The Marketing of Service Products

Introduction

In a dynamic world, where more and more competitors are struggling to survive, to gain a strong position on the market and to attract and maintain as many customers as possible, companies need to continuously adjust to all the market’s needs and changes. Today's market has become customer driven and the marketer has to delight the client to gain success. To achieve this service companies have to identify the specific needs of the consumers, design the product mix, communicate price to the public and promote the services in an attractive manner and in different way than the competitor. Marketing practices are important for service innovation, customer satisfaction, customer loyalty, and organizational practices, which in turn influence future profitability and value of the firm (Cobb 2008).

Restaurant industry has been selected for the study. “Starbucks” company was chosen as representative of this field, as it is a well-known organization and to a large degree familiar to me. The choice is based mainly on my personal experience and preferences. This study mainly concentrates on the analysis of service marketing mix variables (7P’s) and also the recommendations to the selected service provider. Marketing practices of the selected company have been identified with reference to 7P’s and the corresponding findings are analyzed.

1. Justification of a service company choice     

“Starbucks” is a wide chain of coffeehouses situated all over the world. Nowadays a typical “Starbucks” offers breakfast, lunch, and other food items outside of the traditional offerings of coffee, pastries, muffins, and biscotti that had become the Starbucks Experience. As the “Starbucks” concept was new and innovative at the period of its foundation, the strong initial sales of this newly implemented strategy had begun offering positive returns very quickly (Seaford, Culp & Brooks 2012, p. 40).

“Starbucks” can be called a service provider company according to the certain characteristics, which make it different from that of goods. The most common characteristics of services are: intangibility, inseparability, perishability, variability. The intangibility characteristic may be low or high depending on the exact service provided. Restaurants and fast food centers have high tangible component as the service provided is always combined with  product (tangible objective), which is food from the menu. Though the products are present at “Starbucks” in a form of displayed pastries, mugs and tumblers, the processes of serving food, making coffee, taking orders that are performed by personnel are still highly intangible (Seaford, Culp & Brooks 2012).

Futhermore, “Starbucks” corresponds to the inseparability feature of service marketing: the service provision and provider are inseparable from the service consumption and consumer. For example, the waiter needs to be physically present for the service to be produced.  All “Starbucks” coffeehouses have wireless Internet connection and background music, which can’t be separated from the service provider. The physical presence of customer is essential in services. To use the services of a coffeehouse a customer must be physically present. Inseparability of production and consumption increases the importance of the quality in services.

The parishability characteristic is the most difficult to evaluate. Services appear to be highly perishable when compared to goods. The services of “Starbucks” can’t be stored and the value of the services exists at the moment when it is required. The services go waste if they are not consumed simultaneously. In addition, the services offered by “Starbucks” vary at each coffeehouse: food and beverages may be the same, but the interior, furnishing and decorations always differ. The provision of services largely depends on the human factor, that is whya professionally trained personnel is so important in service marketing (Muzondo & Mutandwa 2011). Service marketers face a problem in standardizing their service, as it varies with experienced hand, customer, time and firm. Service buyers are aware of this variability. So, the service firms should make an effort to deliver high and consistent quality in their service; and this is attained by selecting good and qualified personnel for rendering the service.

2. Analysis of the customer service component

The key to all successful businesses is being competitive. One is competitive if it manages to establish and maintain its position on the market. The market is, in fact, represented by customers. They have the power to decide whether or not to buy a certain brand, and to accept or reject a certain product. Except for a monopoly industry, customers will always have a choice. Therefore, each company should attract and maintain customers by offering them a high level of value and satisfaction. For this, all companies need to put the customer at the center of all their decisions and activities. This is why nowadays the a company’s success is highly dependent on adopting a customer-oriented approach (Talpau & Boscor 2011, p. 57).

The “Starbucks” company’s main objective was always to serve people, not coffee. This means that they put the customer at the centre of their activity and consequently, all their decisions and actions are made to take the needs of the customers into consideration. They continuously try to offer the customers a high level of value and satisfaction, focusing not only on its products range, but also on the services it provides (Talpau & Boscor 2011).

