Marketing for services - theoretical aspects and practical examples from European low fare airlines

I. Table of contents

II. List of abbreviations

III. List of figures

IV. List of tables

1. Introduction
1.1. Problem
1.2. Goals of this study
1.3. Approach

2. Service Marketing
2.1. Definition and scope
2.1.1. Marketing
2.1.1.1. Exchange process approach
2.1.1.2. Business philosophy approach
2.1.1.3. Managerial function approach
2.1.1.4. Conclusion
2.1.2. Service
2.1.2.1. Constitutive criteria
2.1.2.2. Statistical approach
2.1.2.3. Performance dimensions
2.1.2.4. Other definition possibilities
2.1.2.5. Conclusion
2.1.3. Service Marketing
2.2. Targets
2.2.1. Quantitative targets
2.2.2. Qualitative targets
2.3. 7 Ps of service marketing
2.3.1. Product
2.3.2. Price
2.3.3. Place
2.3.4. Promotion
2.3.5. People
2.3.6. Physical facilities
2.3.7. Process Management
2.4. Other instrumental approaches for service marketing
2.5. Critical appraisal

3. Additional 3 Ps for services described on the example of low fare airlines
3.1. Market and market environment in Europe
3.1.1. Historical developments
3.1.2. Current situation
3.2. Service marketing mix
3.2.1. People
3.2.2. Physical facilities
3.2.3. Process Management
3.2.4. Correlation with other components of the marketing mix
3.3. Critical appraisal

4. Outlook

V. Appendix

VI. List of literature

II. List of abbreviations

illustration not visible in this excerpt

III. List of figures

Fig. 1: Share and breakdown of new demand in LFA’s traffic

Fig. 2: Success factors for service companies

Fig. 3: Expansion of the classical marketing mix

Fig. 4: Communication model

Fig. 5: Pyramid of targets

Fig. 6: A charter flight considering as an example for customer contacts

Fig. 7: Differences between service packages of traditional airlines and low fare airlines

Fig. 8: Capacities of low cost airlines in Europe (June 2005)

Fig. 9: Unit costs compared for a Boeing 737-300

Fig. 10: Different development stages of European markets (February 2006)

IV. List of tables

Tab. 1: Distribution channels

Tab. 2: Comparison of legroom at different airlines

Tab. 3: Employees per economic sector in Germany

1. Introduction

1.1. Problem

In the recent years, a growing economic importance of services especially in western countries could be observed. The share of people working in the service sector has grown to more than 60% in nearly all western countries.^[1] This can be observed in figure 3 in the appendix: In Germany, an increasing share of people was employed in the service sector, with the highest share ever in the 4th quarter 2005. At this point of time, 72,1% of the employees were employed in the tertiary sector. This increasing importance of the service sector will continue, as it is predicted that a positive balance of additional employment in the next years will only be reached in the service sector. Additionally, not only has the service sector the highest share in the employment statistic, but also the biggest part of the gross domestic product.^[2]

Also, the importance of services becomes obvious, when the following figures are considered: In Germany, only 10 to 25% of the whole industrial value added originates directly from the production of a product. The other 75 to 90% result from intra-corporate services.^[3] Plus, intra-corporate services have the biggest share of all intermediate inputs used by corporations.^[4]

One practical example for the growing importance of services is the European aviation industry. Formerly exclusively dominated by a small number of state-aided airlines embedded in a system of national regulations, the liberalisation of the industry during the 1990s’ was the starting point for a new era in the aviation industry. The airlines had to face competition and an innovative new sector, the sector of low fare airlines, developed itself to meet the customer needs by offering flights for affordable prices. As a consequence traditional airlines had to revise their concept and strategy in order to avoid a significant loss of market share. In 2010 it is expected that the share of low fare air traffic in Europe will reach over 40%.^[5]

But low fare airlines do not only poach customers from traditional airlines. The no-frills-concept of low fare airlines also generated new demand. In 2002 59% of the passengers of low fare airlines would not have travelled by air if the cheap tickets would not have been available. Therefore they participated in the extension of the air transport industry.

illustration not visible in this excerpt

Following European Low Fares Airline Association (2004), p. 6.

