• Lack of Ownership

• Lack of Ownership

When customers buy physical goods, such as cars and computers, they have personal access to the product for an unlimited time. They actually own the

product. They can even sell it when they no longer wish to own it. In contrast, service products lack that quality of ownership. The service consumer often has

access to the service for a limited time. An insurance policy is yours only when you have paid the premium and continue to renew it. A holiday is experienced and, hopefully, enjoyed, but after the event, it remains ephemeral, unlike a product in the hand. Because of the lack of ownership, service providers must make a special effort to reinforce their brand identity and affinity with the consumer by one or more of the following methods:

I. They could offer incentives to consumers to use their service again, as in the case of frequent­flyer schemes promoted by British Airways and other big airlines.

652 • Chapter 15 Marketing Services

Marketing

The Death The UK funeral market, with

some 3,500 funeral service firms,

Business: Marketing

Highlight

is worth about £650 million a year.

Funeral Services

15.1 Funeral directors range from small

independent directors, which People rarely like to be reminded

account for nearly 60 per cent of of their mortality. If you were in

the market, to chains such as the the funeral industry ­ the business

Co­operative Wholesale Society of dealing with death (and, indeed,

(GWS) Funeral Services Group. one that depends on death for its

Working practices tradition­ survival) ­ how would traditional

ally were reminiscent of a cottage marketing practices be of use in

industry. The only 'marketing' that selling such a sensitive service? In

firms undertook was probably a recent years, funeral companies in

small, discreet advertisement in

a number of countries have not only increasingly the local paper or an entry in the Yellow Pages. In adopted a more commercially minded approach

the early 1980s, however, a Mr Howard Hodgson, an to selling funeral services, but also introduced rel­

independent undertaker, with well­honed business atively innovative marketing practices to main­

skills selling life insurance, began shaking up the tain and increase market share.

insular world of funeral directing. Hodgson re­ Since the UK's Independent Television Com­

alized that the operating inefficiencies in most mission changed its rules in 1993 ­ governing the

undertakers meant that scale economies would broadcast of 'sensitive' advertising ­ undertakers

be easy to achieve by adding extra business, lie are using TV advertising to persuade viewers to

acquired a small, moribund funeral directors' arrange and pay for their own funerals years

business and, using a shrewd and hands­on man­ before they could actually expect to die. Funeral

agement approach, managed to improve produc­ directors Great Southern, owned by America's

tivity, Hodgson joined the unlisted securities Service Corporation International (SCI), the

market (XISM) in 1986 and continued to extend world's largest funeral services company, did just

distribution coverage through further acquisition. that with 'Chosen Heritage', its prepayment

The successful strategy was followed by Hodgson's scheme first advertised in the London TV area in

main rivals ­ CWS, Great Southern and Kenyon early 1994. It had amassed over £40 million in

Securities. Hodgson later merged with Kenyon sales from 67,000 people, by September 1994.

(29 per cent owned by France's largest funeral Funeral directors are applying marketing

group. Pompes Funebres Generates) to form PFG thinking due to a number of changes in their

Hodgson Kenyon International, later renamed environment. First, the demographics of death

Plantsbrook Group, which became one of the mean that the number of funerals per year until

more prominent players in the UK market. the end of the century will remain static at about

With growth by acquisition put aside for the 650.000 a year, although the numbers are set to

time being after the heady pace of change in the rise after that. Second, with competition intensi­

1980s, the funeral business has turned to market­ fying, many of the larger funeral operations were

ing. A greater understanding of what the target acquiring family­run firms and smaller chains of

customer 'wants is now regarded as important. undertakers in order to boost market share. And

Some people may want to delay their purchase of foreign operators have stepped up their invasion

a headstone, others may want a proper funeral for of the European funeral market, as in SCI's acqui­

the deceased. Some are cutting back on flowers. sition of Britain's Great Southern and Plantsbrook

Pricing issues have also gained importance. A in 1994, which took it the UK's no. 1 position,

survey conducted by the Old Fellows Friendly with a 15 per cent share of the market. Operators

Society, which sells insurance plans to cover who lack funds to buy or to maintain their acqui­

funeral costs, found that the average cost of a sition trail, have turned to other ways to increase

funeral Is rising. On average a burial in the United market share ­ marketing.

Kingdom would cost some £1,022 and a crema­

Nature and Characteristics of a Service • 653

tion, around £806. This is cheap compared to Some countries are less inhibited. In Japan, Europe: a burial in France, for example, costs

for example, death can be celebrated with a gusto £1,102; in Germany, £1,127; and in Belgium,

that few in the West embrace. The Gyokuzenin £1,159. With funeral directors facing increasing

funeral business charges £3,000 for a 60­minute pressure to abide by the voluntary codes of prac­

'music and light' funeral, in which synthesized tice and enforcement procedures operated by the

Buddhist chants, together with an elaborate laser industry's main body, the National Assoeation of

show, take the deceased to a new hi­tech world. Funeral Directors, excessive pricing is often inap­

Some of Tokyo's 'full­service' funeral homes could propriate as a means of propping up margins. But

charge up to £25,000 for a funeral. Sharper oper­ pricing uncertainty has favoured funeral direc­

ators have augmented their business by running tors, who have responded by encouraging people

their own minihotels where out­of­town mourn­ to take advantage of the prepayment funeral

ers can stay. They 'add value' to the core service schemes — a US idea ­ thus allowing undertakers

by having on­site catering and flower­arranging. to price their service in advance.

