Services Marketing
New Perspectives On Marketing in the Service Economy
Overview
Services Marketing
Why Study Services? What are Services? Marketing Challenges Posed by Services Extended Marketing Mix Required for Services Integration of Marketing with Other Management Functions Developing Effective Service Marketing Strategies
Services Marketing
Why Study Services?
Why Study Services?
Services Marketing
Services dominate most economies and are growing rapidly:
Services account for more than 60% of GDP worldwide Almost all economies have a substantial service sector Most new employment is provided by services
Strongest growth area for marketing
Understanding services offers you a personal competitive advantage
Services Dominate the Global Economy
Services Marketing
Contribution of Service Industries to GDP Globally
Manufacturing 32%
Services 64%
Agriculture 4%
Source: The World Factbook 2008, Central Intelligence Agency
Estimated Size of Service Sector in Selected Countries
Jersey (97%), Cayman Islands (95%), Hong Kong (92%) Bahamas (90%), Bermuda ( 89%), Luxembourg (86%) USA (79%), Fiji (78%), Barbados (78%), France (77%), U.K. (76%)
Services Marketing
Japan (72%), Taiwan (71%), Australia (71%), Italy (71%)
Canada (70%), Germany (69%), Israel (67%) South Africa (65%), Brazil (66%), Poland (66%) Turkey (63%), Mexico (62%) Argentina (57%), Russia (55%) India (55%) Malaysia (46%), Chile (45%) Indonesia (41%), China (40%) Saudi Arabia (35%)
10 20 30 40 50 60 70
Services as Percent of GDP
80
90
Source: The World Factbook 2008, Central Intelligence Agency
Value Added by Service Industry Categories to U.S. GDP
Business Services 12%
Services Marketing
Transport, Utilities & Communications 9%
SERVICES
Wholesale & Retail Trade 12%
Source: US Bureau of Economic Analysis, Industry Economics Accounts, 2007
Why Study Services?
Services Marketing
Most new jobs are generated by services
Fastest growth expected in knowledge-based industries
Significant training and educational qualifications required, but employees will be more highly compensated Will service jobs be lost to lower-cost countries? Yes, some service jobs can be exported
Changing Structure of Employment as Economies Develop
Services Marketing
Agriculture Services
Share of Employment
Industry
Time, per Capita Income
Source: IMF, 1997
Why Study Services?
Services Marketing
Powerful forces are transforming service markets
Government policies, social changes, business trends, advances in IT, internationalization
Forces that reshape:
Demand Supply The competitive landscape Customers choices, power, and decision making
Transformation of the Service Economy
Social Changes Government Policies Business Trends
Services Marketing
Advances In IT
Globalization
New markets and product categories Increase in demand for services More intense competition
Innovation in service products & delivery systems, stimulated by better technology
Customers have more choices and exercise more power Success hinges on: Understanding customers and competitors Viable business models Creation of value for customers and firm Increased focus on services marketing and management
Factors Stimulating Transformation of the Service Economy
Social Changes Government Policies Business Trends
Services Marketing
Advances In IT
Globalization
Changes in regulations Privatization New rules to protect customers, employees, and the environment New agreement on trade in services
Factors Stimulating Transformation of the Service Economy
Social Changes Government Policies Rising consumer expectations More affluence More people short of time Increased desire for buying experiences vs. things Rising consumer ownership of high tech equipment Easier access to information Immigration Growing but aging population Business Trends
Services Marketing
Advances In IT
Globalization
Factors Stimulating Transformation of the Service Economy
Social Changes Government Policies Business Trends
Services Marketing
Advances In IT
Globalization
Push to increase shareholder value Emphasis on productivity and cost savings Manufacturers add value through service and sell services More strategic alliances and outsourcing Focus on quality and customer satisfaction Growth of franchising Marketing emphasis by nonprofits
Factors Stimulating Transformation of the Service Economy
Social Changes Government Policies Growth of Internet Greater bandwidth Compact mobile equipment Wireless networking Faster, more powerful software Digitization of text, graphics, audio, video Business Trends
Services Marketing
Advances In IT
Globalization
Factors Stimulating Transformation of the Service Economy
Social Changes Government Policies Business Trends
Services Marketing
Advances In IT
Globalization
More companies operating on transnational basis Increased international travel International mergers and alliances Offshoring of customer service Foreign competitors invade domestic markets
Services Marketing
What are Services?
What Are Services?
Services Marketing
The historical view
Smith (1776): Services are different from goods because they are perishable Say (1803): As services are immaterial, consumption cannot be separated from production
A fresh perspective: Benefits without Ownership
Rental of goods:
(a) Payment made for using or accessing something usually for a defined period of time instead of buying it outright and (b) Allows participation in network systems that individuals and organizations could not afford
What Are Services?
