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SERVI(L'ES MARKEYING

FOR THE SMAI.I.ER FIRM
Edward W. Wheatley

Ernest B.Uhr
East Carolina University

ABSTRACT

Concepts being developed in the field ofservices marketi ng ma

nagerne
ra con be applied by

the smaller firm. The small firm can be more responsive, flerdble and personal than the larger
competi tor. The authors believe that small service firms may be able to leverage these competi ti ve
advantages by utilizing marketing strategies and actions designed to copitolize on the unique
characteristics of services. The marketing strategies of dramatization, demand management,
process engineering, and relationship management offer the small service firm significant
opportuni ties for competin've advantage.

"Service Managers'ction Guidelines" are presented in an effort to assist small firm
managers in implementing services marketing techniques. Guidelines are based on four
charocteristics which strategically differentiate the marketing services from products. Four
strategies are recommended to assist managers in taking advontage of strategic service

differences and opportunities. Several action recommendations are overed for each strotegy.

INTRODUCTION

The growing discipline of services markeung blossomed during the 1970's and 80's. The
literature of this specialized area is rich and complex. It features theory, research, analysis, and
case studies in both periodical and book formats. The American Marketing Association has
developed an extensive biography cataloguing the literature (Fisk & Tansuhaj, 1985). The
majority of services marketing articles appear in academic journals such as The Journal of
Marketing, The Journal of Services Marketing, The Journal of Professional Services Marketing
and the Journal of the Academy ofMarketing Science. A growing number of services marketing
texts such as those by Lovelock (1991), Bateson (1989), Sasser, Hart & Heskett (1991) and
Gronroos (1990) and others are used by business school faculty teaching services markeung
courses. The popular press has published a variety of books capitalizing on the growing interest
in services ranging from the business best sellers Service America and At Americas Service to

more specialized offerings such as Service Quality. However, a review of periodical literature and
of the publications produced by the Small Business Administration produced no articles or
materials dealing with service marketing strategy and tactics for the smaller firm.

To assist managers in utilizing services marketing in the small service firm, the authors
have developed "Service Managers'ction Guidelines". The guidelines are based on four key
characteristics that strategically differentiate the marketing of services from the marketing of

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products. Four basic marketing strategies are offered to assist managers in taking advantage of
strategic service differences and opportunities. For each service marketing strategy several
specific schon recommendations and examples are presented that can lead to more success in the
highly competitive market place of the 90's.

WHAT THE MANAGER NEEDS TO KNOW ABOUT
SERVICE VS. PRODUCT DIFFERENCES

At first glance, differentiating products I'mm services appears straightforward. A product
is a physical article that has tangible properties. A service is an act performed by the business on
behalf of a consumer. Services are intangible. However, in the world of business, consumers
purchase solutions to needs and/or desires. These solutions usually consist of combined product/
service components. For example, a business traveler may be hungry and stop for dinner at a local
restaurant. The need to eat and the desire for a particular type of food is satisfied by a combination
of tangible products (food and beverage items are the physical facilities of the restaurant) and less
tangible services (valet parking, hostess greeting and seating, wait staff actions, cooks, dishwash-
ers, and so on). Shostack (1977) illustrates this combination of tangible and intangible elements
using a continuum. Figure 1 illustrates business offerings ranging from a commodity product,
such as salt, to a personal service, such as consulting or teaching. Salt is high in tangibility
attributes, teaching is more intangible.

Figure 1. The Goof/s-Services Continuum

Ocncttaas

Ccotocdca Fsn-food
Oodcts

fntsnddtto

Tsttttlble

fast-food Ad„~
futun

As

Cccnoldnd T~

Why is the continuum concept important to the small firm manager? Thinking of business
offerings as combinations of tangible and intangible components helps the manager focus on both
the product and service aspects of their offerings. Marketing management strategies and actions
for services must be adjusted to account for the differences in product and service characterisucs.