Fig. 1: Share and breakdown of new demand in LFA’s traffic

That is only the direct effect that the services of low fare airlines have on the air transport market. But there is also an indirect effect. Due to the significantly growing number passengers flying with a low fare ticket, the service industry e.g. at secondary airports as Cologne/Bonn grows as well. To make the passengers’ waiting time more comfortable gastronomy and other businesses of the service industry were settled in and around the airports.^[6]

1.2. Goals of this study

This study will describe the special characteristics of services and the requirements for marketing activities in the service sector compared to other areas. Thereby, special attention will be paid to low fare airlines, which have contributed to the increasing importance of the service sector in general and the aviation service sector in particular due to the reasons already mentioned above.

1.3. Approach

Firstly, the required terms in the context of service marketing will be described and different theoretical approaches will be presented. Several possibilities to define the main terms in the context of this case study will be given. Secondly, the special requirements of service marketing will be shown and compared to the marketing of products, i.e. real assets. Thirdly, the history and current situation of the low fare airline business will be shown and explained. Afterwards, the special challenges in the marketing of low fare airlines will be discussed. Solutions and possible approaches for a successful marketing of low fare airlines will be presented. The main focus will be on the expansion of the classical marketing mix, i.e. the 3 P people, physical facilities and process management. Finally, a brief outlook will be given which describes possible future developments and highlights several important fields, to which companies should pay attention.

2. Service Marketing

2.1. Definition and scope

2.1.1. Marketing

Due to the multiplicity of marketing definitions three major approaches are provided in the course of this chapter.

First, the exchange process approach is introduced to describe the historical background of marketing activities. Second, the business philosophy approach provides a theoretical background of marketing activities. Third, to terminate this part with a practical approach, marketing is considered as a management function.

2.1.1.1. Exchange process approach

The development of ways by which products can be exchanged between individuals and societies has been the basic principle for economic increase and progress. In the course of time this approach has developed from a pure barter - which depends on individuals with complementary products finding each other - to market situation which is mainly dominated by the use of money. The use of money allows the market participants to detach from the situation where one party directly has to fulfil the needs of the other party to reach his own goals. For example, without the use of money a farmer who wants to exchange his wheat for a pig had to find another person who wants exactly to conclude the countertrade.^[7]

Due to the worldwide trade increase there is a rise in markets and merchants. On the one hand this fact provides individuals with opportunities to choose among many potential suppliers. But on the other hand it also presents more potential customers for the suppliers. Compared with the exemplary situation of the farmer displayed above, this growth of the markets usually leads to a separation of suppliers and customers. Parallel with the often decreasing direct contact between customer and supplier the possibility to learn about each other decreases, too. Moreover this separation could cause a further loss of benefit of both sides. Firstly, the supplier has to cope with the increase of costs, e.g. linked with the increased distance to the customer. Secondly, the customer receives less value for his money because the suppliers partly account their increased costs in less product quality. Starting from this assumption marketing analyses the exchange process and provides ways to maximise the benefit of both parties.^[8]

2.1.1.2. Business philosophy approach

“Consumption is the sole end and purpose of all production and the interests of the product ought to be attended to only so far as it may be necessary for promoting those of the customer.”^[9]

The implementation of this awareness by Adam Smith leads to a view on marketing as a business philosophy which describes the adjustment of the company to the market.^[10] According to Meffert, the approach of an integrated customer orientation as a leadership guideline is the most accepted marketing comprehension.^[11]

This approach regards the customer as the most important factor for the company’s success. Hence the main task of a company should be to serve the customer and fulfil his needs rather than to manufacture products. So, marketing as market orientation is considered as the backbone of company’s philosophy. To be successful, this philosophy of stringent customer (and market-) orientation must be accepted as being crucial for the company’s success by every part of the organisation. Hence, only with the implementation of this philosophy in every employee’s mind this philosophy can work in practice.^[12]

The influence of employees on the company’s success will be discussed later in this case study, especially in chapter 2.4.5.

2.1.1.3. Managerial function approach

Following the above mentioned task of marketing to design the exchange process between customer and supplier, marketing’s role can be seen as a facilitator who helps on the one hand the company – and therefore the total stakeholders – to sell the products and therewith reach its economic goals and on the other hand to help the customer to fulfil their needs. Hence, the marketing employee can be seen as the person who implements the abstract idea of exchange into reality.^[13]

This means that marketing has to consider both, the market’s needs and the company’s interests at the same time. So besides identifying and anticipating the customer’s needs it is the task of the marketing department to create a product which matches the researched needs. In addition, marketing also has to deal with questions of the product’s price, its distribution and the promotion activities of the company.^[14]

2.1.1.4. Conclusion

Nowadays, the term marketing is usually associated with the 4 Ps approach, which was firstly introduced by Neil Borden in 1962.^[15] Thus the common understanding of marketing is close to the given managerial function approach. But the two different approaches described above show exemplary that there are more ways to determine a marketing definition. However, besides the described marketing approaches there are even more definitions or modifications of the given approaches. E.g. the system-orientated marketing approach could be seen as an extension of the managerial function approach.^[16]

As mentioned before, because of the inconsistency of the marketing definitions in the literature, it was decided to use the operative 4 Ps approach for this case study.

