20140930061122_topic 1 foundations for services marketing

STUDY GUIDE BMSV5103 Service Marketing

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Topic 1: Foundations for Services Marketing

Learning Outcomes

By the end of this topic, you should be able to:

1. Explain what services and service marketing are;

2. Outline the basic differences between goods and services;

3. Introduce the expanded marketing mix for services;

4. Introduce the gaps model of service quality and its usefulness for understanding service quality;

5. Identify the difference between customer expectations and perceptions;

6. Show the four gaps that occur in companies; and

7. Identify the factors responsible for each of the four provider gaps.

Topic Overview

This topic presents up-to-date trends, issues and opportunities in services as a backdrop for the strategies addressed in subsequent topics. It introduces the gaps model of service quality, which is the framework that provides the structure for the course.


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Focus Areas and Assigned Readings

Focus Areas Assigned Readings

Zeithaml, V. A., Bitner, M. J., & Gremler, D. D. (2013). Services marketing: Integrating customer focus across the firm (6th ed). Singapore: McGraw-Hill.

1.1 What are Services? Chapter 1, pp 3-6.

1.2 Why Service Marketing? Chapter 1, pp 6-14.

1.3 Service and Technology Chapter 1, pp 14-19.

1.4 Characteristics of Services Compared to Goods

Chapter 1, pp 19-24.

1.5 Services Marketing Mix Chapter 1, pp 24–27.

1.6 Customer Gaps Chapter 2, pp 35-36.

1.7 Provider Gaps Chapter 2, pp 36-45.

1.8 Closing the Gap Chapter 2, pp 45.

Content Summary

1.1 What are Services?

Services are deeds, processes and performance.

Service industries and companies include those industries and companies typically classified within the service sector whose core product is a service.

Services as products represent a wide range of intangible product offerings that customers value and pay for in the marketplace.

Customer service is the service provided in support of a company’s core products.


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Derived service is yet another way to look at what service means. For example, Vargo and Lusch (2004) suggest that value derived from physical goods is really the service provided by the good, not the good itself.

1.2 Why Service Marketing?

Service marketing concepts and strategies have developed in response to the tremendous growth of service industries, resulting in their increased importance to a country and world economies.

As the traditional service industries (e.g. banking, health care, etc) evolve and become more competitive, the need for effective services management and marketing strategies continues.

Companies are now seeking better ways to understand and segment their customers, to ensure the delivery of quality and to strengthen their positions amid a growing number of competitors.

1.3 Service and Technology

Information technology is shaping the field and profoundly influencing the practice of service marketing.

In addition to providing opportunities for new service offerings, technology is providing approaches for delivering existing services in more accessible, convenient and productive ways.

Technology, specifically the Internet, provides an easy way for customers to learn, do research and collaborate with each other.

Technology enables both customers and employees to be more effective in getting and providing service.

Although technology and the Internet have profoundly changed how people do business and what offerings are possible, it is clear that customers still want basic service, such as dependable outcomes, easy access, responsive systems, flexibility, apologies and compensation when things go wrong.


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1.4 Characteristics of Services Compared to Goods

Goods Services Resulting Implications

Tangible

Intangible

Service cannot be inventoried.

Service cannot be easily patented.

Service cannot be readily displayed or communicated.

Pricing is difficult.

Standardised

Heterogeneous

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 has been delivered.

Production separate from consumption

Simultaneous production and consumption

Customers participate in and affect the transaction.

Customers affect each other.

Employees affect the service outcome.

Decentralisation may be essential.

Mass production is difficult.

Non-perishable

Perishable

It is difficult to synchronise supply and demand with services.

Services cannot be returned or resold.

Search qualities are attributes that a consumer can determine before purchasing a product (e.g. colour, style, price, fit, feel, hardness, smell, etc).

Experience qualities are attributes that can be discerned only after purchase or during consumption (e.g. taste, wear ability, etc).

Credence qualities include characteristics that the consumer may find impossible to evaluate even after purchase or consumption (e.g. appendix operations and brake re-linings on automobiles).


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1.5 Service Marketing Mix

The traditional marketing mix is composed of the four Ps: product, price, place (distribution) and promotion.

These elements appear as core decision variables in any marketing plan.