As processes, services have many intriguing characteristics. Judd (1964),Rathmell (1974),
Shostack (1977),Bateson (1977),and Sasser, Olsen, A Wyckoff (1978) were among the first to
ponder the implications of service intangibility, service perishability, product/consumption
simultaneity, and consumer participation in service processes. They found that traditional
markeung, with its goads-bound approaches, was not helpful in process design, process modifi-

cation, or process control (Shostack, 1977).

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Figure 2 presents specific recommended marketing strategies for the small firm manager.
'these strategies can be utilized to deal with the suategic service characteristics of intangibility,
perishability, purchase/consumption simultaneity, and the interactive producer/consumer rela-
tionship. Specific marketing management action guidelines are offered to help the small firm
manager implement the recommended marketing strategies.

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Figure 2. Service Management Snafegies And Acnon Guidelines

Service
ln ibili perishability

Purchase/Consumption fur«ective Rdatitmships
Charactcsis

'ntangibility
Simulumcity Producer/Consumer

Marftcting 0 u rou Rdationship
Sttetcgy Mensgcmcat Engineering Mensgcmcnt

L hkadfy consumer auvkc
Itrpll«CICIIU, attrcnt

, IUld pccutkm

1. Provide wrincn/video I 'umyra Idtnfuy md Soph L Coadua maga tcseelte m
dcsaip6cas of savitc fcstunu hhtouyemnumcr~ ~mdmskm
md bCIICfilL wcch. mash, snd sess«, ole ~ Ives

2. Bkclcittt plasosl «cststba
2. TI ~loco etocremcca 2 Bait«L sales for to«re cyst«« tahe sr«ms snslyas 3. Dcsige sml mdmek

pc«Cond m de«attn punning periods. ~snd comaaitas. Cavke meospbcrks fcr sn
ph/steel cocL

/poa 3, Budsa end cssttp hue«a sad s. Badse serve» sysam deuto us
plrdUcc IenoolutllaCICII ~ pleural tcamtcct lo clutch mssimlse speed/tpdhy, 4, hha6/y hcy i«ansi ceaomcr
dasiling scrvi«saiora mhm ptronsgc dassnd psnans. coa/queue, snd canpaidve srionships.

Mar/feting on bchslf of ««sumac, ~dvasage funcdccs.
Induding eel« mppat 4. Supplaeau pest paled aetf 5. Develop snd Implcmcnt lnhisl

Management
litcrsture. dc«~ sal snd tesurocs through Ivom 4. Design snd Implcmcnt an ~nd cantlnumm test«ca savice

Action poa savit» cvidntec Use training, temps, snd ksscd I~Igoelg atsllty sacer«an trslnlns flu cmcmsl snd Imcmsl
pephlc snd video fcrmsts if cuulPoclrt/kdnbcL pogrsm gnenaing fccdboch cusloalcIL
posable. ~nd amlysis of:

f. Use pomodonsl pricing snd a quslitsdvc kcuns - c.g. 6. Dcvdcp snd Im places ress
4. Dcslglt aid ullplanan poa baafit utdling Io Chin dec atd IscnUInct peepthcm thee complshn snd coamd

purchssc ootssa des onmming fran peck paiods. intansl auumcr tmolufhm po«shura
Isencdme benefhs.

6. Ofia mm eaviccs with b. qmuitsdve foacm - Lc, 7. Gcac mlvi«provider humect
5. Dispky scrvhn pcmonnel caepfisuatay daesod psnans. resp«ac time. dclivay nducdta program.

ctcdsisk. ntnc, ctclPlallt ttsckttg
~ulcc snd coa mslyaa g. censidtr qusfity drdc or outcr

