Introduction to Services Marketing Introduction to Services Marketing

8/2/2019 Introduction to Services Marketing Introduction to Services Marketing

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Chapter 1

Introduction toServices Marketing


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ow mpor an s eService Sector in

Our Economy?

In most countries, services add moreeconomic value than agriculture, rawmaterials and manufacturing

combined In developed economies, employment

is dominated by service jobs andmost new job growth comes from

services Jobs range from high-paid

professionals and technicians tominimum-wage positions

Service organizations can be any size


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United States Economy:

GDP by Industry, 2001(Fig. 1.1)

Source: Bureau of Economic Analysis, November 2002

Finance, Insurance,Real Estate

20%

Wholesale andRetail Trade

16%

Transport, Utilities,Communications

8%Health

6%

BusinessServices

5%

Other Services 11%

Government(mostly services)

13%

Manufacturing 14%

Agriculture, Forestry,Mining, Construction 8%

SERVICES


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Employmentas Economic Development

Evolves (Fig. 1.2)

Time, per Capita

Income

Share ofEmployment

Industry

Services

Agriculture

Source: IMF, 1997


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Profiled by NAICS but NotIdentified by SIC Codes

v Casino Hotels

v Continuing CareRetirement Communities

v Diagnostic ImagingCenters

v Diet and WeightReducing Centers

v EnvironmentalConsulting

v Gold Courses andCountry Clubs

v Hazardous WasteCollection

v HMO Medical Centers

v Industrial Design Services

v Investment Banking andSecurities Dealing

v Management ConsultingServices

v SatelliteTelecommunications

v Telemarketing Bureaus

v Temporary Help Services


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Internal Services

Service elements within anorganization that facilitate creation

of--or add value to--its final output Includes:

accounting and payroll administration

recruitment and training legal services transportation catering and food services cleaning and landscaping


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Major Trends in ServiceSector(Fig. 1.3)

Government Policies (e.g.,regulations, trade agreements)

Social Changes (e.g., affluence, lackof time, desire for experiences)

Business Trends Manufacturers offer service Growth of chains and franchising Pressures to improve productivity and

quality More strategic alliances Marketing emphasis by nonprofits Innovative hiring practices

Advances in IT (e.g., speed,


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Some Impacts ofTechnological Change

Radically alter ways in which servicefirms do business:

with customers (new services, moreconvenience)

behind the scenes (reengineering, new

value chains) Create relational databases about

customer needs and behavior, minedatabanks for insights

Levera e em lo ee ca abilities and


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Marketing RelevantDifferences BetweenGoods and Services


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Defining the Essence of aService

An act or performance offered by oneparty to another

An economic activity that does notresult in ownership

A process that creates benefits by

facilitating a desired change in: customers themselves physical possessions

intangible assets


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s ngu s ng arac er s csof Services

(Table 1.1)

Customers do not obtain ownership ofservices

Service products are ephemeral andcannot be inventoried

Intangible elements dominate value

creation Greater involvement of customers in

production process

Other people may form part of product


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Marketing Implications - 1

No ownership Customers obtain temporary rentals,

hiring of personnel, or access to facilitiesand systems

Pricing often based on time Customer choice criteria may differ for

renting vs. purchase--may include

convenience, quality of personnel Cant own people (no slavery!) but can

hire expertise and labor

Services cannot be inventoriedafter production


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Customers may be involved inproduction process

Customer involvement includes self-

service and cooperation with servicepersonnel

Think of customers in these settings aspartial employees

Customer behavior and competence canhelp or hinder productivity, so marketersneed to educate/train customers

Changing the delivery process may affect


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Intangible Elements inGoods and Services (Fig. 1.4)

TANGIBILITY SPECTRUM

Fast food restaurantPlumbingrepair

OfficecleaningHealthclubAirline

flightRetailbankingInsuranc

e Weather

forecast

Salt

SoftdrinksCD

PlayerGolf

clubsNewcarTailored

clothingFurniturerental

Lo Hi

Hi

Tan g

ibleEl e

ments

Intangible Elements


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Other people are often part of theservice product

Achieve competitive edge through

perceived quality of employees Ensure job specs and standards for

frontline service personnel reflect bothmarketing and operational criteria

Recognize that appearance and behavior ofother customers can influence serviceexperience positively or negatively

