Differences in Service and Product Marketing - Assignment Example

Delivering Service Excellence Contents Introduction 5 Service and Service marketing (knowhow) 5 Differences in service and product marketing 6 Service marketing and operations management 7 Service marketing strategies and model 10 Metrics to measure service quality 16 Critical issues 19 Recommendations for future 20 Reference List 22 Introduction The project evaluates the service excellence in British airways and provides suitable recommendations to elevate the same. British airway is the largest airways of United Kingdom (UK) on the basis of international fights, destinations and fleets size. It functions in domestic and international charter as well as scheduled air service areas for carriage of freights, passengers in addition to mails. British airways have over 550 destinations globally making it a leader in the industry (British Airways, 2014). The main hubs of British airways are at London Gatwick Airport and London Heathrow Airport (British Airways, 2014). The airlines company is failing to maintain excellence in the services provided in terms of quality and price. The two key aspects of service excellence which the airlines company requires to give attention to are thus quality and price maintenance. Ryan Airline, the competitors of British Airways is maintaining price and quality leadership for attaining a journey of excellence in the airlines industry. Therefore, to increase the competitiveness, sustain and grow in the business, British airways require elevating the service excellence towards the customers. The paper highlights in details about the shortcomings in the service marketing, recommendations for the same with suitable models and theories to indicate how the airlines company can improve, and develop a sustainable service strategy.  Service and Service marketing (knowhow) Service can be described as solutions that are provided to deliver a consistent set of outcomes, performance and deliverables for organization, systems as well as people. Services are intended to satisfy the expectations, motivations and unmet needs of the receivers. The quality of service depends on the effectiveness of the activities of the providers. The performance and experience of a service rest on the way it is produced. A service may be further described as a perishable and intangible component of a business offering or a form of promoting tangible products. The complete methodology to generate awareness, interest, desire and action (AIDA) to ingest services that are offered by the provider is referred to as service marketing (Lin and Hsieh, 2014). Service marketing can be referred to as the subfield of marketing that covers the promotion of goods as well as services. Marketing of goods refers to the promotion of durables and the fast moving consumer good (FMCG). On the other hand, service marketing denotes to the business to business (B2B) and business to consumer (B2C) services (Lin and Hsieh, 2014). The most common examples of service marketing can be cited in air travel, telecommunication, health care, professional, hospitality and financial services. Differences in service and product marketing Service marketing is not the same as product marketing. The difference between product and service marketing can be stated as follows: Intangibility- The most basic difference between service and product are intangibility. Service can never be inventoried and hence fluctuations in demand are most often difficult to manage. Intangibility in the marketing of services creates several challenges. The cost of a service provided is quite cumbersome to assess. Additionally, the relationship between quality and price is complex. Heterogeneity- Services are heterogeneous in nature as compared to products which makes it difficult to maintain their quality. Quality depends on two most important factors such as the ability of the customer to articulate their needs and the demand for the service. All the factors ruling service cannot be controlled fully, hence it turns out to be complicated for mangers to sometimes understand whether the services are delivered in a consistent manner as originally planned and promoted. Simultaneous production and consumption- As services are produced and consumed at the same time unlike products; it is difficulty to produce the same in masses. The customer satisfaction and quality of services are extremely depends upon the real time interactions between the consumers and the employees. Decentralization of the operations is relatively necessary for the direct delivery of services to the customers at convenient locations. Perishability- Services are perishable in nature as compared to the products as they cannot be stored, saved, returned or resold. Inability to inventory a service is the most important issue faced by marketers. Creative planning and demand forecasting for the utilization of the capacity are therefore most challenging decisions (Lin and Hsieh, 2014). Service marketing and operations management Efficient service marketing and operations management can help an organization to sustain and survive in the industry (Payne and Frow, 2014). There are a number of airline companies like the Ryanair airways, Kingfisher airlines who maintain effective service marketing and operation mange to succeed in the business. These are the most two important aspects which needs to be controlled efficiently in order to excel in business. Service marketing and operations management mainly takes into consideration the most important sources of revenue generation that is present in the industry. Service marketing relates to the suitable understanding of the customer needs and producing goods and service as per the analysis. Operations management is concerned with designing, controlling, and overseeing the production process and redesigning the operations in the manufacture of products and services. Operations management helps to ensure that the making optimal utilization of the resources needed to fulfill the requirements of the customers. The highest level officers present in an organization revises the strategies and the line officers takes tactical decisions to carry out the strategies. British airways operate in a number of sectors such as hotel and airlines. The business operations of British airways are strictly maintained by the management. The higher level management of British airways manages the services of the organization through efficient development and revision of the marketing strategies. There are different levels of line or lower level officers present in the airlines corporation who takes tactical decisions that can be helpful for the company and carries out the