Journal of Business Strategy

New Marketing Mix Stresses Service

David A. Collier
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David A. Collier, (1991),"New Marketing Mix Stresses Service", Journal of Business Strategy, Vol. 12 Iss 2 pp. 42 - 45
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 42

New Marketing Mix

Stresses Service
David A. Collier
The seven Ps of service management include some nontraditiona
ingredients to help formulate marketing strategy. Two examples illustr
how competitive advantage can be won or lost based on applying o
ignoring the seven Ps.

T he original model of the four

Ps of the traditional mar­ Winning With the Seven Ps
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keting mix (product, price,

place, and promotion) was One international company, Benetton,
founded in the Industrial focuses on producing a universal prod­
Revolution. Today, three additional Ps uct (sweaters) in a wide variety of colors
(physical evidence, participants, and pro­ and designs in a niche market. The
cess) founded in the service sector Benetton service package is a powerful
revolution, have been added and are mix of the seven Ps of service manage­
often called the "expanded marketing ment. It is a focused strategy capable of
mix."1 These seven Ps recognize that at great cost efficiencies, flexible produc­
the points of service creation and tion capacity, and quick delivery time
delivery (i.e., service encounters), that produces and delivers a wide
marketing and operations functions variety of sweaters that best fit the
occur simultaneously. target markets of each store.
The seven Ps of service management The first P—product—is based on a
can be a powerful management para­ timeliness and global set of customer
digm or mind-set to help a company values (i.e., everyone likes basic colorful
gain and sustain competitive advantage. sweaters). A certain level of product
Many companies, such as Domino's quality is expected. Likewise, a certain
Pizza, 3M, Federal Express, Frito-Lay, "service experience" is expected.
American Airlines, Marriott Hotels, Product life cycles are sometimes less
L.L. Bean, Wal-Mart, McDonald's, and than a season and Benetton is renown
The Limited, are industry leaders be­ for tracking and quickly following
cause they understand and manage the fashion trends by store around the
seven Ps of service management with globe. Store owners can carry only
meticulous attention to every detail. Benetton products. Also, the Benetton
The competitive strategies of these product logo is a worldwide logo sym­
leading companies (and their com­ bolizing certain characteristics of the
petitors) can all be formatted into the other six Ps. The customer immediately
seven Ps of service management. perceives certain attributes of the
David A. Collier is a Two examples illustrate how one inter­ 1
member of the Faculty of national company used the seven Ps to See Booms, Bernard H. and Mary J. Bitner, "Marketing
Management Sciences at Strategies and Organizational Structures for Service Firms," in
Ohio State University. He
gain competitive advantage and how one Marketing of Services, eds. James H. Donnelly and William R.
is the author of two books regional U.S. company ignored the seven George (Chicago: American Marketing Association, 1981),
47-52; Magrath, A.J., "When Marketing Services, 4 Ps Are Not
on service management. Ps and lost its advantage. Enough," Business Horizons, 29 (May-June 1986): 44-50.

