsible for production deadlines should have input into scheduling the work. Otherwise, production deadlines will be missed and service quality will be deficient.

Take a long-run view of the Business:A third element of corporate philosophy that is critical in service retiling- is a long-run view of the business. Short-run cost reduction is suitable tactics if they do not damage long-term profitability. Likewise the service retailer must be careful not to out grow short-run capabilities in effort to maximize sales and profitability, adding new services and expanding existing services may be a good short-run competitive move, but can result in long-run customer dissatisfaction and lost sales if quality cannot be maintained in the face of rapid change.

TRAINING AND ORGANISATIONAL SUPPORT

Service employees often have direct contact with the customer and are critical to the service delivery process. Therefore, service retailers are really marketing the performance of their employees, leading to the success or failure of the organization. This suggests that employees be treated as the retailers’ internal customers. Their needs and wants should be researched and given a high priority in an effort to minimize employee turnover and increase productivity.

Because it is necessary to attain consistency in the production process, employees must be trained to produce very similar products using similar production methods. Policies and procedure should be thorough and easy to understand and tight organizational controls should ensure adherence   to   company   guidelines.      However,   service retailers  should  be  careful  not  to  apply  organizational controls in a manner that drives employees the freedom and flexibility to tailor the service to the customer’s needs-an advantage those service retailers have over product retailers. Training programs should teach employees how to interact with customers as well as how to provide the service. Customer’s needs and preference as they relate to the retailer’s services should also be addressed, perhaps through simulated customer contact situations.   The cost of training may seem substantial, but must be weighed against the cost of loss sales, lost profits, and image problems that may result from lack of training.

  Marketing Information System (MKIS) & Marketing Research

Finally, employees should be genuinely rewarded for producing quality services. Rewards may include monetary incentives, formal recognition of outstanding performance, or simple acknowledgement of the job well done. An important motivator for service employees is the satisfaction of having ultimate control of the quality of the service they produce, and being told that quality is good.

FOCUS ON THE CUSTOMER:

Given the customer’s higher levels of perceived risk, lack of adequate information on which to base a purposeful decision,   and   poorly   defined   service   quality   improve customer’s perceptions of service quality.

Educate Customers About the Service:   First   the   service retailer can educate customers about the service, i.e. which services are best for them as well as when and how to use the service.   For example, a pest control company can explain the different pesticides they use, the different options they offer for controlling pests, possible harmful effects of the pesticides and how often treatment is needed.    Such an explanation will enable customers to make better decisions and reduce their level of perceived risk. Some retailers may even find it advantageous to teach customers when they should perform the service for themselves-and when they should use an expert. Often, when a retailer does this extra. unexpected things over the above the customers expectation, the customer consider the retailer’s service to be superior.

Educate Customer about the nature of problem: The service retailer may educate customer about the nature of the problem that the service is intended to solve.   Dry cleaners, for example, may use visual aids to describe different kinds of stains or fabrics, and the cleaves that a given stain can be remove without damaging the fabric.   Medial practitioners may use brochure diagrams- of human body, and videotaped presentations to explain problems to patients.

Communicate Policies, Procedures and  Qualification: Customers perceptions of service quality can be improved by explaining service retailing policies and procedures, and informing   the   customers   about   the   service   provider’s professional  qualification. Informing  customers  about policies regarding warranties, guarantees and money-back refunds will risk perceptions.   Some policies may not make sense to the customer and may even be a source of irritation.

Explaining the reasons for these policies can make them more potable and increase overall satisfaction. The display of professional certificates, diplomas, and commendations for providing excellent service will inform customers about the service provider’s credentials as well as reinforce positive service quality perceptions.

Match Service Provider and Customer: Customers tend to develop loyalty and a sense of confidence in service providers they associate with the service. Therefore perceived risk can be reduced by assigning the same service provider to a given customer whenever possible. This strategy will enable the service provider to establish a personal relationship with the customer, learn the customer’s needs and wants, and tailor the service to the individual customers.