2.1.2. Service

The spectrum of different services in the service sector is broad and there is no commonly recognized definition of the term service available yet.^[17] The discussion about a definition of the term service is affected and aggravated by the heterogeneity of the different services and also partly intersecting characteristics between services and real assets, which are often considered as counterparts.^[18]

Following, the main characteristics of services and several ways to define services will be listed and described. Namely, these are definitions by constitutive criteria, enumeration of service categories, a statistical approach and the definition via performance dimensions.

2.1.2.1. Constitutive criteria

The first possibility to define the term service is the use of constitutive criteria. These characterise each service. In literature, there are several opinions about which of the criteria are the most important ones. Most commonly, two of these constitutive criteria are accounted as being most important: Firstly, services are intangible. That means the result of a service is not concrete and does not have a physical reality (e.g. the performance of a hairdresser or a flight with an airplane).^[19] Nevertheless, it is possible and common to deliver a service with additional contributions in kind, e.g. the reparation of a car, i.e. the service, combined with the installation of spare parts, i.e. the contribution in kind. Secondly, services require the integration of an external factor. This means that the customer has to implement an external factor into the process of service creation. This external factor can be an animal (e.g. at the veterinarian), a material good (e.g. the car during a reparation), a nominal good (e.g. the money in a bank service), a information (e.g. during a consulting service) or the customer hisself (e.g. during the hair dresser visit).^[20] Without the integration of the external factor, performance delivery is not possible.^[21]

Besides these two mentioned characteristics, services are highly individual and cannot be standardised easily.^[22] They are relatively complex and the service quality is hard to evaluate. Trade, transport and storage of services are in general not possible. Due to the fact that they are not superposable, they are awarded as being perishable and therewith related to a certain risk of purchase. The last mentioned criteria is also due to the hardly evaluable quality of a service.^[23]

In addition to the constitutive criteria mentioned before, there are two main differences of services in comparison to other industrial goods: Firstly, a service has to be sold before it is produced. This is due to the fact, that for the production of a service external production factors are needed and have to be implemented from the purchaser of the services. Secondly, the production and transfer/consumption of the service have to happen simultaneously as for the production of a service the combination of the external factor and the internal factor (i.e. the performance of the service company) are required. One example for the simultaneous production and transfer/consumption of a service, the so-called uno-actu-principle, is the telecommunication industry, where during a telephone call the production (i.e. the phone call itself) and the transfer of the service (i.e. the transfer of the phone call) happen at the same time. Due to these two mentioned characteristics, a production on stock is not possible in the service sector. Ultimately, in the case of distribution problems, this leads to immediate fluctuations in employment and therewith the often low productivity in the service sector.^[24][25] The last mentioned classical characteristics of services, namely direct use and local linking, have been softened by the modern information and communication technologies, which allow storage and room as well as time independent use of at least some - mainly digital - services.^[26] Nevertheless, in most cases the immediate presence and the direct contact to the costumers is still an important factor, which cannot be compensated by other actions as service companies have to be responsive to the individual needs of their costumers.^[27]

To sum up, it can be said that the constitutive criteria mentioned before can be used to distinguish services from real assets descriptive. Nevertheless, a absolutely selective definition of services and real assets is not possible. For example, several real assets (e.g. foodstuffs) have also the characteristic of perishability. Also, on one side, absolutely individually created real assets are available or, on the other side, highly standardized services are offered (e.g. insurances). This means that on one hand real assets can also have the identified constitutional characteristics and on the other hand some services may miss some of them. Therefore, the before mentioned classification has to be seen as a tendency with some exceptions, but offers a practical and relative accurate classification.

Meffert and Bruhn also define services through constitutive criteria. Namely, the three criteria they use are potential orientation, process orientation and result orientation.^[28] As the approach of Meffert and Bruhn is not synonymous with the before mentioned definition of constitutive criteria but offers another way of definition, which partly builds on the before mentioned constitutive criteria, it will be reviewed in more detail in part 2.1.2.4. of this case study, when the three performance dimensions are described.

