Changing Marketing Paradigm In Service Marketing

It has been argued that we are in the midst of a revolution that is changing marketing. There are various underpinning factors like the new consumers, the new market, nature/structure of competition, social change, emerging technologies, changes in consumer behaviour etc. Three sources of change are identified increasing importance of technological mediation; changing consumer and professional role; and decreasing importance of relational factors in consumer decision making. The ability to anticipate and adapt to change, and inspire others to change is a key feature of successful strategic managers. Thus, this research documents how these factors are affecting marketing practices and how marketers have adapted to these changes. The author will try to analyse, how the marketing of goods have undergone transition and the causes for same in reference with marketing mix. Comments are made after conducting literature review of several studies.

Background

“A victorious strategy is not repeated… Water configures its flow in accord with the terrain; the army controls its victory in accord with the enemy. Thus the army does not maintain any constant strategic configuration of power; water has no constant shape… One who is able to change and transform in accord with the enemy and wrest victory is termed genius”.

— SunTzu, Art of War

(Referred from Tapp, A. (2005) “Marketing Revolution: The Radical New Approach to Transforming the Business, the Brand and the Bottom Line.” pg. 1.

Essentially management is about change and, for a commercial undertaking change is elucidation to secure and grow markets. Many successful authors believe that we are in midst of evolution. Successful businesses are continuously striving to employ strategic fit between the changing marketing environment and their market responsive strategy. Marketing being one of the important function of businesses have experienced drastic change to meet the market demands.

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At the beginning of 21st Century, special issues have developed in area of marketing due to drastic changes in business environment and intense competition that has compelled the marketers to change the way of doing business (Piercy, N. 2002). Marketing is changing and that’s obvious. The focus of marketing has widened from the classic product, price, and place, promotion to incorporate the yield management, customer experience and customization that necessitates marketer to concentrate on issues such as processes, people and consumer insight. Escalating customer’s demands, development of technology, increasing competition, increasing consumerism all have been main causes that led strategic change in marketing. In this research paper, author will profoundly analyse the process of transition from CONVENTIONAL marketing to NEW marketing in the changing business environment in Service Sector. With service sector being one of the driving sectors of many developed economy and pure product continuum shifting towards services as product marketers are offering services as a part of their augmented benefit the researcher will maintain its focus on changes occurring in service marketing.

Over the past two and a half decades services marketing have emerged as a well established subject of study in the marketing discipline. In many ways, its growth and acceptance in the research arena are undeniably remarkable and thus the researcher will be focusing on studying emerging themes and changes in service marketing management.

Service sector in post industrial economies is facing unprecedented changes. Service marketing in 21st century is all about achieving return on investment (ROI) and relationship (ROR), retaining customer and increasing customer lifetime value (Wharton Business School: 2003). The changing role of marketing in service sector demands efficient and effective management of customers, channels, markets and profit in order to evade commoditization and low margins (Frederick, N. 1997). Utilising a scenario planning the paper examines the three core trends that have resulted in changing role of service marketing: the increasing importance of technological mediation; changing consumer and professional role; and decreasing importance of relational factors in consumer decision making (Laing, A., Lewis, B., Foxall G. & Hogg G.: 2003). These trends pose fundamental challenge to service marketers to design business strategies that integrates such dynamic changes in business environment.

10 Trends identified in the Service Sector in 21st Century

Personalisation: The new service marketers are designing marketing strategies that favours engagement of human in delivering a service in order to build relationship factor (Laing, A., Lewis, B., Foxall G. & Hogg G. (2003). However, with increasing use of technology the human factor is placed less importance. Marketers are promoting use of internet transaction like online banking, online check in that reduced human engagement and favours standardization of service delivery process.

Understanding of Customer Expectation: With increasing use of research on consumer behaviour, marketers are able to measure customer expectation and try designing services that will fulfil consumer perceived value. Also, with increasing use of consumer database with tools like credits card, loyalty cards etc. Marketers are successfully able to analyse the buying behaviour of consumers and are able to design targeted campaigns based on the behavioural study.