oe.going anployce pmgrsm lo
loshltan tocUCUtdtaUcn,
probkm «Iagnitka. snd



SERVICE MARKETING STRATEGY DISCUSSION

Intangibility/Dramatization

Since services are less tangible than products, customers may not recognize, appreciate, or
be anxious topsy for the work that was done on their behalf. Lack of tangibility also makes it more
difficult for consumers to evaluate potential service providers during the shopping process. For
example, the purchaser of an automobile is dealing with a highly tangible, product-specific
purchase. The purchaser of an annual tuneup from a small business tuneup center is involved in
a relatively intangible service purchase. The tuneup customer drives the car to the shop, leaves
it for the day, and returns to find the car waiting in the parking lot and the bill waiung at the
cashier's office. While the car buyer has constant tangible feedback concerning the goodness of
the purchasing decision, the purchaser of a tuneup service may have difficulty evaluaung the
purchase. Most of the tuneup work has been performed behind the scenes. Quality is based on
the performance of highly technical equipment and the subtle diagnostic and repair skills of the
auto technician. The consumer has been absent during the service and, even if present, would
likely be unable to evaluate the process. In order to meet the challenges that intangibility presents,
the tuneup center should damatize their actions. Dramatization is the process of explaining in
detail ("acting out") what work has been performed on the customer's behalf and demonstrating
the expected benefits of the work performed. Dramatization action recommendations are
presented in the third column of the marketing management action guidelines (Figure 2).
Dramatization can improve current customer satisfaction, increase return business and referral
behavior. The materials and pmcesses used in dramatization can be passed on by customers to
other potential customers. Price objections will be reduced as customers gain a clearer
understanding of what the smaU business service provider has done for them. Dramatization helps
make services more tangible. Consider the following example.

A customer enters a small television (T.V.)repair shop to pick up her repaired set. She is
handed a bill for $127 which simply says "T.V.repair". She writes achedi and leaves feeling $ 127
was a lot to pay. She is suspicious that she was unfairly charged. A customer of another repair
business has a different experience. First, the owner tests the T.V. when the customer brings it
in discussing the symptoms, probable cause, and what next steps will be taken. After finding the
tmuble, the owner calls the customer explaining in detail the additional testing performed, the
results, and the time, parts and costs involved in the repairs. The customer decides to have the unit
fixed. When the set is picked up the customer receives a detailed invoice, an explanauon of
invoice entries, a plastic bag containing old parts, and a demonstration that the set is functioning.
The bill is $ 130. However, due to the dramatization skills of the owner the customer understands
the charges. Her confidence in the skills and integrity of the firm causes her to recommend the
business to others.

Perishability/Demand Management

A small business service provider often finds that demand is seasonal or variable. If the
organization is not pmperly configured and staffed to provide the correct level of service at the
correct time, sales are lost. When this occurs, the business faces double jeopardy. Not only is the
sale lost, but the service customer's needs may be met by a competitor with the possibility of the
customer being lost indefinitely. Services are perishable. They cannot be inventoried or placed
in a warehouse until the exact moment of demand. If the service provider does not have the
facilities and the staff to meet the service demand, unserved customers are lost. If the service

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provider has capacity and resources that are in excess of actual service demand, firm esources
are squandered. A demand management strategy can be applied in most service firm seuings. To
the extent possible, the service provider must match service offerings to fluctuating demand
periods. Under extreme conditions the firm may offer special incentives to shift demand from
peak periods to slower periods. Cross training of personnel to do more than one job, use of temps,
and short-term leasing of service equipment can modulate the cost of demand pattern swings.

Owners of a popular 30-table family restaurant have become effective demand managers.
They have extended business hours to cater to early and late dinners. Attractively priced "early
bird" and "late dining" specials am offered and promoted to spread peak load demand over a more
manageable time span. Personnel are cross-trained to be proficient in at least two job specialties.
"Prep cooks" have been added to prepare staple food items prior to opening to allow concentration
on entree preparation and to speed service. Menu item demand pauems are analyzed weekly and
printed out in gtaphic form as a byproduct of the finn's computerized cash register and inventory
conuol system. Menu complexity is matched to anticipated demand patterns to manage food,
beverage, and service quality. In food service, the business frequenUy manages the owner. In the

example presented, the owners have gained control and improved service utilizing demand
management techniques.

