MARKETING OF SERVICES
-Introduction
Objectives of Chapter : Introduction to Services
Explain what services are and identify important trends in services. Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating. Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.
Why study Service Marketing?
A. Service-based economies (US, UK etc.) ServiceB. Imperative (essential) in manufacturing and ITITGives you Competitive Advantage
C. Deregulated industries and professional service needs D. Services marketing is different E. Service equals profits
How Important is the Service Sector in Our Economy?
The size of the service sector is increasing in almost all economies around the world Services make up the bulk of today¶s economy and also account for most of the growth in new jobs Even in emerging economies, service output is growing rapidly and often accounts for half or more of GDP Jobs range from high-paid professionals and technicians to highminimumminimum-wage positions Service organizations can be any size ± from huge global corporations to local small businesses
The service sector: What is it?
Traditional & simplest way, is to define the sector by what it isn¶t, eg. isn¶t agriculture, mining or manufacturing An alternative way of defining services is to look for common features which make them different from goods
Three horizons of economic development
First horizon: the nation¶s core products: horizon:
Agriculture, mining, manufacturing, metals, chemicals etc
Second horizon: recently introduced services that are horizon: expected to grow in the medium term:
Communications, retail, tourism, finance, transport, construction, hospitality, personal services, business services etc.
Third horizon: services in the embryonic stages of horizon: development which represent future growth potential (exports, job growth and GDP):
Biotechnology & health, new information economy
Factors responsible for the transformation of the µservice¶ economy
Internationalisation (e.g. µHollowing out¶ effect,
Increased services trade, Global customers)
Government Regulation (e.g. Deregulation/
privatisation, New trade agreements in services)
Social Changes (e.g. Increased customer
expectations, Increased affluence and leisure time, More women in the workforce)
High Service Sector Growth
24.8 1990-91
Agriculture 30.9
53.3
21.9 2000-01
Services 43.7
Industry 25.4
Defining services?
Any act, performance or experience that one party can offer another; one that is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a physical product
Lovelock (2004)
Deliver help, utility or care, an experience, information or other intellectual content ± and the majority of that content is intangible rather than residing in any tangible object
Lovelock (2004)
In the most simple terms, services are deeds, processes, and performances.
Defining the Essence of a Service
An act or performance offered by one party to another An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in:
customers themselves physical possessions intangible assets
Examples of Service Industries
Health Care
hospital, medical practice, eye care accounting, legal, architectural banking, investment advising, insurance restaurant, hotel/motel, bed & breakfast rafting airline, travel agency, theme park hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
Professional Services
Financial Services
Travel and Hospitality
Personal Services
Distinguishing Characteristics of Services
Customers do not obtain ownership of services Intangible elements dominate value creation Greater involvement of customers in production process Other people may form part of product experience Greater variability in operational inputs and outputs Many services are difficult for customers to evaluate Service products are short-lived and cannot be inventoried shortTime factor is more important--speed may be key important--speed Delivery systems include electronic and physical channels
Tangibility Spectrum (Services Continuum)
Salt
Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets
Intangible Dominant
Tangible Dominant
Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching
Differences between Goods and Services
Differences Between Goods and Services: 4 I¶s
Intangibility Inconsistency
(Heterogeneity)
Inseparability
(Simultaneous Production and Consumption)
Inventory (Perishability)
Implications of Intangibility
Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult
Implications of Heterogeneity
(Inconsistency)
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
Inseparability (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 difficult
Implications of Inventory
( Perishability)
It is difficult to synchronize supply and demand with services Services cannot be returned or resold
Therefore Challenges for Services:
Defining and improving quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource efforts Setting prices Finding a balance between standardization versus personalization Ensuring the delivery of consistent quality
Traditional Marketing Mix
All elements within the control of the firm that communicate the firm¶s capabilities and image to customers or that influence customer satisfaction with the firm¶s product and services: Product
Price Place Promotion
Expanded Mix for Services -The 7 Ps Product
Price Place Promotion
People
the firm¶s personnel, the customers.
Physical Evidence
The physical environment in which the service is delivered and any other tangible components
Process
The actual procedures, mechanisms, and flow of activities
Expanded Marketing Mix for Services
The Services Marketing Triangle
Company (Management)
Internal Marketing
³enabling the promise´
External Marketing
³setting the promise´
Employees
Interactive Marketing
³delivering the promise´
Customers
The Services Triangle and Technology
Company
Technology
Providers
Customers
MASLOW PYRAMID OF NEEDS
SelfActualization Esteem Needs Belongingness & Love Needs Safety Needs Physiological Needs
Class Exercise: Maslow¶s Hierarchy of Needs
E.g -Meals
Internal Satisfaction SelfSelfactualisation The respect of others Action for and from others Survival Satisfaction of basic hunger Esteem
Experiment with ethnic cuisine A meal at the best restaurant in town Social meal with friends and family Safe food from a reputable source Food from any uncontaminated source
Love & belonging Safety Physiological
Nature of Services
at peoples bodies (Beauty saloons, Fitness centers, Health care, etc.
People Processing: Services directed
Possession Processing: services directed at physical
possessions (Laundry, repair & maintenance, maids, gardening)
Mental stimulus processing: services directed at
people¶s mind (Advertising, art & entertainment, education, religion, etc.)
Information Processing: services directed at intangible
assets (Banking, accounting, insurance , legal services, etc.)
doc_309132286.ppt
-Introduction
Objectives of Chapter : Introduction to Services
Explain what services are and identify important trends in services. Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating. Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.
