Synopsis
Services Marketing
1. Distinctive Aspects of Service Management
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Describe what kinds of organisations provide services.
Recognise the major changes occurring in the service sector.
Identify the characteristics that make services different from goods.
Understand the 8Ps of integrated services management.
Explain why service businesses need to integrate the marketing, operations and human
resource functions.
Sections
1.1
1.2
1.3
1.4
Services in the Modern Economy
The Evolving Environment of Services
Marketing Services versus Physical Goods
An Integrated Approach to Service Management
Learning Summary
Why study services? Because modern economies are driven by service businesses, both large
and small. Services are responsible for the creation of a substantial majority of new jobs,
both skilled and unskilled, around the world. The service sector includes a tremendous
variety of different industries, including many activities provided by public and nonprofit
organisations. It accounts for over half the economy in most developing countries and for
around 70 per cent in many highly developed economies.
As we’ve shown in this module, services differ from manufacturing organisations in many
important respects and require a distinctive approach to marketing and other management
functions. As a result, managers who want their enterprises to succeed cannot continue to
rely solely on tools and concepts developed in the manufacturing sector. In the remainder of
this book, we’ll discuss in more detail the unique challenges and opportunities faced by
service businesses. It’s our hope that you’ll use the material from this text to enhance your
future experiences not only as a service employee or manager, but also as a customer of
many different types of service businesses!
2. Customer Involvement in Service Processes
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Appreciate the value of classification in services marketing.
Understand useful ways of classifying differences between various types of services.
Define a service process.
Describe four different types of service processes and their implications for management
strategy.
 Recognise that the nature of a customer’s contact with a service varies according to the
underlying process.
Sections
2.1
2.2
2.3
How Do Services Differ From One Another?
Service as a Process
Different Processes Pose Distinctive Management Challenges
Learning Summary
We’ve shown you in this module that while not all services are the same, many do share
important characteristics. Rather than focusing on broad distinctions between goods and
services, it’s more useful to identify different categories of services and to study the
marketing, operations and human resource challenges that they raise.
The four-way classification scheme in this module focuses on different types of service
processes. Some services require direct physical contact with customers (hairdressing and
passenger transport); others centre on contact with people’s minds (education and entertainment). Some involve processing of physical objects (cleaning and freight transport);
others process information (accounting and insurance). As you can now appreciate, the
processes that underlie the creation and delivery of any service have a major impact on
marketing and human resources. Process design (or redesign) is not just a task for the
operations department. Both managers and employees must understand underlying processes (particularly those in which customers are actively involved), in order to run a service
business that is both efficient and user friendly.
3. Managing Service Encounters
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Recall that the extent of customer contact with a service varies according to the nature of
the underlying processes.
 Recognise that there are significant differences in managing service businesses according
to the level of customer contact.
 Distinguish between backstage and frontstage operations.
 Understand service encounters, especially in situations where other people are part of the
service product.
 Understand the nature of critical incidents and recognise their significance for customer
satisfaction and dissatisfaction.
 Appreciate the potential role of customers as ‘co-producers’ of services.
Sections
3.1
3.2
3.3
3.4
Customers and the Service Operation
Service as a System
Managing Service Encounters
The Customer as Co-Producer
Learning Summary
Service businesses can be divided into three, overlapping systems. The operations system
consists of the personnel, facilities and equipment required to run the service operation and
create the service product; only part of this system, described here as ‘frontstage’, is visible to
the customer. The delivery system incorporates the visible operations elements and the
customers who, in self-service operations, take an active role in helping create the service
product – as opposed to being passively waited on. Finally, the marketing system includes
not only the delivery system, which is essentially composed of the product and distribution
elements of the traditional marketing mix, but also additional components such as billing and
payment systems, exposure to advertising and sales people, and word-of-mouth comments
from other people.
