Service Service Characteristics of Characteristics of

TravelTravel and and Tourism Tourism

MarketingMarketingObjectiveObjective: discussing four distinguishing : discussing four distinguishing characteristics of services and several things characteristics of services and several things

management of service firmsmanagement of service firms and in particular and in particular travel and tourism firmstravel and tourism firms can do to increase the can do to increase the

effectiveness of their business.effectiveness of their business.

Services MarketingServices Marketing

Service industries are quite varies: Service industries are quite varies: governmental servicesgovernmental services - courts, - courts, hospitals, police, fire departments, hospitals, police, fire departments, postal services, schools etc; postal services, schools etc; private private nonprofit organizationsnonprofit organizations - museums, - museums, colleges, hospitals etc; colleges, hospitals etc; business business organizationsorganizations - airlines, hotels, - airlines, hotels, restaurants, advertising, real estate restaurants, advertising, real estate etc.etc.

Satisfying the CustomersSatisfying the Customers

The aim of the service organizations is The aim of the service organizations is also serving and satisfying the also serving and satisfying the customer. customer.

The belief that customer comes first is The belief that customer comes first is reinforced in Four Seasons Hotels reinforced in Four Seasons Hotels where employees who go to where employees who go to extraordinary efforts to satisfy the extraordinary efforts to satisfy the customer are entitled to be the customer are entitled to be the “Employee of the Year”, story of Ron “Employee of the Year”, story of Ron Dyment, doorman in Toronto.Dyment, doorman in Toronto.

Nature and Nature and Characteristics of Characteristics of

ServicesServices There are four distinguishing There are four distinguishing characteristics of services. They characteristics of services. They are;are;

IntangibilityIntangibility InseparabilityInseparability VariabilityVariability PerishabilityPerishability

Service IntangibilityService Intangibility

means that unlike physical products, means that unlike physical products, services cannot be seen, tasted, felt, heard services cannot be seen, tasted, felt, heard or smelled before they are bought.or smelled before they are bought.

Buyers look for “signals” or “tangible Buyers look for “signals” or “tangible evidences” like the place, people, price, evidences” like the place, people, price, equipment and information about the equipment and information about the service in order to reduce uncertainty service in order to reduce uncertainty caused by intangibility before they pay the caused by intangibility before they pay the price. E.g. the cleanliness of the restaurant, price. E.g. the cleanliness of the restaurant, employee uniforms of the hotelemployee uniforms of the hotel, Heublein vs , Heublein vs Smirnoff.Smirnoff.

Service InseparabilityService Inseparability means that services cannot be separated from means that services cannot be separated from

their both (1) providers and (2) other their both (1) providers and (2) other customers.customers.

If a service employee provides the service, then If a service employee provides the service, then the employee is part of the service. E.g. the the employee is part of the service. E.g. the food in the restaurant may be outstanding, but food in the restaurant may be outstanding, but if the service person is rude, customers will if the service person is rude, customers will downrate the overall service of the restaurant. downrate the overall service of the restaurant.

the other customers affect the service outcome the other customers affect the service outcome as well. E.g. a couple may choose a restaurant as well. E.g. a couple may choose a restaurant but if a group of loud customers is seated next but if a group of loud customers is seated next to them, the couple will be disappointed.to them, the couple will be disappointed.

Service VariabilityService Variability means that the quality of services depends on means that the quality of services depends on

who provides them, plus, when, where, and how who provides them, plus, when, where, and how they are provided. E.g. within a given hotel they are provided. E.g. within a given hotel chain, one reception desk agent may be cheerful chain, one reception desk agent may be cheerful and efficient one day but would be unpleasant and efficient one day but would be unpleasant and slow the other day. and slow the other day.

Service providers’ service quality depends on Service providers’ service quality depends on his energy and his frame of mind at the time of his energy and his frame of mind at the time of each customer encounter.each customer encounter.

Fluctuating demand makes it difficult to deliver Fluctuating demand makes it difficult to deliver consistent services during periods of peak consistent services during periods of peak demand. demand.