They will also take care of Japan's complex re­ Funeral directors use a variety of methods to

ligious rituals, with 'tangible' support given in the promote their service. TV advertising and other

way of books and magazines for people who need media advertising are used to create awareness

to learn the funeral rites. Japan's rapidly ageing of prepayment schemes. The Go­op holds 'open

population has proved a boon to the industry, days' at its funeral homes, where visitors are

which is seeing an increase in deaths of around 2 greeted with a video, say, and literature about the

per cent a year! New entrants are muscling into work carried out in preparing for a funeral.

this profitable business. Quality control has become Independent undertakers rely heavily on per­

an issue. Established funeral firms are turning to sonal or word­of­mouth recommendation to gain

'professionahzation' to differentiate their offering customers.

and to see off the 'upstarts'. In co­operation with All the marketing efforts in the 1990s are

the Ministry' of Labour, funeral operators have based on the assumption that people's attitudes

started a certification course ­ anyone can don a regarding death are changing, that people are

black coat and set up a funeral home, but to be a becoming more conscious of 'dying costs' and are,

funeral director, you must have a certificate. therefore, more witting to think and plan ahead tiian ever before. Educating the public to con­

SOURCES: Drawn extensively from David Churchill, 'Grave

sider funerals in advance is hard going. But there

undertakings'. Ainrketinft liusinesn (October J 992). pp. 43­

are signs that people are prepared to be more

5; Stephen Nathan, 'Invasion of the body matchers', The

imaginative about funerals ­ one man recendy European (9­15 September 1994). p. 29; Caroline Sou they,

'Plantsbrook advances 8 per cent despite fall in death rate',

arranged to have a jazz band play at his ­ although

Financial Times (9 September 1994), p. 20; 'Death, Japanese

most customers still opt for a traditional funeral.

style', The Rconomisi (15 March 1997), p. 80­

They could create membership clubs or associations to give an impression of ownership (e.g. British Airways' executive clubs for air travellers.

Toshiba's cookery clubs for microwave oven users, IKEA's family club membership).

Where appropriate, service providers might turn the disadvantage of non­ ownership into a benefit: for example, an industrial design consultant might argue that, by employing his or her expertise, the customer would actually

bo reducing costs, given that the alternative would be for that customer to employ a full­time designer with equally specialized knowledge. Paying for access to services rather than performing the activities in­house (e.g. warehousing) reduces capital cost, while also giving greater flexibility to a business.

654 • Chapter 15 Markcting Services

Marketing Strategies for Service Firms

Until recently, service firms lagged behind manufacturing firms in their use of marketing. Many service businesses are small {shoe repair shops, barber shops, dry cleaners) and often consider marketing unnecessary or too costly. Some service organizations (e.g. schools, churches) were at one time so much in demand that they did not need marketing until recently. Others (e.g. legal, medical and accounting practices) believed that it was unprofessional to use marketing. Still Others who sell sensitive services did not contemplate using marketing tech­ niques because it was not discreet to do so (see Marketing Highlight 15,1).

Furthermore, service businesses are more difficult to manage when using only traditional marketing approaches. In a product business, mass­produced

products are fairly standardized and sit on shelves waiting for customers. But in a service business, the customer and frontline service employee interact to create the service. Thus service providers must work to interact effectively with customers to create superior value during service encounters. Effective intetae­ tion, in turn, depends on the skills of frontline service staff, and on the service production and support processes backing these employees.

Thus successful service companies focus their attention on both their employees and customers. They understand the service­profit chain, which links service firms' profits with employee and customer satisfaction. This chain consists of five links:"

1. Healthy service­profits and growth ­ superior service firm performance,

which results from ...

2. Satisfied and loyal customers ­ satisfied customers who remain loyal, repeat purchase and refer other customers, which results from ...

3. Greater service value ­ more effective and efficient customer value creation

and service delivery, which results from...

4. Satisfied and productive service employees ­ more satisfied, loyal and

hard­working employees, which results from...

5. Internal service quality ­ superior employee selection and training, a quality work environment and strong support for those dealing with customers.

internal marketing Thus reaching service profits and growth goals begins with taking care of Marketing by a service

firm to train and those who take care of customers. All of this suggests that service marketing effectively motivate its

requires more than just traditional external marketing using the four Ps. Figure customer­contact

15.2 shows that service marketing also requires both internal marketing and employees and all the

interactive marketing.

supporting service Internal marketing means that die service firm must invest heavily in people to teorfe as a team

employee quality and performance. It must effectively train and motivate its to provide customer

customer­contact employees and all the supporting service people to work as a satisfaction.

team to provide customer satisfaction. For the firm to deliver consistently high service quality, everyone must practise a customer orientation. Tt is not enough to

interactive marketing have a marketing department doing traditional marketing while the rest of the Marketing by a service

company goes its own way. Marketers must also encourage everyone else in the firm that recognizes that

perceived service quality organization to practise marketing. In fact, internal marketing must precede depends heavily on the

external marketing. It makes little sense to advertise excellent service before the quality of buyer­seller

company's staff is ready, willing and able to provide it.

interaction. Interactive marketing means that perceived service quality depends heavily on the quality of the buyer­seller interaction. In product marketing, product

Marketing Strategies for Service Firms