“Starbucks” is attracting customers not only because of its’ quality coffee at a reasonable price. The success of “Starbucks” is not only an effective business model, but also an unusual approach to the psychology of consumers. Without it “Starbucks” could have remained a regional network of coffee shops, where people would go just to drink coffee.
Indeed, besides coffee “Starbucks” offers consumers an unusual (especially for the American consumer) environment - the pleasant atmosphere of cafe. Self-service gives customers a choice of location - sitting on a couch, chair, or at the table. Unlike traditional cafes with waiters or fast food centers, nobody rushes - clients do not have to leave the coffeehouse immediately after drinking a cup of coffee. Wireless Internet connection, available in “Starbucks”, seems to welcome to stay, no matter how long, for twenty minutes or an hour.
Starbucks offered a very democratic choice - in same coffeehouse there can be students, parents with children and office workers, people may get together for a chat or to spend time alone. But even in the latter case, the people around, talking and relaxing music create a sense of presence in the community. Of course, many entrepreneurs soon copied the “Starbucks” model all over the world. But in the mid-80s in the U.S., it was a real innovation, which, along with a successful business model, has enabled the company to grow so fast (Cobb 2008).

3. Service provider analysis according to 7P’s    

According to Dr. B. Sudhir, the marketing mix is “one of the most important universal concepts, which has been developed in marketing” (Sudhir & Reddy 2010, p. 50). All the variables are inter-related and interdependent on each other. When service organizations adopt marketing principles, they frequently organize their marketing plans around the four P’s. The strategies for the four P’s require some modifications when applied to services due to the special features of the services (Sudhir & Reddy 2010, p. 50). When service businesses try to develop their marketing and tactical programs around the four P’s, the one fundamental difficulty they encounter is making the four P’s fit the nature of their operations. The four P’s ignore important service marketing realities: namely, personnel, physical assets, and process management. These three P’s represent vital marketing elements in the management of service businesses.

Product

“Starbucks” products do not contain poor quality materials. On the contrary, it is a company that has achieved a great success due to the uncompromising standard of quality. “Starbucks” managers are proud of the quality of the products and introduce the quality requirements in the declaration of intent of the company. This declaration states that the company's partners will adhere to the highest standards of quality requirements that concern purchasing, roasting and fresh delivery of coffee. With this purpose “Starbucks” leaders do what is necessary to achieve and exceed their quality standards, even if it involves the rejection of the "old methods" of work. Management does not stop conducting research aimed at developing technologies and systems in order to establish a more solid and consistent relationship between the processes of roasting and selling fresh product to the consumer (Seaford, Culp & Brooks 2012). Such a commitment to innovative aspects in selling quality products had considerable impact on the company's ability to expand its customer base and reach the international market.

At “Starbucks” customers are able to make an individual composition of their favorite beverage ingredients with the qualified help of barista (the Italian name of the bartender and the term used in “Starbucks” to call people who make drinks). Making beverages according to individual requirements of each visitor often involves a special selection of temperature, the availability of soy milk in the coffeehouse, and various flavors of fillings.

Price

“Starbucks” coffeehouses focus on the quality and personal experience, rather than on price. A comparison with similar services of competitors shows only slight differences. A key element of the success of “Starbucks” is the company's image.

Generally, “Starbucks” does not offer special prices for their products. All the beverages are quite expensive, though the price is reasonable due to high quality of coffee served. The price level is one of the important factors that shape company’s image. “Starbucks” goal to become a global brand is working for the good of the company and helps it to attract the attention of world’s biggest companies, who are seeking to establish partnerships with “Starbucks”. This provides a solid foundation for the company’s future development at international markets, which in its’ turn implements the company's mission to become a leading supplier of high-quality coffee in the world.

