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Service & Relationship Marketing
Bove 2015 1
Week 1: Introduction to Service
The Students Association of Management and Marketing
COMPETITIONTest your knowledge of Marketing Communications in our Case Competition
JOIN US?Join the committee and become a part of a great team of like-minded students
[email protected]/UniMelbSAMMunimelbsamm.com
INSIGHTGain insight into the industry through talking with professional representativesat our Annual Networking Night
WORKSHOPSDevelop greater knowledgeof specific functions of Management and Marketing through our industry workshops proudly supported by
Subject overview
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Readings provided on LMS pageConsultation time by appointment
[email protected] individual and team based:Mid semester test (10%)Case study introduction oral (10%)Servicescape written analysis (30%)Final exam (50%)
Learning objectivesAfter this week you should be able to:
Demonstrate importance of services to economies
Appreciate challenges services present Outline the seven Ps of the service mix Contrast the service-dominant logic for
marketing with the market orientation logic
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Australian services
The service industry represents about 70% of Australias gross domestic product (GDP) and employs four out of five Australians
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Australian trade in services
In 2012-13, Australia's five largest services exports were:
Education-related travel services - $14.5. billion Recreational travel services - $12.6 billion Business travel services $4.2 billionProfessional services - $4.1 billionTechnical and other business services (including architectural, engineering, surveying and scientific services) - $3.5 billion
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Growth of service
Material production now involves little or no material labour. For example, the actual material production of cars by automobile workers is now of less importance than the immaterial production of ideas to improve manufacturing, marketing, or design of the product.
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Services are diverse
Consumer Services
Airlines Banking and financeHairdressingHotels Restaurants
Business-to-Business
Accountancy Architecture Engineering Legal Management Consulting GovernmentNot-for-profit
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Services defined
Berry, 1991Goods = Object, Device, ThingServices = Act, Deed
Performance or Effort
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Services marketing defined
Services Marketing is the study and practice of building relationships with customers over time through valued deeds, processes and performances
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Service encounters
Are dyadicAre made up of a number of incidents termed moments of truthCan take different forms differing in duration and complexity
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Service encounters takemany forms
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Issues associated with services
IntangibleInseparableCustomer plays a role in production and deliveryHeterogeneousPerishableOwnership
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Intangibility
Services cannot be seen, touchedor tasted. Customers are asked to buy promises
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The Good-Service Continuum
All products can be placed on a scale somewhere between being a pure service (no tangible output) and a pure good (no intangible service added to the good). In practice, most products fall between the two extremes by being a combination of good and service
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The Good-Service Continuum
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Inseparability Unlike physical goods, it is difficult to separate the service from the person who performs the actThe service provider plays an important role
Interaction with the service provider affects the service provision and the customers satisfaction
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Role of customer
Customers are often part of the service deliveryOther customers directly affect service perception
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Heterogeneity
Difference or variability in the serviceHeterogeneity is the result of different people providing the same service in a slightly different way because no two people are identical.
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Perishability
Services cannot be stored like physical goods in inventory for later sales or useServices cannot be returned after purchase
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Ownership
Services cannot be ownedBut, they are remembered as we take away our memories of the service e.g., how we felt during the hotel stay
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Classifying services Chase 1981
Three levels of contact:Low- an absence of, or limited physical contact between service personnel and customer. Often takes place remotely.Medium- some contact between the customer and service personnel, usually at the initiation or conclusion of the service encounterHigh- active engagement between the customer and service personnel for the duration of the service delivery
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Expanded marketing mix for services
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Place, Cyber-space & Time
Price
Promotion
Product (Service)
Customers
People Process
Physical Evidence
People
Service personnel and service customers have an influence upon the marketing of servicesService personnel quality and performance needs to be maintained and/or improvedCustomers can influence other customers directly in the production process with servicesStaff are often the face of the service
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Physical evidenceIncludes servicescape the physical layout of service facility, ambience, etcService organisations need to manage the evidence to help overcome the problems posed by the intangible nature of services
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Process of service assembly
This is basically the how of the service delivery functionProcesses can be considered in two ways - complexity(nature of steps and sequence) and divergence (variability)Process is essentially between marketing and operations
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Managerial challenges
Estimating demandTraining staff to reach uniform levels of service provisionTraining customersIntegration with human resource and operations departments.
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Service as defined by SD-Logic
Definition:the application of specialized competences (skills and knowledge), through deeds, processes, and performances for the benefit of another entity or the entity itself (self-service) (Vargo & Lusch, 2004)
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Services
Definition:Implies units of output, rather than a process as implied by the singular word service (Vargo & Lusch, 2004)Both goods and services render service
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Service
Service is sometimes provided directly, and sometimes it is provided indirectly through the provision of tangible goods (Vargo & Lusch, 2004)The importance of tangible goods lies not so much in owning them as in obtaining the service they render (Kotler, 1997). As the individual uses and consumes the good over time, value is derived from the consumption experience (Vargo & Lusch, 2004)
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Products
Products are a means for reaching end-states or valued states of being, such as happiness, security and accomplishment Example:
A person may purchase a sports car because owning it, displaying it and experiencing it provides satisfactions beyond those associated with the basic functions of the car (e.g., transportation)
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ValueValue creation is the unit of analysis
Goods-centered view value is embedded in outputService-centered view value is defined and co-created with the consumerMove from make-and-sell strategy to sense-and-respond (Haeckel 1999)
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ValueFirms provide their customers with value propositions that constitute experiences and/or solutionsHowever, it is only through the interactive co-creation process that the customer is enabled to evaluate this proposition and assess its actual value (as a value-in-context).
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Co-creation of valueFP6: The customer is always a co-creator of value: There is no value until an offering is used experience and perception are essential to value determination
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Co-creation of value
The focus on marketing should be on value co-creation rather than value distribution. Marketing needs to facilitate and support the customers value-creating processes rather than simply distributing ready-made value to customers
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How?
The best way to co-create value is to focus on the experiences of the customer
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How?
Enjoyable and engaging experiences provide instrinsic value (Deci and Ryan, 1985). They offer a state which people try to maintain and seek to repeat.
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