2.1.2.2. Statistical approach

From the statistical point of view, services are defined as all businesses working in the tertiary sector. In separation from the primary and secondary sector, the tertiary sector contains the branches trade, transport, telecommunication, credit and banking, insurance, accommodation as well other service businesses, private households and non-profit organisations. Due to the problem of the indefiniteness of the term other service businesses, this kind of definition is not absolutely accurate. Stille solves this problem by defining the tertiary sector as being everything that is not contained in the primary, i.e. the agricultural, and the secondary, i.e. the producing, sectors. Again, this solution is not absolute accurate.^[29]

Additionally, it is not exactly clear, how corporations have to be assigned to the different sectors, especially concerning their internal services. This again leaves some cases of doubt when different companies should be classified.^[30]

2.1.2.3. Performance dimensions

To avoid the problems of the before mentioned two possibilities of service definition and to find a more structured way of defining what a service is, service characteristics (mainly based on the constitutive criteria already mentioned in point 2.1.2.1.) have been divided into three groups, namely result orientation, potential orientation and process orientation.^[31] Through this model, services are defined as individual performances. They have a performance potential, are part of a process in which internal and external factors are combined to result in a performance and have a result with material or immaterial value gaining effect.^[32]

Following, the three dimensions will be described in more detail: Firstly, through the dimension of result orientation, services are defined as being purposeful. This means, they are produced to gain value for the customer or user. Especially in the view of the intangibility of services, the measurement and identification of the actual result of a service is often not easily possible. Therefore, often a differentiation of services and real assets is not possible only result orientated. But a classification based on the main part of the delivered product or service, whether it is intangible or real, can help in most cases.^[33]

Secondly, the potential orientation of services results from the fact, that services are not readily produced products, but only the ability and willingness to deliver a performance.^[34] Thus, marketing activities have to be adjusted to the fact that offering companies are only able to present only his abilities when they establish the first contact with their customers. Examples are hairdresser during the opening hours of their shops or taxis. Again, at this point it has to be mentioned that the digital media are an exception of this characteristic.^[35]

The importance of potential orientation is reduced by the fact that the ultimate thing the customer demands is generally rather the result of a service than the potential.^[36]

As for the production of a product, the potential of the company is also required like in the case of a service, the potential orientation is not sufficiently usable to differentiate between services and real assets.^[37]

Thirdly, the most simplifying definition of a service is to consider it as a process. All the characteristics which were described above (e.g. that services are intangible and perishable) can be ascribed to that process approach. Almost every service is a process, e.g. the flight of an aeroplane. Although the customer often benefits from the outcome / result (e.g. the arrival at the flight destination), the core of the service is a process.^[38]

The lack of accurate differentiation between services and real assets that the two before mentioned performance dimensions offer, led to the process oriented differentiation of services. Here, the already mentioned implementation of an external factor plays the major role. Parallel to potential orientation, it is important to know that not only the process but even more the result of a performance has to be promoted in most cases. Exclusions are e.g. theatres or the tourism industry, where the process itself is the purchase reason. As services can lead to both, immaterial and material results, even then, when only information are implemented as external factors (e.g. the planning of a production plant), process orientation does again not lead to a clear differentiation between services and real assets.^[39]

2.1.2.4. Other definition possibilities

Besides the already mentioned definitions, there are several other, minor important definitions available, which will be described subsequently:

Negative definitions specify the term service through allocation of products which are no real assets to the service sector. Therewith, they are somehow the counterpart of definitions like the statistical approach or the definition via constitutive criteria. As this kind of definition can only be viewed as a scientific stopgap, it will not be viewed in more detail in this study.^[40]

Another way to define services is the enumeration of the different branches, which are considered as services, e.g. accommodation, energy supply, banking and tourism. The possible length of such a list soon reveals the two main problems of this sort of definition: Firstly, the list can easily be too long to be manageable, and secondly, there are possible cases of doubt where branches can not generally be defined as a service or not a service but have to be viewed from case to case to make a final decision. Therefore, and additionally because they do not figure out explicit criteria from which you can judge if a service is a service or not, enumerative definitions are inadequate for a scientific definition.^[41] Nevertheless, from the practical point of view, these sorts of listings can in some cases make sense and be useful.^[42]

