The growth in the service economy is widely recognized and increasingly contributes to the economic development of many regions. The nature of services has made them diverse and therefore difficult to define (Gilmore 2003). However, there have been many attempts to describe services and how they contribute to the market offering and the economy. This article will explain why the product/service dichotomy in marketing theory is no longer sustainable. It will also explain how services are not different and how marketers just need to look beyond ‘goods’ and take a more holistic view of the market offering. The article will look at service marketing in General Electric Gas.
General Electric industry is a financial service company that deals with power generation, processing water, consumer financing, and industrial products. It also has several entry-level corporate leadership programs in communication, engineering, finance, information technology, and manufacturing as well as sales and marketing. This company commits itself to achieving customer success worldwide.
Marketing of services is not different from product marketing but what the marketers require to do is to look beyond goods and take a more holistic view of the market offering. Services just like the products need to be of high quality to attract more customers (Lovelock 2010). They need to be promoted to create customer awareness and convince them to buy. Services also include contemporary issues such as packaging and warranty. The physical product or the core service is the most important element in the total bundle of satisfaction but sometimes the element is perceived by customers to be similar for all products. Services, just like products, have the market mix which the marketers use to get an edge in the market. Strategies like segmentation, targeting, and positioning are also done in the service market. Whatever makes the services different from products are their characteristics.
Characteristics of services
Characteristics of services offered by the General Electric Company such as the corporate leadership programs and consumer financing are different from the characteristics of the product.
Services cannot be seen, touched, or experienced by our senses. Due to this, customers cannot shop for them as they would for products. They cannot be picked up, examined, and evaluated. The pre-purchase stage is important because a customer can assess the quality and reliability of the service (Crane, 1993). The service marketers must compensate for the customer’s inability to examine the service physically by providing evidence of its quality, thus building a reputation for reliability. General Electric Company has overcome this challenge of intangibility by building a good reputation which makes customers associate it with high-quality service provisions. Problems associated with intangibility can also be overcome by identifying services with a tangible label.
A service cannot be separated from its provider or deliverer. In General Electric Company, a customer’s contact with a salesperson is an important channel in the distribution of the company’s products. The inseparability characteristic results when the customers have to go to the company’s outlet to get the services. The involvement of the customer in the production and delivery of the service means that the service provider must exercise care in what is being produced and how it is produced. Proper selection and training of customer contact personnel are necessary to ensure the delivery of quality.
Although General Electric Company may sell and deliver the same services, the augmented services they dispense are not identical from outlet to outlet. No service business can have precisely the same standard of service in every outlet at every moment. Sometimes variability could result from poor training and supervision, lack of communication and information, and general lack of regular support. Due to the difficulty in standardizing a service from one outlet to another, the company needs to set measurable standards for quality services. It is also important to pay particular attention to training and motivating its staff to meet and exceed those standards.
Services are highly perishable because they cannot be stored. Hours, when the salespeople are idle in the General Electric Company, cannot be used to provide quick services in a day when the company has many customers to serve. Another characteristic of a service is that its demand fluctuates considerably with seasons. The demand for General Electric Company services also fluctuates just like that of other companies. For example a day before a holiday, the company receives more customers than other days (Cowell, 1977). Fluctuations in demand characterize service organizations and may pose problems where these fluctuations are unpredictable. Therefore, strategies need to be developed so that a better match between supply and demand can be produced.
Elements of the marketing mix are the basis of any marketing strategy of a firm, giving it the baseline for launching its products to a particular market niche. The mix “establishes the strategy of the brand in a systematic and structured manner” (Zeithamel, Bitner & Gremler 2009). Compared to the traditional marketing mix which includes the product, price, place, and promotion, the marketing mix for services has been expanded to account for additional complexities due to its specific features and characteristics. Zeithamel, Bitner & Gremler (2009) argue that service customers often look for the tangible cue to help them understand the nature of the service experience.