Purchase/Consumption Simultaneity

Most service firms only get one chance to "get it right". The purchaser of a large-screen
stereaff.V. will have many years to interact with and leam about the product. A couple dining
at a local restaurant offer a one-hour window of service opportunity from the time of restaurant
selection until the completion of the meal. There is only one goal in service marketing and that
is "perfection". Of course, perfection is seldom anainable. However, because services are often
performed in a highly compressed ume period, the service provider must constantly strive toward
that unattainable goal. Customers who have abed experience with a service provider are not likely
to give the firm a second chance or be sympathetic to excuses and explanations. Since services
are delivered in a compressed time span, the small service firm has a limited opportunity to create
a satisfied customer. The strategy of process engineering and careful service planning require that
the service system be developed, refined, tested, and evaluated to achieve maximum efficiency
and customer satisfaction. The service system must then be continuously evaluated and
re-engineered to ensure lasting customer satisfaction. Service providers who engage in initial and
ongoing process engineering can develop a strong competitive advantage in the market place.

A nursery/plant sales business was disappointed by its lack of growth in volume and profits.
After talking to customers, the owner found dissatisfaction with speed of service, quality of
products, facility layout, and getting shrubs and plants to their vehicles after the purchase. The
owner applied a systems approach to analyzing their business. With help from a local university,
they flow charted their operations: Based on customer comments and their flow charts, the owner
changed both layout and operation. Related products were grouped based on frequency of
demand. An additional check-out locauon was provided. The firm furnished cans to hold
products and facilitate transport to customer vehicles, placed parking closer to larger items such
as shrubs and large potted plants, and improved plant watering and feeding sequences. The firm
also implemented a biweekly inventory inspection procedure. By breaking their customer service
process down to individual steps and using flow chaning to visualize how these steps could be
reconfigured, the finn used process engineering to help customers and improve business.

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Interactive Relationships/Relationship Management

Services are highly personal. The way in which a customer is treated can be as important
to customer satisfaction as the service being purchased. To the service customer, the service
provider is the organization. If the relationship is positive, pleasant, and efficient, the firm may
enjoy return purchase loyalty as well as positive recommendations. If the service customer has
a bad experience with a service provider, it matters linle that the other aspects of the finn are
perfectly managed. Jan Carlzon, the President of Scandinavian Airlines System, characterized
the critical period of interaction between the service customer and service provider as a "moment
of truth". He pointed out that at Scandinavian Airlines there are over 65;000 moments of truth
each day as airline employees interact with customers (Boone Jk Kurtz, 1992). In avery real sense
the small service firm's only reason for existence is to successfully orchestrate these moments of
truth. Firms that manage each customer service encounter to produce maximum customer
satisfaction increase their probability of long-term success. Smaller firms usuaUy can be more
responsive, more flexible, and have a greater knowledge of customers. Personalization of service
is a key competitive advantage for the smaller firm.

There is another important player in a firm/customer relationship, the "internal customer".
Internal customers are members of the firm who support each other in delivering service to the
final consumer. Local health club customers may have primary interaction with an aerobics
instructor. However, the success of the class depends on more than the skill of the instructor. The
instructors'uccess also depends upon the recruiting efforts of club owners, the biUing and
membership records personnel, individuals who clean and maintain the physical facility and
equipment, and other employees of the organization. Successful service is a team effort.
Employees who serve each other well serve the customer well. Relationship management is an
important service marketing strategy. The relationships tobe managed include those between the
customer and the service provider and those among members of the small firm employee team.

Facing competition from a newly opened mass merchandiser, the manager of a local
appliance store focused on improving customer loyalty. Floor sales staff received initial and
continuous training on interpersonal customer service skills. The topics included customer
greeting and eye contact, dress, gtooming, spending time with the customer, making friends not
just sales, relationship building, telephone service and complaint resolution. Prior training had
been limited to technical product features. Sales persons became owners of long-term customer
satisfaction and took an active role in coordinaung major repairs, emergencies, and use of loaner
equipment. 'Ihe roles of clerical, repair, and delivery staff were redefined from being isolated
specialists to members of a customer team. Regular "team" meetings were insututed with
interactive problem and solution discussions that included management, sales and support
personnel. Building and maintaining positive customer relationships and a more effective
customer service team was seen as the best way to compete against the impersonal service of the
mass merchandiser.