same in an organized manner. Operation management model Operations management can be described further as the systematic control and direction of processes that supports to transform the inputs into the finished goods and services (Payne and Frow, 2014). Therefore, operations management deals with all the activities associated in the designing, followed by producing and the final delivery of products and services. The role of operations management in a business can better be explained through the model of value chain. It is a functional area that supports corporate strategy and helps in the exchange of information related to marketing, human resource and financial areas. Figure 1: Porters value chain model (Source: Donavan, Brown and Mowen, 2004) Operations management takes into consideration operations, inbound logistics, outbound logistics, technology development and aspects of procurement (Donavan, Brown and Mowen, 2004). Effective operations management is all about giving customer the goods and services they need. Companies survive by providing the customers the accurate product, price, place, promotion, timing, service, quality and performance among all other points. Managing the operations requires giving the customers what they want and exceed their levels of expectation. The examples of operation decisions are strategic, tactical and operating. The decisions as already stated earlier are taken by the senior management of the organization. Similarly, British Airways tries to fulfill the needs of the customers through the appropriate management of their operations. In the recent past though there are certain difficulties faced by the management to satisfy the customers. The price of the air tickets charged by British airways only represents a motive of the management to earn greater revenues. The prices are not as competitive and low as that of the top competitor of the company Ryanair airlines. Besides that, the qualities of the service are not creating much value and satisfaction to the consumers. There were certain incidences of mishandling the baggages of the customers in the recent past. Besides that, the levels of motivation of the employees are low and hence it is affecting their performance and service quality equally. The marketing of the products and services are also not efficiently carried on (Grönroos and Gummerus, 2014). These points indicate that the services are not framed by the top level management as per the changing needs of the consumers. There are also a number of other problems associated with the value chain and operation management of the company. Therefore, it is necessary for the human resource department of British Airways to analyze the value chain of the organization and make the needed changes to remain competitive and survive in the airlines industry (Payne and Frow, 2014). Service marketing strategies and model Effective service marketing is quite a complex process which involves different strategies, tasks and skills. The greatest challenge faced by the service firms is to guarantee continuous quality services to all the consumers. An approach of viewing service marketing in an integrated manner can be in the form of a model known as the GAPS model. The model positions key strategies, decisions and concepts in service marketing in a right perspective. The most vital is the customer gap which can be described as the difference between customer expectation and perception (Payne and Frow, 2014). Figure 2: Service quality Gap model (Source: Cherubini, Iasevoli and Michelini, 2014 ) Customer Gap (5) The consumer expectations are references or standards that are brought in by them into service experiences (Payne and Frow, 2014). The perceptions of the customers are subjective assessments of the actual performance of the services. For delivering quality services, it is important to close the gap between the customer expectation and perception. This is the starting point and the basis of the GAPS model. As customer focus and satisfaction are critical areas of competitiveness of companies, therefore any firm that area involved in delivering quality amenities must instigate with a proper understanding of all its customers. The key sources of the customer expectations can be described as follows: Marketer controlled factors such as advertising, sales promotion, pricing as well as Factors in which the marketers has limited ability to effect such as word of mouth communication, distinctive personal needs and competitive offerings (Strandvik, Holmlund and Grönroos, 2014). An ideal expectation, perception and situation would therefore be identical. In other words, the consumers would perceive that they have received the service what they expected they should. Therefore, the goal of service marketing is broadly to bridge the distance between consumer expectation and perception through effective service strategies. The customer gap leads to different situations such as: 1. Bad reputation in the market. 2. Lost customers. 3. Negative local or corporate image. 4. Negatively confirmed quality (Rust and Huang, 2014). Provider Gap (1-4) Besides the customer gap, the gap model suggests that there are four other vital described together as the Provider gap. These gaps are committed by the organization which is providing a given service. These are explained as follows: Gap 1: Not knowing the expectation of the customers. Gap 2: Not selecting the appropriate service standard and design. Gap 3: Not delivering as per the service standard and design. Gap 4: not matching the performance as promised (Donavan, Brown and Mowen, 2004). Gap 1- It can be described as the difference between the expectation of the customer from a service and the understanding of the same by the firm. Due to lack of understanding of the accurate expectation of the customers, a number of companies failed to perform in an appropriate manner. The reasons for the failure of the mangers to interpret the customer expectations are: 1) They might not have directly interacted with the consumers. 2) They might be unwilling to inquire about the consumer expectation. 