Introduction to Services Marketing  Digitization of text, graphics, audio, video

Why study services? Globalization

 Services Dominate Economy in Most Nations  More companies operating on transnational
 Most New Jobs are Generated by Services basis
o Fastest Growth Expected in  Increased international travel
Knowledge-Based Industries  International mergers and alliances
o e.g. Education, Research, Health,  “Offshoring” of customer service
media, Finance, Technology,  Foreign competitors invade domestic markets
Computer programming, What are services?
o Many New Jobs are Well-Paid  Services involve a form of rental, offering
Positions Requiring Good Educational benefits without transfer of ownership.
Qualifications  An intangible activity, benefit or item offered for
Powerful forces that are transforming service economic value.
markets o Include rental of goods
o Marketing tasks for services differ from
those involved in selling goods and
transferring ownership
Five broad categories within non-ownership
framework:
 Rented goods services
 Defined space and place rentals
 Labor and expertise rentals
 Access to shared physical environments
 Systems and networks: access and usage
Implications of Renting Versus Owning (Service
Insights 1.1)
 Markets exist for renting durable goods rather
than selling them
 Renting portions of larger physical entity (e.g.,
Government Policies office space, apartment) can form basis for
 Changes in regulations service
 Privatization  Customers more closely engaged with service
 New rules to protect customers, employees, suppliers
and the environment  Customer choice criteria may differ between
 New agreement on trade in services rentals and outright purchases
Social Changes  Services offer opportunities for resource
 Rising consumer expectations sharing
 More affluence Services
 Personal Outsourcing  Are economic activities offered by one party to
 Increased desire for buying experiences vs. another
things  Most commonly employ time-based
 Rising consumer ownership of high-tech performances to bring about desired results in:
equipment o Recipients themselves
 Easier access to more information o Objects or other assets for which
 Immigration purchasers have responsibility
 Growing but aging population  In exchange for their money, time, and effort,
Business Trends service customers expect to obtain value from
 Push to increase shareholder value o Access to goods, labor, facilities,
 Emphasis on productivity and cost savings environments, professional skills,
 Manufacturers add value through service and networks, and systems;
sell services o But they do not normally take
 More strategic alliances ownership of any of the physical
 Focus on quality and customer satisfaction elements involved.
 Growth of franchising Four broad categories of services
 Marketing emphasis by nonprofits  Based on differences in nature of service act
Advances in IT (tangible/intangible) and who or what is direct
 Growth of Internet recipient of service (people/possessions),
 Greater bandwidth there are four categories of services:
 Compact mobile equipment o People processing
 Wireless networking  Customers must:
 Faster, more powerful software
  physically enter the  The eight common differences are:
service factory o Most service products cannot be
 co-operate actively inventoried
with the service o Intangible elements usually dominate
operation value creation
 Managers should think about o Services are often difficult to visualize
process and output from and understand
customer’s perspective o Customers may be involved in co-
 to identify benefits production
created and non- o People may be part of the service
financial costs: experience
o Time, mental, o The time factor often assumes great
physical effort importance
o Possession processing o Distribution may take place through
 Customers are less physically nonphysical channels
involved compared to people Differences, Implications, and Marketing-Related
processing services Tasks (Table 1.1)
 Involvement is limited
 Production and consumption
are separable
o Mental stimulus processing
 Ethical standards required
when customers who depend
on such services can
potentially be manipulated by
suppliers
 Physical presence of
recipients not required
 Core content of services is
information-based
 Can be ‘inventoried’
o Information processing
 Information is the most Expanded marketing mix for services
intangible form of service Services Require an Expanded Marketing Mix
output,  Marketing can be viewed as:
 But may be transformed into o A strategic and competitive thrust
enduring forms of service pursued by top management
output o A set of functional activities performed
 Line between information by line managers
processing and mental o A customer-driven orientation for the
stimulus processing may be entire organization
blurred.  Marketing is only function to bring operating
revenues into a business; all other functions
are cost centers.
 The “7 Ps” of services marketing are needed
to create viable strategies for meeting
customer needs profitably in a competitive
marketplace
The 7 Ps of Services Marketing
Traditional 4 Ps Applied to Services (4)
 Product elements
o Service products are at the heart of
services marketing strategy
o Marketing mix begins with creating
service concept that offers value
o Service product consists of core and
Challenges posed by services supplementary elements
 Marketing management tasks in the service  Core products meet primary
sector differ from those in the manufacturing needs
sector.  Supplementary elements are
value-added enhancements
  Place and time  Quality and content vary
o Service distribution can take place among employees, between
through physical and non-physical employees
channels  Variations can be with different
o Some firms can use electronic customers
channels to deliver all (or at least  Variations from time of the day
some) of their service elements o Variability can be reduced by:
o Information-based services can be  Standardized procedures
delivered almost instantaneously  Implementing rigorous
electronically management of service quality
o Delivery Decisions: Where, When,  Training employees more
How carefully
o Time is of great importance as  Automating tasks
customers are physically present  Train employees in service
o Convenience of place and time recovery procedures
become important determinants of o Manage process design and “flow of
effective service delivery customers
 Price (and other user outlays)  Physical environment
o Marketers must recognize that o Design services cape and provide
customer costs involve more than tangible evidence of service
price paid to seller performances
o Identify and minimize non-monetary o Create and maintain physical
costs incurred by users: appearances
 Additional monetary costs  Buildings/landscaping
associated with service usage  Interior design/furnishings
(e.g., travel to service location,  Vehicles/equipment
parking, babysitting, etc.)  Staff grooming/clothing
 Time expenditures, especially  Sounds and smells
waiting  Other tangibles
 Unwanted mental and o Manage physical cues carefully— can
physical effort have profound impact on customer
o Revenue management is an important impressions
part of pricing  People
 Promotion (and Education) o Interactions between customers and
o Plays three vital roles: contact personnel strongly influence
 Provide information and customer perceptions of service
advice quality
 Persuades the target o Well-managed firms devote special
customers of merit of service care to selecting, training and
product or brand motivating service employees
 Encourages customer to take o Other customers can also affect one’s
action at specific time satisfaction with a service
o Customers may be involved in co- Framework for effective services marketing
production so: strategies
 Teach customer how to move
effectively through the service
process
 Shape customers’ roles and
manage their behavior
Extended Mix for Managing the Customer Interface
(1)
 Process
o How firm does things may be as
important as what it does
o Customers often actively involved in
processes, especially when acting as
co-producers of service
o Operational inputs and outputs vary
more widely