This is anything that is offered to satisfy a want or need. It involves a decision on various variances like a brand name. A service must deliver a minimum level of performance to ensure the success of other elements of the marketing mix.
This refers to the amount that a customer has to pay to acquire a service. This depends on factors such as cost of production, segment targeted, the ability of the market to pay, and demand and supply of competing and substitute products. Pricing involves a decision on the retail price and on dealer and retail margins that need to be provided to the channel partners. Pricing can also be used as a tool to promote differentiation and enhance the image of the service.
A company should decide on how and in which manner it wants its services made available to the final consumer profitably. In every industry, catching the eye of a consumer and making it easy for him to buy a service is the main aim of a good distribution strategy. Organizations have to strike an ideal balance between the cost to the organization and consequent convenience to a target consumer. The distribution strategy should ensure that services are easily accessible so that a large number of people can buy them.
This involves all the activities undertaken to make the service known to and preferred by both the user and the trader. This can include advertising, word of mouth, press reports, and direct marketing.
This is anything tangible that is associated with a given service. This may include buildings that an organization occupies or even the appearance of the staff. The need for physical evidence within the marketing mix arises directly from the typical intangible nature of the service. The provision of physical evidence is most obvious in the product and place component of the marketing mix and also in the promotion. Market mix and brand building relate in a way that the former makes the latter look tangible; hence the target market niche can find what to relate to. Building an image and brand is important because it reduces risks and emphasizes quality (Swartz, 2000).
The need for physical evidence is also important in the context of promotion. The problem facing service marketers is that they have no physical product to present to the customers. Thus, from a marketing perspective, promotion must try to develop a message and form of presentation which will make a service seem more tangible. The General Electric Company has overcome the problem of intangibility by building a good brand name and image. This has resulted in customers perceiving quality for the services provided by the company.
The process is concerned with how a service is delivered, including business policies for service provision, procedures, and the level of mechanization. There are several reasons why the process is important. First, the heterogeneity of services raises the issue of quality management and control. Secondly, inseparability suggests that the process of providing the services is highly visible to the customer and thus needs to be flexible enough to accommodate the potential demand variations. Thirdly, the intangibility of the service means that the process by which the service is provided will often be an important influence on the consumer’s assessment of service quality. The main concern with the process is typically in the distribution but it is also relevant to price decision making.
In delivering General Electric financial services, the intangible nature of the service means that there is nothing physical to the consumer. The consumer only pays for a bundle of benefits and thus the distribution channel should put a lot of emphasis on these benefits. The variability of service quality leads to pressure in service delivery in financial institutions, especially for services like money transmission. For other services like financial advice, it is a bit complex to automate, although recent development in the expert systems is assisting with the automation of more complex services. The process is important to price due to its impact in monitoring the measurement of production cost. Careful attention to the process of delivering a service can be of value in understanding the nature of costs and thus developing a sensible approach to pricing.
The people factor in the marketing mix emphasizes the important role played by individuals in the provision of services. Consumers sometimes find the precise details of services difficult to understand. The provision of information and purchase of services depends on the interaction between a consumer and a company’s representative. The purchase decision is highly influenced by how consumers perceive the staff that they deal with and how they interact. The people who provide a service affect how consumers see the product, how it is promoted as well as delivered. The people component of services is also commonly associated with personal selling which relates to both promotion and place elements of the marketing mix. It is also relevant to the product element because of the mix, as it can have a significant impact on the quality of services provided.
Market segmentation involves the process of determining what separable and definable groups of clients exist in the market for a specific type of service. Segmentation creates opportunities for the smaller firms offering ways to the large markets and thus it is a tremendous potential threat to the larger incumbent. Through segmentation, new entrants can get their way to become the market leader. Segmentation helps a firm to divide a general market into smaller submarkets so that it can get closer to the customer. One of the pre-conditions for segmentation is the existence of a gap in a market (Nargundkar 2006). A market gap exists if customers either believe they have needs that have not been specifically and currently fulfilled by competitors in the market. The other pre-condition is a market gap which exists if the amount of business that can be obtained from these prospects or customers is potentially profitable enough to warrant the necessary investment.