Implementing Marketing Strategy - A Case Example

The following case is based on an auto repair and service business. The firm employed dune
full-time and one part-time mechanic and one full-time and one part-time mechanic's helper. In
addition, a full-time employee handled afl receptionist, administrative, and bookkeeping duties
while sharing the parts and supplies purchasing duties and work scheduling with the owner/
mechanic. The facility featured three bays for regular automotive repair and one bay that housed

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a front-end alignment/mufger, bake installation, and repair facility. Tbe application of recom-
mended marketing management strategies and actions follows the sequence in Figure l.

Dramatization was used to make services more tangible. Time was dedicated to explanation
and demonstration of work and benefits. Brochures discussing and illustrating the importance of
preventative maintenance were furnished by parts suppliers. These and other brochures
concerning engine rebuilding, transmission repair, front-end alignment, etc., were placed in the
customer waiting area. Brochures were also used in mailings, in credit customer bills and were
given to customers with written estimates. All employees attended customer service seminars
offered at a local community college and a program offered by a vendor of automotive
replacement parts. Mechanics were required to pursue continuing technical training and
certification. Mechanics'elpers attended a local technical college's auto repair courses and
clinics. Certifications and diplomas for these personnel were displayed in the customer waiting
area With the exception of routine maintenance for regular customers, the owner/manager
carefully discussed work to be performed and the expected benelits with each customer prior to
the work being authorized. A detailed written estimate was prepared and signed. If unexpected
problems occurred during the repair, the customer was contacted, the problem carefully ex-

plained, and alternatives outlined. On completion of the work, the customer received a legible,
detailed, machine-printed invoice explaining alt labor procedures and pans utilized. Wherever

possible, parts that were replaced were returned or shown to the customer.

Demonstrations were used when possible. For example, the mechanic physically demon-
strated the looseness in a wheel bearing, pointing out bearing/surfaces that had begun to roughen
due to lack of pmper lubrication. Enlarged schematic drawings of major automotive systems were
hung on the walls of the shop. These included cutaway drawings of engines, t'ransmissions, drive
trains, front-ends, cooling and electrical systems. Mechanics were required to spend a few
minutes with each customer explaining the nature of the problem and illustrating what had been
done to their vehicle in the repair process. These additional steps added only minutes to each
service encounter.

A telephone and postcard reminder system was utilized for routine preventative mainte-

nance appointments. For all major repairs, the receptionist called the customer one week after the
car was delivered to ensure the customer was satisfied. If not, a follow-up visit was scheduled.
The owner handled all follow-ups by reviewing what was done, supervising follow-up work, if
required, and conducting a subsequent road test.

Dming the first few years of operation the owner was reacting to demand rather than
attempting to manage it. Demand management approaches were implemented to modulate
extremes in demand panerns. Analysis of past invoices revealed peak and slack demand periods.
Business hours and work schedules were realigned to increase capacity during high demand and
reduce overhead during low demand periods. Mechanics were required to develop at least one
additional specialty. For example, someone skilled in engine maintenance and rebuilding
developed front-end alignment skills. A backup person for the receptionist/administrator was-
identified and trained. This retired individual was used part-time as needed. Arrangements were

made with a rental finn to provide addiuonal tools and equipment on short-term notice.
Customers were offered discount coupons and add-on products, e.g., a free oil filter and services
and free tire rotation for having regular preventative maintenance performed during slack periods.

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Process engineering involved a "clean sheet of paper" approach to identifying service
offerings and the pmcedures to be used in service delivery. Ongoing market research took the
form of customer comment cards left on the seat of every completed vehicle. A car wash and
waxing service was initiated based on feedback from customers expressing their wishes for a clean
car at the end of the repair cycle. Flow chans were prepared tracking events beginning with
telephone inquiries to the presentation of the completed vehicle and invoice. All employees met
to review the work

flow

diagrams

an suggest ways of improving efficiency and quality of service.
Improved use of mechanics'elpers to do routine work as well as tear down and finish procedures
reduced cost and increased capacity. The customer check-in ticket and the mechanic's work order
were combined into one form which became the final invoice. Assessment of customer
perceptions was done on a continuing basis through verbal feedback, the use of customer
comment cards, and the customer callback program. An employee incentive program was
implemented to stimulate ongoing process improvement.