In all types of services, understanding and managing service encounters between customers and service personnel is central to creating satisfied customers who are willing to enter
into long-term relationships with the service provider. There are wide variations, however, in
the nature of such encounters. In high-contact services, for example, customers are exposed
to many more tangible clues and experiences than they are in medium-contact and lowcontact situations. Critical incidents occur when some aspect of the service encounter is
either highly satisfactory or dissatisfactory. In some instances, including self-service,
customers participate in the process of creating and delivering services, effectively working
as ‘partial employees’ whose performance will affect the productivity and quality of output.
Under these circumstances, service managers must be sure to educate and train customers so
that they have the skills needed to perform well.
4. Customer Behaviour in Service Settings
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Distinguish between search, experience and credence properties as they relate to the ease
of evaluating goods and services before or after consumption.
 Discuss how service characteristics like the intangibility of service performances and
variability in service inputs and outputs affect consumer evaluation processes.
 Explain the purchase process for services.
 Differentiate between core and supplementary service elements, as well as between
hygiene factors and enhancing factors.
 Construct a simple flowchart showing a service process from the customer’s perspective.
Sections
4.1
4.2
4.3
4.4
4.5
Understanding Customer Needs and Expectations
How Customers Evaluate Service Performances
The Purchase Process for Services
The Service Offering
Understanding Customer Behaviour at Different Points in the Service Experience
Learning Summary
Gaining a better understanding of how customers evaluate, select, use (and occasionally
abuse) services should lie at the heart of strategies for service design and delivery. In this
module we discovered that several of the distinctive characteristics of services (especially
intangibility and quality control problems) mean that customer evaluation processes often
differ from those involved in evaluating physical goods and thus present unique challenges
for services management, as do each of the other stages that customers go through in the
purchase decision process.
Because the consumer evaluation and purchase processes for many services are often
complex, it’s especially important that service managers understand how customers view the
service offering. We briefly examined the concept of core and supplementary elements,
noting that the latter can be divided into hygiene factors (those that must be provided) and
enhancing factors (optional extras). Achieving competitive advantage in the marketplace
often centres on choosing which enhancing factors to offer and whether to match or exceed
competitive performance on these optional supplementary elements.
Finally, the chapter demonstrated how to create a visual picture of the service delivery
process from the customer’s perspective. This diagram, called a flowchart, provides a stepby-step analysis of a typical customer’s service encounters, indicating how a customer’s
experience of each step of ‘frontstage’ service delivery relates to the many operational tasks
performed back stage.
5. Positioning a Service in the Marketplace
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Describe the four different focus approaches.
Understand the principle of target market segmentation.
Distinguish between important and determinant attributes in consumer choice decisions.
Explain the elements of a service strategy.
Define the concepts of competitive positioning and repositioning.
Know how to design and interpret positioning maps.
Sections
5.1
5.2
5.3
5.4
The Search for Competitive Advantage
Creating a Competitive Position
Steps in Developing a Positioning Strategy
Developing Positioning Maps
Learning Summary
Most service businesses face active competition. Marketers need to find ways of creating
meaningful competitive advantages for their products. Ideally, they should be targeting
segments that they can serve better than other providers.
The concept of positioning is valuable because it forces explicit recognition of the different attributes comprising the overall service concept and emphasises the need for marketers
to understand which attributes determine customer choice behaviour. Positioning maps
provide a visual way of summarising research data and display how different firms are
perceived as performing relative to each other on key attributes. When combined with
information on the preferences of different segments, including the level of demand that
might be anticipated from such segments, positioning maps may suggest opportunities for
creating new services or repositioning existing ones to take advantage of unserved market
needs. If offering such a service is seen as compatible with the organisation’s resources and
values, then the firm may be able to develop a profitable niche for itself in the market.
6. Targeting Customers, Managing Relationships and Building
Loyalty
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Recall the principles of segmentation, particularly as they relate to customer behaviour.
Understand the bases by which firms can set priorities for targeting specific segments.
Understand why capacity-constrained firms need to target multiple market segments.
Recognise that not all customers are attractive for a firm and consider strategies for
dealing with abusive behaviour.