Credibility: Marketers are emphasizing on positioning themselves as organisation that effectively deliver brand promise by focusing on creating Emotional selling proposition rather than Unique Selling proposition. Companies are employing combination of above the line and below the line techniques. It’s been observed that modern are favour branding and public relation opposed to pay advertising.

Simplification: Trends towards decreasing consumer complexity and increasing consumer knowledge. New cyber channels are being used as info-mediaries to provide consumer with quick and convenient information and access to service provider. Most of the marketers are designing marketing tools like website highly interactive and engaging that allows the consumer to consume services in easy, comfortable and convenient way.

Internationalisation: Trend towards the dominance of global service brands operating in service sector. This is mainly because giant companies are able to invest in advancing technology to serve burgeoning customer needs. They are able employ advanced CRM tools that can help marketing and promoting their brands to consumers.

Bundling: Trend towards aggregating a physical good or other service with basic service offering. This strategy is commonly being adopted in order to develop physical evidence. Also, it helps in reducing the impact of fundamental characteristic of intangibility in marketing services consumer.

Rationing: Marketers are putting strong efforts to maximise per output in provision of service to meet the challenge of high return on investment. Marketers are challenged on presenting profit impact of marketing strategy (PIMS). The marketing function has become more analytical opposed to designing creative strategy.

Virtual experience: Marketers are commonly using technological tools like virtual reality in provision of services or as a substitute for services. Marketers are also developing platforms like fan-clubs; forums in order share their experience to develop trust about the service offering (Laing, A., Lewis, B., Foxall G. & Hogg G. (2003)

Marketspaces: The new cyber market has been able to successfully get more and more number of service users for the companies. Currently, it is strongest channel of distribution used by service providers. For example, Hotels, Broadband Services, Airline Industry etc.

Multi-dimensional competition: Marketers are trying to appear as non-traditional service providers in order to blur distinctions between markets (Laing, A., Lewis, B., Foxall G. & Hogg G. (2003). Marketers are adapting niche and focused marketing approach in order position their service as a customised package for the target market.

All the above trends are enforcing marketers to adapt to this change, customize their strategies based on market needs. Thus, researchers have been continuously taking interest in understanding the changing marketing environment and changing consumer behaviour. Therefore in order to further explore this subject, a study was undertaken to accomplish the following objective

To examine the changes occurring in the marketing of services from selling concept to Relationship Marketing.

To identify the critical issues related to subject

To analyse the role of consumers in the changing marketing environment.

To understand the impact of changing dynamic on service organisations.

1.2 Research Question:

Marketing approach is significantly being affected by the changing marketing environment. Most of the literature in service marketing has studies the transition from 7 P’s of Service to Relationship Marketing. However, it fails to address impact of technologies, changing consumer behaviour and increasing consumer knowledge in last ten years. The research is designed with the objective of filling this gap and progress the research conducted in area of service marketing.

Through the preliminary investigation and literature review, the researcher has identified the following areas for exploration in order to meet research objective

Overarching Question:

“How is the marketing approach and tactics changing in service marketing?”

Specific Questions:

RQ1. Impact of changing marketing environment on four fundamental characteristics of services i.e. intangibility, inseparability, pershisibality and heterogeneity.

This first area of enquiry deals with studying impact of changing marketing environment on dealing with fundamental characteristic of services. All the previous studies starting from Booms and Bitner (1981) to Beckwith (2000) mainly concentrates on designing marketing mix for service marketing. However, there is no evidence of any literature in service marketing that focuses on designing strategies to deal with these characteristic of services. Thus, researcher will be specifically investigating about impact of changing marketing environment on fours fundamental characteristic of services that distinguishes services from goods/commodity.

RQ2. What opportunities or threats has new marketing environment posed for the modern service marketers?

