McGraw-Hill © 2000 The McGraw-Hill Companies
1
SM
McGraw-Hill © 2000 The McGraw-Hill Companies
McGraw-Hill © 2000 The McGraw-Hill Companies
2
SMSM
McGraw-Hill © 2000 The McGraw-Hill Companies
Chapter 1
INTRODUCTION
TO
SERVICES
McGraw-Hill © 2000 The McGraw-Hill Companies
3
SMA note on the A note on the
PowerPoint Slides...PowerPoint Slides...
These PowerPoint slides contain selected exhibits, figures and tables from the chapters as well as objectives for the chapters. For many chapters, we include extra lecture slides and in-class exercises that we have compiled and used in our classes. The lecture slides are not intended to provide full outlines or complete lectures for the chapters, but rather may be used selectively to enhance class sessions.
McGraw-Hill © 2000 The McGraw-Hill Companies
4
SMObjectives for Chapter 1:Objectives for Chapter 1:Introduction to ServicesIntroduction to Services
• Explain what services are and identify service trends• Explain the need for special services marketing
concepts and practices• Outline the basic differences between goods and
services and the resulting challenges for service businesses
• Introduce the service marketing triangle• Introduce the expanded services marketing mix• Introduce the gaps model of service quality
McGraw-Hill © 2000 The McGraw-Hill Companies
5
SM Challenges for ServicesChallenges for Services
• Defining and improving quality
• Communicating and testing new services
• Communicating and maintaining a consistent image
• Motivating and sustaining employee commitment
• Coordinating marketing, operations and human resource efforts
• Setting prices
• Standardization versus personalization
McGraw-Hill © 2000 The McGraw-Hill Companies
6
SMExamples of Service Examples of Service
IndustriesIndustries
• Health Care– hospital, medical practice, dentistry, eye care
• Professional Services– accounting, legal, architectural
• Financial Services– banking, investment advising, insurance
• Hospitality– restaurant, hotel/motel, bed & breakfast, – ski resort, rafting
• Travel– airlines, travel agencies, theme park
• Others:– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club
McGraw-Hill © 2000 The McGraw-Hill Companies
7
SMFigure 1-1Figure 1-1
Tangibility SpectrumTangibility Spectrum
TangibleDominant
IntangibleDominant
SaltSoft Drinks
DetergentsAutomobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teaching
Fast-foodOutlets
Fast-foodOutlets
McGraw-Hill © 2000 The McGraw-Hill Companies
8
SMFigure 1-2 Figure 1-2
Percent of Percent of U.S. Labor Force by IndustryU.S. Labor Force by Industry
0
10
20
30
40
50
60
70
80
1929 1948 1969 1977 1984 1996
Per
cent
of
GD
P
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
Year
Services Manufacturing Mining & Agriculture
McGraw-Hill © 2000 The McGraw-Hill Companies
9
SM
0
10
20
30
40
50
60
70
80
1948 1959 1967 1977 1987 1996
Figure 1-3 Figure 1-3
Percent of U.S. Gross Domestic Percent of U.S. Gross Domestic Product by IndustryProduct by Industry
Perc
ent o
f G
DP
Year
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
Services Manufacturing Mining & Agriculture
McGraw-Hill © 2000 The McGraw-Hill Companies
10
SMDifferences BetweenDifferences Between Goods and Services Goods and Services
Intangibility
PerishabilitySimultaneous
Productionand
Consumption
Heterogeneity
McGraw-Hill © 2000 The McGraw-Hill Companies
11
SM Implications of IntangibilityImplications of Intangibility
Services cannot be inventoried Services cannot be patented Services cannot be readily displayed
or communicated Pricing is difficult
McGraw-Hill © 2000 The McGraw-Hill Companies
12
SM Implications of HeterogeneityImplications of Heterogeneity
Service delivery and customer satisfaction depend on employee actions
Service quality depends on many uncontrollable factors
There is no sure knowledge that the service delivered matches what was planned and promoted
McGraw-Hill © 2000 The McGraw-Hill Companies
13
SMImplications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and Consumption
Customers participate in and affect the transaction
Customers affect each otherEmployees affect the service outcomeDecentralization may be essentialMass production is difficult
McGraw-Hill © 2000 The McGraw-Hill Companies
14
SM Implications of PerishabilityImplications of Perishability
It is difficult to synchronize supply and demand with services
Services cannot be returned or resold
McGraw-Hill © 2000 The McGraw-Hill Companies
15
SM Table 1-2 Table 1-2
Services are DifferentServices are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.
Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.
Productionseparate fromconsumption
Simultaneousproduction andconsumption
Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.Decentralization may be essential.Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.
McGraw-Hill © 2000 The McGraw-Hill Companies
16
SMFigure 1-5Figure 1-5
The Services Marketing TriangleThe Services Marketing Triangle
Internal Marketing
Interactive Marketing
External Marketing
Company(Management)
CustomersEmployees
“enabling thepromise”
“delivering the promise”
“setting thepromise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
McGraw-Hill © 2000 The McGraw-Hill Companies
17
SMServices Marketing Triangle Services Marketing Triangle
Applications ExerciseApplications Exercise
• Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle?
• How is each type of marketing being carried out currently?
• Are the three sides of the triangle well aligned?• Are there specific challenges or barriers in any of
the three areas?
McGraw-Hill © 2000 The McGraw-Hill Companies
18
SMWays to Use the Ways to Use the
Services Marketing TriangleServices Marketing Triangle
Overall Strategic Assessment
• How is the service organization doing on all three sides of the triangle?
• Where are the weaknesses?
• What are the strengths?
Specific Service Implementation
• What is being promoted and by whom?
• How will it be delivered and by whom?
• Are the supporting systems in place to deliver the promised service?
McGraw-Hill © 2000 The McGraw-Hill Companies
19
SM
Source: Adapted from A. Parasuraman
Company
CustomersProviders
Technology
Figure 1-6 Figure 1-6
The Services Triangle The Services Triangle and Technologyand Technology
McGraw-Hill © 2000 The McGraw-Hill Companies
20
SMServices Marketing Mix:Services Marketing Mix:
7 Ps for Services7 Ps for Services
• Traditional Marketing Mix
• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through People, Processes, and Physical Evidence
• Ways to Use the 7 Ps
McGraw-Hill © 2000 The McGraw-Hill Companies
21
SM Traditional Marketing MixTraditional 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
McGraw-Hill © 2000 The McGraw-Hill Companies
22
SM Expanded Mix for Services --Expanded Mix for Services --the 7 Psthe 7 Ps
• Product• Price• Place• Promotion
• People• Process• Physical Evidence
McGraw-Hill © 2000 The McGraw-Hill Companies
23
SMTable 1-3Table 1-3
Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices
PRODUCT PLACE PROMOTION PRICE
Physical goodfeatures
Channel type Promotionblend
Flexibility
Quality level Exposure Salespeople Price level
Accessories Intermediaries Advertising Terms
Packaging Outlet location Salespromotion
Differentiation
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
McGraw-Hill © 2000 The McGraw-Hill Companies
24
SM
PEOPLE PHYSICALEVIDENCE
PROCESS
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicatingculture and values
Signage Level of customerinvolvement
Employee research Employee dress
Other tangibles
Table 1-3 (Continued)Table 1-3 (Continued)
Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices
McGraw-Hill © 2000 The McGraw-Hill Companies
25
SM Ways to Use the 7 PsWays to Use the 7 Ps
Overall Strategic Assessment
• How effective is a firm’s services marketing mix?
• Is the mix well-aligned with overall vision and strategy?
• What are the strengths and weaknesses in terms of the 7 Ps?
Specific Service Implementation
• Who is the customer?
• What is the service?
• How effectively does the services marketing mix for a service communicate its benefits and quality?
• What changes/improvements are needed?