Further potential differentiation criteria are the process of the service production (autonomous or integrative), or if it is a commercial or non-commercial, personal or automated and consumptive or investive service.^[43]

2.1.2.5. Conclusion

To conclude, it can be said that until today there is no clear definition of the term service. Therewith, a clear cut between service and real assets is not possible to be

drawn. Above other things, this is due to the fact that the term service is not exactly the contradiction of the term real asset. Therefore, a clear differentiation is also not possible.^[44] In science, one result of this is the development of performance bundles, in which both, material and immaterial elements are contained.^[45]

Furthermore, if a definition of service is needed, small inaccuracies have to be accepted due to the before mentioned definition problems. In general, this is no problem for the practical use. In science, case-to-case definitions should be used to fit to the specific requirements of a situation.^[46]

This leads to competition between the several definitions and will lead to one common, mostly-used definition on the long run. At the moment, the definition via performance definitions as described before seems to prevail.^[47]

For this reason, in this case study, the definition of services based on performance dimensions will be used. Also, this is due to the fact that especially in the view of performance creation, services differ from the production of real assets due to the importance of the potential factors and therewith a classification is more frequently possible than in the other definition possibilities mentioned before.^[48]

In addition to the different possible definitions, services can also have several forms of appearance. Most commonly, these are differentiated in supply-related and demand-related forms of appearance. Further forms of appearance can be divided in rare cases, but these will not be observed in more detail in this case study.

The last mentioned demand-related forms of appearance can be divided concerning the performance recipient: On the one hand, consumers (consumed services), on the other hand, corporations (investive services). Both recipient groups have different requirements as for example different price resiliences and therewith service companies have to take different actions and need close coordination to be successful.^[49]

For the supply-related differentiation, there mainly can be two characteristics of services: Internal, i.e. within the own company, or external. Here it again can be divided between services which can be marketed independently or which belong to another product, the main product.^[50] The last-mentioned is especially important - and still getting more important as costumers more and more demand tailor-made solutions according to their problems - to create additional value and sales pitches in the marketing of industrial goods.^[51] This means that services can help a product producing company to make its product unique and differentiate from its competitors.^[52]

Regardless of this importance, in this case study only independent services will be under consideration. Also, the focus will mainly be on external services.

2.1.3. Service Marketing

As mentioned before, for successful marketing of services, it is essential to use the marketing tools, especially the expanded classical marketing mix, which will be described in more detail later in this case study, in close adjustment to the needs and characteristics of services. One of the most important challenges for service companies is the task to show reliability and therewith create trust to balance out the lack of quality guarantee a service has because of its intangibility.^[53] Additionally, due to the already mentioned quality problem and subjectivity of the customers, a service company is required to deliver a satisfying service although the expectations and valuations differ depending from the people or the point of time when the service is fulfilled. To avoid significant differences between the delivered service and the expectation of the customer, companies have to assure that they do sufficient market research and optimise the communication with the customers in order to gain information about the customers expectation. This knowledge can then be used to develop and deliver this service through an adjustment of the different tools of the marketing mix in an appropriate way. Also, due to the already mentioned fact that the customer is often implemented in the production or delivery of a service, it is very important to integrate the customer in this process.^[54]

The success factors for service companies can be described as shown in the following table:

illustration not visible in this excerpt

Following Krämer, H. (2000), p. 219.

Fig. 2: Success factors for service companies

2.2. Targets

2.2.1. Quantitative targets

The consequent and sustainable use of the tools of the marketing mix, which will be discussed later in this case study, realise a better customer orientation, which in the first place is a qualitative target of service marketing. But as this better customer orientation will lead to higher costumer satisfaction and - on the long run - to costumer binding and therewith turnover increases, it leads to the most important quantitative target of service marketing.^[55]

Additionally, optimised resource allocation and therewith cost cutting can be achieved, as especially in contrast to products, other marketing tools have to be used. Therewith, inefficient resource allocation can be avoided. Also, through the use of modern technologies in the marketing of services, cost potentials can be realised and the efficiency of processes can be enhanced. One example is the use of the internet in order to reduce personnel costs.^[56]

Employee orientation, another actual qualitive target, works similar to customer orientation. Hereby the satisfaction of the employees is the first step in the

functional chain and therewith a primary target of a company. This employee satisfaction could be achieved e.g. through the use of incentives, the design of a comfortable working environment or employees’ monetary participation in companies profits. These measures should lead to satisfied and motivated employees who have, especially in service companies (see chapter 2.3.5.), much influence on customer’s perception of service quality. The perception of service quality again heavily influences the repurchase willingness of the customer and therewith the economic situation of a company.^[57]