There are three types of segmentation which include corporate, product, or service market and tactical segmentation. Big organizations like General Electric practice all three types while smaller organizations usually practice product market and tactical segmentation. Incorporate segmentation the focus is on deciding what industries to compete in and what broad types of services to supply. The organization sets SBUs and business models to implement this type of segmentation. The second type of segmentation focuses on the broad service market. This focuses on the types of services to be offered in the market. The third type of segmentation is tactical which deals in the implementation of the customer value approach to marketing.
A competition perspective can be used to describe the relationship between the three types of segmentation. Corporate segmentation deals with the “what” of competition. It focuses on what industry, what strategy, and what business model can be used to make the company competitive. Long-term horizons and large investments typically characterize this form of segmentation. It focuses on “which types of services and which type of broad types of customers the company will target to get an edge in the market” (Parasuraman & Berry 2004, p.169). Tactical segmentation deals in the “who” and “how” of competition and It focuses on who precisely are the target customers and how they will be served. Short time horizons and tactical marketing programs characterize this form of segmentation (Parasuraman & Berry, 2004).
General Electric Company uses the three types of segmentation. The company is organized into more than twenty SBUs like lighting, GE aircraft, medical systems, and power systems among others. Each SBU focuses on various service markets as lighting focuses on home lighting, business lighting, lighting systems in Austria and Germany, and other countries. With each service, marketing managers tactically segment customers. For example, business lighting is segmented into key accounts, major accounts, and special projects.
The logic behind market segmentation is that it will be to the financial benefit of the organization to offer different products and services to different segments of the market. This is possible when customers place greater value on different services of products configuration than its cost to create this variety. It is also “possible when the organization bases its strategy on economies of scope or economies of focus”, thus developing an ability to focus on specific areas of marketing (Parasuraman & Berry 2004, p.77). Segmentation’s financial benefits are also achieved when identifiable groups of consumers exist in the market.
There are two broad styles of market segmentation. The first style is to identify the different types of customers that naturally exist in a market (Parasuraman & Berry 2004). Customers are grouped according to their characteristics and needs. The second segmentation style is creating artificial groups of customers that better fit the way the organization carries out its business. When customers are segmented primarily according to their needs, it will clearly show how services will be designed to satisfy these needs. For consumer marketing, the segmentation bases include “variables where the market is divided according to such variable as age, income, gender, and occupation” (Parasuraman & Berry 2004, p.174). A market can also be divided geographically where variables like geographical location, rural versus urban area are considered (Parasuraman & Berry 2004). Psychological segmentation includes variables such as customer values and beliefs that affect their lifestyle and hence purchasing behavior. Behavioral segmentation can also be done where variables related to customer behavior concerning a specific product category are considered.
This is an undifferentiated approach that assumes that all customers in the market have similar needs and wants and that can reasonably be satisfied with a single marketing program. This strategy works best when the needs of an entire market are relatively homogenous. It is advantageous in terms of production efficiency and lower marketing cost.
This involves dividing the total market into groups of customers having relatively common needs and attempting to develop a marketing program that appeals to one or more of these groups. It is necessary when customers’ needs are similar within a single group and differ across groups.
This involves focusing marketing efforts on one small, well-defined market segment or niche that has a unique and specific set of needs. This strategy requires that firms understand and meet the needs of target customers so completely that despite the small size of the niche, the firm’s substantial share makes the segment highly profitable.
