The subtle science of service marketing...

Nov 07, 2016 • Features • Management • management • Blumberg Advisory Group • selling service

Michael Blumberg, President of Blumberg Advisory Group explores the nuances of marketing services and how to get it right...

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Service executives often struggle to grow their businesses when they try to apply product-marketing concepts to service marketing.

The 4 P’s marketing mix is one such concept that works great for products but not for services. It is based on the theory that the success of a company’s marketing program is based on how well the company manages strategies and tactics related to product (i.e., design, form/factor, etc.), price, promotion (e.g., sales, advertising, etc.), and place (i.e., distribution).

The problem is that these 4 P’s do not always apply to services. Service products are intangible and difficult to describe, so they can be challenging to promote. Another problem is that place has a fuzzy connotation in service marketing because there are multiple entities involved in service distribution.

The perception a customer has about a service provider is what influences their decision to work with that service provider.

Sometimes they cooperate, other times they collaborate, and still other times they compete. Services can be offered by one entity, ordered through another, and delivered by a third. Without well-defined product, promotion and place strategies, all that is left is price and that becomes a slippery slope for service marketing. Sales and marketing can never be just about prices because customers will always find a way to negotiate price.

In order to achieve results, service executives instead need to master three fundamental or strategic concepts about service marketing. First, perception is just as important as reality. The perception a customer has about a service provider is what influences their decision to work with that service provider.

Customers need to trust that their service provider has the capability to deliver service before it is actually delivered.

Second, customers pay more for services over the lifetime of a product than they do when purchasing the product itself. In fact, they may pay as much as 8-10 times more for services than what they originally pay for the product.

Clearly the dollars can add up. Finally, there is a relationship between “value in use” and time. Value in use is the cost to your customer in absence of the service. Some services are mission critical. If they are not performed in a timely manner, the customer may lose money by not having the service available. Seeing this connection allows service marketers to effectively price their services and articulate the value of what they provide.

By mastering these strategic concepts service providers will begin to observe a shift in the way they think about service marketing. In fact, only by changing their mindset can they hope to become more effective in implementing strategies that lead to higher revenues, greater profits, and increased market share. Service providers who go through such an evolution understand that the Successful Service Marketing™ mix is actually based not on 4 but on 7 key principles.

These principles are:

PORTFOLIO:

Often described in terms of a service-level commitment, such as 24/7with a four-hour response time. The more distinctions a service provider can make to define their service portfolio, the more likely they will be to fulfill the needs of prospective customers.

PROVIDER:

Tangible elements of the service infrastructure, such as a call center, self-service portals, enterprise systems and service technology that make it possible to deliver on the promise of the service portfolio.

PROCESS:

The steps customers must take to request the service, and the tasks that occur to deliver the service. For example, performing front-end call screening and diagnostics before dispatching a field technician.

PERFORMANCE:

Evidence that the service provider can deliver on your promise, such as KPIs, customer satisfaction results and customer testimonials.

PERCEPTION:

The ability to win business and retain satisfied customers is based on the service provider’s ability to influence the perception that current and prospective customers have of them. This goes beyond simply promotion through advertising, branding, and communications. It gets to the essence of who are service provider is, what they stand for, and how they portray themselves in the market.

PLACE:

Services distribution channels can be complex. Quite often, consumers can purchase service from one place, order or request it from another place, and have it delivered to them at a third place (e.g., onsite, depot, remote, etc.). Sometimes it’s the same company delivering this service. Other times it’s not. Regardless, the service marketing mix must deal with these complexities.

PRICE:

Of course, there is always the issue of price. The important thing to remember is that price is a function of value in use and perception that consumers have of their service provider (i.e., expertise, experience, capability).

There are just a few more concepts that service providers need to learn if they are going to win at service marketing. First, they have to know their market. Service providers obtain this knowledge through market research. If they know who buys, what they buy, and why they buy then they can sell more service to customers, to more customers, and get them to buy more often.

Market research also provides the insight needed to communicate effectively with current and prospective customers. It helps determine what messages, what images, what ideas will resonate with them and make them want to buy. Marketing is about taking a need and converting it into a want. You may need a watch to tell time but you want a Rolex because of the status and prestige associated with owning one. So when you have really good market research of who buys, what they buy and why they buy, you can construct your message in such a way that you turn a need to a want.

Many companies price their services on the basis of either cost-plus or competitive pricing strategies

Good market research not only helps in creating a service portfolio customers want but supports in developing an optimal pricing strategy for that portfolio. Many companies price their services on the basis of either cost-plus or competitive pricing strategies. With cost-plus pricing, you calculate what it costs to deliver service and then mark up that amount to cover you profit. With competitive pricing strategies, you conduct market research to find out what your competitors are charging and then price your services at a lower amount.

A third type of pricing strategy is called value-in-use pricing. It involves measuring the economic value or loss to the customer of not having the service available in a timely manner. This can be significant. For example, a manufacturing facility may lose millions of dollars every hour its machines are down. Therefore, it may be willing to a pay premium for faster service.

Market research can help determine whether a service provider should pursue a cost-plus, competitive, or value in use pricing strategy.

The final aspect to winning service marketing is called invisible selling. This is based on the premise that companies win service business not by pushing their offers onto prospects, but by pulling customers towards them. One way is through indirect marketing as opposed to direct selling. Indirect marketing includes publishing articles or white papers that demonstrate that the service provider understands the problems companies in their market are experiencing and that they have solutions. Other forms of indirect marketing involve using social media and public speaking opportunities to influence others to seek out the service providers’ expertise.

When companies put all the elements of a Successful Service Marketing™ program together, when they fully understand the strategic concepts of service marketing, when they effectively apply the seven principles of service marketing, when they learn how to optimally price their services, and when they use market research effectively, they achieve phenomenal results. Their service-marketing program becomes successful, their sales take off, and their profits skyrocket.