2.2.2. Qualitative targets

The factors mentioned in the definition of services in point 2.1.2.1. show that especially for services a high trust of the recipient towards the deliverer is necessary. Building this trust therewith has to be one of the main goals of the service company to be successful in the long term. One tool to reach this goal is the effective and consequent use of the marketing mix.^[58] Unique customer service can make a service experienceable. The customer receives the impression that he receives an individual treatment. A feeling of trust is build up in the customers’ mind as he believes in the quality of the provided service. This will lead to customer binding.^[59]

Another possibility to build up trust is a strong brand name for a service. This name indicates high quality to the customer when he buys the service. Therefore, the task for service companies is also to build a brand around an intangible service, which is often difficult to achieve.^[60]

2.3. 7 Ps of service marketing

Starting from the for this case study chosen marketing definition in chapter 2.1.1., the classical marketing mix consists of 4 pieces:^[61]

- product,
- price,
- place and
- promotion.

The term product deals with everything regarding the characteristics of the actual sold unit, e.g. the product quality.^[62] The product field is often considered as the core of the classic marketing mix. Hereby is argued that the other three Ps price, place and promotion are more or less adapted to the characteristics of the actual product.^[63]

However, the pricing of the product also influences the sales. When companies develop pricing strategies, it is crucial for their success to match the price-value-ratio. That means that the price should represent the customer’s expectations about the value and the quality of a product. Customers usually are willing to pay more money for more quality but they often have a sensitive perception when a price is too high for the offered value.^[64]

The third P, place, deals with the channel of distribution of the products or services.^[65] Promotion on the other hand, usually considered as the fourth P, includes the communication towards market participants, mainly to the customer. Hereby personal and / or non-personal instruments like advertising or personal selling are used. The promotion activities aimed to inform, persuade or reinforce the potential customers and their buying decisions.^[66]

As mentioned, these four components form the classic marketing mix, which is also known as the 4 Ps approach. When the term 4 Ps is mentioned in this case study it is always related to the 4 components product, price, place and promotion. These single components will be discussed in the course of the case study as part of the extended 7 Ps approach by Allan J. Magrath.

illustration not visible in this excerpt

Following Homburg, C., Krohmer, H. (2003), p. 840.

Fig. 3: Expansion of the classical marketing mix

Due to the already discussed special characteristics of services Magrath argued that the classical 4 Ps are not enough to cope with marketing of services.^[67] His approach to handle this challenge is the implementation of three additional interconnected Ps:

- personnel,
- physical facilities and
- process management.

Personnel, as the first of the three additional Ps, deals with the field of company’s staff. Relating to newer approaches this field is named as people in this case study. These newer approaches partly consider the customer in the 7 Ps approach and are discussed in more detail later in this case study. Physical Facilities (Magrath also names it Physical assets) are important in two ways for the actual service: Firstly the visible setting directly affects the perception of the service’s quality. But secondly, the settings which can not be seen by the customer are often crucial for the service. For example, visitors experience Disney World by what they see but the hidden machinery is essential for the functioning of the whole attractions.

Because of the already described service characteristics like simultaneous production and consumption or the perishability of services process management is necessary to assure the availability of services in a consistent quality. Furthermore, without a proper process management it is difficult to balance service supply and demand.^[68]

Following, a detailed introduction of the above-mentioned seven Ps starting with the term product will be given.

2.3.1. Product

There are different ways a product can be defined. Either it can be seen as “pure tangibles, tangibles with accompanying services, major services with accompanying minor goods and services [or] pure services.”^[69]

In this case study, the term product is constricted to pure tangible objects and services which are clearly assigned to tangibles. Hence the term product is used if a borderline contra service is needed. However, the following discussion of the 7 Ps is primarily concerned with pure services and the marketing of pure services.

As mentioned in the service definition above, the quality factor is especially important for services and their values. Due to that, this aspect will be discussed in the following.

The quality approach for products and for services clearly differs. Whereas in classic product marketing quality can be understood as the level of performance of a product, service quality is not that easy to determine. Service quality can be seen as the perceived level of performance of a service, which always depends on the individual expectations of the customer. So it is possible, that one customer evaluates a service as perfect to fulfil his needs whereas another customer is disappointed after getting the service just because of different expectations.

