Chapter 01 Introduction to Services Marketing

7/24/2019 Chapter 01 Introduction to Services Marketing

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Slide2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 2

How Important is the Service Sector inOur Economy?

In most countries, services add more economic value thanagriculture, raw materials and manufacturing combined

In developed economies, employment is dominated byservice jobs and most new job growth comes fromservices

Jobs range from high-paid professionals and technicians

to minimum-wage positions Service organizations can be any sizefrom huge global

corporations to local small businesses

Most activities by government agencies and nonprofitorganizations involve services


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Services dominate the United States Economy:GDP by Industry, !!"!ig" #"#$

Source: Bureau of Economic Analysis, November 2002

#inance, Insurance,$ea% Estate

!&

'ho%esa%e and$etai% (rade

")&

(ransport, Uti%ities, *ommunications +&

Hea%th )&

usinessServices -&

Other Services ""&

Government.most%y services/ "0&

1anu2acturin3 "4&

53ricu%ture, #orestry,1inin3, *onstruction +&

SERVICES


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*han3in3 Structure o2 Emp%oymentas Economic Deve%opment Evo%ves !ig" #"%$

Time, per Capita ncome

Shareof

Employment

Industry

Services

Agriculture

Source: !", 1##$


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Some Service Industries Pro2i%ed by 65I*S but6ot Identi2ied by SI* *odes

*asino Hote%s

*ontinuin3 *are $etirement*ommunities

Dia3nostic Ima3in3 *enters

Diet and 'ei3ht $educin3*enters

Environmenta% *onsu%tin3

Go%d *ourses and *ountry*%ubs

Ha7ardous 'aste *o%%ection

H1O 1edica% *enters

Industria% Desi3n Services

Investment an8in3 andSecurities Dea%in3

1ana3ement *onsu%tin3Services

Sate%%ite (e%ecommunications

(e%emar8etin3 ureaus

(emporary He%p Services


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Interna% Services

Service elements within an organization that facilitatecreation of--or add value to--its final output

Includes&accounting and payroll administrationrecruitment and training legal servicestransportation

catering and food servicescleaning and landscaping

Increasingly, these services are being outsourced


7/34Slide2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E 1 - 7

1a9or (rends in Service Sector!ig" #"'$

(overnment )oliciese"g", regulations, tradeagreements$

Social *hangese"g", affluence, lac+ of time, desire foreperiences$

usiness .rends Manufacturers offer service (rowth of chains and franchising

)ressures to improve productivity and /uality

More strategic alliances

Mar+eting emphasis by nonprofits Innovative hiring practices

0dvances in I.e"g", speed, digitization, wireless,Internet$

Internationalizationtravel, transnational companies$



Some Impacts o2 (echno%o3ica% *han3e

1adically alter ways in which service firms do business&with customers new services, more convenience$ behind the scenes reengineering, new value chains$

*reate relational databases about customer needs andbehavior, mine databan+s for insights

2everage employee capabilities and enhance mobility

*entralize customer servicefaster and more responsive

3evelop national4global delivery systems

*reate new, Internet-based business models



!ar%etin& 'elevant(ifferences Bet)een*oo+s an+ Services



De2inin3 the Essence o2 a Service

0n act or performance offered by one party to another

0n economic activity that does not result in ownership

0 process that creates benefits by facilitating a desiredchange in&

customers themselves

physical possessions

intangible assets



Distin3uishin3 *haracteristics o2 Services.able #"#$

*ustomers do not obtain ownership of services

Service products are ephemeral and cannot be inventoried

Intangible elements dominate value creation

(reater involvement of customers in production process

5ther people may form part of product eperience

(reater variability in operational inputs and outputs

Many services are difficult for customers to evaluate .ime factor is more important--speed may be +ey

3elivery systems include electronic and physical channels



1ar8etin3 Imp%ications "

6o ownership*ustomers obtain temporary rentals, hiring of personnel, or access

to facilities and systems

)ricing often based on time

*ustomer choice criteria may differ for renting vs" purchase--may

include convenience, /uality of personnel*an6t own people no slavery7$ but can hire epertise and labor

