chapter 01 introduction to services marketing
TRANSCRIPT
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How Important is the Service Sector inOur Economy?
In most countries, services add more economic value thanagriculture, raw materials and manufacturing combined
In developed economies, employment is dominated byservice jobs and most new job growth comes fromservices
Jobs range from high-paid professionals and technicians
to minimum-wage positions Service organizations can be any sizefrom huge global
corporations to local small businesses
Most activities by government agencies and nonprofitorganizations involve services
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Services dominate the United States Economy:GDP by Industry, !!"!ig" #"#$
Source: Bureau of Economic Analysis, November 2002
#inance, Insurance,$ea% Estate
!&
'ho%esa%e and$etai% (rade
")&
(ransport, Uti%ities, *ommunications +&
Hea%th )&
usinessServices -&
Other Services ""&
Government.most%y services/ "0&
1anu2acturin3 "4&
53ricu%ture, #orestry,1inin3, *onstruction +&
SERVICES
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*han3in3 Structure o2 Emp%oymentas Economic Deve%opment Evo%ves !ig" #"%$
Time, per Capita ncome
Shareof
Employment
Industry
Services
Agriculture
Source: !", 1##$
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Some Service Industries Pro2i%ed by 65I*S but6ot Identi2ied by SI* *odes
*asino Hote%s
*ontinuin3 *are $etirement*ommunities
Dia3nostic Ima3in3 *enters
Diet and 'ei3ht $educin3*enters
Environmenta% *onsu%tin3
Go%d *ourses and *ountry*%ubs
Ha7ardous 'aste *o%%ection
H1O 1edica% *enters
Industria% Desi3n Services
Investment an8in3 andSecurities Dea%in3
1ana3ement *onsu%tin3Services
Sate%%ite (e%ecommunications
(e%emar8etin3 ureaus
(emporary He%p Services
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Interna% Services
Service elements within an organization that facilitatecreation of--or add value to--its final output
Includes&accounting and payroll administrationrecruitment and training legal servicestransportation
catering and food servicescleaning and landscaping
Increasingly, these services are being outsourced
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1a9or (rends in Service Sector!ig" #"'$
(overnment )oliciese"g", regulations, tradeagreements$
Social *hangese"g", affluence, lac+ of time, desire foreperiences$
usiness .rends Manufacturers offer service (rowth of chains and franchising
)ressures to improve productivity and /uality
More strategic alliances
Mar+eting emphasis by nonprofits Innovative hiring practices
0dvances in I.e"g", speed, digitization, wireless,Internet$
Internationalizationtravel, transnational companies$
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Some Impacts o2 (echno%o3ica% *han3e
1adically alter ways in which service firms do business&with customers new services, more convenience$ behind the scenes reengineering, new value chains$
*reate relational databases about customer needs andbehavior, mine databan+s for insights
2everage employee capabilities and enhance mobility
*entralize customer servicefaster and more responsive
3evelop national4global delivery systems
*reate new, Internet-based business models
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!ar%etin& 'elevant(ifferences Bet)een*oo+s an+ Services
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De2inin3 the Essence o2 a Service
0n act or performance offered by one party to another
0n economic activity that does not result in ownership
0 process that creates benefits by facilitating a desiredchange in&
customers themselves
physical possessions
intangible assets
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Distin3uishin3 *haracteristics o2 Services.able #"#$
*ustomers do not obtain ownership of services
Service products are ephemeral and cannot be inventoried
Intangible elements dominate value creation
(reater involvement of customers in production process
5ther people may form part of product eperience
(reater variability in operational inputs and outputs
Many services are difficult for customers to evaluate .ime factor is more important--speed may be +ey
3elivery systems include electronic and physical channels
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1ar8etin3 Imp%ications "
6o ownership*ustomers obtain temporary rentals, hiring of personnel, or access
to facilities and systems
)ricing often based on time
*ustomer choice criteria may differ for renting vs" purchase--may
include convenience, /uality of personnel*an6t own people no slavery7$ but can hire epertise and labor
Services cannot be inventoried a2ter production Service performances are ephemeraltransitory, perishable
Exception& some information-based output can be recorded in electronic/printed form and re-used many times
