Snapshot : This week, we cover how you can use digital services to connect better with customers and grow your business. We review the 3 extra service Ps – people, process and physical evidence – that add to the core marketing mix. And then, we look at three key online customer needs – information, entertainment and shopping – where digital services can grow your brand.
It’s clear the 4Ps of marketing is a great starting point for marketing plans. With product, price, promotion and place, you have a well-proven and easy to remember check-list of key factors to structure your plan.
But as we covered on our article on the 4Ps of marketing last week, you’ll find some people who argue the 4Ps are not relevant for today’s digital and technology led world.After all, the model was invented more than 60 years ago.
This is clearly a terrible argument.
By the same argument, no-one would watch TV, use the phone or drive a car. Because all those “inventions” are way older than 60 years old.
The context has changed
A more common sense view of marketing acknowledges the world has changed since McCarthy invented the 4Ps back in 1960. But it recognises that this world change only changes the context in which the 4Ps has to work. The original purpose of the 4Ps – to organise and prioritise key actions to grow your brand – still applies. You just need to consider the implications of these context changes when you use the 4Ps.
For us, one of the biggest changes has been how businesses deliver services. Digital and technology have transformed expectations and delivery of all types of services from travel to insurance, from food delivery to how we connect with each other.
We’ll show how to extend the 4Ps to 7Ps. You use the extra 3Ps – people, process and physical evidence – to really nail down a competitive advantage in delivering services.
The difference between products and services
Let’s start with the differences between products and services. Most normal (i.e. non marketing people) get this. It’s only when strict 4Ps of marketing followers wedge services into “product” that things get confusing.
So, let’s deal with that first.
Products are tangible
A product is what the customer buys. It’s something tangible.
This is important. When you buy a product, you can see it, touch it, maybe even smell, hear or taste it. There’s ownership. You can point to it, and say “that’s mine”. (though if you’re leasing or renting a product, this ownership may only be for a set amount of time).
Products can be something that lasts a long time, like your house. Or, a short time, like a chocolate bar.
But, whatever the product is, it’s easy to recognise and describe. You own it.
Services are intangible
Services, on the other hand are intangible. You can’t touch them or own them. They are an experience that you get from a person or business. The outcomes of the service can be tangible – a new haircut or an insurance document, for example – but the service itself, you can’t actually touch.
It’s unique to you only for the time it happens, which means it’s inherently perishable. When the service experience is “done”, it goes away. You no longer own it, unless you pay for a repeat of the service.
This all makes sense to “normal” people.
Now some marketers like to argue that services like those we’ve mentioned – haircuts and insurance for example – are technically products if you take a broader view of products as “what the customer buys”.
It’s a fair argument. But, it’s really only marketers who think that way. Real people think of products as things they can see and touch. So, when you look at services, and in particular digital services, it helps to have some additional ways to clarify those differences..
The 7Ps of Marketing Services
So, that’s why we like the 7Ps model when we look at marketing services. We like it because it doesn’t replace the original 4Ps. It evolves it with three more Ps – people, process and physical evidence / location. These help clarify the differences that come with services, because they cover areas like intangibility, ownership and perishability.
Many businesses struggle to articulate a clear “product” using the original 4Ps definition of product – something tangible that’s owned.
Think about services like banking, travel and insurance, for example. Think about personal services like hairdressing or medical treatments. Their products are experiences. These extra 3Ps give those businesses a way to articulate the experience in a much clearer way.
So, for example, with businesses where personal interaction with customers is important, you can use the People element of the 7Ps to clarify what you need to do.
So, this could be as simple as the staff uniform and the “do you want fries with that?” experience of your average fast-food joint.
But often when the interaction is more complex, you need plans to have staff with the right skills available.
Think about car sales or real estate for example. If you’re the marketing lead in those categories, the style, tone and appearance of the sales team who talk to customers is hugely important.
And even if your sales team never meet the customer face to face – let’s say insurance businesses for example who mainly work on the phone or on email – there’s still a large people element to what you need to do to win over customers and build your brand.
And the standard view of “Product” from the 4Ps, stuff you make and put in a box, doesn’t automatically trigger these sorts of thoughts, does it?
Similarly, setting standard ways to deliver a service is important. We expect certain ways of working when we try to transfer money through our bank, book plane tickets or shop online.
When we use these digital services, what we click and choose on the screen needs to make things happen in the real world.
Our bills needs to be paid. Our plane seats need to be booked. And our online shopping needs to land on our doorstep when we need it.
For the delivery of these services to run smoothly, and efficiently, it’s important to set up clear Processes. So, for online shopping for example, the order to delivery process is critical. You need to plan in advance factors like the shipping packaging, the customer contact and the resolution of delivery issues.
Again, the standard view of “Product” in the marketing mix, doesn’t immediately prompt you to consider these, which is why this additional “P” helps.
Physical evidence / location
And then lastly, we come to the final “P” of Physical evidence / location. So, this covers any factor that influences how customers experience the service.
So, think about the layout and signage in-store that helps you find the product you want at the supermarket, for example.
Think about the ambience of your favourite restaurant.