A target market consist of a group of potential clients who share certain characteristics, tend to behave in similar ways, and are likely to be attracted to a specific combination of products or services (Crandall, 2002). A target market represents a defined market segment that contains identifiable clients who demand or represent a potential demand for certain services. In selecting a target market for a company’s services, a marketer needs to determine their objectives, understand what motivates a group of clients and assess whether the target market can be reached in a financially sustainable way. The target of the leaders at General Electric Healthcare was originally based on “solutions at large national accounts which bought largely on price” (Crane, 1993, p.98). These clients were not good candidates and thus the company refined its target customer profile to focus on multi-hospital systems. Through this targeting, General election health care narrowed its focus to just 150 of the roughly 400 multi-hospital systems in the United States healthcare market. The result was to be “50 accounts as the primary attention, including customers ready to enter into a contractual relationship with the company” (Crandall, 2002, p.99).
Target markets can be identified by the characteristics of the clients a company wants to serve and the type or level of business activity it wishes to support (Crandall 2002). Once a target market is selected, it is important to determine if that market is being reached and what impact the provision of services the company has on the market. In targeting the market a company can use the following strategies;
This strategy is used by a firm whose capabilities are tied to the needs of a specific market segment. The firms using this strategy are those that deal in a particular service category. This strategy makes the firm understand the customers’ needs, preferences, and lifestyles. The firms also strive to improve quality and customer satisfaction by continuously improving their services to meet changing customer preferences.
Firms that have multiple capabilities in many different product categories use selective targeting successfully. The strategy has the advantage of diversification of a firm’s risks to reach the most attractive market segment opportunities.
Mass market targeting
Large firms can execute mass-market targeting which involves the development of multiple marketing programs to serve all customer segments simultaneously.
Service specialization strategy
Firms engage in service specialization when their expertise in a service category can be leveraged across many different market segments. A firm can adopt service specifications to match the different needs of individual customer groups.
Firms engage in market specialization when their intimate knowledge and expertise in one market allows them to offer customized marketing programs that deliver needed services and provide solutions to customers’ problems.
Service’s or product’s position refers to a brand’s subjective or perceived attributes about competing brands. The perceived image of a brand is the property of the consumer’s mental perception. Therefore, the advertiser’s main concern should be with the subjective perception of his brand as seen by a target consumer (Crane 1993). The essence of the positioning strategy is to create the desired perception and make a brand occupy a particular point or space in the target consumer’s mind.
General Electric Company has positioned itself to serve the market with high-value services which resulted in high growth. To increase the “company’s perceived value”, the brand managers strive to develop innovative technologies that support the company’s promise of substantiating the premium value and effectively positioning itself in the marketplace (Crane 1993). The brand managers also develop long-term service road maps to ensure a technology continuum that is reflective of customer needs
To achieve a good positioning strategy, first, the idea should be centered on the functional attributes to get them registered in the customer’s mind. Secondly, marketers should realize that brand positioning is not what is done to a brand but what results in the consumer’s mind (Crane 1993). Thirdly, the brand positioning should focus on functional benefits valued by consumers rather than those valued by the managers. In positioning the company’s brand, one should identify the customer’s needs in the different segments of the market and identify the most attractive segment. One should then develop the brand to own a functional benefit to the target market.
Strengthening the current position strategy
The key to strengthening the current product or service position is to monitor constantly what target customers want and the extent to which customers perceive the product or service as satisfying those wants (Crane, 1993). This strategy is all about continually raising the bar of customers and being perceived by customers as the only firm capable of reaching great heights.
At times declining sales or market share may signal that customers have lost faith in a service’s ability to satisfy their needs. In such cases, a new position may be the best response because strengthening the current position may accelerate the downturn in performance. Repositioning involves the change in all or some of the marketing elements.
Reposition the competition strategy
In many cases, a company should reposition the competition rather than change its position. A direct attack on a competitor’s strength may put its services in a less favorable light or even force the competitor to change its positioning strategy.
Marketing of services is no different from product marketing. What the marketer needs to do is to look beyond the product and take a holistic view of market offering. This article has explained the special characteristics of services that a marketer should consider when marketing. It has also looked at the extended marketing mix of services and how a marketer should use them to be competitive in the market. Finally, the article has looked at segmentation, targeting, and positioning done in the service market.
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