alancing demand and supply may be vital mar+eting strategy
8ey to profits& target right segments at right times at right price
9eed to determine whether benefitsare perishable or durable
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1ar8etin3 Imp%ications
*ustomers may be invo%ved in production process*ustomer involvement includes self-service and cooperation with
service personnel
.hin+ of customers in these settings as :partial employees;
*ustomer behavior and competence can help or hinder productivity,
so mar+eters need to educate4train customers*hanging the delivery process may affect role played by customers
3esign service facilities, e/uipment, and systems with customers inmind& user-friendly, convenient locations4schedules
Intan3ib%e e%ements dominate va%ue creation1 management is critical to achieve service /uality
Ma+e highly intangible services more :concrete; by creating andcommunicating physical images or metaphors and tangible clues
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;a%ue 5dded by (an3ib%e vsIntan3ib%e E%ementsin Goods and Services !ig" #"?$
#ast 2ood restaurantP%umbin3 repair
O22ice c%eanin3
Hea%th c%ub
5ir%ine 2%i3ht
$etai% ban8in3
Insurance
'eather 2orecast
Sa%t
So2t drin8s
*D P%ayerGo%2 c%ubs
6ew car(ai%ored c%othin3
#urniture renta%
o -i
-i
Tan
&ib
leElem
ent s
ntan&ible Elements
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1ar8etin3 Imp%ications 0
5ther people are often part of the service product0chieve competitive edge through perceived /uality of employees
=nsure job specs and standards for frontline service personnel reflectboth mar+eting and operational criteria
1ecognize that appearance and behavior of other customers can
influence service eperience positively or negatively0void inappropriate mi of customer segments at same time
Manage customer behavior the customer is not always right7$
(reater variability in operational inputs and outputs
Must wor+ hard to control /uality and achieve consistency
See+ to improve productivity through standardization, and by trainingboth employees and customers
9eed to have effective service recovery policies in place because it ismore difficult to shield customers from service failures
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1ar8etin3 Imp%ications 4
5ften difficult for customers to evaluate services =ducate customers to help them ma+e good choices, avoid ris+ .ell customers what to epect, what to loo+ for*reate trusted brand with reputation for considerate, ethical behavior =ncourage positive word-of-mouth from satisfied customers
.ime factor assumes great importance5ffer convenience of etended service hours up to %?4@
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mportant (ifferencesE.ist amon& Services
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#our *ate3ories o2 ServicesEmp%oyin3 Di22erent Under%yin3 Processes !ig" #"A$
People Processing Possession Processing
Mental StimulusProcessing
InformationProcessing
(directed at intangible
assets)
e
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Imp%ications o2 Service Processes."/ See8in3 E22iciency 1ay =ower Satis2action
Processes determine how services are created/deliveredprocess change may affect customer satisfaction
Imposing new processes on customers, especiallyreplacing people by machines, may cause dissatisfaction
9ew processes that improve efficiency by cutting costsmay hurt service /uality
est new processes deliver benefits desired by customers
!aster Simpler
More conveniently
*ustomers may need to be educated about newprocedures and how to use them
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Imp%ications o2 Service Processes:./ Desi3nin3 the Service #actory
People-processing servicesrequire customers to visit theservice factory, so!
.hin+ of facility as a :stage; for service
performance 3esign process around customer
*hoose convenient location
*reate pleasing appearance, avoidunwanted noises, smells
*onsider customer needs--info,par+ing, food, toilets, etc"
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Imp%ications o2 Service Processes:.0/ Eva%uatin3 5%ternative De%ivery *hanne%s
"or possession-processing, mental-stimulus processing, orinformation processing services, alternatives include!
#" *ustomers come to the service factory
%" *ustomers come to a retail office
'" Service employees visit customer6s home or wor+place
?" usiness is conducted at arm6s length through
- physical channels e"g", mail, courier service$ - electronic channels e"g", phone, fa, email, Beb site$
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Imp%ications o2 Service Processes:.4/ a%ancin3 Demand and *apacity
#hen capacity to serve islimited and demand varieswidely, problems arise becauseservice output can$t be stored!