Or, consider why you actually need a copy of the insurance policy or travel documents when you buy these services, when it’s already set up in their system.
These are all physical evidence of the service provided. But they’re not technically the actual “product” itself.
Some people argue you should stretch the meaning of the word product to include these experiences of the service.
But we believe, the extra 3Ps brings extra clarity to services. They’re not mandatory, but in most cases, they will help.
While we do like the 4Ps, it’s not a “one size fits all” marketing model. Sometimes, you need to tweak or adapt that model to suit the context. And nowhere, is that more true than the world of services, and in particular digital services.
So, let’s now move on to look at the impact “digital” has had on services in the last 20 to 30 years.
There’s a lot of mixed opinions on what digital means for marketing. But for us, the simplest way to think about it, is that “digital” is a macro trend.
In marketing planning terms, it sits across your PEST analysis – political, economic, social and technology.
So, taking PEST in reverse order, the technology impact of digital changes how people find out about and experience brands. Digital media gives customers more access to information than they could ever use. E-Commerce lets them shop any time of day or night, from any place they can get online. It gives them access to products and services from all over the world.
The social impact changes how we interact with and talk about brands. Twenty years ago, your opinion about a brand would be limited to your friends and family. Now, you can share your opinions with the whole world on social media. Brands are under constant scrutiny, and customers expect instant responses to questions and problems. Brands now need to factor this interactivity into their customer experience.
With access to new channels and new ways of selling like e-Commerce, there’s clearly an economic impact. As we recently shared, over 12% of sales now happen online. Customers can easily compare prices between products, and expectations have changed on key areas like payment and delivery.
And with the Australian government’s recent spat with Facebook, and on-going concerns over issues like data privacy and online bullying, there’s also a clear political aspect to digital.
From macro trend to individual customers
But, sometimes, macro trends can feel a bit remote and distant. Like they impact someone else, not you.
So, let’s also try to look at digital from an individual customer level. Because, if we’re talking about you, and how digital affects you as an individual, that’s clearly a different point of view. At an individual level, everyone has different expectations of what digital services they need and value.
What digital services do customers want?
We covered the six basic activities people do online; information, entertainment, social connections, to communicate with others, to shop, and to do productive things; in a previous article. This insight came from the excellent digital life study from the sadly, now rebranded business, TNS.
Now, when we read that list, what we see are clear customer needs. Needs that people have online that your brand can satisfy with digital services. And if you can satisfy customer needs, then that’s clearly an opportunity to grow your business.
Some of them are harder than others to take advantage of. Communicating with others is tough for example, unless you have the technical infrastructure to support this. So, we’re going to focus on the three most common ways we see businesses drive sales from digital services. These are information, entertainment and shopping.
So, obviously, digital has transformed the way people access and use information.
The newspapers, books, libraries and educational and training courses we used before the internet still exist. But, we access and use them in very different ways.
Much of publishing has moved online. Newspapers now make more money with advertising or paywalls than from selling printed copies of their papers. Printed books survive, but Amazon’s Kindle has drawn a lot of value away from traditional channels. For example, the turnover of the newspaper and book industry in Australia dropped from $4.59 bn in 2010 to $2.91 bn in 2018. That’s a massive decline.
And of course, people still value professional qualifications. Universities, colleges and other training are still popular. But, they face increasing competition from the likes of You Tube, Udemy and Udacity.
These sites give aspiring learners access to instant learning for free, or at a low cost. That’s hard to compete with.
Looking at these examples, we believe the use of information as part of your digital services comes down to three main options.
Information that moves customers towards a goal
Firstly, you’ve got information that helps move customers towards a goal. And this goal is part of a journey that’ll eventually convert into a sale.
This is information content that’s part of your customer experience plan.
You understand customer information needs at each point of their journey. And you create relevant information based content to meet that need, AND to move them on to the next step.
There’s many ways to do this.
Digital gives you plenty of channels to share information with your customers. For example, you can share information as part of your digital services to customers though your website, your blogs, your social media posts, and your CRM program.
And, as we cover in our guide to digital media, You Tube is a great channel to share ”How To” guides that meet information needs.
And when you get close to the point of purchase, then obviously key information sources like your product page information become more relevant and important.
Information content with attached services
Then, you’ve got information content, to which you can attach additional services that generate their own separate income.
This can be as simple as selling advertising space on your information content, or getting paid for referrals (affiliate marketing).
To the consumer, the information is still “free”. They don’t directly pay for it. But they are actually paying for it indirectly, when they buy products and services after seeing adverts, or clicking on referral links.
Information as a packaged and paid for service
And then finally, you’ve got options where you package up the information, so customers pay for the whole package as a bundle of information.
Obvious examples include collating your information into a book format and publishing it through Kindle self-publishing to creating training courses and selling them on sites like Udemy and Teachables.
Information impact on the 7Ps
So, with those three options in mind, let’s look at how you might pull on different levers in the 7Ps marketing mix. Let’s look at how you can market informational digital services.
In all three options, you need to make some place decisions. Where and how will customers find and experience this information? This slightly stretches the original definition of place from the 4Ps model, in that the place can now be online.