 Calculate the value of a customer who remains loyal to a firm and recognise the role that
loyalty plays in determining financial success.
 Develop ideas for creating customer loyalty programmes.
Sections
6.1
6.2
6.3
6.4
Targeting the Right Customers
Selecting the Appropriate Customer Portfolio
Abusive Customers and How to Deal with Them
Creating and Maintaining Valued Relationships
Learning Summary
All marketers need to be concerned about who their customers are, but this concern takes
on added dimensions for certain types of services. When customers have a high level of
contact with the service organisation and with one another, the customer portfolio helps to
define the character of the organisation, because customers themselves become a part of the
product. Too diverse a portfolio may result in an ill-defined image, especially if all segments
are present at the same time. Abusive customers may spoil the experience for others and
hurt profitability in other ways, too. So marketers must be selective in targeting the desired
customer segments, and guidelines must be established for customers’ behaviour while they
are using the service.
For services that are capacity-constrained, the marketer’s task is not only to balance
supply and demand, but also to obtain the most desirable types of customers at a particular
point in time. This may require targeting different segments at different times. For profitseeking businesses, a key issue is which segments will yield the greatest net revenues. Public
and nonprofit organisations, while not ignoring financial issues, need to consider which
segments will help them best fulfil their nonfinancial objectives. In all instances, accurate
market analysis and forecasting assume great importance in guiding marketing strategy.
Finally, marketers need to pay special attention to those customers who offer the firm the
greatest value since they purchase its products with the greatest frequency and spend the
most on premium services. Programmes to reward frequent users – of which the most highly
developed are the frequent flyer clubs created by the airlines – not only serve to identify and
provide rewards for high-value customers but also enable marketers to track the former’s
behaviour in terms of where and when they use the service, what service classes or types of
product they buy, and how much they spend. The greatest success is likely to go to organisations which can give their best customers incentives to remain loyal, rather than playing the
field and spreading their patronage among many other suppliers.
7. Complaint Handling and Service Recovery
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Identify the extent of consumer complaining behaviour and the effectiveness of current
service recovery practices.
 Outline the courses of action open to a dissatisfied consumer.
 Explain the factors influencing complaining behaviour.
 Identify the principles of an effective service recovery system.
 Demonstrate the value of a well-planned unconditional guarantee.
Sections
7.1
7.2
7.3
Consumer Complaining Behaviour
Impact of Service Recovery Efforts on Customer Loyalty
Service Guarantees
Learning Summary
Collecting customer feedback via complaints, suggestions and compliments provides a
means of increasing customer satisfaction. It’s a terrific opportunity to get into the hearts
and minds of customers. In all but the worst instances, complaining customers are indicating
that they want to continue their relationship with the service firm. But they are also signalling that all is not well, and that they expect the company to make things right.
Service firms need to develop effective strategies for recovering from service failures so
that they can maintain customer goodwill. This is vital for the long-term success of the
company. However, service personnel must also learn from their mistakes and try to ensure
that problems are eliminated. After all, even the best recovery strategy isn’t as good in the
customer’s eyes as being treated right the first time! Well-designed unconditional service
guarantees have proved to be a powerful vehicle for identifying and justifying needed
improvements, as well as creating a culture in which staff members take proactive steps to
ensure that guests will be satisfied.
8. Creating Services and Adding Value
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Understand the nature of service products.
Describe approaches to new service development.
Distinguish between facilitating and enhancing supplementary services.
Define the eight petals of the Flower of Service.
Show how organisations can use each petal to enhance their core services.
Illustrate how technology offers new opportunities to provide value-added supplementary services.
Sections
8.1
8.2
8.3
8.4
8.5
Service Products as Experiences
Core Products and Supplementary Services
Classifying Supplementary Services
Managerial Implications
Planning and Branding Service Products
Learning Summary
In mature industries, the core service often becomes a commodity. The search for competitive advantage often centres on the value-creating supplementary services that surround this
core. In this module, we grouped supplementary services into eight categories, circling the
core like the petals of a flower.
