Part 1

FOUNDATIONS FOR SERVICES MARKETING

FOUNDATIONS FOR SERVICES MARKETING

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Chapter 1Introduction to Services What are Services? Why Service Marketing? Service and Technology Characteristics of Services Service Marketing Mix Staying Focused on the Customer

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Objectives for Chapter 1:Introduction to Services Explain what services are and identify important trends in services.

Explain the need for special service marketing concepts and practices and why the need has developed and is accelerating.

Explore the profound impact of technology on service.

Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.

Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text.

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What are Services?

Services are deeds, processes, and performances provided or coproduced by one entity or person for another entity or person.

e.g. IBM -repair and maintenance service for its equipment, -consulting services for IT and e-commerce applications, -training services and etc.

Differentiate these termsService industries and companiesService as a product

a wide range of intangible product offerings that customers value and pay for

Customer Servicethe service provided in support of a company’s core products

Derived servicethe value derived from physical goods

Examples of Service Industries Health Care

hospital, medical practice, dentistry, eye care Professional Services

accounting, legal, architectural Financial Services

banking, investment advising, insurance Hospitality

restaurant, hotel/motel, bed & breakfast ski resort, rafting

Travel airline, travel agency, theme park

Others hair styling, pest control, plumbing, lawn maintenance, counseling services, health

club, interior design

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Contributions of Service Industries toU.S. Gross Domestic Product

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Tangibility Spectrum

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Tangibility is a key determinant of whether and offering is a service.

Why Service Marketing?

Services dominate U.S. and worldwide economies

Service as a business imperative in goods-focused businesses

Deregulated industries and professional service needs

Service marketing is differentService leads to profits

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Percent of U.S. Labor Force by Industry

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Percent of U.S. Gross Domestic Product by Industry

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Why service? (Continued)

Service as a business imperative in goods-focused businesses

e.g. Xerox: document management service Petsmart: pet hotels, groooming, and training P&G:Tide Dry Cleaners, Mr.Clean Car Wash

Examples of Goods Companies that are Expanding into Services

Boeing

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Firms focus on services because

Services can provide higher profit margins and growth potential than products

Customer satisfaction and loyalty are driven by service excellence

Services can be used as a differentiation strategy in competitive markets

Why service? (Continued)

Deregulated industries and professional service needs For example, the deregulation in airline industries

created turmoil in the industry, since the price used to be determined and monitored by US government.

Professional service providers need to understand their customers, to ensure the delivery of quality services

Why service? (Continued)

Service marketing is different Services differ from goods. There is a need for new concepts and approaches for

marketing and managing service businesses.

Service leads to profits Successful businesses devote to common service

themes, e.g. trust-based relationship with customers and commitment to investment in employee success.

Service and TechnologyTechnology significantly influences the practice

of service marketingNew service offerings

Interactive edition of The Wall Street Journal

New way to deliver existing servicesMedical information on the web

Enabling both customers and employeesCustomers: online banking, online shoppingEmployees: software and real-time information to customize

services to fit customer’s needs

Eight Central Paradoxes of Technological Products

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Characteristics of ServicesCompared to Goods

Intangibility

Perishability

SimultaneousProductionandConsumption

Heterogeneity

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Comparing Goods and Services

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IntangibilityServices cannot be seen, felt, tested or touched

Heterogeneity No two services will be precisely alike

Simultaneous Production and ConsumptionSold first, and then produced and consumed

simultaneously

PerishabilityServices cannot be saved, stored, resold, or

returned.

Implications of Intangibility

Services cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult

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Implications of Heterogeneity

Service delivery and customer satisfaction depend on employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

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Implications of Simultaneous Production and Consumption

Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult1-28

Implications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

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Search, Experience, and Credence Qualities:A framework to classify goods and services Search qualitiesAttributes that a customer can determine before

purchasing a productExperience qualitiesAttributes that can be discerned only after purchase

or during consumptionCredence qualitiesAttributes that may be impossible to evaluate even

after purchase and consumption

Search, Experience, and Credence Qualities

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Challenges and Questions for Service MarketersDefining and improving qualityDesigning and testing new servicesCommunicating and maintaining a consistent

imageAccommodating fluctuating demandMotivating and sustaining employee

commitment

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Challenges and Questions for Service MarketersSetting pricesOrganizing to facilitate strategic and tactical

decision-makingFinding a balance between standardization and

personalizationProtecting new service concepts from

competitorsCommunicating quality and value to customersEnsuring the delivery of consistent quality

service1-33

Traditional Marketing Mix

Elements an organization controls that can be used to satisfy or communicate with customers: Product Price Place Promotion

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Expanded Mix for Services – The 7 Ps People

All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

Physical Evidence The environment in which the service is delivered and where

the firm and customer interact, and any tangible components that facilitate performance or communication of the service.

Process The actual procedures, mechanisms, and flow of activities by

which the service is delivered—the service delivery and operating systems.

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Expanded Marketing Mix for Services

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Expanded Marketing Mix for Services

Ways to Use the 7 Ps

Overall Strategic Assessment

How effective is a firm’s service marketing mix?

Is the mix well-aligned with overall vision and strategy?

What are the strengths and weaknesses in terms of the 7 Ps?

Specific Service Implementation

Who is the customer? What is the service? How effectively does the

service marketing mix for a service communicate its benefits and quality?

What changes/ improvements are needed? 1-38