3) They might not be prepared enough to address them. When managers fail to understand the service expectations of the consumers, they might end up making sub optimal resource allocation and develop wrong decisions that results in the perceptions of pitiable service quality. Therefore Gap 1 is a result of inadequate marketing research, lack of upward communication, insufficient focus on relationship and inadequate recovery of service. Gap 2- This gap is a result of failure to select the right service standard and design. In order to deliver quality services to the consumers it is important to perceive the accurate customer expectations. Besides that, there should always be presence of performance standards and service designs that has the capability to reflect the accurate perceptions. Therefore, lack of understanding of the customer needs leads to the Gap 2. The key factors leading to provide Gap 2 can be explained as follows: Undefined and vague service designs. Poor design of service. Lack of customer driven standards. Inappropriate servicescape and physical design (Rust and Huang, 2014). Gap 3- The gap is due to the inability of companies to deliver as per the service standards and design. Once the service standards and designs are in right order it is most likely that the companies will be able to deliver high quality of services. The assumption can be true but might not be enough for delivering excellent quality of services. Every company must have a right balance of processes, systems, place and people to ensure that the delivery of the service matches the standards and designs. The major factors leading to the gap are: Human resource policy deficiencies. Inability of customers to fulfill roles. Service intermediaries related problems. Failure to match the demand and supply (Strandvik, Holmlund and Grönroos, 2014). Gap 4- The final and the most important gap is the inability to match the performance of services to the promises made. The gap is a result of the difference between the external communication of the service provider and the service delivery. The promises made by organizations through advertisements, sales force and other media, raise the expectation of the customer and increase the perception of the standards against which the quality of the service is assessed. Therefore, any discrepancy between the promised and actual service can have an adverse effect on customer gap. The key factors related to the provider gap are as follows: Absence of integrated service marketing communications. Inefficient management of the expectations if the customers. Over promising. Inadequate horizontal communication (Rust and Huang, 2014). Therefore, the crucial strategy in service marketing is to close the customer gap through the termination of the provider gaps. It is important for service based corporations to turn negative customer response to positive results by turning the perceived quality better than the expected quality. Similarly it is important for British Airways to regain more customers present in the market by fulfilling the service perceptions of the customers. The airlines company needs to remove the gap between the service perception and expectation of services of the consumers in order to retain the reputation and corporate image in the industry. The Ryanair airline which is the top competitor of British airways provides effective services at the most competitive prices to all the customers. In order to sustain in the market British airways simultaneously needs to maintain the quality of services and low prices. The baggages of the customers are not handled in a sufficiently right manner which needs to be rectified in order to satisfy the customers (Omid, Ebrahim and Bagher, 2014). Besides that, there is certain issue with flight delays and poor employee relation which are also equally affecting the goodwill of British airways. The management of British airways should invest more in the research and development department to understand the current needs of the customers. Understanding the needs of the target customers can considerably support the company to deliver services as per their changing expectations. Right amount of promotion of the products which reflects true information about the services is also important. The advertisements highlighting the prices of the tickets set and the discounts given should be true, so that customers do not feel misguided. Besides the quality of the services can be maintained to paramount standards if the employees are trained and instructed properly. British airways failed to maintain healthy relation with the employees in the recent past which reflects in the decrease in the service quality. The employees failed to have good terms with the employers which resulted in their decreased level of motivation. Therefore the employee’s level of motivation should be increased by British airways through proper training and rewards for their performance. This strategy can further improve their service giving. By analyzing the gap model the human resource managers should frame appropriate service policies which can help them to fulfill the needs of the target market through their proper placements. Besides that, the gap model can help the mangers to further understand in details the various aspects of failure in the services which lead to the bridges present in the customer expectation of the services and their perceptions. The gap model can therefore efficiently support the management of British Airways to improve their strategies developed (Grönroos and Gummerus, 2014). Metrics to measure service quality It is important to measure the quality of services for every organization to understand the present standard of the amenities and the way it can be improved further (Grönroos and Gummerus, 2014). Similarly, British airways can measure the standard of the services provided by the organization through a variety of metrics. One of the most important metric for measuring the quality of the services is the Ansoff’ Growth Matrix. This matrix is utilized in the paper to infer the key areas of service standard improvements for British airways so that they can be modified further to suit the needs of the customers. Figure 3: Ansoff Matrix (Source: Gou, et al., 2003) Market penetration- It is marketing strategy whereby companies try to grow by offering existing products and services in prevailing markets. British airline applied the business strategy of incorporating a long list of destinations. There are also a number of travel classes offered by British airways such as first, economy, club and business class. In a number of current destinations British airways provides variant list of travel classes to fulfill the customer satisfaction. In spite of operating in several years, the profit of the company declined drastically in 2012 by 55% (Robson, Beninger and Hall, 2014). Therefore, it became necessary for British Airways to diversify their services in Europe, Far Eat, Middle East, EEA, India and China. IN 2009, British airways merged with Iberia (Grönroos and Gummerus, 2014). The merger created the third largest airlines of the world in relation to annual revenue. In 2014, the company also announced a fresh route to the South Korean country, Seoul (Robson, Beninger and Hall, 2014). For penetrating into new markets, the