A key insight from the Flower of Service concept is that different types of core products
often share use of similar supplementary elements. As a result, customers may make
comparisons across industries when. For instance, ‘If my stockbroker can give me a clear
documentation of my account activity, why can’t the department store where I shop?’ Or ‘If
my favourite airline can take reservations accurately, why can’t the French restaurant up the
street?’ Questions such as these suggest that managers should be studying businesses outside
their own industries in a search for ‘best-in-class’ performers on specific supplementary
services.
Managers should be aware of the importance of selecting the right mix of supplementary
service elements – no more and no less than needed – and creating synergy by ensuring that
they are all internally consistent. The critical issue is not how many petals the flower has, but
ensuring that each petal is perfectly formed and adds lustre to the core product in the eyes of
target customers.
9. Designing Service Delivery Systems
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Recognise that successful service delivery systems must address issues of both place and
time.
 Distinguish between physical and electronic channels of delivery.
 Describe the role of intermediaries in service delivery.
 Recognise the distinctive challenges to delivery system design posed by high-contact and
low-contact service processes.
 Explain the role of technology in enhancing the speed, convenience and productivity of
service delivery systems.
 Understand the important role of physical evidence in service delivery.
Sections
9.1
9.2
9.3
9.4
9.5
Alternative Scenarios for Service Delivery
The Physical Evidence of the Servicescape
Place and Time Decisions
The Process of Service Delivery
The Role of Intermediaries
Learning Summary
‘Where? When? and How?’ Responses to these three questions form the foundation of
service delivery strategy. The customer’s service experience is a function of both service
performance and delivery characteristics. ‘Where?’ relates, of course, to the places where
customers can obtain service delivery. In this module, we presented a categorisation scheme
for thinking about alternative place-related strategies, including remote delivery from virtual
locations.
‘When?’ is involved with decisions on scheduling of service delivery. Customer demands
for greater convenience are now leading many firms to extend their hours and days of
service. ‘How?’ concerns channels and procedures for delivering the core and supplementary
service elements to customers. Advances in technology are having a major impact on the
alternatives available and on the economics of those alternatives.
10. Pricing Services
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Appreciate the factors that shape pricing strategy.
Formulate pricing objectives.
Define different types of financial costs incurred by companies.
Define the different costs of service incurred by customers.
Undertake a break-even analysis.
Formulate pricing strategies and policies for services.
Sections
10.1
10.2
10.3
10.4
Paying for Service
Foundations of Pricing Strategy
Value Strategies for Service Pricing
Putting Service Pricing Strategy into Practice
Learning Summary
Customers pay more to use a service than just the purchase price due to the supplier. For
them, the costs of service also include related expenditures (such as travel to the service site),
plus time, physical effort, psychological costs, and sensory costs. The value of a service
reflects the benefits that it delivers to the customer minus all the associated costs. Customers
are often willing to pay a higher price when the non-financial costs of service are minimised.
Establishing a pricing strategy for a service business begins with clarification of objectives: is the firm trying to go far beyond just establishing the price itself? Issues such as
convenience, security, credit, speed, simplicity, collection procedures and automation may all
play a role in improving customer satisfaction with service organisations. Technology has
significant potential to facilitate creation of a cashless society, but in practice we are still
some distance from that point.
In addition to all these decisions, pricing strategy must address the central issue of what
price to charge for selling a given unit of service at a particular point in time (however that
unit may be defined). It is essential that the monetary price charged should reflect good
knowledge of the service provider’s fixed and variable costs, competitor’s pricing policies,
and the value of the service to the customer.
11. Communicating to Customers: Education and Promotion
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Explain the role of marketing communications in a service setting.
Describe how marketing communications differ between services and goods.
Discuss the marketing communications mix elements.
Understand how the level of customer contact affects communication strategy.
Define marketing communication objectives and identify the communication mix
elements necessary to reach those objectives.
 Recognise the potential value of the Internet (e-mail and websites) as a communication
channel.