The second area of inquiry deals with identifying opportunities and threat in the external environment. Marketers approach and strategy is highly be influenced by the opportunities and threats existing in the external market environment. Thus it very important to analyse and understand the opportunities and threats developed in the service marketing environment.

RQ3. What are the main factors that have influenced change in service marketing?

The third query deals with identifying and analysing the factors that has influenced change. The unique characteristics of services forced the old school marketers to adapt new framework focusing on delivery of services. (Grove 2000). However, there is no specific study conducted on analysing the main agents responsible for change. Thus, the study will focus on understanding the factors responsible for changing marketing paradigm.

RQ4. What are the challenges and issues faced by modern service marketers due to dynamic changes in the service marketing environment?

The fourth area of enquiry deals with understanding the challenges and issues encountered by service marketers. It is very critical to understand the challenges faced by the service marketer as the recommendation and conclusion of the study should be able to identify any solution to overcome the challenges and direct any future research areas.

RQ5. How has the new marketing approach facilitated Customer relationship management that is one the most important element of service marketing?

The last area of enquiry deals with studying the impact of new marketing approach on customer relation ship management. Grove (2000) identified customer experience as one the most critical factor in service marketing. Further, Beckwith (2001) complemented the research by focusing on customer satisfaction as one the main key element of service marketing strategy. Thus, this study needs to analyse how has the new marketing approach facilitated customer relationship management and increased level of customer satisfaction.

Literature Review

The development of service marketing has been associated to human evolution (Fisk, P., Brown, W. & Bitner J.:1993). At the first stage of service marketing termed as Crawling Out Stage based on literature review, the period of pre 1980, services were not differentiated from products thus businesses marketed services in similar fashion as product. With introduction of increasing number services, the existence of service was questioned and therefore numerous debates were taking place on whether service marketing was different or not. This debate resulted in discovery of service characteristics i.e. intangibility, inseparability, perishabilty and heterogeneity. The next stage termed as Scurrying about age. Further at these stage characteristics of service were exploited in order to design marketing strategies and tactics. New issues related to service marketing were discovered like service recovery, gap model, service encounter that gains huge strategic importance in current business environment in order to build customer relationship (Fisk, P., Brown, W. & Bitner J.:1993). At this stage, marketers were clear that there is a differentiation existing between goods and services. Thus they continued enquiring on new areas such as service design and mapping and service encounters that are related with improving operational efficiency and human resource management. More and more scholars were investigating on different features of service in order to improve field of service marketing. And the last stage (1986 – Present) is referred as Walking Erect stage. This stage can also be referred as explosive stage (Fisk, P., Brown, W. & Bitner J.:1993). Service Marketing is fully explored. Marketers are aware of different strategic issues related with the service marketing. Marketers try to innovate the concepts developed during the first two stages. Businesses have overcome the limitations of service like intangibility inconsistency. Today service marketing have reached that stage were the concepts of service marketing are not only employed in service industry but also in goods sectors.

The above service evolution exemplify that service marketing has undergone revolutionary change and flourished over of period of time. This advancement took place as marketers recognized impact of external event on entire business process and reacted to it. One of the most important aspects that helped service marketers to explore marketing opportunities by overcoming the limitation of services is technological development. During the end of 20th century, service industry was booming and thus was service marketing. Marketing was moving from transactional marketing to building long term relationships with customer at this phase and hotel industries were one of the main industries that heavily relied on relationship market for their success. (Laing, A., Lewis, B., Foxall G. & Hogg G.:2003) The four main issues of service marketing that mainly made marketing difficult in services were resolved to a large extent with the aid of technological development. This was done by adding tangible features to service, standardizing service standards, creating new channels of distribution to lower inventory and employing technology as means to offer consumer service. However, early references identifying the diffrences between the characteristics of goods and services was only notable in the works of Branton (1969) and Wilson (1972). In 1970’s, there was increasing interst in area of service marketing. Many service marketing concepst and theorie have been proposed in in these era (Blois 1974; Bessom and Jackson 1975; Shostack 1977). The two main reasons identified for increasing importance of services was growth of service sector in post industrial economy and increaisng use of services as a part of augmented benefit of product package to create competitive advantage.(Kotler et al. 2001; Jobber 2001; Constantinides, 2006).

