Chapter 12 ♦ Services and Nonprofit Organization Marketing 12-1
CHAPTER 12 Services and Nonprofit Organization Marketing
CHAPTER FEATURES
Chapter Features
Key Points
✓ Marketing & You
Students are given a survey to determine their attitude towards
charitable operations.
✓ Customer Experience
Starbuck’s is the largest coffeehouse company in the world. Its
success is based on its quality and variety of coffee drinks, and its
distinctive European style coffeehouse experience.
✓ Case Study
MinuteClinic healthcare centers are open seven days a week with
later hours than traditional doctors have and they don’t require
appointments. How has their services and place and promotion
strategies helped lead to their success?
Kodak isn’t selling only products, these days. The company has an
entire division dedicated to delivering service solutions to business
customers.
USING THIS MANUAL
Chapter twelve includes eight learning outcomes that help students become more familiar with marketing for services
✓ Ethics In Marketing
Texting is the newest promotion tool being implemented by the
reach a younger market. Research shows that the new promotional
effort appears to be successful.
✓ Application Exercise
Students work rank products and services according to how difficult
it is to assess their quality.
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LEARNING OUTCOMES
1 Discuss the importance of services to the economy
The service sector plays a crucial role in the U.S. economy, employing more than 80 percent of the work force and
2 Discuss the differences between services and goods
Services are distinguished from goods by four characteristics. Services are intangible performances in that they lack
3 Describe the components of service quality and the gap model of service quality
Service quality has five components: reliability (ability to perform the service dependably, accurately, and consistently),
responsiveness (providing prompt service), assurance (knowledge and courtesy of employees and their ability to convey
4 Develop marketing mixes for services
“Product (service) strategy issues include what is being processed (people, possessions, mental stimulus, information),
core and supplementary service, customization versus standardization, and the service mix. Distribution decisions
5 Discuss relationship marketing in services
Relationship marketing involves attracting, developing, and retaining customer relationships. There are three levels of
6 Explain internal marketing in services
Internal marketing means treating employees as customers and developing systems and benefits that satisfy their needs.
7 Discuss global issues in services marketing
The United States has become the world’s largest exporter of services. Although compensation is keen, the United States
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8 Describe nonprofit organization marketing
Nonprofit organizations pursue goals other than profit, market share, and return on investment. Nonprofit organization
marketing facilitates mutually satisfying exchanges between nonprofit organizations and their target markets. Several
CHAPTER OUTLINE
1 Discuss the importance of services to the economy
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Service
I. The Importance of Services
A service is the result of applying human or mechanical efforts to people or
objects.
The basic marketing process is the same for all products and organizations.
2 Discuss the differences between services and goods
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How Services Differ from
Goods
Review Question 2.2
II. How Services Differ from Goods
Services are distinguished from products by four unique characteristics. They are
have greater variability in outputs, and they are perishable.
Review Question 2.1
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How Services Differ from
Goods
A. Intangibility
The fundamental difference between services and goods is that services are
intangible performances. Intangibility means that services cannot be
touched, seen, tasted, heard, or felt in the same manner that goods can be
sensed.
1. Services cannot be stored and can often be easily duplicated.
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cannot be easily assessed even after purchase and experience.
B. Inseparability
1. Inseparability means that services are often sold and then produced
consumed in decentralized locations.
C. Heterogeneity
1. Heterogeneity means that the consistency and quality control are
D. Perishability
1. Perishability refers to the fact that services cannot be stored,
3 Describe the components of service quality and the gap model
of service quality
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Components of Service
Quality
Review Question 3.1
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The Gap Model of Service
Quality
III. Service Quality
Because of the four unique characteristics of services, service quality is difficult
to define and measure. Customers evaluate services along 5 dimensions.
A. These dimensions are:
1. Reliability is the ability to perform the service dependably,
accurately, and consistently.
B. The Gap Model of Service Quality
A model of service quality called the gap model identifies five gaps that
can cause problems in service delivery.
1. Gap 1: The gap between what customers want and what management
thinks customers want.
4 Develop marketing mixes for services
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Product Strategies for
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Service as a Process
The Service Factory
IV. Marketing Mixes for Services
Elements of the marketing mix need to be adjusted to meet the special challenges
posed by the unique characteristics of services.
A. Product (Service) Strategy
1. Service as a Process
a. People processing
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The Service Offering
2. Core and Supplementary Service Products
The service product can be viewed as a bundle of activities that
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Customization/
Standardization
3. Customization/Standardization
a. Customized services are more flexible and responsive to
individual customer needs but also cost more.
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The Service Mix
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Place (Distribution)
Strategy
technology to deliver customized services on a mass basis.
4. The Service Mix
a. Most service organizations offer more than one service. A
B. Distribution Strategy
1. Distribution strategies for service organizations focus on convenience,
2. Management must set objectives for the distribution system and select
operation type (usually direct or franchise), location, and scheduling.
C. Promotion Strategy
Class Activity: Has
students devise a
promotion strategy for the
multiple publics of a
nonprofit organization
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Price Strategy
1. Four promotional strategies for dealing with the unique features of
services are:
a. Stressing tangible cues which are a concrete symbol for the
service offering.
D. Price Strategy
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Pricing Objective
The unique characteristics of services present some special pricing
challenges.
