Webster University

MRKT 5980

Services Marketing

&

Service Lifecycle Management

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Differences Between Differences Between Services and GoodsServices and Goods

Definitions and distinctionsDefinitions and distinctions

• Goods are physical objects, devices, or things.Goods are physical objects, devices, or things.• Services are deeds, performances, or actions.Services are deeds, performances, or actions.• Goods are fixed in form and require physical distribution.Goods are fixed in form and require physical distribution.

Services are delivered as problem solutions on or off-Services are delivered as problem solutions on or off-site.site.

• The main difference between goods and services is The main difference between goods and services is intangibility. intangibility. Services are generally more intangible,personalized, Services are generally more intangible,personalized, and perishable.and perishable.

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Linkage between Services and GoodsLinkage between Services and Goods

Goods and services complement one another. Goods and services complement one another. Goods frequently require servicing after their Goods frequently require servicing after their purchase.purchase.

Goods and services are marketed in varying Goods and services are marketed in varying packages or combinations to targeted customer packages or combinations to targeted customer groups.groups.

Customer groups have differing perspectives on Customer groups have differing perspectives on the features and provision of services.the features and provision of services.

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Stand-Alone ServicesStand-Alone Services

Services compete with goods and compete Services compete with goods and compete with other services (e.g., video rentals).with other services (e.g., video rentals).

Services are intangible and perishable, Services are intangible and perishable, presenting problems in matching service presenting problems in matching service capacity to variations in demand.capacity to variations in demand.

Consumption of servicesConsumption of servicesrequires provider and requires provider and customer involvement.customer involvement.

Service consistencyService consistencyis required.is required.

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Tangible/Intangible Offerings of AirlinesTangible/Intangible Offerings of Airlines

Distribution

Price

Airlines

Intangible

Tangible

Vehicle

Transport

Service Frequency

Food and Drinks

In-flight Service

Pre- and Postflight Service

SOURCE: G. Lynn Shostack,”Breaking Free from Product Marketing,” in Services Marketing ed. Christopher H. Lovelock (Englewood Cliffs, NJ; Prentice-Hall, 1984),40.

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Problems with ServicesProblems with Services

Market transparencyMarket transparency

• Consumers have difficulty in evaluating services Consumers have difficulty in evaluating services because customers may use (or require )the same because customers may use (or require )the same service in different way.service in different way.

Service heterogeneityService heterogeneity

• Services vary in their content and quality of delivery Services vary in their content and quality of delivery as customer requirements change.as customer requirements change.

Cultural sensitivityCultural sensitivity

• Services are delivered directlyServices are delivered directly to the customer, making them to the customer, making them potentially more culturally potentially more culturally sensitive than products. sensitive than products.

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The Role of ServicesThe Role of Services

In the U.S. economyIn the U.S. economy

• The service sector produces 80% of U.S. GNP and The service sector produces 80% of U.S. GNP and employs 83% of the workforce.employs 83% of the workforce.

• Financial and technical services exporting and Financial and technical services exporting and importing are both growing rapidly.importing are both growing rapidly.

In the world economyIn the world economy

• Services are the fastest growing world trade sector.Services are the fastest growing world trade sector.• International services contribute International services contribute

more than half of GNP in more than half of GNP in many industrial nations.many industrial nations.

• Trade in services is about Trade in services is about 29% of all world trade.29% of all world trade.

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Global Transformation of ServicesGlobal Transformation of Services

Reduced governmental regulationReduced governmental regulation

• Transportation, banking, and Transportation, banking, and telecommunications telecommunications

Decreased regulation by industry groups.Decreased regulation by industry groups. Technological advances are opening up and Technological advances are opening up and

increasing worldwide service increasing worldwide service trade opportunities.trade opportunities.

Both labor-intensive and Both labor-intensive and technology-intensive technology-intensive services are expanding services are expanding into global markets.into global markets.

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International Trade Problems in ServicesInternational Trade Problems in Services

Data collection problemsData collection problems

• The quality of data collected on the The quality of data collected on the service trade is poor due to the difficulty service trade is poor due to the difficulty of quantifying and tracking the delivery of quantifying and tracking the delivery of services.of services.

• Services lack of homogeneity for Services lack of homogeneity for transparency, making comparisons and transparency, making comparisons and the measurement of the effects of the measurement of the effects of services in global markets difficult.services in global markets difficult.

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Regulation of Services TradeRegulation of Services Trade

U.S. disincentives to international servicesU.S. disincentives to international services

• state and federal regulations are formidable barriers state and federal regulations are formidable barriers to entryto entry

Governmental justification for entry barriersGovernmental justification for entry barriers

• national Securitynational Security• economic Securityeconomic Security• protection of infant industriesprotection of infant industries

Obstacles to service trade abroadObstacles to service trade abroad

• barriers to entrybarriers to entry• performanceperformance• discriminatory and nondiscriminatory regulationsdiscriminatory and nondiscriminatory regulations

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Corporations and Involvement in Corporations and Involvement in International Services MarketingInternational Services Marketing

E-commerce has played an important role in E-commerce has played an important role in expanding global services.expanding global services.