Sections
11.1
11.2
11.3
11.4
11.5
The Role of Marketing Communication
Services vs. Goods: Implications for Communication Strategy
Setting Communication Objectives
The Marketing Communications Mix
Impact of New Technologies on Marketing Communication
Learning Summary
Many different communication elements are available to service marketers as they seek to
create a distinctive position in the market for both their firm and its products and to reach
prospective customers. The options include paid advertising, personal selling and customer
service, sales promotions, public relations and corporate design and the evidence offered by
the servicescape of the service delivery site. Informational materials, from brochures to
websites, often play an important role in educating customers in how to make good choices
and obtain the best use from the services they have purchased.
Some of the distinctive characteristics of services suggest that a different approach is
needed to marketing communications strategy than is used to market goods. Advertising, for
instance, may provide much needed tangible clues to service quality and performance
without raising expectations unrealistically. And internal as well as external public relations
management is critical in ensuring sound and enduring relationships, credibility and
goodwill. Public relations activities, and the proactive generation of publicity and positive
word-of-mouth, should be regarded as a valuable long-term investment necessary to building
a service firm’s reputation and place within a community.
Marketing communication strategies must, of course, be integrated with strategic decisions related to the other elements of integrated service management (the ‘8Ps’). To the
extent that new technologies enable firms to craft new strategies – especially in areas such as
service design, electronic delivery systems and plans to improve productivity and quality –
managers have had to consider how to rethink delivery of communication elements, too.
12. Enhancing Value by Improving Quality and Productivity
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Define what is meant by both productivity and quality in a service context.
 Describe the relationship between customer expectations, service quality and customer
satisfaction.
 Explain the gaps model of service quality.
 Recognise key dimensions of service quality, as described in the SERVQUAL scale.
 Discuss productivity and quality measurement techniques.
 Identify the components of a service quality information system.
Sections
12.1
12.2
12.3
12.4
12.5
12.6
12.7
Integrating Productivity and Quality Strategies
A Role for Marketing
Definition and Measurement
Identifying and Correcting Service Quality Shortfalls
Problem-Solving and Service Recovery
How Productivity Improvement Impacts Quality and Value
Customer-driven Approaches to Improving Productivity
Learning Summary
Enhancing service quality and improving service productivity are often two sides of the same
coin, offering powerful potential to improve value for both customers and the firm. A key
challenge for any service business is to deliver satisfactory outcomes to its customers in ways
that are cost-effective for the company. If customers are dissatisfied with the quality of a
service, they won’t be willing to pay very much for it – or even to buy it at all if competitors
offer better quality. Low sales volumes mean unproductive assets. Needlessly low prices may
result in low returns on investment, which also means less productive assets.
The notion that customers are the best judges of the quality of a service process and its
outcome is relatively new and replaces (or supplements) other concepts of quality. When the
customer is seen as the final arbiter of quality, then marketing managers come to play a key
role in defining expectations and in measuring customer satisfaction. However, service
marketers need to work closely with other management functions in service design and
implementation.
This module presented a number of frameworks and tools for defining, measuring and
managing quality, including research programmes to identify quality gaps, and blueprinting
to identify failure points in service delivery. Peer review may also be an important alternative
approach when measuring the core product quality on services that are high in credence
characteristics.
Marketing managers should be included in productivity improvement programmes whenever these efforts are likely to have an impact on customers. And because customers are
often involved in the service production process, marketers should keep their eyes open for
opportunities to reshape customer behaviour in ways that may help the service firm to
become more productive. Possibilities for cooperative behaviour include adopting selfservice options, changing the timing of customer demand to less busy periods, and making
use of third party suppliers of supplementary services.
In summary, value, quality and productivity are all of great concern to senior management, since they relate directly to an organisation’s survival in the competitive marketplace.
Strategies designed to enhance value are dependent in large measure on continuous
improvement in service quality (as defined by customers) and productivity improvements
that reinforce rather than counteract customer satisfaction. The marketing function has
much to offer in reshaping our thinking about these three issues, as well as in helping to
achieve significant improvements in all of them.
