Lecture 1 Introduction of Services Marketing

8/2/2019 Lecture 1 Introduction of Services Marketing

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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 1

Introduction to ServicesMarketing

Lecture 1

MK 606


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Objective of the lesson

Why Study Services?

What are Services?

The Marketing Challenges Posed by Services*

The Expanded Marketing Mix Required for Services*

Integration with Other Management Functions*


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Why Study Services?


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Why Study Services? (1)

Services dominate economy in most nations

Understanding services offers you personal competitiveadvantages

Importance of service sector in economy is growingrapidly:

Services account for more than 60 percent of GDP worldwide

Almost all economies have a substantial service sector

Most new employment is provided by services

Strongest growth area for marketing


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Why Study Services? (2)

Most new jobs are generated by services

Fastest growth expected in knowledge-based industries

Significant training and educational qualifications required,but employees will be more highly compensated

Will service jobs lost to lower-cost countries? Yes, some service jobs

can be exported


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Changing Structure of Employment asEconomic Development Evolves

Industry

Services

Agriculture

Time, per Capita Income

Share of

Employment

Source: IMF, 1997


7/45Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 1 - 7

What Are Services?



What are services?

According to Looy et al (2003:11), service is anyactivity that one party can offer to another that isessentially intangible and does not result in theownership of anything.

Zeithaml et al (2006:4), puts it in most simple termsservices are deeds, processes, and performances.

These definitions give a clue about the nature of services

as processes rather than products. These definitions putservice as a process involving the employee and thecustomer where the employee is the seller andrepresents the service being delivered.



What are Services

Services Are economic activities offered by one party to another

Most commonly employ time-based performances to bring aboutdesired results in:

recipients themselves objects or other assets for which purchasers have responsibility

In exchange for their money, time, and effort, servicecustomers expect to obtain value from

Access to goods, labor, facilities, environments, professional skills,networks, and systems

But they do not normally take ownership of any of the physicalelements involved



What is a service?

It is intangible.

It does not result in ownership.

It may or may not be attached with a physical product



Types of services

Zeithaml et al (2006:5-6) divided services into four distinct groups:

(i) Service industries and companies: those industries and companiestypically classified within the service sector whose core product is aservice.

(ii) Services as products: a wide range of intangible product offeringsthat customers value and pay for in a market place.

(iii) Customer service: service that is provided in support of acompanys core products.

(iv) Derived service: the value of service that a service provides, thebenefit a consumer receives from using a service.



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The Nature of Services

Regardless of the product, there is a service component tothe offerings of all firms

In some cases, a service is the principal purpose of thetransaction, as in the rental of a car, a haircut, or legalservices -- we refer to this as the core servicecore service

In other cases, service is performed in support of the sale ofa tangible product -- these are referred to as supplementarysupplementaryservicesservices



Service Products versus Customer Serviceand After-Sales Service

A firms market offerings are divided into core productelements and supplementary service elements

Is everyone in service? Need to distinguish between:

Marketing of services Marketing goods through added-value service

Good service increases the value of a core physical good

Manufacturing firms are reformulating and enhancingexisting added-value services to market them as stand-alone core products



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Canned

foods

Ready-

madeclothes

Auto-

mobiles

Draperies,

Carpets

Rest-

aurantmeals

Repairs:

auto, house,landscaping

Air

travel

Insurance,

Consulting,Teaching

MOSTLY GOODS MOSTLY SERVICES

The Goods-Services

Continuum



Classifying services

The product - service continuum

Figure 22.1



Difference between physical goods and services

Physical goods Servicestangible intangible

homogeneous heterogeneous

Production and distribution are separated fromconsumption Production, distribution and consumption aresimultaneous processes

A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller

interaction

Customers do not participate in the productionprocess

Customers participate in production

Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership



1. Intangibility - u cant touch this

2. Production (or performing the service)

and Consumption (using the service) -

happens at the same time

3. Heterogeneity - services are not alwaysdelivered the same way

4. Perishability - cannot be put ininventory or stored for later use

ie. You cant buy 2 haircuts

4 Characteristics of Services

Not in the text




Services cannot be stored

Services cannot be protected through

patents

- therefore a really great travel package and

service can be copied

a really great physical object can be

patented, and NOT allowed to be copied

Characteristics of Services

Not in the text




Hard to explain and display Services if youcant see them

Prices are difficult to set - depends oncustomers expectations


Not in the text




Marketing Strategies

stress tangible cues, eg. Smiling face

use personal information, sources, references

use word-of-mouth

contact customers after they buy to stimulatecontinued enthusiasm and hope they talk it up