In addition to the traditional four Ps, the services marketing mix includes people, physical evidence and process.

People are 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 is the environment in which the service is delivered and where the firm and customer interact and any tangible component that facilitates performance or communication of the service.

Process refers to the actual procedures, mechanisms and flow of activities by which the service is delivered – the service delivery and operating systems.

1.6 Customer Gaps

Customer gap is the difference between customer expectations and perceptions (Fig. 2.1, p.35).

Customer expectations are standards or reference points that customers bring into the service experience, whereas customer perceptions are subjective assessment of actual service experiences.

1.7 Provider Gaps

To close the all-important customer gap, the gaps model suggests that four other gaps – the provider gaps – need to be closed.

These gaps occur within the organisation providing the service and include:


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(a) Gap 1: Not knowing what customers expect (Fig. 2.2, p.37);

(b) Gap 2: Not selecting the right service designs and standards (Fig. 2.3, p.39);

(c) Gap 3: Not delivering according to service designs and standards (Fig. 2.4, p.41); and

(d) Gap 4: Not matching performance to promises (Fig. 2.5, p.44)

1.8 Closing the Gaps

The gaps model of service quality (Fig. 2.6, p.45) conveys a clear message to managers wishing to improve their quality of service: The key to closing the customer gap is to close provider gaps 1 through 4 and keep them closed.

To the extent that one or more of provider gaps 1 through 4 exist, customers perceive quality short-falls.

Study Questions

1. Why is it important to learn about service?

2. With an example, discuss why intangibility is considered the most basic distinguishing characteristic of service.

3. According to Zeithaml, Bitner and Gremler (2013, p. 25), “Careful management of the four Ps: product, place, promotion and price are clearly to be essential to the successful marketing of services. However, the strategies for the four Ps require some modifications when applied to services”. Do you agree with their statement? Why?

4. Why is the quality of service delivered by customer contact personnel critically influenced by the standards against which they are evaluated and compensated?

5. Provider gap 4 illustrates the difference between service quality and the service provider’s external communications. Discuss prescriptions that can ensure external communications promises are realistic.

6. Based on the case study, answer the questions that follow.


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Case Study

Malaysia’s GDP Driven Mainly by Services, Manufacturing Sectors KUCHING: Amid the more challenging external environment, Malaysia’s economy is projected to experience a steady pace of growth in gross domestic product (GDP) between four and five per cent in 2012, driven mainly by the services and manufacturing sectors. On the supply side, of all its sectors such as services, agriculture, mining, manufacturing and construction are projected to register growth in 2012, according to data by Malaysian Institute of Economic Research (MIER). Of all supply economic sectors that contributed to the Malaysian economy, the top three components were the services, manufacturing and agriculture sectors. The largest contributor to real GDP was services with 58.6 per cent in 2011. The services sector managed to maintain its year-on-year growth rate at 6.8 per cent in 2011, unchanged from the previous year. MIER stated that the domestic-oriented services sector is fast becoming a critical economic sector in Malaysia, significantly outpacing the real GDP growth rate, which came in at 5.1 per cent. The next largest contributor to real GDP was manufacturing sector with 27.5 per cent share of GDP. However, its growth rate of 4.5 per cent year-on-year in 2011 was below that of real GDP growth due to uncertainties in the export-oriented markets. For the agriculture sector, in 2011 it maintained growth at 7.3 per cent, unchanged from the previous year in 2010, supported by a recovery in the production of crude palm oil. As percentage share of real GDP by sector, the three largest sectors in 2011 were services (58.6 per cent), manufacturing (27.5 per cent) and agriculture (7.3 per cent), while the remaining sectors were mining (6.3 per cent) and construction (3.2 per cent). According to MIER, the main growth driver for 2012 is expected to be the largest contributor to real GDP. MIER cited that the proper implementation of the 20 initiatives would definitely help drive the economy forward. Source: http://www.theborneopost.com/2012/04/20/malaysias-gdp-driven-mainly-by-services-manufacturing-sectors/ (a) Discuss the differences between services and manufacturing sectors. (b) The services sector in Malaysia was the largest contributor to real GDP

in 2011. Do you think this sector will still be the main contributor to Malaysian real GDP in the next five years? Why?

20140930061122_topic 1 foundations for services marketing

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