Services cannot be inventoried a2ter production Service performances are ephemeraltransitory, perishable

Exception& some information-based output can be recorded in electronic/printed form and re-used many times

alancing demand and supply may be vital mar+eting strategy

8ey to profits& target right segments at right times at right price

9eed to determine whether benefitsare perishable or durable



1ar8etin3 Imp%ications

*ustomers may be invo%ved in production process*ustomer involvement includes self-service and cooperation with

service personnel

.hin+ of customers in these settings as :partial employees;

*ustomer behavior and competence can help or hinder productivity,

so mar+eters need to educate4train customers*hanging the delivery process may affect role played by customers

3esign service facilities, e/uipment, and systems with customers inmind& user-friendly, convenient locations4schedules

Intan3ib%e e%ements dominate va%ue creation1 management is critical to achieve service /uality

Ma+e highly intangible services more :concrete; by creating andcommunicating physical images or metaphors and tangible clues



;a%ue 5dded by (an3ib%e vsIntan3ib%e E%ementsin Goods and Services !ig" #"?$

#ast 2ood restaurantP%umbin3 repair

O22ice c%eanin3

Hea%th c%ub

5ir%ine 2%i3ht

$etai% ban8in3

Insurance

'eather 2orecast

Sa%t

So2t drin8s

*D P%ayerGo%2 c%ubs

6ew car(ai%ored c%othin3

#urniture renta%

o -i

-i

Tan

&ib

leElem

ent s

ntan&ible Elements



1ar8etin3 Imp%ications 0

5ther people are often part of the service product0chieve competitive edge through perceived /uality of employees

=nsure job specs and standards for frontline service personnel reflectboth mar+eting and operational criteria

1ecognize that appearance and behavior of other customers can

influence service eperience positively or negatively0void inappropriate mi of customer segments at same time

Manage customer behavior the customer is not always right7$

(reater variability in operational inputs and outputs

Must wor+ hard to control /uality and achieve consistency

See+ to improve productivity through standardization, and by trainingboth employees and customers

9eed to have effective service recovery policies in place because it ismore difficult to shield customers from service failures



1ar8etin3 Imp%ications 4

5ften difficult for customers to evaluate services =ducate customers to help them ma+e good choices, avoid ris+ .ell customers what to epect, what to loo+ for*reate trusted brand with reputation for considerate, ethical behavior =ncourage positive word-of-mouth from satisfied customers

.ime factor assumes great importance5ffer convenience of etended service hours up to %?4@



mportant (ifferencesE.ist amon& Services



#our *ate3ories o2 ServicesEmp%oyin3 Di22erent Under%yin3 Processes !ig" #"A$

People Processing Possession Processing

Mental StimulusProcessing

InformationProcessing

(directed at intangible

assets)

e



Imp%ications o2 Service Processes."/ See8in3 E22iciency 1ay =ower Satis2action

Processes determine how services are created/deliveredprocess change may affect customer satisfaction

Imposing new processes on customers, especiallyreplacing people by machines, may cause dissatisfaction

9ew processes that improve efficiency by cutting costsmay hurt service /uality

est new processes deliver benefits desired by customers

!aster Simpler

More conveniently

*ustomers may need to be educated about newprocedures and how to use them



Imp%ications o2 Service Processes:./ Desi3nin3 the Service #actory

People-processing servicesrequire customers to visit theservice factory, so!

.hin+ of facility as a :stage; for service

performance 3esign process around customer

*hoose convenient location

*reate pleasing appearance, avoidunwanted noises, smells

*onsider customer needs--info,par+ing, food, toilets, etc"



Imp%ications o2 Service Processes:.0/ Eva%uatin3 5%ternative De%ivery *hanne%s

"or possession-processing, mental-stimulus processing, orinformation processing services, alternatives include!

#" *ustomers come to the service factory

%" *ustomers come to a retail office

'" Service employees visit customer6s home or wor+place

?" usiness is conducted at arm6s length through

- physical channels e"g", mail, courier service$ - electronic channels e"g", phone, fa, email, Beb site$



Imp%ications o2 Service Processes:.4/ a%ancin3 Demand and *apacity

#hen capacity to serve islimited and demand varieswidely, problems arise becauseservice output can$t be stored!

