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Introduction to Services

Chapter 1

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Introduction to Services CHAPTER

1

• What are services?

• Why services marketing?

• Service and Technology

• Characteristics of Services Compared to Goods

• Services Marketing Mix

• Staying Focused on the Customer

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Objectives for Chapter 1: Introduction to Services

Explain what services are and identify important trends in services.

Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating.

Explore the profound impact of technology on services.

Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses.

Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text.

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Examples of Service Industries

Health Care Hospital, medical practice, dentistry, eye care

Professional Services Accounting, legal, architectural

Financial Services Banking, investment advising, insurance

Hospitality Restaurant, hotel/motel, bed and breakfast Ski resort, rafting

Travel Airline, travel agency, theme park

Others Hair styling, pest control, plumbing, lawn maintenance,

counseling services, health club, interior design

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Contributions of Service Industries to Canadian Gross Domestic Product

Contributions of Service Industries to Canadian Gross Domestic Product

FIGURE 1.1

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Four Distinctions in Services

Service industries and companies

Services and products

Customer service

Derived service

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Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Figure 1.2

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Service Sector Contribution to Selected Economies Worldwide

Country Percent of GDP Attributed to Services

Bahamas 90

United States 79

Japan 74

United Kingdom 73

France 73

Canada 71

Sweden 69

Australia 68

Germany 68

Singapore 67

Brazil 51

India 48

China 33Source: The World Factbook 2004, published by the Central Intelligence Agency, www.cia.go/cia/publications/factbook/geos

TABLE 1.1

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Why Study Services Marketing?

Service-based economies

Service as a business imperative in manufacturing and IT

Deregulated industries and professional service needs

Services marketing is different

Service equals profits

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Service and Technology

Potential for new service offerings

New ways to deliver service

Enabling both customers and employees

Extending the global reach of services

The Internet

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Characteristics of Services Compared to Goods

Intangibility

Perishability

SimultaneousProduction

andConsumption

Heterogeneity

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Implications of Intangibility

Services cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult

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Implications of Heterogeneity

Service delivery and customer satisfaction depend on employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

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Implications of Simultaneous Production and Consumption

Customers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficult

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Implications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

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Challenges for Services

Defining and improving quality

Designing and testing new services

Communicating and maintaining a consistent image

Accommodating fluctuating demand

Motivating and sustaining employee commitment

Coordinating marketing, operations, and human resource efforts

Setting prices

Finding a balance between standardization versus personalization

Ensuring the delivery of consistent quality

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Traditional 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

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Expanded Mix for Services –The 7 Ps

Product Price Place Promotion People

All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment.

Physical Evidence The environment in which the service is delivered and where the

firm and customer interact, and any tangible components that facilitate performance or communication of the service.

Process The actual procedures, mechanisms, and flow of activities by

which the service is delivered—the service delivery and operating systems.

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WestJet: Aligning People, Processes and Physical Evidence

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Ways 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?

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Ways to Use 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?