Introduction to Services Marketing Introduction to Services Marketing
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Transcript of 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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Marketing Implications - 2
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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Marketing Implications - 3
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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Marketing Implications - 4
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