Avoid inappropriate mix of customer


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Often difficult for customers toevaluate services Educate customers to help them make

good choices, avoid risk

Tell customers what to expect, what tolook for Create trusted brand with reputation for

considerate, ethical behavior Encourage positive word-of-mouth from

satisfied customers Time factor assumes great importance

Offer convenience of extended servicehours up to 24/7

Understand customers time constraints


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Important Differences Existamong Services


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Employing DifferentUnderlying Processes (Fig. 1.5)

People Processing Possession Processing

Mental StimulusProcessing

Information Processing(directed at intangible assets)

e.g., airlines, hospitals,haircutting, restaurants hotels,

fitness centers

e.g., freight, repair,cleaning, landscaping,

retailing, recycling

e.g., broadcasting, consulting,education, psychotherapy

e.g., accounting, banking,insurance, legal, research

TANGIBLEACTS

INTANGIBLE

ACTS

DIRECTED AT PEOPLE DIRECTED AT POSSESSIONS

What is theNature of theService Act?

Who or What is the Direct Recipient of the Service?

P


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Processes(1) Seeking Efficiency May

Lower SatisfactionProcesses determine how services arecreated/delivered

process change may affect customersatisfaction

Imposing new processes on

customers, especially replacingpeople by machines, may causedissatisfaction

New processes that improve

P


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Processes:(2) Designing the Service

FactoryPeople-processing servicesrequire customers to visit theservice factory, so:

Think of facility as a stage for

service performance Design process around customer

Choose convenient location

Create pleasing appearance,

avoid unwanted noises, smells Consider customer needs--info,

parking, food, toilets, etc.


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Processes:(3) Evaluating Alternative

Delivery ChannelsFor possession-processing, mental-stimulus processing, orinformation processing services,alternatives include:

1. Customers come to the service factory

2. Customers come to a retail office

3. Service employees visit customershome or workplace

4. Business is conducted at arms length

P


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Processes:(4) Balancing Demand and

CapacityWhen capacity toserve islimited and demandvarieswidely, problemsarise becauseservice output cantbe stored:

1. If demand is highand exceeds supply,business may be lost

2. If demand is low,


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Processes:(5) Applying Information

TechnologyAll services can benefitfrom IT,but mental-stimulus

processingand information-

processingservices have the most

to gain: Remote delivery of

information-basedservices anywhere,

anytime

P


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Processes:(6) Including People as Part

of the ProductInvolvement inservicedelivery often entails

contact with otherpeople

Managers should be

concerned aboutemployeesappearance, socialskills, technicalskills


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The ServicesMarketing Mix

M k ti Mi


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Marketing Mix:7Ps vs. the Traditional

4Ps

Rethinking the

original 4Ps Product elements Place and time

Promotion andeducation Price and other user

outlays


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The 7Ps:(1) Product Elements

All Aspects of Service Performance thatCreate Value

Core product featuresboth tangible

and intangible elements Bundle of supplementary service

elements

Performance levels relative tocompetition

Benefits delivered to customerst m r nt h t l r m


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The 7Ps:(2) Place and Time

Delivery Decisions: Where, When, andHow

Geographic locations served

Service schedules

Physical channels

Electronic channels Customer control and convenience

Channel partners/intermediaries


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e s:


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e s:(4) Price and Other User

OutlaysMarketers Must Recognize that CustomerOutlays Involve

More than the Price Paid to Seller

Traditional Pricing Tasks Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms

Identify and Minimize Other Costs Incurred by Users Additional monetary costs associated with service usage (e.g.,

travel to service location, parking, phone, babysitting,etc.) Time expenditures, especially waiting Unwanted mental and physical effort

Negative sensory experiences


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The 7Ps:(5) Physical Environment

Designing the Servicescape andproviding tangible

evidence of service performances Create and maintaining physical

appearances buildings/landscaping interior design/furnishings vehicles/equipment staff grooming/clothing sounds and smells


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7Ps:(6) Process

Method and Sequence in ServiceCreation and Delivery

Design of activity flows Number and sequence of actions for

customers

Providers of value chain components Nature of customer involvement

Role of contact personnel


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The 7Ps:(7) People

Managing the Human Side of theEnterprise

The right customer-contact employees

performing tasks well job design recruiting/selection

training motivation evaluation/rewards

empowerment/teamwork

Collaboration between


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Collaboration betweenMarketing, Operations, and HR

Functions (Fig. 1.7)

Customers

OperationsManagement

MarketingManagement

Human ResourcesManagement

Introduction to Services Marketing Introduction to Services Marketing

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