As one would expect in a small finn, producer/customer relations and working relationships
among employees were generally good. Service was highly personalized and many regular
customers had first name relationships with their mechanic and the owner. To protect and enhance
these relationships additional action was taken. On an annual basis, a random sample of customers
were asked to complete a two-page questionnaire evaluaung key components of the firm. These
included physical facilities, personnel, pricing, responsiveness, customer confidence, and other
service variables. Based on negative feedback concerning the physical appearance of some
employees and the facility itself, the firm began utilizing a uniform leasing service. Changes were
made to the physical facility to improve its interior and exterior appearance. A 100 percent
customer satisfaction policy was adopted and implemented. For all major reps'he owner and/
or the lead mechanic road tested the vehicle to verify repair results. Whenever possible, the owner
road tested the vehicle with the customer present discussing the specifics of the repair and what
had been done. Finally, a bimonthly Friday morning employee breakfast round table was
instituted. It was hasted by the owner and all employees were required to participate. These
regular meetings featured an equal dose of praise and analysis of ways of improving repair quality
and customer service. It was also recommended that the owner/manager take uuining in quality
circle implementation and in team building. Management and marketing seminars and reading
materials were available at a regional Small Business Center and community college.

The marketing strategies of dramatization, demand management, process engineering, and
relationship management, (recognizing both external and internal customers,) offered this small
service firm opportunities for competitive advantage.

CONCLUSIONS

While the application of specific marketing management guidelines vary by firm and
industry, the concepts being developed in the field of services markeung management can be
applied with positive results for the smaller firm. 'Ihe small firm can be more responsive, flexible
and personal than the larger competitor. 'Ihe authors believe that small service fums may be able
to leverage these competitive advantages by utilizing marketing strategies and actions designed
to capitalize on the unique characteristics of services.

9



REFERENCES

Jownal ofr la.'cademy ofMarketing Services, JAI Press, 55 Old Port Road, No. 2, PO. Box 1678,
Greenwich, Cl'6836-1678.

Allrecht, K. (1988).At Americas service. Homewootk IL: Dow Jones - Irwin.
Alhecht, K. & Zemke, R. (1985).Service America. Homewood, IL: Dow Jones - Irwin.
Bateson, J. E. G. (1989).Managing services marketing. Chicago, IL: The Dryden Press.
Boone L E.& Kurtz D. L (1992).Coruemporary marketing. FL Wonh TX: The Dryden Press,

375.
Brown, S. W., et al (1991).Service quality. Lexington, MA: Lexington Books.
Fisk, R. P. & Tansuhaj, P. S. (1985).Services marketing - an annotated bibliography. Chicago,

IL: American Marketing Association.
Gronroos, C. (1990). Service managemeru and marketing, New York, NY: The Free Press.
Lovelock, C. H. (1991).Services marketing. Englewood Clilfs, NJ: Prentice-Hall.
Journal of Marketing, American Marketing Association, 250 S. Wacker Drive, Chicago, IL

60606.
Journal of Professional Services Marketing, The Haworth Press, 10 Alice Street, Binghamton,

NY 13904-1580.
Sasser, Jr., W., Christopher, E., Hart, W. L., &. Heskett, J. L. (1991) The service management

course. New York, NY: The Free Press.
Journal ofServi ces Marketing, Grayson Associates, 108 Lorna Media Road, Santa Barbara, CA

93103.
Shostack, G.L.(1977). Breaking free from product marketing. Journal ofMarketing, April, 77.
Shostack, G.L.(1987). Service positioning through structural change. Jownal ofMarketing. 51,

(January) 34.

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