The most important researches in service sector was initiated by Booms and Bitner (1981). The study was an incredible revolution in area of service marketing. It recognised the three key elements of service marketing mix i.e. people, process and pysical evidence. Further Cowell (1984) supported this model by justyying the original marketing mix framework. In 1989,researchers identified need fr introducing new marketing tools to mange the unique characteritic of service marketing. Bruner (1989) introduced 4 C mix model i.e. concept mix, cost mix, channel mix and coomunication mix based on Kotlers 4P framework. However, this model did not gain any polpularity due to lack of focus on service delivery process. In 1990’s most of researchers changed their focus on quality and service diferrentitaion as a key focus of marketing strategy (Fryar 1991; Heuval 1993; Doyle 1994). Heaval (1993) identified people as one of the key element service delivery process .

Also, in 1990 one of the most important marketing concept that was researched was Relationship marketing. Relationship marketing was introduced by Berry (1983) as a strategy to attract, maintain and enhance relationship with customer. Further this concept was intensively explored in various studies that focused on improving the process of realtionship building. (Morgan and Hunt, 1994; Gummesson, 1994; Parvatiyar, 1996; Palmatier, 2008). It was evident from all the researches that relation marketing was considered as postitve and more startegic and was more widely accpetable compared to the 4P marketing mix model. Also, the relation marketing included the two main limitation i.e. interaction and quality of the 4 P framework.

In 2000, the researches in service marketing saw a new direction. The research more focused on brand building and corporate communication startegy (Melewar, Saunders 2000; English 2000). Beckwith (2001)complemented the research by proposing branding and packaging as key tool for promoting services. In additon, there were few research conducted to study the service encounter and service delivery process (Parvatiyar, 1996; Palmatier, 2008) Howveer, there has not been any signifcant researches to further explore marketing of services in the changing world. So far as the development of knowelge is concerned, all researches have empahasised changing business environment as one of the key reasons for employing new marketing startegies to meet the challenges in the competitve enironment. The findings of the consistently support the notion that the four unique characterictice ofservices are key variablee for the service marketing.

Findings from Literature review and Desktop Study.

Tangiblising the Intangible:

As marketers cannot allow consumers to touch, feel or sense service, main challenge of service provider is to create customer experience. The two main industries that didn’t face this problem to that extent were Banks and Hotels, as the Hotel Property and Bank Building acted as a tangible assurity to the customer An IBM survey showed that 85 per cent of senior business leaders believe they could increase customer loyalty and market share by focusing their organization on integrated customer experience strategies and implementation (Tapp, A., 2005). If marketers are able to assure customers about a pleasant and assured experience they can overcome the limitation of intangibility. With development of technology marketers have been able develop a feel of actual value proposition of service to customers. Modern marketers are heavily relying on Internet to add tangible features. An example of marketing technique designed by coalescing technology and creativity is of Hotel Habbo, the company offers kids with tool that enable them to design 3D private virtual rooms and share it with their friends by creating their own home page on their site (Spero ,I. and Stone M. :2004). Such marketing techniques not only helping marketers to make customer feel about the experience but also allow them to share it with others. Service organisations try offering maximum information to consumer through their website about the services that helps consumer in purchase decision making. In late decades of 20th century, consumer was not very supportive with the idea of being a part of virtual market. But with increasing use of technology in every field made consumer accustomed to this growing technology lifestyle (Zineldin M.:2000). Technology not only helped marketers to reach customer but also to increase use of services. A classic example of this banking industry, banking industry revolutionised with revolutionizing technology. Today on an average every consumers utilises banking services every two times a day and this was not the case earlier, use of banking was mainly restricted to saving money.