Why study Service Marketing?
A. Service-based economies (US, UK etc.) ServiceB. Imperative (essential) in manufacturing and ITITGives you Competitive Advantage
C. Deregulated industries and professional service needs D. Services marketing is different E. Service equals profits
How Important is the Service Sector in Our Economy?
The size of the service sector is increasing in almost all economies around the world Services make up the bulk of today¶s economy and also account for most of the growth in new jobs Even in emerging economies, service output is growing rapidly and often accounts for half or more of GDP Jobs range from high-paid professionals and technicians to highminimumminimum-wage positions Service organizations can be any size ± from huge global corporations to local small businesses
The service sector: What is it?
Traditional & simplest way, is to define the sector by what it isn¶t, eg. isn¶t agriculture, mining or manufacturing An alternative way of defining services is to look for common features which make them different from goods
Three horizons of economic development
First horizon: the nation¶s core products: horizon:
Agriculture, mining, manufacturing, metals, chemicals etc
Second horizon: recently introduced services that are horizon: expected to grow in the medium term:
Communications, retail, tourism, finance, transport, construction, hospitality, personal services, business services etc.
Third horizon: services in the embryonic stages of horizon: development which represent future growth potential (exports, job growth and GDP):
Biotechnology & health, new information economy
Factors responsible for the transformation of the µservice¶ economy
Internationalisation (e.g. µHollowing out¶ effect,
Increased services trade, Global customers)
Government Regulation (e.g. Deregulation/
privatisation, New trade agreements in services)
Social Changes (e.g. Increased customer
expectations, Increased affluence and leisure time, More women in the workforce)
High Service Sector Growth
24.8 1990-91
Agriculture 30.9
53.3
21.9 2000-01
Services 43.7
Industry 25.4
Defining services?
Any act, performance or experience that one party can offer another; one that is essentially intangible, and does not result in the ownership of anything. Its production may or may not be tied to a physical product
Lovelock (2004)
Deliver help, utility or care, an experience, information or other intellectual content ± and the majority of that content is intangible rather than residing in any tangible object
Lovelock (2004)
In the most simple terms, services are deeds, processes, and performances.
Defining the Essence of a Service
An act or performance offered by one party to another An economic activity that does not result in ownership A process that creates benefits by facilitating a desired change in:
customers themselves physical possessions intangible assets
Examples of Service Industries
Health Care
hospital, medical practice, eye care accounting, legal, architectural banking, investment advising, insurance restaurant, hotel/motel, bed & breakfast rafting airline, travel agency, theme park hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design
Professional Services
Financial Services
Travel and Hospitality
Personal Services
Distinguishing Characteristics of Services
Customers do not obtain ownership of services Intangible elements dominate value creation Greater involvement of customers in production process Other people may form part of product experience Greater variability in operational inputs and outputs Many services are difficult for customers to evaluate Service products are short-lived and cannot be inventoried shortTime factor is more important--speed may be key important--speed Delivery systems include electronic and physical channels
Tangibility Spectrum (Services Continuum)
Salt
Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets
Intangible Dominant
Tangible Dominant
Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching
Differences between Goods and Services
Differences Between Goods and Services: 4 I¶s
Intangibility Inconsistency
(Heterogeneity)
Inseparability
(Simultaneous Production and Consumption)
Inventory (Perishability)
Implications of Intangibility
Services cannot be inventoried Services cannot be easily patented Services cannot be readily displayed or communicated Pricing is difficult
Implications of Heterogeneity
(Inconsistency)
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
Inseparability (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 difficult
Implications of Inventory
( Perishability)
It is difficult to synchronize supply and demand with services Services cannot be returned or resold
Therefore Challenges for Services:
Defining and improving quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource efforts Setting prices Finding a balance between standardization versus personalization Ensuring the delivery of consistent quality
Traditional Marketing Mix
All elements within the control of the firm that communicate the firm¶s capabilities and image to customers or that influence customer satisfaction with the firm¶s product and services: Product
Price Place Promotion
Expanded Mix for Services -The 7 Ps Product
Price Place Promotion
People
the firm¶s personnel, the customers.
Physical Evidence
The physical environment in which the service is delivered and any other tangible components
Process
The actual procedures, mechanisms, and flow of activities
Expanded Marketing Mix for Services
The Services Marketing Triangle
Company (Management)
Internal Marketing
³enabling the promise´
External Marketing
³setting the promise´
Employees
Interactive Marketing
³delivering the promise´
Customers
The Services Triangle and Technology
Company
Technology
Providers
Customers
MASLOW PYRAMID OF NEEDS
SelfActualization Esteem Needs Belongingness & Love Needs Safety Needs Physiological Needs
Class Exercise: Maslow¶s Hierarchy of Needs
E.g -Meals
Internal Satisfaction SelfSelfactualisation The respect of others Action for and from others Survival Satisfaction of basic hunger Esteem
Experiment with ethnic cuisine A meal at the best restaurant in town Social meal with friends and family Safe food from a reputable source Food from any uncontaminated source
Love & belonging Safety Physiological
Nature of Services
at peoples bodies (Beauty saloons, Fitness centers, Health care, etc.
People Processing: Services directed
Possession Processing: services directed at physical
possessions (Laundry, repair & maintenance, maids, gardening)
Mental stimulus processing: services directed at
people¶s mind (Advertising, art & entertainment, education, religion, etc.)
Information Processing: services directed at intangible
assets (Banking, accounting, insurance , legal services, etc.)
doc_309132286.ppt