As described in the definition of services through constitutive criteria, another significant difference between products and services is the standardisation of both. Whereas standards in the product manufacturing make it relatively easy to monitor and maintain the product quality, services often can not be standardised - firstly because of their intangibility. But secondly, the often unique seller / buyer - relationship in service business causes that there are usually not two services provided in the exactly same way. Due to this fact, measurement and monitoring of service quality is hardly realisable.^[70]

Besides the complexity of measuring the service quality, it is also difficult to figure out which quality factors are important for the costumer and for which he is willing to pay. A service which may be seen by the producer as highly qualitative because of certain technical specialties may be perceived in a different way by the customer.^[71] Especially for services, the quality is – although hard to determine - a crucial factor used by the customer to evaluate the service of one company in comparison to the service of another. Actually, customers often do not judge mainly the quality of a service but rather the quality of the service provider. This is one reason why the later discussed branding is such an important tool for service marketing.^[72]

As described before, the expectations of the costumers have a key role for the quality evaluation. Therefore, the service program of a company has to be adjusted to customer’s demands and expectations. The most possible match of the customer’s needs should conduct in a competitive advantage.^[73]

Important in this respect are e.g. innovation and change management. Nevertheless, in this case study, these aspects will not be observed in more detail.^[74] Another part of the sphere of influence regarding quality is the amount of waiting time the customer has to spend before he gets the product. This topic will be analysed in more detail in part 2.4.7., when the process management component of the advanced service marketing mix will be discussed.

2.3.2. Price

The P for price is the only variable of the marketing mix which directly generates income – all other elements firstly involve expenditures.^[75] So pricing has a major effect on the financial situation of a company.

However, the room to exert influence on the income via pricing is limited. On the one hand, demand considerations provide a ceiling, whereas on the other hand cost considerations create a price floor. But besides the cost aspect sellers are limited because of several other reasons. First, they have to consider corporate guidelines regarding financial objectives and have to generate a profit which influences the minimum price. Second, competitive factors usually reduce the maximum price, so the sellers can often not charge the whole potential margin.^[76]

[...]

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^[1] Cf. Homburg, C., Krohmer, H. (2003), p. 808.

^[2] Cf. Mangold, K. (1998), p. 55.

^[3] Cf. Schremp, J. E. (1998), p. 27.

^[4] Cf. Mangold, K. (1998), p. 65.

^[5] Cf. http://www.elfaa.com/documents/ELFAABenefitsofLFAs2004.pdf.

^[6] Cf. Reuter, P. (2006), p. b03.

^[7] Cf. Adcock, D., a.o. (1998), p. 3.

^[8] Cf. Adcock, D., a.o. (1998), p. 4.

^[9] Smith, A. (1776), quoted by Adcock, D., a.o. (1998), p. 6.

^[10] Cf. Meffert, H. (2000), p. 8.

^[11] Cf. Meffert, H. (2000), p. 7.

^[12] Cf. Adcock, D., a.o. (1998), p. 6.

^[13] Cf. Hill, E., O´Sullivan, T. (1999), p. 3.

^[14] Cf. Hill, E., O´Sullivan, T. (1999), p. 4.

^[15] Cf. Borden, N. (1962), p. 386 et seqq.

^[16] Cf. Stoor, S. (1989), p. 44 et seqq.

^[17] Cf. Bruhn, M. (2003), p. 13.

^[18] Cf. Stille, F. (2000), p. 3 et seq.

^[19] Cf. Corsten, H. (2001), p. 56 et seq.

^[20] Cf. Bruhn, M. (2003), p. 14 et seq.; Hermanns, A., Wißmeier, U. K. (2001), p. 532 et seq.; Homburg, C., Krohmer, H. (2003), p. 810.

^[21] Cf. Scheuer, T. (2005), p. 12.

^[22] Cf. Scheuer, T. (2005), p. 11 et seq.

^[23] Cf. Hermanns, A., Wißmeier, U. K. (2001), p. 532 et seq.; Homburg, C., Krohmer, H. (2003), p. 809.

^[24] Cf. Bruhn, M. (2003), p.15; Maleri, R. (2001), p. 137 et seq.

^[25] For further information on the need and significance of capacity planning in context with services, please refer to Corsten, H., Stuhlmann, S. (2001), p. 177 et seqq.