THE JOURNAL OF BUSINESS STRATEGY March/April 1991

 SERVICE MANAGEMENT STRATEGY 43

"Benetton experience" or "Benetton ser­ In the past, the target market has
vice package." been moderately affluent 19- to 25-year-
The second P— the price of Benetton olds. Today, Benetton, like other spe­
sweaters in the United States—is mod­ cialty retailers, is segmenting the
erate overall, but some sweaters cost up markets even more, often with unique
to $120. Credit losses amount to one stores for each market segment.
percent of total sales. Discounting is These four Ps offer a narrow view
becoming more prevalent in Benetton's and an incomplete analysis of Benetton's
4,500 stores in sixty countries. Prices are service package. It ignores three of the
always stated in the currency of each most powerful ways to gain competitive
country. Pricing strategy is becoming a advantage. The three additional Ps
challenge because they cannot depend (physical evidence, process, and par­
on their unique Italian manufacturer/ ticipants) complete the management
subcontractor/agent/store processes paradigm for competing in the global
when supplying other countries. marketplace in the 1990s and beyond.
The third P— place—is where Benet­ The fifth P— physical evidence—is
ton locates its stores, warehouses (and vital to Benetton's service package "The timely
inventory), and factories. Small stores of strategy. Benetton stores are a showplace collection
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approximately 400 square feet are of color. Storefronts are made of all and use of
located in target market areas. Usually a glass, and colorful sweaters are neatly information
lead store is followed by more stores. displayed in the front and perimeter of to track
Recently, Benetton admits it may have the store. The customer experiences the
made a strategic mistake by locating too Benetton service package, part of which demand 'by
many stores too close together. For ex­ is color, by looking through the store­ store' and
ample, at one time there were twenty- front or walking into the front room of trigger
eight Benetton stores in New York City, Benetton's service factory. manufactur-
some on the same city block. Once in the store, customers can feel ing orders
Factories used to be only in Italy, but the garment without waiting for or ask­ has been a
in 1987 Benetton built a U.S. factory in ing a store employee to help them. The
Rocky Mount, North Carolina. Certain familiar Benetton signage and storefront major reason
sweaters are dyed at the last minute so directs the way to the store with a for Benetton's
factories can immediately respond to splash of color that stands out com­ competitive
fashion trends for each store. Factories pared to other retailers, especially in advantage."
produce only to order. Warehouses tend countries other than the United States.
to carry the more stable sweater colors Customers cannot only buy the physical
and designs while more fashionable product but they also experience the ser­
sweaters are shipped directly from the vice package, too.
factory to the stores. A flexible and effi­ Benetton franchisees must select one
cient manufacturing and distribution of five types of store interiors. For ex­
system enables Benetton to minimize ample, an upscale store might have a
fashion risk, inventory investment, and prepackaged wood-paneling interior and
meet customers' changing fashion needs more upscale merchandise while a
with a wide variety of sweaters. trendier store might choose a high-tech
Ten years ago, the Benetton name was interior with more of "this season's
not known worldwide. Today, promo­ items." Music that fits the target
tion—the fourth P— has established the customer plays in the background. Like­
Benetton service package and brand wise, store employees (or service-
name in the minds of millions of cus­ providers) dress to fit the target market
tomers around the world. Advertising at and store image.
sporting events and in certain "youth­ Process design—the sixth P— includes
ful" magazines is part of managing the Benetton's fashion design and store
fourth P. order cycle, the factory and distributor

THE JOURNAL OF BUSINESS STRATEGY March/April 1991

 44 SERVICE MANAGEMENT STRATEGY

supply cycle, franchising policies and delivery systems against that of

procedures, merchandise payment poli­ competitors.
cies and procedures, and salesperson
training procedures.
In the early days, all of these "paper"
procedures were well planned and exe­ Losing With the Traditional
cuted. Today, many of these processes Four Ps
have been computerized and the stores
and factories electronically linked. In A regional U.S. fertilizer and grass seed
fact, the timely collection and use of in­ manufacturer (company A) sold most of
formation to track demand "by store" its products to parks and golf courses.
and trigger manufacturing orders has Customers could only slightly evaluate
been a major reason for Benetton's the technical differences among com­
competitive advantage. Other enhance­ petitors between the primary goods (i.e.,
ments of their processes include: the fertilizer and grass seed).
computer-aided design, a just-in-time Customer service was defined as pro­
production and inventory planning viding the right product to the right
system, and a McDonald's-style fran­ customer at the right time. The focus of
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chising system. company A was on following the

The seventh P— the participant— physical production and distribution of
whether it be the service provider or these goods through distribution chan­
customers in the store, is the final link nels to the customer's job site. Once
in this value-added chain of retailing. these goods were delivered, company A,
Each P of service management adds based on its product mentality, assumed
value to the final Benetton service its job was done.
package. The traditional four Ps of product,
Benetton salespeople are trained on price, place, and promotion were
the job, usually in established stores. roughly equivalent among industry com­
They are trained to mix and match petitors. Yet, one innovative competitor
colors and outfits. They must be well- (company B) began an application ser­
groomed, fit the market niche personal­ vice that routinely applied the fertilizer
ity for that store, be friendly and polite, and grass seed for its primary custom­
and know the procedures of the store. ers. Company B bundled the application
Benetton is also training the customer, service to the primary goods and
much like McDonald's did in the 1960s. charged a higher price for this bundled
For example, the display and presenta­ service package.
"The seven. tion of merchandise is standardized in Company A did not consider the ap­
Ps can be all stores with the largest sizes on the plication service part of what it sold to
used to bottom shelf and the smallest sizes on the customer. A local subcontractor or
benchmark the top shelf. As customers become customers themselves applied the fer­
one's service familiar with the "Benetton way," there tilizer and seed. Often, the job was done
is less need to rely on the store salesper­ incorrectly. Was it the fault of the
packages and son. In effect, the place, physical physical product or the way it was ap­
delivery evidence, and process Ps all help sup­ plied? Either way, customers' lawns were
systems port this subliminal form of self-service. in poor shape.
against that These seven Ps of service management The service package strategy of com­
of com- are bundled together to form the Benet­ pany B required the company to make
petitors." ton service package. Each P can be major changes in how it ran the busi­
viewed as an opportunity to gain com­ ness. For example, physical evidence now
petitive advantage and define business required that all machinery used to ap­
strategy. The seven Ps can be used to ply the fertilizer and grass seed be clean,
benchmark one's service packages and modern, look professional, and not