Not in the text



2. Inseparability of Production (orperforming the service) and Consumption

(using the service) - happens at the same

time:Many people involved in delivering a service & massproduction of services is hard to do


Marketing Strategies

Emphasize how much you train your people - so

their ability to give you good service will be high

Have many locations so customers can get to you

ie. Insurance sales come to your homeNot in the text


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It is very difficult to standardize services

eg. A machine can make ice cream cones a

standard size 100% of the time

A person filling an ice cream cone with a scoop

cannot do it the same amount each time,unless you use a machine to dispense the ice

cream


Not in the text


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It is very difficult to standardize services

eg. A Taxi driver cannot drive you to the office

in exactly the same time each day because the

traffic patterns change

eg. A travel agent can sell you a vacationpackage - but cannot guarantee you will like

the trip exactly the same way another tourist

did.


Not in the text


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4. Perishability - cannot be put ininventory or stored for later use

ie. You cant buy 2 haircuts

Demand fluctuates and changes, sometimes

depending on the season, or weather

eg. Taxi in the rain, vacation in summer


Not in the text


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Challenges Posed by Services*


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Services Pose DistinctiveMarketing Challenges

Marketing management tasks in the service sector differfrom those in the manufacturing sector

The eight common differences are:

1. Most service products cannot be inventoried (Perishability)

2. Intangible elements usually dominate value creation (Intangibility)

3. Services are often difficult to visualize and understand

4. Customers may be involved in co-production (Inseparability)

5. People may be part of the service experience

6. Operational inputs and outputs tend to vary more widely7. The time factor often assumes great importance

8. Distribution may take place through nonphysical channels

What are marketing implications?


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Differences, Implications, andMarketing-Related Tasks (1)* (Table 1.1)

Difference

Most serviceproducts

cannot be inventoried

Intangible elementsusually dominate

value creation

Services are oftendifficult to visualize

and understand

Customers may beinvolved in co-

production

Implications

Customers may beturned away

Harder to evaluateservice and distinguish

from competitors

Greater risk anduncertainty perceived

Interaction betweencustomer and provider;

but poor task execution

could affect satisfaction

Marketing-Related Tasks

Use pricing, promotion,and

reservations to smoothdemand; work with ops tomanage capacity

Emphasize physical clues,employ metaphors and vividimages in advertising

Educate customers onmaking good choices; offer

guarantees

Develop user-friendlyequipment, facilities, and

systems; train customers,

provide good support


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Implications

Behavior of servicepersonnel and customers

can affect satisfaction

Hard to maintain quality,consistency, reliability

Difficult to shieldcustomers from failures

Time is money;

customers want serviceat convenient times

Electronic channels orvoice telecommunications

Difference

People may be partof

service experience

Operational inputsand

outputs tend to vary

more widely

Time factor oftenassumes great

importance

Distribution may takeplace through

nonphysical channels

Marketing-Related Tasks

Recruit, train employees to

reinforce service concept

Shape customer behavior

Redesign for simplicityand

failure proofing

Institute good servicerecovery procedures

Find ways to compete onspeed of delivery; offer

extended hours

Create user-friendly,

Differences, Implications, andMarketing-Related Tasks (2)* (Table 1.1)


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Value Added by Physical, Intangible ElementsHelps Distinguish Goods and Services (Fig 1.6)

PhysicalElements

High

Low Intangible Elements High

Salt

Detergents

CD PlayerWine

Golf ClubsNew Car

Tailored clothing

Fast-Food RestaurantPlumbing Repair

Health Club

Airline FlightLandscape Maintenance

Consulting

Life Insurance

Internet Banking

Source; Adapted from Lynn Shostack


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Expanded Marketing Mixfor Services*


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Services RequireAn Expanded Marketing Mix

Marketing can be viewed as: A strategic and competitive thrust pursued by top management

A set of functional activities performed by line managers

A customer-driven orientation for the entire organization

The 8Ps of services marketing are needed to createviable strategies for meeting customer needs profitablyin a competitive marketplace


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The 8Ps of Services Marketing

Product Elements

Place and Time

Price and Other User Outlays

Promotion and Education

Process*

Physical Environment*

People*

Proactive customer service(Productivity and Quality)* Fig 1.9 Working in

Unison: The 8Ps ofServices Marketing


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The 8Ps of Services Marketing:(1) Product Elements