Also, in all three information marketing options, you need to plan for both the people and the process elements.
So, how do you plan for and manage the people who’ll create the information, for example? What’s the process where customers find the information, how will they interact with it, and how will it move them on to the next stage of the customer experience journey?
In particular, if you’re selling the information as a package, you need a plan to make the creator of that information part of your mix. For example, do they have credible and relevant experience, qualifications or a reputation that’ll convince more people to buy the information package?
The physical evidence is also important when the customer “buys” your information. You need to plan how to deliver the information content. Is it written, and in a downloadable book or brochure format, for example? Is it video content that the buyer watches?
These things don’t just happen. They need to be part of your digital services marketing plan.
And don’t forget the original 4Ps
In the two options where information drives customers towards a goal or comes with an attached service, information is essentially a promotional mechanic. It’s a way to communicate with customers.
And because it’s essentially free, your pricing mechanic is not visible to customers with these two options. In actual fact, from a business model point of view, you cover the cost of providing this information, by recouping it within your end selling price.
But, in the third option, where you’re selling information packages directly, the information is the product. And you have to work out the best way to price it. How do you make it a credible and valuable transaction for the customer?
This is especially hard, if there are other free options available. Your information package has to both meet their needs, AND be unique and distinctive enough that they can’t get it elsewhere.
We generally see Kindle publishing, and online training digital services like Udemy doing this the best. Although you need to attract many customers to make this work. The price per sale is usually pretty low. You’d expected to pay $15 – $20 for a course on Udemy for example based on their frequent deep discount sales. And if you’re patient, you can pick up most books on Amazon / Kindle for under $10.
All things to consider as part of your 7Ps marketing mix, if in any way, information is part of your offer to customers.
As we share in our guide to brand storytelling, the other main communication option if you don’t go down the information / education route, is entertainment.
If you have a brand that can entertain customers, this is a strong competitive advantage. People like to be entertained. Entertainment connects to the emotional centre of our brains. It brings joy, sadness, fear, anger and much more.
However, it’s a harder service to provide. Its a different skill set, and already served by well-established businesses. People clearly think of brands like Netflix and Spotify when they think of digital services from an entertainment point of view.
But again, like information, you do have options.
Entertainment as part of your customer experience
You can try to be entertaining as part of your customer experience. For advertising that’s not information focussed, isn’t that what those are trying to do for example.
Isn’t that advert intended to be entertaining, so that you think better of Coke?
There’s no information or education intent in that advert. But, the entertainment value essentially makes it part of Coke’s digital services to customers.
Entertainment with attached services
Again, this can be “free” entertainment that comes with attached paid for services like advertising or referral marketing.
(in fact, IFL Science does an unusual job of being informational and entertaining at the same time)
Check out, the entertaining content of “will it blend”, for example.
For customers, this content from a blender manufacturer is free.
But what it does it create more interest in the blender product behind the tests, and the company – Blendtec – who make the blenders.
It’s essentially entertainment as part of their digital services.
Entertainment as a paid for package
Well, clearly this gets into the world of paid for video content. Independent production companies now have access to a much wider range of channels with the likes of Netflix, Amazon Prime and Apple TV.
This is too big a topic to cover in this article, but for bigger businesses, we do sometimes wonder if they are missing a trick with this sort of digital service.
In the early days of TV, production companies worked in partnership with sponsors to create content but also promote products. So, not just product placements, but entire programmes. The term “soap opera” for example comes from the fact that these types of shows were originally paid for by companies like Proctor and Gamble.
And here’s the thing, people expect to pay to be entertained. Compared to information, there’s much more value to customers in content that’s entertaining.
Now, while some businesses may not consider themselves as entertaining, with a bit of creative thinking, there are ways to do it like the Blend IT example above.
The last online need is the one that clearly links the most directly to sales. And that’s online shopping.
Setting up an online store in these sorts of business gives them access to many more customers than would ever be driving past.
They can offer the digital services like fast delivery and 24-7 shopping to boost the impact of their marketing mix.
But even those business who don’t “make” things can use technology to improve the way they offer services.
So, for physical service providers like hairdressers, doctors and dentists, online appointment systems help remove a possible barrier to a sale. For intangible categories like insurance or banking, you can use technology to automate tasks like form completion and transaction management.
Business-to-business providers can also use digital as a way to extend their offer. So, for example, they can use digital to offer services like health and safety checks, insurance and to manage tax and legal issues.
These types of service improvements don’t come for free though.
You need to plan them out in the marketing plan. The core 4Ps plus the 3 optional Ps help you organise and prioritise marketing actions.
Digital services conclusion
Digital services is an exciting and challenging area. We love it. It’s such a new area, there’s lots of opportunities. Nothing is yet set in stone. Take shopping for example. Physical market places have existed for thousands of years. Amazon has only just turned 25.
That means there’s lots of opportunities to connect with and influence customers. We see digital services pulling heavily from key learning areas like the marketing plan, digital marketing, customer experience, and e-Commerce.
Check out our guides to those topics to find out more. Or contact us directly if there’s something we can help you with when it comes to digital services.