Variability or lack of consistency is the major Variability or lack of consistency is the major cause of customer disappointment in the cause of customer disappointment in the industry.industry.

Service PerishabilityService Perishability means that services cannot be stored for later means that services cannot be stored for later

sale or use. E.g. if a 100 room hotel can sell sale or use. E.g. if a 100 room hotel can sell only 40 rooms today, selling the remaining 60 only 40 rooms today, selling the remaining 60 is gone forever.is gone forever.

If service providers are to maximize revenue, If service providers are to maximize revenue, they must they must manage capacity and demandmanage capacity and demand. E.g. . E.g. hotels charge lower rates in the off-season to hotels charge lower rates in the off-season to attract more guests; restaurants hire part-time attract more guests; restaurants hire part-time employees to serve during peak periods; tour employees to serve during peak periods; tour operators and airline companies have last-operators and airline companies have last-minute sales.minute sales.

Service perishability is a serious problem when Service perishability is a serious problem when demand fluctuates.demand fluctuates.

MarketMarketinging Strategies for Strategies forService FirmsService Firms

Services are different form tangible Services are different form tangible products, that is why, additional marketing products, that is why, additional marketing approaches are needed to market services.approaches are needed to market services.

In service businesses, the customer and In service businesses, the customer and front-line service employees interact. front-line service employees interact. Service providers must interact effectively Service providers must interact effectively with customers to satisfy them. That is with customers to satisfy them. That is why, companies take care of their why, companies take care of their employees to make profit. Because they employees to make profit. Because they believe that onlybelieve that only

satisfied and productive service satisfied and productive service employees can create satisfied and loyal employees can create satisfied and loyal customers.customers. Internal marketingInternal marketing; means that the service ; means that the service

firm must effectively train and motivate its firm must effectively train and motivate its customer-contact employees to provide customer-contact employees to provide customer satisfaction.customer satisfaction.

Interactive marketingInteractive marketing; means that service ; means that service quality depends on the quality of the buyer-quality depends on the quality of the buyer-seller interaction during the service seller interaction during the service encounter.encounter.

In order to increase the profit margin, In order to increase the profit margin, there are three major marketing tasks there are three major marketing tasks for service companies;for service companies;

Managing Service Managing Service DifferentiationDifferentiation

Differentiated offer, delivery and Differentiated offer, delivery and image are the keys for the solution image are the keys for the solution to price competition.to price competition. The The offeroffer can provide innovative can provide innovative

features like e.g. in-flight movies, features like e.g. in-flight movies, advance seating, frequent-flyer award advance seating, frequent-flyer award programs in an airlines. British Airways programs in an airlines. British Airways offers a sleeping compartment and hot offers a sleeping compartment and hot showers. showers.

The The deliverydelivery can be differentiated by can be differentiated by having better customer-contact having better customer-contact people, developing apeople, developing a superior superior physical environment, or by physical environment, or by designing a superior deliver process designing a superior deliver process like e.g. home banking can be like e.g. home banking can be provided as a better way to deliver provided as a better way to deliver banking services.banking services.

The The imageimage can differentiate the can differentiate the service company through symbols service company through symbols and branding.and branding.

Managing Service QualityManaging Service Quality

A service firm can also differentiate A service firm can also differentiate itself by delivering consistently higher itself by delivering consistently higher quality than its competitors do.quality than its competitors do. Service quality will always vary, Service quality will always vary,

depending on the interactions between depending on the interactions between employees and customers. A company employees and customers. A company cannot always prevent service problems cannot always prevent service problems but can recover them. A good but can recover them. A good service service recoveryrecovery can turn angry customers into can turn angry customers into loyal ones. Companies loyal ones. Companies empowerempower front-line front-line

service employees (giving authority service employees (giving authority to do whatever it takes to keep to do whatever it takes to keep customers happy) to recover customers happy) to recover problems. problems.

Good service companies also Good service companies also communicate their qualities to communicate their qualities to employees and provide employees and provide performance performance feedbackfeedback..