Customization and Standardization- a paradox

The progressive service standardization within customized service production is paradoxical. During the early stage of Walking Erect marketers attempted to standardize service production due to the unpredictable character of service operations. But by leveraging technology marketers have been successful in offering a standardized service that is customized in nature. Presently standardization is used as a means to improve people mix and process mix. Standardization is used in order to help the management to control, predict and minimize mistakes and deviation among employees (Sandoff M.: 2005). Bitner et al. focused on the base of the pyramid model which links customers and employees to study how service encounters can be improved through the effective use of technology. They identified different ways by which technology can be enabler for employees and customers to achieve customization and flexibility, improve service recovery, and provide spontaneous delight. Earlier, service encounters were allowed to evolve more naturally in contrast to now when standard operating procedures are used to regulate the behaviour of single employee. Organisations are deploying service blueprints that are designed by service engineering department taking into account customer insight. This kind of controlled marketing efforts help in controlling the output activity and service quality the core of service mix. Global Organisation like McDonalds has been successfully able to resolve the paradox of customization and standardization of the services that became their Unique Selling Proposition (USP) by employing advanced technology (Kotler, P. 2006). With use of information technology marketers can identify different type customers with different need and adapt standardised services to fulfil their needs as marketing orientation is finally to satisfy customer needs.

Brick and Click Model

With increasing use of internet as the most convenience form of channel of distribution by customers, marketers are able to conduct situation analysis of the demand for services as there is no channel mediaries involve (Laing, A., Lewis, B., Foxall G. & Hogg G.:2003). As the organisations operating in the current business economics stress marketers to attain high return on investment, marketers adapt differentiated pricing strategy in order to deal with the perishabilty characteristics of service. Air line Industry is a typical example that perfectly employs yield management approach in order to attain maximum returns. Marketers are creatively designing strategies to promote advance booking of services that assures no loss. Another example that reflects a successful strategy to surmount perishabilty factor is National Express Coach, one of the leading coach service that offers travelling service all over United Kingdom. National Express offer fun fare tickets at low prices through online booking for unpopular destinations. This kind of pricing promotion helps organisation to reduce the losses that they might suffer due to non consumption of service. Also one of the important strategies adapted by service provider to increase demand for services is developing strong strategic alliances. Earlier companies did not focus much on partnering with other companies in order to develop additional channel of distribution. But with increasing competition, companies try to tie-up with organisations and use their internet portal to promote their service. Such kind of strategic alliance with other companies helps organisation to build its strength and create competitive advantage. Thus internet has helped organisation to reach large number of consumers and thus create demand for the service.

Technology as a means of service delivery.

Inseparabity is a unique characteristic of service and the only area that has not been completely trounced. But there are certain fields that have encouraged isolated consumption like counselling, teaching. An incredible example of isolated consumption is “Indo-U.S. Inter-University Collaborative Initiative in Higher Education and Research.” (The BadgerHerald, 2005). This program is an international alliance between 15 American universities, three Indian universities, three global corporations and the Indian government will utilize their country’s EDUSAT satellite that will allow American instructors to lead classes in remote classrooms, thousands of miles away, via Web cast. Such invention in field of technology has changed the traditional method of teaching service. Another model of isolated production of service consumption is “Wheel on meal” concept that was a innovation to make service consumption possible at customers convenience. But still there is huge scope of development in this area. In future we may expect some of discovery in marketing that have identified ways to offer customer service at consumer’s convenience.