13. Balancing Demand and Capacity
Learning Objectives
After reading and reflecting on this module, you should be able to:
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Understand the elements that comprise productive capacity for a service organisation.
Explain how to use capacity management techniques to meet variations in demand.
Understand the concept of demand cycles and their underlying causes.
Formulate demand management strategies appropriate to specific situations.
Understand how well-designed waiting environments can reduce the perceived burden
for customers of waiting for service.
 Know the basics of designing an effective reservation system.
 Understand the principle of asset revenue generating efficiency and the use of segmented
reservations strategies to improve profitability.
Sections
13.1
13.2
13.3
13.4
13.5
13.6
13.7
The Ups and Downs of Demand
Measuring and Managing Capacity
Understanding the Patterns and Determinants of Demand
Strategies for Managing Demand
Managing Customer Behaviour through Queuing Systems
Minimising the Perceived Length of the Wait
Reservations
Learning Summary
Fluctuating demand for service is a problem for numerous service businesses, especially
those with expensive fixed capacity. Since service output can rarely be produced and then
stocked for future sale, strategies must be developed to balance demand against available
capacity. Designing and implementing such strategies typically require close cooperation
between marketing, operations and human resource managers.
Options range from using marketing efforts to smooth the peaks and valleys of demand
to managing the level of available capacity to match the level of demand. When demand
exceeds supply, queues may develop and lead to customer frustration unless carefully
organised. Reservations systems can be used to guarantee customers access to the desired
service at a specified time and thus save them from having to wait in a queue.
The time-bound nature of services is a critical management issue today, especially with
customers becoming more time-sensitive and more conscious of their personal time
constraints and availability. People-processing services are particularly likely to impose the
burden of unwanted waiting on their customers, since the latter cannot avoid coming to the
‘factory’ for service. Reservations can shape the timing of arrivals, but sometimes queuing is
inevitable. Managers who can act to save customers’ time (or at least make time pass more
pleasantly) may be able to create a competitive advantage for their organisations. Use of yield
management techniques, meanwhile, can help firms in certain capacity-constrained industries
to develop sophisticated pricing strategies designed to improve profitability by selling to
different segments at different prices.
Several of the 8Ps of integrated service management underlie the discussion in this module. The first is productivity. Since many capacity-constrained service quality organisations have
heavy fixed costs, even modest improvements in capacity utilisation can have a significant
effect on the bottom line. However, managers must be careful not to degrade the quality of
customers’ service experiences by packing them into a service facility beyond the level of
optimum capacity. In this module we have also shown how managers can transform fixed
costs into variable costs through such strategies as using rented facilities or part-time labour.
Creating a more flexible approach to productive capacity allows a firm to adopt a ‘chase
demand’ strategy, thereby improving productivity.
Decisions on place and time are closely associated with balancing demand and capacity.
Demand is often a function of where the service is located and when it is offered. As we saw
with the discussion of alpine resorts, the appeal of many destinations varies with the seasons.
Marketing strategies involving use of product elements, price and other costs services, and
promotion and education are often useful in managing the level of demand for a service at a
particular place and time.
14. Managing Customer-Contact Personnel
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Appreciate that expenditures on human resources should be seen as an investment that
will pay dividends, rather than a cost to be minimised.
 Understand the strategic importance of recruitment, selection, training, motivation and
retention of employees.
 Define what is meant by the control and involvement models of management.
 Understand the benefits and implications of employee empowerment.
 Recognise how different approaches to human resource management affect customer
satisfaction and retention.
Sections
14.1 Human Resources: An Asset Worth Investing in
14.2 Job Design and Recruitment
14.3 Service Jobs as Relationships
14.4 Human Resource Management in a Multicultural Context
Learning Summary
It’s probably harder to duplicate high-performance human assets than any other corporate
resource. To the extent that employees understand and support the goals of an organisation,
have the skills needed to succeed in performing their jobs, work well together in teams,
recognise the importance of ensuring customer satisfaction and have the authority and selfconfidence to use their own initiative in problem-solving, the marketing and operational
functions should actually be easier to manage.