Managing Service ProductivityManaging Service Productivity

Service productivity can be increased by;Service productivity can be increased by; training the employees better or hiring new and training the employees better or hiring new and

better employees better employees industrializing the service with equipment and industrializing the service with equipment and

standardized production as in McDonald’s standardized production as in McDonald’s using technology to save time and moneyusing technology to save time and money

Trying to increase the productivity would Trying to increase the productivity would reduce quality and diminish customer reduce quality and diminish customer service. That is why, some service providers service. That is why, some service providers accept to have lower productivity levels.accept to have lower productivity levels.

Particular Characteristics Particular Characteristics of Travel and Tourism of Travel and Tourism

ServicesServicesIn particular, travel and tourism In particular, travel and tourism

products have theproducts have the

following special characteritics;following special characteritics;

Seasonality and demand fluctuationsSeasonality and demand fluctuations High fixed costs of service operationsHigh fixed costs of service operations Interdependence of tourism productsInterdependence of tourism products

Seasonality and demand Seasonality and demand fluctuationsfluctuations

As far asAs far as most leisure tourism markets most leisure tourism markets are are concerned, concerned, demand fluctuates greatly demand fluctuates greatly between seasons of the year. As a result, the between seasons of the year. As a result, the occupancies in many tourism businesses occupancies in many tourism businesses increases to 90 to 100 per cent in the high increases to 90 to 100 per cent in the high season but drops to 30 per cent or less in the season but drops to 30 per cent or less in the low season. In addition, seasonal closure of low season. In addition, seasonal closure of many leisure tourism businesses is common many leisure tourism businesses is common as well. These demand variations in tourism as well. These demand variations in tourism is more important because of perishability. is more important because of perishability. That is why, generating demand when there That is why, generating demand when there is less demand, is always the major is less demand, is always the major preoccupation for marketing managers.preoccupation for marketing managers.

High fixed costs of service High fixed costs of service operationsoperations

In the travel and tourism industry, it is In the travel and tourism industry, it is generally the case that the operations have generally the case that the operations have high fixed costs and relatively low variable high fixed costs and relatively low variable costs. This fact focus all service operator’s costs. This fact focus all service operator’s attention on the need to generate extra attention on the need to generate extra demand. Since most large scale businesses demand. Since most large scale businesses are obliged to operate on a very narrow are obliged to operate on a very narrow margin between total cost and total revenue margin between total cost and total revenue because of intense competition, plus or minus because of intense competition, plus or minus one percentage point in average load factors one percentage point in average load factors makes the difference between profit or loss.makes the difference between profit or loss.

Interdependence of tourism Interdependence of tourism productsproducts

The fortunes of The fortunes of all all tourism tourism organizationsorganizations in a destination are in a destination are linked. Since a vacationer chooses linked. Since a vacationer chooses attractions at a destination together attractions at a destination together with the products of accommodation, with the products of accommodation, transport, catering etc., all transport, catering etc., all organizations should function in organizations should function in coordination. coordination. “Partnership”“Partnership”

Marketing in tourism is shaped Marketing in tourism is shaped and determined by two important and determined by two important factors;factors; the operating characteristics of the operating characteristics of

supplying industriessupplying industries the nature of demand for tourismthe nature of demand for tourism

Useful Links and Useful Links and SourcesSources

Kotler, P.; Bowen, J. and Makens, J. (1999). Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality and Tourism (2nd Marketing for Hospitality and Tourism (2nd ed.). Prentice Hall. NJ.ed.). Prentice Hall. NJ.

Kotler, P. and Armstrong, G. (2006) Kotler, P. and Armstrong, G. (2006) Principles of Marketing (11th ed.). Prentice Principles of Marketing (11th ed.). Prentice Hall. NJ. Hall. NJ.

Middleton, V.T.C. (2004) Marketing in Middleton, V.T.C. (2004) Marketing in Travel and Tourism (3rd ed). Elsevier. Travel and Tourism (3rd ed). Elsevier. Oxford.Oxford.

http://www.hotelsmag.comhttp://www.hotelsmag.com http://www.tourism.bilkent.edu.tr/~edahttp://www.tourism.bilkent.edu.tr/~eda