Many service providers know customers Many service providers know customers “virtually” only.“virtually” only.

Language barriers slow e-commerce service Language barriers slow e-commerce service expansion.expansion.

Typical international services include financial, Typical international services include financial, construction, design, engineering services, construction, design, engineering services, legal and accounting, teaching, and legal and accounting, teaching, and management consulting.management consulting.

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Starting to Market Services InternationallyStarting to Market Services Internationally

For services tied to complementary goods“For services tied to complementary goods“

• Follow the path of the good in the market.Follow the path of the good in the market. For services independent of goodsFor services independent of goods

• Identify market situations abroad similar to the Identify market situations abroad similar to the domestic market where the application of services domestic market where the application of services expertise presents opportunities for marketexpertise presents opportunities for market

entry and expansion. entry and expansion. Identify and understand transition Identify and understand transition

pointspoints

• Domestic and economics Domestic and economics changes in foreign countrieschanges in foreign countries can create the need for can create the need for services expertise.services expertise.

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International Services MarketingInternational Services Marketing

Strategic ImplicationsStrategic Implications

• Identify the nature and the aim of the service Identify the nature and the aim of the service offering core.offering core.

• Communicate the performance of the service on Communicate the performance of the service on both the mass level and the personal level.both the mass level and the personal level.

• Train organizational personnel to convey the spirit, Train organizational personnel to convey the spirit, values, and attitudes of the corporation.values, and attitudes of the corporation.

• Address issues of service pricing and financing.Address issues of service pricing and financing.• Consider the distribution implications of international Consider the distribution implications of international

services.services.

Logistics and Supply Chain Management

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A Definition of A Definition of International LogisticsInternational Logistics

“…“…designing and managing of a system that controls designing and managing of a system that controls the flow of materials into, through, and out of the the flow of materials into, through, and out of the international corporation”international corporation”

In taking a systems approach to linkages among In taking a systems approach to linkages among logistics components, firms can incorporate efficiencies logistics components, firms can incorporate efficiencies through system design and management techniquesthrough system design and management techniques

• JIT - just-in-timeJIT - just-in-time• EDI - electronic data interchangeEDI - electronic data interchange• ESI - early supplier involvementESI - early supplier involvement• ECR - efficient customer response systemsECR - efficient customer response systems

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The Phases of The Phases of International LogisticsInternational Logistics

Materials managementMaterials management

• Timely movement of raw Timely movement of raw materials, parts, and materials, parts, and supplies through the firmsupplies through the firm

Physical distributionPhysical distribution• Movement of the firm’s Movement of the firm’s

product to its customersproduct to its customers

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The Systems ConceptThe Systems Concept

The extensive and complex materials-flow activities within The extensive and complex materials-flow activities within and outside of the firm must be considered in the context of and outside of the firm must be considered in the context of their interaction.their interaction.

Total-cost conceptTotal-cost concept

• Minimizing overall logistics costs by identifying Minimizing overall logistics costs by identifying activity-based costs that impact after-tax activity-based costs that impact after-tax profits.profits.

Trade-off conceptTrade-off concept

• Recognize that logistics activities involve Recognize that logistics activities involve trade-off in areas such as time-saved in trade-off in areas such as time-saved in delivery versus the increased costs of delivery versus the increased costs of expedited delivery systems.expedited delivery systems.

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Supply-Chain ManagementSupply-Chain Management

An integration of the three system concepts.An integration of the three system concepts. Value-added activities connect the company’s supply Value-added activities connect the company’s supply

side with the demand side.side with the demand side. Efficient supply chain design increases customer Efficient supply chain design increases customer

satisfaction and saves moneysatisfaction and saves money

• reduces inventory holding costsreduces inventory holding costs• increases inventory turnover cyclesincreases inventory turnover cycles• reduces operating costsreduces operating costs• reduces order handling and mailing costs reduces order handling and mailing costs • makes firm more price competitivemakes firm more price competitive

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The Impact of The Impact of International LogisticsInternational Logistics

Logistical costs are 10% to 30% Logistical costs are 10% to 30% of the total landed cost of an of the total landed cost of an international order.international order.

Factors necessary for the use Factors necessary for the use of logistics as a competitive tool:of logistics as a competitive tool:

• Close collaboration with suppliers and Close collaboration with suppliers and customers.customers.

• Technologically advanced information Technologically advanced information processing and communication exchange processing and communication exchange capabilities.capabilities.

• An integrated business infrastructure.An integrated business infrastructure.

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New Dimensions of New Dimensions of International LogisticsInternational Logistics

Basic differencesBasic differences

• DistanceDistance• Currency variation and exchange rate differencesCurrency variation and exchange rate differences• Varying entry regulationsVarying entry regulations• Different transportation modesDifferent transportation modes

Country-specific differencesCountry-specific differences

• Transportation systems and intermediaries vary.Transportation systems and intermediaries vary.• Reliability of carriers may be different.Reliability of carriers may be different.• Computation of freight rates may be different.Computation of freight rates may be different.