Helping Customers Establish Evaluation Criteria: The service retailer can help the customer establish the criteria by which services are to be evaluated. For example, a hairdresser may suggest to a customer that the ideal hairstyle complements facial features and requires little time and attention. Once these criteria are agreed upon, misunderstandings about what constitutes good service should not occur. Also the service retailer will know the criteria on which his services are to be evaluated and can feel reasonably assured that satisfaction would result if he or she does the job properly.

THE SERVICE MARKETING MIX:

The service marketing mix consists of managing four variables:

1)       The service delivery process

2)       The channels of Distribution

3)        Pricing

4)        Promotion.

Each of them will be discussed. These four variables can be coordinated to maximize service quality and customer satisfaction (See Exhibit 3).

The Service Delivery Process: The service delivery process is a primary  determinant  of perceived  service  quality. Service retailers can influence customer’s service perceptions in a positive way by providing evidence of service quality and by managing supply so that services are provided promptly and efficiently.

Visual aspects of office or interior decor can enhance service customer’s perception of service quality, attractive uniforms worn by:

The Service Marketing Mix

Service providers, company stationary’ and signs, and advertising are coordinated to portray a consistent image and achieve maximum effect. This sense of sight is the most dominant aspects of the service delivery that provide strong clues to the quality of the service.

The sense of meaning is the second most dominant sense. Therefore, it is important qualified and use correct diction and grammar, background music should be appropriate for the customers served. The store layout also affects service quality requirement. In a product-retailing environment, layout refers to variables such as merchandise arrangement on the sales floors, cash register locations, and traffic patterns throughout the store. In a service-retailing environment layout refers to getting the customer to the correct office, department, or service area with a minimum amount of confusion. Landmarks such as plants, statues, and printings can help customers find their way around service facility. Movement around the facility is also easier to the setting as is similar to others with which the customer is familiar.

Company names can serve as “brands” and thereby tangibles the service in much the same way as visual images. The “brand” should set the company apart from competition, communicate the company’s reason for being, possess a tangible quality, and like the most important services to specific brands, to each other, and to the overall company brand.

Other details of the service encounter that provide evidence of service quality include the service employee’s ability to answer questions, account statement that are easy to read, and services that are delivered at a designated time. Temperature, lighting, noise, design of furniture and facilities, seals arrangement, and interpersonal distances also influence customer’s service quality assessments.

In addition to tangibles of the service, custom’s service quality perceptions are strongly influenced by the retailer’s ability to supply its services promptly and efficiently. The ability to provide quality services often entails reshaping supply to account for fluctuations in demand. For many retail services, supply can be reshaped by hiring part-time employees during period of peak demand and by cross-training existing employees. In some cases, substituting equipment for human labour can reshape supply. The personal nature of services, however, dictates that service automation be used with caution. Retailers must, therefore, know what part of the service can be performed high-tech machines and what should be performed with “high-touch” employees. The answer to the question depends on understanding of the service, the retailer, and the customer before the decision can be made.

Channels of Distribution

Production of a service quality occurs at the point of consumption. Consequently service business is often unable to provide convenience to the customer while achieving the economics of scale inherent in centralize production facilities. Some retailers are able to overcome these limitations by combining centralized production with multisite distribution. Dry cleaners, for example, often produce the service at a centralized production facility and distribution the cleaned clothes at various retail locations across town. Sometimes, additional economics of scale can be achieved through the sharing of production facilities. For example, multiple dry cleaning companies may share the same cleaning equipment, or airlines may share the same airport terminals and baggage claims areas.    The service retailers can also compensate for the inability to achieve economics   of   scale   through   centralized production   by combining  complementary   services  into  one  production facility.  For example, optometrists often share office space with optical dispensaries.