THE RISE OF THE NEW CUSTOMER

Customers have become more demanding of how we interact with them and how we treat them across segments, products and channels. In a world where today’s best practice becomes the basic standard of tomorrow, it is becoming harder for companies to retain and attract customers cost-effectively. It is a world where experiences are at the heart of life and of life’s objectives. (Piercy, N.:2002). This has compelled marketer to recognize and engage with the new customer to succeed in this new customer-driven age. Technology has empowered new customer then a marketer; this helps them managing intake of communications and filter out unwanted messages. Increased mobility, distance and new tools for communication and entertainment have resulted in consumerism (Tapp, A.: 2005). This has resulted in higher demand and expectation of consumer from service experience. The new consumer benchmark for excellence service all the time; it might be from an entirely different industry or it will be their best experience in any category. Marketers cannot afford meeting these expectations as it’s too high. This customer driven agenda is making marketing professional’s role more intricate as customers are only loyal to organisation that offer them the best service and act as referrals of that organisation. But it is always not possible to meet consumer needs, thus modern marketers try identifying customers with long-term value and meet the enhanced service expectations of this valuable customer. Thus marketers adopt the operationalizing segmentation a scientific technique that aims at identifying customers personally each time they contact the business (Tapp, A.: 2005). Marketers plan customer engagements segment by segment, design engineer channel strategy, and establish quality level based on what is valuable to the customer (not what is easiest quality to manage). They also try identifying all the possible touch points in the customer life cycle try establishing micro-marketing at the heart of a branded delivery. In short, marketing has reinvented itself for a new age of customer.

VALUE DRIVEN MARKETING

The product is now undoubtedly a very small proportion of the profit in a value chain. Product differences are rarely a sustainable competitive advantage: there has to be something more it’s in the service/ solution part of the equation. So, all businesses are trying to differentiate through services and solution that can offer value to customer. Organisations are trying enhancing company’s service delivery process along with evoking emotions for the brand (Gray B., Matear S. & Matheson P., 2002). If companies are able to match the customer expectation of performance during all points of contact that is referred as customer journey, this will result in creating loyalty advocacy and attraction. Thus modern consumer cannot be easily influenced by adopting attraction strategies. Every time when customers come into contact with an enterprise they experience the transaction process to deal with that particular organisation and build image about the company. The experience is the ultimate conveyor of value to the customer and a primary influence on future behaviour (Tapp, A.: 2005). Thus the current trend is not as same as the early 21st century where marketers try building relational ship factors with the customers to influence decision making. Modern consumers demand value in service that consumer offer, only when consumer is assured about the value it is going to obtain from that transaction it will further respond to build relationship with the organisation. Thus marketers have to take strong efforts in order to design value at every stage of service encounter (Gray B., Matear S. & Matheson P.2002). In order to successfully design the marketing efforts the marketers should have deep, embedded knowledge about consumers and markets that helps to structure planning and decision making We might define this as ‘the ability to perceive clearly or deeply’, a deep, embedded knowledge about consumers and markets that helps to structure planning and decision making. This have resulted in development of integrated approach in marketing where everyone is involved in satisfying consumer needs and interacting with consumers that provides them with clear insight of customers want.

Studying Children’s: Methods and Processes

2.1.1 Research philosophy & approach:

The research conducted was qualitative and in-depth, as advocated for exploring (Deshpande´,1983) and understanding (Easterby-Smith et al., 1991) a phenomenon. The objective of the study is to understand the changing marketing approach and factors that has influenced the change in service marketing. This research was a type of exploratory research studying the changing paradigm in service marketing. Thus, the rationale, goals, and questions of this research called for a methodology that supported active involvement of marketing experts from service industry .Such a study enabled marketing experts to document and reflect their outlook, as well as articulate their beliefs in an environment that is comfortable, structured and engaging. As recommended by other researchers, experimentations and testing of subjects in a laboratory- type setting would not be conducive for drawing their views (Gotz, M., Lemish, D., Aidman, A. & Moon, H. , 2005).

As a researcher, author wanted to steer clear of a territory that is outside the area of expertise. Thus the researcher has focused the study only on service marketing and not general marketing as a function. During the resea