Chapter 1: Lovelock
NEW PERSPECTIVES ON MARKETING IN THE SERVICE ECONOMY
WHY STUDY SERVICES?
Services dominate economy in most nations Understanding services offers you personal competitive advantages Importance of service sector in economy is growing rapidly:
Services account for more than 60 percent of GDP worldwide Almost all economies have a substantial service sector Most new employment is provided by services Strongest growth area for marketing
SERVICE SECTOR IN BANGLADESH
GDP composition by sector:
agriculture:
18.4%
industry:
28.7% 52.9% (2009 est.)
services:
WHY STUDY SERVICES
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 lost to lower-cost countries? Yes, some service jobs can be exported
WHY STUDY SERVICES?
Powerful forces are transforming service markets
Government policies, social changes, business trends, advances in IT, internationalization
These forces are reshaping
Demand Supply The competitive landscape Customers choices, power, and decision making
FACTORS TRANSFORMING THE SERVICE ECONOMY
Social Changes Business Trends Advances in IT Globalization
Intermediate Demand from Firms
Growth in specialized services Trend of outsourcing
FACTORS TRANSFORMING THE SERVICE ECONOMY
Social Changes Government Policies Business Trends Advances in
IT
Globalization
Rising consumer expectations More affluence More people short of time Increased desire for buying experiences
versus things
Rising consumer ownership of high tech
equipment
Easier access to information Immigration Growing but aging population
FACTORS TRANSFORMING THE SERVICE ECONOMY
Social Changes Government Policies Business Advances in IT Globalization
Trends
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 TRANSFORMING THE SERVICE ECONOMY
Social Changes Government Policies Business Trends
Advances in IT
Globalization
Growth of the Internet Compact mobile equipment Wireless networking Faster, more powerful software Digitization of text, graphics, audio, video
FACTORS TRANSFORMING THE SERVICE ECONOMY
Social Changes Government Business Trends Advances in IT
Policies
Globalization
More companies operating on transnational
basis
Increased international travel International mergers and alliances Offshoring of customer service Foreign competitors invade domestic markets
Challenges Posed by Services
SERVICE CHARACTERISTICS:
Intangibility Inseparability Variability Perishability Customer participation No ownership
DIFFERENCES, IMPLICATIONS, AND MARKETING-RELATED TASKS
Difference
Implications
Marketing-Related Tasks
pricing, promotion, and Use reservations to smooth demand; work with ops to manage capacity
Most service products
cannot be inventoried
Customers may be
turned away
Intangible elements
usually dominate value creation
Harder to evaluate
service and distinguish from competitors
Emphasize physical clues, Educate customers on
employ metaphors and vivid images in advertising
Services are often
difficult to visualize and understand
Greater risk and
uncertainty perceived
making good choices; offer guarantees
Customers may be
involved in coproduction
Interaction between
customer and provider; but poor task execution could affect satisfaction
Develop user-friendly
equipment, facilities, and systems; train customers, provide good support
DIFFERENCES, IMPLICATIONS, AND MARKETING-RELATED TASKS
Difference Implications Marketing-Related Tasks
People may be part of
service experience
Behavior of service
personnel and customers can affect satisfaction
Recruit, train employees to
reinforce service concept Shape customer behavior
Operational inputs and
outputs tend to vary more widely
Hard to maintain quality,
consistency, reliability
Redesign for simplicity and
failure proofing Institute good service recovery procedures
Difficult to shield
customers from failures customers want service at convenient times
Time factor often
assumes great importance
Time is money;
Electronic channels or
voice telecommunications
Find ways to compete on
speed of delivery; offer extended hours
Distribution may take
place through nonphysical channels
Create user-friendly,
secure websites and free access by telephone
Expanded Marketing Mix for Services
8 PS OF SERVICES MARKETING
Product Price Place Promotion Physical evidence/environment People Productivity and Quality
PRODUCT ELEMENTS
Embrace all aspects of service performance that create value
Core product responds to customers primary need Array of supplementary service elements
Help customer use core product effectively Add value through useful enhancements
Planning marketing mix begins with creating a service concept that:
Will offer value to target customers Satisfy their needs better than competition
PLACE AND TIME
Delivery decisions: Where, When, How Geographic locations served
Service schedules
Physical channels Electronic channels Customer control and convenience Channel partners/intermediaries
PRICE AND OTHER USER OUTLAYS
Marketers must recognize that customer outlays involve more than price paid to seller Traditional pricing tasks:
Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms Additional monetary costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.) Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences
Identify and minimize other costs incurred by users:
PROMOTION AND EDUCATION
Informing, educating, persuading, reminding customers Marketing communication tools
Media elements (print, broadcast, outdoor, retail, the Internet, etc.) Personal selling, customer service Sales promotion Publicity/PR Branding Corporate design Information, advice Persuasive messages Customer education/training
Imagery and recognition
Content
PROCESS
How firm does things may be as important as what it does
Customers often actively involved in processes, especially when acting as co-producers of service
Process involves choices of method and sequence in service creation and delivery
Design of activity flows Number and sequence of actions for customers Nature of customer involvement Role of contact personnel Role of technology, degree of automation
Badly designed processes waste time, create poor experiences, and disappoint customers
PHYSICAL ENVIRONMENT
Design servicescape and provide tangible evidence of service performances Create and maintain physical appearances
Buildings/landscaping Interior design/furnishings Vehicles/equipment Staff grooming/clothing Sounds and smells Other tangibles
Manage physical cues carefully can have profound impact on customer impressions
PEOPLE
Interactions between customers and contact personnel strongly influence customer perceptions of service quality The right customer-contact employees performing tasks well
Job design Recruiting Training Motivation
The right customers for firms mission
Contribute
customers Possessor can be trained to have needed skills (co-production) Can shape customer roles and manage customer behavior
positively to experience of other
PRODUCTIVITY AND QUALITY
Productivity and quality must work hand in hand Improving productivity key to reducing costs Improving and maintaining quality essential for building customer satisfaction and loyalty Ideally, strategies should be sought to improve both productivity and quality simultaneouslytechnology often the key
Technology-based innovations have potential to create high payoffs But, must be user friendly and deliver valued customer benefits