  Retailing And Retail Management Production

Sometimes, economics of scale can be achieved by encouraging customers to travel longer distance, thereby minimizing the need for decentralization of production and distribution of services. For example, coupons and other price discount offers can be extended to distant customers. Service retailers can also achieve economics of scale by reducing the range of needs satisfied by the service. For example, an automobile repair service may specials in electrical, transmission or engine works.

Some banks have taken a novel approach distributing service away from a centralized facility, by converting armored car into mobile banks to take into areas often ignored by banks such as factory sites, public institutions. and housing estates.

Pricing: Pricing may be one of the most challenging tasks for service retailers. Service pricing strategies tend to be based on the cost of providing the service more than on the demand of the service, or the price charged by other competitors. However, the unique characteristics of services make it difficult to determine the cost of providing them.

Because production costs are difficult to determine, service retailers often use standard prices based on overall costs and projected demand levels. In this way, a given service delivery costs more than anticipated, the lost wilt-be offset by another, more profitable service deliver. When costs are difficult to estimate, prices maybe quoted in a range. The final price will be determined after the service has been delivered and costs can be estimated more accurately.

Pricing strategies can be used to reshape fluctuations in demand. For example cinema houses level out demand by offering afternoon matinees at reduced prices in off-seasons. Pricing strategies designed to level fluctuations in demand are often combined with special promotions, such as professional sports teams offering reduced prices and free T-shirts to encourage attendance at middle-of-the-game.

.  The   use   of   pricing   discounts   to   smooth   out fluctuations demand should be used with caution. However, because services are characterized by experience and credence properties, the purchaser has little information available during the search stage of the decision making process. Therefore, in the absence of better information, however prices may signal the customer that the service is in some way inferior to the higher priced services offered by competitors.

One aspect of pricing that is less obvious to customer, although it does increase the retailer’s expenses, if found in retail banking. Some banks offer free current accounts, and providing free information service.

Promotion:

Because services are low in search properties, the first-time purchaser of services has little information on which to base a decision, and is likely to use price and the tangible aspects of the service as clues to service quality. Service retailers can “tangibilise” the service through visual representations. In-store signs also may be used to increase the degree of tangibility and inform customer about the service.

Service purchasers rely heavily on word-of-mouth communications for information about the services search properties. These interpersonal communications are the single most important promotional tool available to the service marketer.     Therefore,  favourable  word-of-mouth communication should be stimulated to the greatest extent possible.     This  may  be  achieved  through  the   use  of advertisements that contain testimonials, writing thank-you letters to satisfied customer and other sources of favourable communication,   and  marketing   aggressively   to   opinion leaders.   Brochures business cards, and information prices e.g. magazine containing articles about the service-rated issues) can stimulate interpersonal communication. Satisfied customers can be encouraged to tell a friend and pass along these materials.

Word-of-mouth communication and the quality of the face-to-face encounter can be stimulated through mini-encounters. Mini-encounters are a series of communications that build awareness of the service retailer, creating a feeling of trust on the part of the customer, and increase the customer’s knowledge about the nature of the service and how the service transaction can be expected to occur. Each min-encounter should reinforce every other mini-encounter and said similar messages and imagers to the potential purchaser.     Example  of mini-encounters  includes radio commercials,  letters,  brochures  relating  to  the   service, birthday   and   Christmas   cards,   information   newsletter, signage and uniforms.

The service provider should make the mini-encounter increasingly personal in nature. For example, radio commercial may be used initially to make the potential customer aware that the service is available, followed by direct mail to inform customer about the nature and,, availability of the service and. finally, a telephone call to the potential customer. A pest control company who would like to check a potential customer’s home for pests might use this approach.

Sales promotions, such as coupons and free visit, may be used as short-run price decreases to stimulate trail use, build sales, counter competitive activity, and smooth fluctuations, in demand. Since customers often equal price with service quality, care should be taken not to dilute the service retailer’s quality image.

Finally, some service retailers are able to achieve economics of scale in promotion when the outlets are identified and members of a large group and when the services are consistent across providers. This can be done by advertising on a national basis to take advantage of the rate structure available to national advertisers.


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