1. It is important to define the unit of service consumption.
3. Three categories of pricing objectives have been suggested:
a. Revenue-oriented pricing focuses on maximizing the surplus of
Chapter 12 ♦ Services and Nonprofit Organization Marketing 12-7
often trying to blend the objectives to best fit the type of business.
5 Discuss relationship marketing in services
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Relationship Marketing
Review Question 5.1
V. Relationship Marketing in Services
Relationship marketing is a means for attracting, developing, and retaining
customer relationships to build strong customer loyalty.
A. Relationship marketing is important in service businesses that involve a
C. Relationship marketing can be practiced at three levels:
1. Level 1: The firm uses pricing incentives, such as frequent-flier
programs.
structural bonds to the formula that are not available from other firms.
Customer Experience
Starbuck’s
Starbuck’s is the largest coffeehouse company in the world. Its success is based on its
quality and variety of coffee drinks, and its distinctive European style coffeehouse
6 Explain internal marketing in services
Review Questions 6.1, 6.2
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Internal Marketing
VI. Internal Marketing in Service Firms
Internal marketing means treating employees as customers and developing
systems and benefits that satisfy their needs.
7 Discuss global issues in services marketing
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Review Question 7.1
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VII. Global Issues in Services Marketing
The United States is the world’s largest exporter of services.
8 Describe nonprofit organization marketing
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Nonprofit Organizations
VIII. Nonprofit Organization Marketing
A nonprofit organization is an organization that exists to achieve some goal
other than the usual business goals of profit, market share, or return on
investment.
Nonprofit organizations account for over 20 percent of the economic activity in
the United States.
A. What Is Nonprofit Organization Marketing?
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Nonprofit Organization
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Nonprofit Organization
Marketing
1. Nonprofit organization marketing is the effort of public and private
nonprofit organizations to bring about mutually satisfying exchanges
3. Most nonprofit organizations perform the following activities:
a. Identify the customers they wish to serve or attract.
b. Explicitly or implicitly specify objectives.
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Unique Aspects of
Nonprofit Organization
Marketing Strategies
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Objectives
B. Unique Aspects of Nonprofit Marketing Strategy
Differences between business and nonprofit marketers create unique
challenges for nonprofit managers in setting marketing objectives, selecting
target markets, and developing appropriate marketing mixes.
1. Objectives
Global Issues in Services
Marketing
Services that are exported include financial, credit card, construction,
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Without a profit motive to guide them, many nonprofit organizations
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Target Markets
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Product Decisions
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Promotion Decisions
2. Target Markets
a. Nonprofit organizations often have apathetic or strongly
3. Product Decisions
a. Benefit complexity: Nonprofit organizations often market
complex behaviors or ideas.
4. Distribution Decisions
Distribution for nonprofit products is usually direct from producer to
consumer.
a. A nonprofit organization’s capacity for distributing its service
channels of distribution.
Ethics in Marketing
Churches Extend their Reach in the Digital Age
5. Promotion Decisions
a. Professional volunteers can assist organizations in developing
and implementing promotion strategies. Advertising agencies
12–10 Chapter 12 ♦ Services and Nonprofit Organization Marketing
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Price Decisions
6. Price Decisions
Five key characteristics distinguish nonprofit organization pricing
decisions from profit-sector pricing decisions.
a. Pricing objectives are generally concerned with covering costs
partially or fully or equitably distributing resources.
KEY TERMS
assurance
inseparability
public service advertisement (PSA)
core service
intangibility
reliability
credence quality
internal marketing
responsiveness
experience quality
nonprofit organization
service
gap model
nonprofit organization marketing
supplementary services
heterogeneity
perishability
tangibles
Suggested Homework:
• The end of each chapter contains numerous questions that can be assigned or used as the basis for longer
investigations into marketing.
Chapter 12 ♦ Services and Nonprofit Organization Marketing 12–11
REVIEW AND APPLICATIONS
1.1 To keep track of how service employment is affecting the U.S. economy, go to
www.bls.gov/bdm/home.html. Look at the right sidebar, which gives the latest numbers for Business
Employment Dynamics. What trends do you see? Do the numbers support the information from the
chapter?
2.1 Assume that you are a manager of a bank branch. Write a list of implications of intangibility for your firm.
attempt to associate their products with tangible qualities or symbols that consumers can recognize.
2.2 Over 25 years ago, Tim and Nina Zagat began publishing leisure guides containing reviews of
restaurants. Today, the renowned Zagat guides still contain reviews of restaurants, but they also rate
hotels, entertainment, nightlife, movies, shopping, and even music. Go to www.zagat.com. In your
opinion, are Zagat survey guides goods or services? Explain your reasoning.
3.1 Analyze a recent experience that you have had with a service business (for example, a hairdresser, movie
theater, dentist, car repair, and restaurant) in terms of your expectations and perceptions about each of the
five components of service quality.
4.1 Form a team with at least two other classmates, and come up with an idea for a new service. Develop a
marketing mix strategy for your new service.
Here is an example:
The marketing mix for an auto-leasing company that specializes in inexpensive leases for college students:
5.1 For the new service developed in question 4.1, have the members of the team discuss how they would
implement a relationship marketing strategy.
Internal marketing means treating employees as customers and developing systems and benefits that satisfy their
6.1 Choose a service with which you do a lot of business. Write a memo to the manager explaining the
importance of internal marketing and outlining the factors internal marketing includes.