airlines company also carries on effective advertisements of the new products and carries on corporate social responsibilities to gain the support of the customers. Product Development- Product development refers to the creation of new products and services in the existing markets to accomplish growth. British airways continue to introduce supplementary services such as telephony and inflight internet services in certain regions of its operation. The airlines company also provides a dedicated travel class in certain regions. With the motive of gaining further business, services like inflight advertisements for several companies such as HSBC and GUCCI is carried on by the British airways (Parida, et al., 2014). Besides that, it provides financial services such as bureau de change and travelers cheques. In 2010, British airways also introduced an inflight entertainment system in First Cabin and Boeing 777-300 ER (Grönroos and Gummerus, 2014). The cabins were made sophisticated for the customers so that they can recreate, work, sleep and eat. In the recent past though, there is a sharp decline in the development of new products and services which has also lead to the reduced growth margin of the company. Market development A firm tries to expand into new markets using the existing offerings. The market strategy of British airways focuses on the non-buying clients in current targeted segments in addition to the new customers in all the new segments. British airway is constantly trying to regain the customers of Virgin, Ryanair and few other airlines (Gummesson, Kuusela and Närvänen, 2014). The loyalty program whereby the small as well as medium size businesses receive loyalty point is the starting point (Carayannis, et al., 2014). Besides that, British airways also successfully incorporated a service for all business class in 2011 from London to New York to gain more business through customer satisfaction. In the recent past though, the airlines company failed to offer existing services in new markets as consistently as earlier. Market penetration It is a marketing strategy whereby companies sell existing products in existing markets. In other words it tries to grow and increase the market share in all the existing markets (Grönroos, 2004). Although British airways have presence in the existing markets, yet it is subject to stiff competition. In the market of short haul which is saturated with various budget airlines, the company lost almost £ 1 billion in terms of revenue during 2010 (Gwinner, Gremler and Bitner, 2008). Therefore the major options lying ahead of British airways are: 1) Improve all the processes involving people, including bag handling. 2) Invest further on information technology and mostly on speedy internet bookings. In the recent past British airways could not penetrate the market as smoothly as before because of their poor baggage handling and reliability. Besides that, the airlines company failed in the efforts to target the expense conscious customers through low cost carrier operations. Diversification It requires both market and product developments as new products are introduced in new markets (Mäkinen, Seppänen and Ortt, 2014). British airways utilize this strategy to gain increased profit margins, growth and sustainability in the market. The emerging and the new markets of Middle East have the capability to offer the paramount promise of revenue and reduce the effects of decreased revenues in all traditional markets. British airways can also take further advantages in the business by following the new trend of alliances prevailing in the new markets. The airlines company can form alliance by collaborating with airlines companies such as Kingfisher airlines to increase to improve the schedules of flights and destination connections. Critical issues British airways should focus more into increasing the B2B and B2C relations. Satisfying the customer with the best quality services at reasonable prices can help the company to grow and sustain in the airlines industry. The company can grow rapidly if it provides more importance to the critical issues such as: Maintenance of quality of the services. Diversifying the business. Greater employee satisfaction Elevated cost leadership. Greater promotions. Efficient handling of operations and value chain management. Recommendations for future British airways should change few service marketing strategies to acquire greater service excellence. The following inference can be made through the critical analysis of the paper: More emphasis to service quality- It is important for the airlines giant to maintain the service quality as per the expectations of the customers. The amenities should be provided as promised to the customers. The luggages of the customers should be handled more efficiently by the company. As there are number of competitors of British airway, it is vital for the company to maintain the service quality in order to sustain in the market. Greater employee relation- The employees of British airways should be provided better incentives in order to motivate them to work in favour of the company. Employees will work more productively if they are appraised for their work. They will provide efficient services to the customers if they are more motivated. The employee turnover can also decrease if healthy relations with the employees are maintained by their superiors. Low cost services- British airways also need to provide low cost services in the similar manner as Ryanair airlines. The low cost of the tickets can increase the number of customers. Instead of maintaining leadership in terms of revenue, British airways should provide lost cost air fares to all the customers. Greater B2B relations- The giant airlines in order to diversify the business should also merge with other airlines company such as the Kingfisher airlines. This can enable the company to increase the number of destinations offered to the customers for visit. Diversifying the business can help the airways to have better growth and control in the airlines industry. Reference List British Airways, 2014. Home. [online] Available at: < http://www.britishairways.com/travel/home/public/en_gb#> [Accessed 30 August 2014]. Carayannis, E. G., Grigoroudis, E., Sindakis, S. and Walter, C., 2014. Business Model Innovation as Antecedent of Sustainable Enterprise Excellence and Resilience. Journal of the Knowledge Economy, 5(3), pp. 440-463. Cherubini, S., Iasevoli, G. and Michelini, L., 2014. Product-service systems in the electric car industry: critical success factors in marketing. Journal of Cleaner Production, pp. 23. Donavan, D. T., Brown, T. J. and Mowen, J. C., 2004. 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