Services Marketing
Five broad categories within non-ownership framework of which two or more may be combined
Rented goods services
Defined space and place rentals
Labor and expertise rentals
Access to shared physical environments
Access to and usage of systems and networks
Definition of Services
Services Marketing
Services
are economic activities offered by one party to another most commonly employ time-based performances to bring about desired results
In exchange for their money, time, and effort, service customers expect to obtain value from
access to goods, labor, facilities, environments, professional skills, networks, and systems;
normally do not take ownership of any of the physical elements involved.
Value Creation is Dominated by Intangible Elements
Physical Elements High
Services Marketing
Salt Detergents CD Player Wine Golf Clubs New Car Tailored clothing Fast-Food Restaurant
Plumbing Repair
Health Club Airline Flight Landscape Maintenance Consulting Life Insurance Internet Banking
Low
Source; Adapted from Lynn Shostack
High Intangible Elements
Service Products vs. Customer Service & After-Sales Service
Services Marketing
A firms market offerings are divided into core product elements and supplementary service elements Need to distinguish between:
Marketing of services when service is the core product Marketing through service when good service increases the value of a core physical good
Manufacturing firms are reformulating and enhancing existing added-value services to market them as standalone core products
Service A Process Perspective
Services Marketing
Differences exist amongst services depending on what is being processed Classification of services into
People processing Possession processing Mental stimulus processing Information processing
4 Categories of Services
Services Marketing
People Processing
Services Marketing
Customers must:
physically enter the service factory cooperate actively with the service operation
Managers should think about process and output from the customers perspective
to identify benefits created and non-financial costs: Time, mental and physical effort
Possession Processing
Services Marketing
Involvement is limited
Less physical involvement Production and consumption are separable
Mental Stimulus Processing
Services Marketing
Ethical standards required:
Customers might be manipulated
Physical presence of recipients not required Core content of services is information-based
Can be inventoried
Information Processing
Services Marketing
Most intangible form of service
May be transformed: Into enduring forms of service output Line between information processing and mental stimulus processing may be unclear
Services Marketing
Marketing Challenges Posed by Services
Services Pose Distinctive Marketing Challenges
Services Marketing
Marketing management tasks in the service sector differ from those in the manufacturing sector. Eight common differences between services and goods but they do not apply equally to all services
What are marketing implications of these differences?
Differences, Implications, and Marketing-Related Tasks
Difference
Most service products cannot be inventoried
Services Marketing
Implications
Customers may be turned away
Marketing-Related Tasks
Use pricing, promotion, reservations to smooth demand; work with ops to manage capacity Emphasize physical clues, employ metaphors and vivid images in advertising Educate customers on making good choices; offer guarantees Develop user-friendly equipment, facilities & systems; train customers, provide good support
Intangible elements usually dominate value creation Services are often difficult to visualize & understand Customers may be involved in coproduction
Harder to evaluate service & distinguish from competitors Greater risk & uncertainty perceived Interaction between customer & provider; poor task execution could affect satisfaction
Differences, Implications, and Marketing-Related Tasks
Difference
People may be part of service experience
Services Marketing
Implications
Behavior of service personnel & customers can affect satisfaction Hard to maintain quality, consistency, reliability Difficult to shield customers from failures Time is money; customers want service at convenient times
Marketing-Related Tasks
Recruit, train employees to reinforce service concept Shape customer behavior Redesign for simplicity and failure proofing Institute good service recovery procedures
Operational inputs and outputs tend to vary more widely
Time factor often assumes great importance Distribution may take place through nonphysical channels
Find ways to compete on speed of delivery; offer extended hours
Create user-friendly, secure websites and free access by telephone
Electronic channels or voice communications
Services Marketing
Extended Marketing Mix for Services
Services Require An Extended Marketing Mix
Marketing can be viewed as:
Services Marketing
A strategic and competitive thrust pursued by top management A set of functional activities performed by line managers A customer-driven orientation for the entire organization
Marketing is only function to bring operating revenues into a business; all other functions are cost centers The 7 Ps of services marketing are needed to create viable strategies for meeting customer needs profitably
The 7Ps of Services Marketing
Services Marketing
Traditional Marketing Mix Applied to Services
Product Place and Time Price Promotion and Education
Extended Marketing Mix for Services
Process Physical Environment People
Services Marketing
Integration of Marketing with Other Management Functions
Marketing to be Integrated with Other Management Functions
Services Marketing
Three management functions play central and interrelated roles in meeting needs of service customers
Operations Management
Customers
Marketing Management
Human Resources Management
Summary
Services Marketing
Why Study Services? Unique Characteristics
Services dominate the economy in many nations. The majority of jobs are created in the service sector.
Services are often intangible, difficult to visualize and understand,
and customers may be
involved in co-production.
Services are a form
of rental (not
ownership). They are performances that bring about a desired result.
Product, Place & Time, Price, Promotion &
What are Services?
Extended
Marketing Mix
Education, Process,
Physical Environment,
People