Promotion

One of the main advantages of the company for many years was its’ tendency to make their product a positive integral part of everyday life. “Starbucks” strategy lies in the expansion of special programs, which allow providing service to customers while they are going somewhere, doing shopping, travelling, by cooperating with various organizations that share the company's values. “Starbucks” implements its strategy by moving sale to shops, cinemas, business centers, airports, schools and homes (Seaford, Culp & Brooks 2012). “Starbucks” has shown that it is better to use less traditional advertising, instead relying primarily on advertising of a recognizable image, for example in the form of product placement in movies and on television.

In addition, “Starbucks” promotes each coffeehouse individually, depending on its location. This flexibility brings dividends, especially in the last decade. Another important fact promoting “Starbucks” is that the company protects the environment. When other vendors are promoting themselves in a similar way, no one does it like “Starbucks”. Customers pay attention to companies that actually help the environment. The company determined that local advertising is much more effective than nationwide. Most of the company's advertising materials are distributed as printed materials, as the target market of the company includes educated people who read more than the average person.

The internet appears to be influencing the customers in searching the information. For effective zero-level distribution without depending on intermediaries, it is suggested that the service companies should provide guidance through internet, which helps customers from far distance places. Providing online services to the customers is having many advantages and may be helpful for better promotion (Sudhir & Reddy 2010, p. 56). In 1998 “Starbucks” launched the company web site. “Starbucks” considered expanding its corporate image by merchandising coffee, furniture, videocassettes, and more through its web site, and invested in several online retailers (Seaford, Culp & Brooks 2012, p. 45).

Traditionally “Starbucks” invested more in PR and in service than in various promotions and advertising, but recent studies show that the company has again started to invest in advertising (Cobb 2008). This strategy will be funded by new revenues (additional profits go for the advertising expenses). One of the main reasons why “Starbucks” is so successful in conditions of recession economy is that it focuses on the quality and positive impressions, but not on price.

Place

Each “Starbucks” coffeehouse is unique, depending on the culture of the city in which it is located. The choice of furniture and equipment, the names of drinks, graphic design - everything is thought over in advance. These tactics have helped the company's shareholders to receive substantial profits.

Futhermore, “Starbucks” coffeehouses are typically clustered in high traffic, high visibility and easy access locations. Coffeehouses greatly differ in size: “Starbucks” places its coffeehouses in different conditions - airports, shops, office buildings and street corners. “Starbucks” has traditionally paid great attention to the location of coffee shops and choosing the right places. In the U.S. the average population per coffeehouse equals 200 000 people, but in small towns this number could be significantly lower.

People

Personnel are key to the creation of the service and its delivery to the con­sumer in a consistently acceptable fashion (Urbonavicius, Dikcius & Kasnauskiene 2007). Services represent personnel producing intangible deeds or efforts. Customers identify and associ­ate the traits of service personnel with the firms they work for. A rude waiter or a care­less cook can seriously affect repeat business for a restaurant.

“Starbucks” is the leader in sales, roasting and preparation of the best quality coffee in the world, but crowds of people are also coming to coffeehouses due to “Starbucks" experience as a whole. In fact, people come to a conveniently furnished cafe, where they can feel their own importance, and where there is a significant mutual connection between the customer and the seller. Everything that is done in the company is designed to ensure that, along with the acquisition of quality beverage or food product, the customer received positive experience, which may raise his spirit.

Moreover, “Starbucks” provides its workers, who spend twenty hours per week at work, with medical insurance – benefit, which “Starbucks” employees received long before this idea was even considered in other companies (Seaford, Culp & Brooks 2012).

However, attitude to employees in “Starbucks” goes far beyond the sale of shares or the provision of health insurance. For example, employees undergo intensive training course, during which they become more aware of the product range, they are explained the principles of work necessary to achieve success, as well as their personal powers and the importance of creating a warm atmosphere when working with clients. In comparison with other organizations, listed among the top five hundred companies in “Fortune” magazine, “Starbucks” spends much more money on employee training, than on promotion. Such training is paying dividends thanks to the stability of labor and maintaining relationships with loyal customers and attracting new visitors.