^[26] Cf. Mangold, K. (1998), p. 66; Ruggiero, R. (1998), p. 85.

^[27] Cf. Krämer, H. (2000), p. 215 et seq.

^[28] Cf. Meffert, H., Bruhn, M. (2000), p. 30.

^[29] Cf. Stille, F. (2000), p. 4.

^[30] Cf. Kleinaltenkamp, M. (2001), p. 30 et seq.

^[31] Cf. Kleinaltenkamp, M. (2001), p. 32.

^[32] Cf. Kleinaltenkamp, M. (2001), p. 40; Meffert, H., Bruhn, M. (2000), p.30.

^[33] Cf. Kleinaltenkamp, M. (2001), p. 33.

^[34] Cf. Hilke, W. (1989), p. 11; Meyer, A. (1991), p. 197.

^[35] Cf. Kleinaltenkamp, M. (2001), p. 35.

^[36] Cf. Kleinaltenkamp, M. (2001), p. 35.

^[37] Cf. Kleinaltenkamp, M. (2001), p. 35.

^[38] Cf. Bruhn, M., Georgi, D. (2006), p. 13 et seqq.

^[39] Cf. Kleinaltenkamp, M. (2001), p. 35 et seqq.

^[40] Cf. Homburg, C., Krohmer, H. (2003), p. 809.

^[41] Cf. Homburg, C., Krohmer, H. (2003), p. 809.

^[42] Cf. Kleinaltenkamp, M. (2001), p. 29 et seq.

^[43] Cf. Bruhn, M. (2003), p.19 et seqq; Stille, F. (2000), p. 4.

^[44] Cf. Engelhardt, W. H., Kleinaltenkamp, M., Reckenfelderbäumer, M. (1993), p. 398.

^[45] Cf. Engelhardt, W. H., Schnittka, M. (2001), p. 920 et seq.

^[46] Cf. Kleinaltenkamp, M. (2001), p. 40; Miegel, M. (1998), p. 102.

^[47] Cf. Kleinaltenkamp, M. (2001), p. 40.

^[48] Cf. Bruhn, M., Meffert, H. (2001), p. 10.

^[49] Cf. Kleinaltenkamp, M. (2001), p. 45.

^[50] Cf. Kleinaltenkamp, M. (2001), p. 41 et seqq.

^[51] Cf. Backhaus, M., Kleikamp, C. (2001), p. 99.

^[52] Cf. Mangold, K. (1998), p. 63.

^[53] Cf. Scheuer, T. (2005), p. 16.

^[54] Cf. Scheuer, T. (2005), p. 137 et seqq.

^[55] Cf. Kasper, H., van Helsdingen, P., de Vries jr, W. (1999), p. 22 et seqq.

^[56] Cf. Gröne, A. (1994), p. 360.

^[57] Cf. Bateson, J.E.G. (1999), p. 59 et seq.

^[58] Cf. Scheuer, T. (2005), p. 12.

^[59] Cf. Gründling, C. (1999), p. 32 et seq.

^[60] Cf. Krämer, H. (2000), p. 220.

^[61] Cf. Hill, E. , O´Sullivan, T. (1999), p. 18.

^[62] Cf. Adock, D., a.o. (1998), p. 151.

^[63] Cf. Adock, D., a.o. (1998), p. 22.

^[64] Cf. Adock, D., a.o. (1998), p. 212 et seqq.

^[65] Cf. Kasper, H., van Helsdingen, P., de Vries jr, W. (1999), p. 588 et seqq.

^[66] Cf. Adock, D., a.o. (1998), p. 251.

^[67] Cf. Magrath, A.J. (1986), p. 44 et seqq.

^[68] Cf. Magrath, A.J. (1986), p. 48.

^[69] Palmer, A. (1994), p. 125.

^[70] Cf. Palmer, A. (1994), p. 131.

^[71] Cf. Bateson, J.E.G., Hoffman, K.D. (1999), p. 340; Palmer, A. (1994), p. 131.

^[72] Cf. Homburg, C., Krohmer, H. (2003), p. 814 et seqq.; Krämer, H. (2000), p. 218.

^[73] Cf. Palmer, A. (1994), p.124.

^[74] Cf. Bruhn, M., Meffert, H. (2001), p. 15.

^[75] Cf. Monroe, K. B. (1991), p. 297.

^[76] Cf. Bateson, J.E.G., Hoffman, K.D. (1999), p. 179.