15. Organising for Service Leadership
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Understand that marketing activities in a service organisation extend beyond the
responsibilities assigned to a traditional marketing department.
 Recognise the interdependence in service organisations of the marketing, operations and
human management functions.
 Discuss the causes of interfunctional tensions and how to avoid them.
 Be familiar with new organisational forms for service businesses beyond the traditional
pyramid-shaped hierarchy.
 Appreciate the nature of leadership in a service organisation.
Sections
15.1
15.2
15.3
15.4
Service Leadership
Interfunctional Conflict
Ensuring that Service Encounters are Customer-Oriented
How Technology Changes Organisations and Control Systems
Learning Summary
Within any given service organisation, marketing has to coexist with operations – traditionally the dominant function – whose concerns are cost- and efficiency-centred rather than
customer-centred. Marketing must also coexist with human resource management, which
usually recruits and trains service personnel, including those who have direct contact with
the customers. An ongoing challenge is to balance the concerns of each function, not only at
head office but also in the field. To a growing degree, information technology is serving to
knit together units that were once geographically separated.
To grow and remain competitive, service firms often expand beyond national frontiers.
So, in the following module, we address issues relating to internationalisation.
16. Developing Strategies for Transnational Operations
Learning Objectives
After reading and reflecting on this module, you should be able to:
 Understand the forces that are stimulating internationalisation.
 Appreciate the cultural challenges and economic opportunities presented for service
firms as the European Union evolves towards a single market.
 Compare and contrast the pan-European market with that of the United States.
 Recognise the distinction between a transnational strategy versus a multilocal one.
 Demonstrate how information technology can help to integrate previously independent
service units.
Sections
16.1
16.2
16.3
16.4
16.5
Moving from Domestic to Transnational Marketing
Forces for Internationalisation of Service Businesses
Transnational Strategy for Supplementary Services
Elements of Global Transnational Strategy
Pan-European Strategies in Business Logistics
Learning Summary
More and more service businesses are now marketing across national borders. However, an
international strategy needs to be more than just a collection of domestic (or ‘multi-local’)
strategies. A truly transnational strategy – whether it be pan-European in scope or even
global – requires selecting countries on more than just stand-alone attractiveness; it must
also consider the potential of each market to contribute to the broader benefits associated
with a large international business. Delivering global products requires that the firm offer a
standardised core product (either a good or a service) that requires a minimum of local
adaptation. Supplementary services, however, offer flexibility in that many can be either
standardised or tailored to meet the needs of customs in local markets. Transnational
marketing requires that management should use a consistent marketing approach in every
country where it does business, although not all elements of the marketing mix need be
identical. Market positioning, however, may vary somewhat in the light of local competitive
offerings. Finally, competitive moves should be integrated across countries, with the same
type of move being made in different countries at the same time or in some systematic
sequence.
Stimulating (or constraining) the move to transnational strategies are such industry drivers as market factors, costs, technology, government policies and competitive forces.
However, significant differences exist in the extent to which the various drivers apply to
people-processing, possession-processing and information-based services. Within each broad
service category, it’s important to analyse each industry systematically to determine not only
how specific drivers currently affect that particular industry, but also to project how they
might change over time. Similarly, managers need to evaluate alternative strategies for their
own company, in the light of its size and market position, as well as corporate objectives,
values and investment criteria.
Managers should also consider the opportunities that exist to standardise each supplementary service element as well as the core product. Continuing advances in information
technology make even global strategies feasible for many information-based elements. As a
result, certain supplementary services can be delivered from a central location, using
conventional telecommunications or the Internet. Others, however, require localised delivery
systems, including local personnel and facilities. The combination of a globally standardised
core product and customised supplementary services may offer service firms the opportunity
to achieve the benefits of both system-wide efficiency and local market appeal.