Embrace all aspects of service performance thatcreate value

Core product responds to customers primary need

Array of supplementary service elements Help customer use core product effectively

Add value through useful enhancements

Planning marketing mix begins with creating a service

concept that: Will offer value to target customers

Satisfy their needs better than competing alternatives


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The 8Ps of Services Marketing:(2) Place and Time

Delivery decisions: Where, When, How

Geographic locations served

Service schedules

Physical channels

Electronic channels

Customer control and convenience

Channel partners/intermediaries


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The 8Ps of Services Marketing:(3) Price and Other User Outlays

Marketers must recognize that customer outlaysinvolve more than 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 8Ps of Services Marketing:(4) Promotion and Education

Informing, educating, persuading, reminding customers

Marketing communication tools

Media elements (print, broadcast, outdoor, retail, the Internet, etc.) Personal selling, customer service Sales promotion

Publicity/PR

Imagery and recognition

Branding Corporate design

Content Information, advice Persuasive messages Customer education/training

h f k


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The 8Ps of Services Marketing:(5) Process

Howfirm does things may be as important as what it does

Customers often actively involved in processes, especiallywhen acting as co-producers of service

Process involves choices of method and sequence inservice creation and delivery

Design of activity flows

Number and sequence of actions for customers

Nature of customer involvement

Role of contact personnel Role of technology, degree of automation

Badly designed processes waste time, create poorexperiences, and disappoint customers

Th 8P f S i M k i


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The 8Ps of Services Marketing:(6) Physical Environment

Design servicescape and providetangible evidence of serviceperformances

Create and maintain physicalappearances

Buildings/landscaping

Interior design/furnishings

Vehicles/equipment

Staff grooming/clothing

Sounds and smells Other tangibles

Manage physical cues carefullycan have profound impact oncustomer impressions

Th 8P f S i M k i


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The 8Ps of Services Marketing:(7) People

Interactions between customers and contact personnel stronglyinfluence customer perceptions of service quality

The right customer-contact employees performing tasks well

Job design Recruiting

Training Motivation

The right customers for firms mission

Contribute positively to experience of other customers

Possessor can be trained to have needed skills (co-production)

Can shape customer roles and manage customer behavior

Th 8P f i k ti


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The 8Ps of service marketing(8) Proactive customer Service

This is final element in the marketing mix of services is critical to providing

customers with what they need, and want in a manner in which they aresatisfied.

Pro-active customer service involves:

Finding out how customers want to be served e.g. survey customer needsand wants before designing new services

Continuously research on improved methods to achieve customersatisfaction

Analysing possible areas in which customers might face problems and tryingto minimise the possibility of problems happening

Give customers more than they have asked for and thus gain customerloyalty

In summary pro-active customer service means anticipating customer needsand wants and provide these to them before the customers feel these needsand complaints for lack of them


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Marketing Must Be Integrated withOther Management Functions*

M k ti M t B I t t d ith


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Three management functions play central and interrelated rolesin meeting needs of service customers

Marketing Must Be Integrated withOther Management Functions(Fig 1.10)

Customers

Operations

Management

Marketing

Management

Human Resources

Management


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A Framework for Developing

Effective Service Marketing

Strategies (Fig 1.11)

A F k F D l i Eff ti


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A Framework For Developing EffectiveService Marketing Strategies: Overview

Understanding Customer Needs, Decision Making,and Behavior in Service Encounters

Building the Service Model

Managing the Customer Interface

Implementing Profitable Service Strategies

S N P ti


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Summary: New Perspectiveson Marketing in the Service Economy

Reasons for studying services: Service sector dominates economy in most nations, many new industries Most new jobs created by services Powerful forcesgovernment policies, social changes, business trends,

IT advances, and globalizationare transforming service markets

Understanding services offers personal competitive advantage

The service concept and its definition:

Services create benefits without transfer of ownership Most employ time-based performances to bring about desired results in

recipients or in assets for which they have responsibility Customers expect value from access to goods, facilities, labor, professional

skills, environments, networks & systems in return for money, time, effort Services present distinctive marketing challenges relative to goods,

requiring:

Expanded marketing mix comprising 8Ps instead of traditional 4Ps Integration of marketing function with operations and human resources

Documents

Lecture 1 Introduction of Services Marketing