Chapter 12Services Marketing

and Customer Relationships

Copyright © 2001 by McGraw-Hill Ryerson Limited

Sommers Sommers Barnes BarnesNinth Canadian EditionNinth Canadian Edition

Presentation byPresentation by

Karen A. BlotnickyKaren A. Blotnicky

Mount Saint Vincent University, Halifax, NSMount Saint Vincent University, Halifax, NS

Copyright © 2001 McGraw-Hill Ryerson Limited12 - 2

Chapter Goals

To gain an understanding of:• The nature and importance of services• Characteristics of services and their

marketing implications• Issues related to the planning and

marketing of services• The four Rs of services marketing• The relationship marketing approach• The impact of technology in providing

services

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The Nature of Services• regardless of the “product”, there is a

services component to the offerings of all firms

• in some cases, a service is the principal purpose of the transaction, as in the rental of a car, a haircut, or legal services -- we refer to this as the core servicecore service

• in others, service is performed in support of the sale of a tangible product -- these are referred to as supplementary supplementary servicesservices

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Goods and Services Continuum

• There are two classes of services.• Services that are the main purpose of a

transaction —renting a truck to move.• Services that supplement the sale of a

tangible good — for example, an information hotline for computer software.

• The focus here is primarily on identifiable, intangible services that are the main object of a transaction designed to provide want-satisfaction to customers; supplementary services growing in importance, however.

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Cannedfoods

Ready-madeclothes

Auto-mobiles

Draperies,Carpets

Rest-aurantmeals

Repairs: auto, house, landscaping

Airtravel

Insurance,Consulting,Teaching

MOSTLY GOODS MOSTLY SERVICES

The Goods-Services Continuum

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Importance of Services

• Three-fourths of the Canadian labour force is employed in service industries.

• Over 70% of the nation’s gross national product is produced by services.

• From 1986 to 2000, virtually all new jobs will be in the service industries.

• Huge growth in personal servicespersonal services as well as business services.business services.

Copyright © 1998 by The McGraw-Hill Companies, Inc.

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Characteristics of Services• intangibilityintangibility: difficult to sample and to evaluate• inseparabilityinseparability:: difficult to separate services from

the service provider; mainly direct sales; staff are essential to the delivery of quality services

• heterogeneityheterogeneity: virtually every service is different; very difficult to standardize quality

• perishabilityperishability:: those not sold can not be stored• fluctuating demandfluctuating demand:: demand for some services

fluctuates by season, or even by time of day

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Strategic Services Management• intangibility generally makes the

marketing of services a challenge• understanding how people buy services

and the segments that exist is just as important

• knowing more about the value of customer segments is important -- some are more valuable than others

• knowing what they value so that service levels can be tailored is also important

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Strategic Product Implications

• service organizations have to plan the introduction of new services and the management of the life cycle

• the core service can be enhanced through the addition of supplementary services, thereby creating added value

• the life cycle of services has to be managed

• the branding of a service can be difficult as the customer often has nothing tangible to show

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Managing Service Quality• Quality is hard to define, measure, control, and

communicate • Quality is defined by the consumer• It’s important to measure customer satisfaction

with an organization’s service quality.• Customers see five important components:

• Core serviceCore service must measure up.• Quality of serviceQuality of service, meeting expectations.• Technical aspectsTechnical aspects of delivery.• InteractionInteraction with people who deliver service.• Affective dimensionsAffective dimensions:: How customers feel.

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Pricing ServicesThe characteristics of perishability, inability

to store, and fluctuating demand for services create pricing challenges.

• Pricing Strategies include:• Discount strategies: Cheaper by the

week.• A variable pricing strategy: Kids eat

free, movies cheaper on Tuesdays.• Price competition.

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Distribution of Services• because most services are tied directly to a

specific service provider, most have been distributed directly to customers

• with advancing technology, many firms are now delivering services through machines

• channels of distribution are necessarily short; some firms use one agent intermediary, such as insurance, real estate, and travel agents

• some firms use franchisesfranchises to distribute services

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Promotion of Services• customer contact personnel represent the

main channel of customer communication• service providers must ensure that each

service encounterservice encounter is a positive one if customers are to develop a positive image

• many professional service firms are now permitted to advertise

• other elements of the promotional mix are used, including publicity and community affairs

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Four Rs of Service Marketing

• Retention• Referrals• Relationships• Recovery

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The Changing Environment for Services• The boom in the service economy, reduced

regulation has created an increase in competition.

• Major focus on increased productivity, efficiency• Work on people aspects of business:

• Education, training programs• Change technology:

• Computer-based technologies used.• Restructure jobs.

• Bottom line: People are key to success!

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Other Considerations in Marketing Services

• Impact of Technology:Impact of Technology:• Remember, not everyone likes impersonal

technology• Performance Measurement:Performance Measurement:

• Larger firms can use market share, etc.• Customer perceptions are essential.

• Prospects for Growth:Prospects for Growth:• It is very likely that services will continue to

take an increasing share of the consumer dollar.

• The use of marketing programs in all services is expected to increase considerably.

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Future Service Profitability

Impacted by:1. Focusing on the right priorities2. Increasing service quality3. Investing in problem solving4. Being fair to customers5. Investing in leadership

development