#" If demand is high and eceedssupply, business may be lost

%"If demand is low, productivecapacity is wasted

Potential solutions!- Manage demand- Manage capacity



Imp%ications o2 Service Processes:.-/ 5pp%yin3 In2ormation (echno%o3y

%ll services can benefit from &',but mental-stimulus processingand information-processingservices have the most to gain!

1emote delivery of information-based services :anywhere,anytime;

9ew service features throughwebsites, email, and internet

e"g", information, reservations$More opportunities for self-service 9ew types of services



Imp%ications o2 Service Processes:.)/ Inc%udin3 Peop%e as Part o2 the Product

&nvolvement in servicedelivery often entailscontact with other people

Managers should beconcerned about employees6appearance, social s+ills,technical s+ills

5ther customers may enhance

or detract from serviceeperience--need to managecustomer behavior



The Services!ar%etin& !i.


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E%ements o2 (he Services 1ar8etin3 1i>:@PsA vs(the (raditiona% 4PsA

'ethin%in& the ori&inal s

)roduct elements

)lace and time )romotion and education

)rice and other user outlays

A++in& Three Ne) Elements

)hysical environment

)rocess

)eople


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(he @Ps:."/ Product E%ements

%ll %spects of )ervice Performance that *reate +alue

*ore product featuresboth tangible and intangibleelements

undle of supplementary service elements

)erformance levels relative to competition

enefits delivered to customers customers don6t buy ahotel room, they buy a good night6s sleep$

(uarantees


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(he @Ps:./ P%ace and (ime

elivery ecisions! #here, #hen, and ow

(eographic locations served

Service schedules

)hysical channels

=lectronic channels

*ustomer control and convenience

*hannel partners4intermediaries


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(he @Ps:.0/ Promotion and Education

&nforming, Educating, Persuading, and .eminding *ustomersMar+eting communication tools

media elements print, broadcast, outdoor, retail, Internet, etc"$ personal selling, customer service sales promotion publicity4)1

Imagery and recognition branding corporate design

*ontent information, advice persuasive messages customer education4training


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(he @Ps:.4/ Price and Other User Out%ays

ar0eters ust .ecogni1e that *ustomer 2utlays &nvolveore than the Price Paid to )eller

Tra+itional ricin& Tas%s

Selling price, discounts, premiums

Margins for intermediaries if any$

*redit terms

+entify an+ !inimi3e 4ther Costs ncurre+ by 5sers

0dditional monetary costs associated with service usage e"g", travel toservice location, par+ing, phone, babysitting,etc"$

.ime ependitures, especially waiting


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(he @Ps:.-/ Physica% Environment

esigning the )ervicescape and providing tangibleevidence of service performances

*reate and maintaining physical appearances buildings4landscaping interior design4furnishings vehicles4e/uipment staff grooming4clothing sounds and smells other tangibles

Select tangible metaphors for use in mar+etingcommunications


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@Ps:.)/ Process

ethod and )equence in )ervice *reation and elivery

3esign of activity flows

9umber and se/uence of actions for customers )roviders of value chain components

9ature of customer involvement

1ole of contact personnel

1ole of technology, degree of automation


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(he @Ps:.@/ Peop%e

anaging the uman )ide of the Enterprise

.he right customer-contact employees performing tas+s welljob design recruiting4selection

trainingmotivation evaluation4rewards empowerment4teamwor+

.he right customers for the firm6s mission fit well with product4processes4corporate goals appreciate benefits and value offered possess or can be educated to have$ needed s+ills co-production$ firm is able to manage customer behavior


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1ana3in3 the @Ps $eBuires *o%%aboration between1ar8etin3, Operations, and H$ #unctions !ig" #"@$

*ustomers

Operations

1ana3ement 1ar8etin3

1ana3ement

Human $esources

1ana3ement

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Chapter 01 Introduction to Services Marketing

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