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International International Transportation IssuesTransportation Issues

Transportation infrastructureTransportation infrastructure

• Roads,rail lines, airports, seaports, pipelinesRoads,rail lines, airports, seaports, pipelines Availability of transportation modesAvailability of transportation modes

• Overland shipping, ocean Overland shipping, ocean shipping, air shippingshipping, air shipping

Choice of modesChoice of modes

• Transit time, predictability, Transit time, predictability, cost, noneconomic factorscost, noneconomic factors

Noneconomic FactorsNoneconomic Factors

• Government involvement, Government involvement, the UNCTAD and the UNCTAD and the 40/40/20 conceptthe 40/40/20 concept

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International Shipment DocumentationInternational Shipment Documentation

Bill of LadingBill of Lading

• acknowledges receipt of goodsacknowledges receipt of goods Shipper’s export declarationShipper’s export declaration

• states proper authorization for export under states proper authorization for export under general or special validated export licensegeneral or special validated export license

Packing list of contentsPacking list of contents Dock and warehouse receiptsDock and warehouse receipts Collection documentsCollection documents

• commercial (consular) invoicecommercial (consular) invoice• certificate of origincertificate of origin• import and foreign exchange licensesimport and foreign exchange licenses

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International Inventory IssuesInternational Inventory Issues

Inventory carrying costs can be up to 25% of the value Inventory carrying costs can be up to 25% of the value of an inventory.of an inventory.

Just-in-Time policies minimize inventory volume by Just-in-Time policies minimize inventory volume by making it available when needed.making it available when needed.

Inventories assist in the movement of products.Inventories assist in the movement of products. Factors in deciding on the Factors in deciding on the

level of inventory to maintain:level of inventory to maintain:

• Order cycle timeOrder cycle time• Desired level of customer serviceDesired level of customer service• Use of Inventory as a strategic toolUse of Inventory as a strategic tool

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Order Cycle TimeOrder Cycle Time

The total time that passes between the placement of an The total time that passes between the placement of an order and the receipt of the merchandise.order and the receipt of the merchandise.

• Length of the total order cycleLength of the total order cycle Longer cycle in international marketing than Longer cycle in international marketing than

domesticdomestic

• Consistency of the order cycleConsistency of the order cycle More complicated delivery mode reduces More complicated delivery mode reduces

consistencyconsistency Altering cycle timesAltering cycle times

• Change transportation methodsChange transportation methods• Change inventory locationsChange inventory locations• Change ordering processChange ordering process

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International Storage IssuesInternational Storage Issues

The storage facilities location decisionThe storage facilities location decision

• AvailabilityAvailability• AdequacyAdequacy• Physical Physical

ConditionsConditions Optimizing the Optimizing the

logistics systemlogistics system

• Rank products by warehousing needs “A” Rank products by warehousing needs “A” products stocked in all distribution centerproducts stocked in all distribution center

““B” products stored only in selected locationsB” products stored only in selected locations ““C” products with low demand stocked only at C” products with low demand stocked only at

headquartersheadquarters

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International Packaging IssuesInternational Packaging Issues

Packaging for domestic shipping may NOT be Packaging for domestic shipping may NOT be adequate for international shipping.adequate for international shipping.

Goods should arrive in a safe, undamaged, Goods should arrive in a safe, undamaged, maintainable, and presentable condition.maintainable, and presentable condition.

Packaging should minimize the stress of Packaging should minimize the stress of intermodal movement and storage.intermodal movement and storage.

Protected from climatic conditions.Protected from climatic conditions. Weight based on delivery mode.Weight based on delivery mode. Follow customer instructions for labeling, Follow customer instructions for labeling,

packaging,packaging, and routing. and routing.

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Management of Management of International LogisticsInternational Logistics

Centralized logistics managementCentralized logistics management

• Headquarters retains decision-making power and Headquarters retains decision-making power and control, coordinates all logistics.control, coordinates all logistics.

Decentralized logistics managementDecentralized logistics management

• The “decentralized full profit center model” allows The “decentralized full profit center model” allows the organization to respond to local market the organization to respond to local market conditions. Possibility for loss of coordination.conditions. Possibility for loss of coordination.

Contract logisticsContract logistics

• Growing preference to outsource logistics function to Growing preference to outsource logistics function to “third party” specialists such as FedEx or UPS.“third party” specialists such as FedEx or UPS.

The supply chain and the InternetThe supply chain and the Internet

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Logistics and the EnvironmentLogistics and the Environment

Reverse DistributionReverse Distribution

• ““a system responding to environmental a system responding to environmental concerns that ensures a firm can retrieve a concerns that ensures a firm can retrieve a product from the market for subsequent use, product from the market for subsequent use, recycling, or disposal”recycling, or disposal”