#" If demand is high and eceedssupply, business may be lost
%"If demand is low, productivecapacity is wasted
Potential solutions!- Manage demand- Manage capacity
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Imp%ications o2 Service Processes:.-/ 5pp%yin3 In2ormation (echno%o3y
%ll services can benefit from &',but mental-stimulus processingand information-processingservices have the most to gain!
1emote delivery of information-based services :anywhere,anytime;
9ew service features throughwebsites, email, and internet
e"g", information, reservations$More opportunities for self-service 9ew types of services
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Imp%ications o2 Service Processes:.)/ Inc%udin3 Peop%e as Part o2 the Product
&nvolvement in servicedelivery often entailscontact with other people
Managers should beconcerned about employees6appearance, social s+ills,technical s+ills
5ther customers may enhance
or detract from serviceeperience--need to managecustomer behavior
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The Services!ar%etin& !i.
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E%ements o2 (he Services 1ar8etin3 1i>:@PsA vs(the (raditiona% 4PsA
'ethin%in& the ori&inal s
)roduct elements
)lace and time )romotion and education
)rice and other user outlays
A++in& Three Ne) Elements
)hysical environment
)rocess
)eople
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(he @Ps:."/ Product E%ements
%ll %spects of )ervice Performance that *reate +alue
*ore product featuresboth tangible and intangibleelements
undle of supplementary service elements
)erformance levels relative to competition
enefits delivered to customers customers don6t buy ahotel room, they buy a good night6s sleep$
(uarantees
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(he @Ps:./ P%ace and (ime
elivery ecisions! #here, #hen, and ow
(eographic locations served
Service schedules
)hysical channels
=lectronic channels
*ustomer control and convenience
*hannel partners4intermediaries
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(he @Ps:.0/ Promotion and Education
&nforming, Educating, Persuading, and .eminding *ustomersMar+eting communication tools
media elements print, broadcast, outdoor, retail, Internet, etc"$ personal selling, customer service sales promotion publicity4)1
Imagery and recognition branding corporate design
*ontent information, advice persuasive messages customer education4training
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(he @Ps:.4/ Price and Other User Out%ays
ar0eters ust .ecogni1e that *ustomer 2utlays &nvolveore than the Price Paid to )eller
Tra+itional ricin& Tas%s
Selling price, discounts, premiums
Margins for intermediaries if any$
*redit terms
+entify an+ !inimi3e 4ther Costs ncurre+ by 5sers
0dditional monetary costs associated with service usage e"g", travel toservice location, par+ing, phone, babysitting,etc"$
.ime ependitures, especially waiting
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(he @Ps:.-/ Physica% Environment
esigning the )ervicescape and providing tangibleevidence of service performances
*reate and maintaining physical appearances buildings4landscaping interior design4furnishings vehicles4e/uipment staff grooming4clothing sounds and smells other tangibles
Select tangible metaphors for use in mar+etingcommunications
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@Ps:.)/ Process
ethod and )equence in )ervice *reation and elivery
3esign of activity flows
9umber and se/uence of actions for customers )roviders of value chain components
9ature of customer involvement
1ole of contact personnel
1ole of technology, degree of automation
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(he @Ps:.@/ Peop%e
anaging the uman )ide of the Enterprise
.he right customer-contact employees performing tas+s welljob design recruiting4selection
trainingmotivation evaluation4rewards empowerment4teamwor+
.he right customers for the firm6s mission fit well with product4processes4corporate goals appreciate benefits and value offered possess or can be educated to have$ needed s+ills co-production$ firm is able to manage customer behavior
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1ana3in3 the @Ps $eBuires *o%%aboration between1ar8etin3, Operations, and H$ #unctions !ig" #"@$
*ustomers
Operations
1ana3ement 1ar8etin3
1ana3ement
Human $esources
1ana3ement