THE JOURNAL OF BUSINESS STRATEGY March/April 1991

 SERVICE MANAGEMENT STRATEGY 45

break down. These machines now management to formulate, differentiate,

helped form the customer's perception and sell its service package in the
of company B and its service package. marketplace. Their bundled service
Process design now required standard­ package guaranteed a "no hassle ex­
ized procedures for applying the prod­ perience" when customers bought their
ucts, resolving customer problems and service package. As might be expected,
complaints, and billing the customer. company B is taking business away from
Each application crew was evaluated by company A.
the customer on how well the applica­ Managers everywhere are asking
tion service was executed. Consideration "How can we differentiate our service
was being given to incorporating these packages from competitors to gain com­
customer evaluations into employees' petitive advantage? " Many management
job performance evaluations. Training paradigms are used to answer this
programs for these frontroom company question.
employees now had been standardized. The seven Ps of service management
The service provider that applied the is a way to conceptualize the business,
product to the parks and golf courses define business strategy, format com­
now wore company uniforms. They now petitive analyses and benchmarking, and
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had to be well-groomed, polite, knowl­ answer this strategic question. The three
edgeable, and create a professional lawn additional Ps broaden management's
service image. They had to have back­ perspective toward what they are (and
room as well as frontroom skills, which should be) selling and how they want to
changed company B's hiring practices, deliver goods and services. The seven Ps
pay scale, and training programs. force management to "think service
Meanwhile, company A, with its prod­ management."2
uct mentality, did not recognize or care Yet, if the underlying paradigm is in­
about the appearance of the machinery complete, vague, or outdated, manage­
or the employees who applied the prod­ ment plans and actions concerning how
ucts. The only time the customer saw to gain competitive advantage can be in­
company A's name or logo was on the correct. What is obvious when using the
physical product. There were no stan­ seven Ps (in the case of Benetton and
dard operating procedures for subcon­ company B) is not obvious when using
tractors. Most complaints were generated the traditional four-P paradigm (com­
with this triad relationship (customers, pany A).
subcontractors, company A). There was Finally, the three additional Ps of
also no formal process to resolve cus­ physical evidence, process, and partici­
tomer problems and complaints. pant are situational variables. They are
Although company A stated in its an­ often under the simultaneous control of
nual report and company literature that the marketing, operations, and human
customer service was a top priority, the resource management functions. They
definition focused on the four Ps of the are best described as part of the service
traditional marketing mix. Company A management function. The work of top
relied on a product mentality that traced management is service management. The
the movement of the physical product. analysis and decisions of the seven Ps
It relied on the traditional marketing are too important and integrated to be
mix mind-set, which is incomplete when left to any single functional area. ■
creating and delivering service packages 2
and service encounters. See Collier, David A., Service Management: Operating
Decisions (Englewood Cliffs, N.J.: Prentice-Hall, Inc. 1987);
Company B also stated in its com­ Collier, D.A., "Measuring and Managing Service Quality," in
Service Management Effectiveness, eds. D.E. Bowen, R.D.
pany literature that it valued customer Chase, and T.G. Cummings (Jossey-Bass Publishers, Inc.,
service, but used the seven Ps of service 1990), ch. 10, pp. 234-265.

THE JOURNAL OF BUSINESS STRATEGY March/April 1991

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