The Satisfaction-Loyalty CurveChapter 1
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
Chapter One – Learning Objectives
Differentiate between services marketing and goods marketing
Acquire introductory knowledge of the 8Ps of services marketing
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
What Are Services?
Defining Services
Services involve a form of rental and non-ownership
Meaning access and usage fees, for a defined period of time, instead of buying it outright
Services non-ownership framework
Rental-good services — right to a physical good
Defined space and place rentals — private space shared with other customers
Labour and expertise rentals — hire people
Access to shared physical environments — share use of an environment, not private
Systems and networks: access & usage — rent right to participate
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
Defining Services
Services are economic activities offered by one party to another, most commonly employing time-based performances to bring about desired results in recipients themselves or in objects or other assets for which purchasers have responsibility.
In exchange for their money, time and effort, service customers expect to obtain values from access to goods, labour, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
Defining Services
Service Product
A service product comprises all the elements of the service performance, both tangible and intangible, that creates value for customers
Businesses sell and market the core service product
This is the marketing of services
Customer Service
Customer support of the core product after it is sold
Marketing through service
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
Importance of Services
Service sector is growing rapidly
Most new jobs are generated by services
Powerful forces are transforming service markets
Reshaping of demand, supply, competition, customers
Personal competitive advantage
Why Study Services?
Contribution of Service Industries to Canadian Gross Domestic Product, 2005
(Fig 1.1)
Estimated Size of Service Sector in
Selected Countries (Fig 1.2)
Challenges Posed by Services
Differences, Implications, and
Difference
manage capacity
Differences, Implications, and
Implications
service experience
speed of delivery; offer
Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services (Fig 1.7)
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
NAICS
Replacing the SIC system – Standard Industrial Classification
Better understanding of service dominated economies
Some examples of new classifications:
Diet and Weight Reducing Centres
Management Consulting Services
Temporary Help Services
Differentiate between services and goods
Marketing tasks in services differ from the manufacturing sector
Eight common differences :
Services difficult to visualize and understand
Customers may be involved in co-production
People may be part of the service experience
Operational inputs and outputs tend to vary widely
Time factor assumes great importance
Distribution through nonphysical channels
What are marketing implications?
The 8 Ps of Services Marketing
Marketing is the only function to bring operating revenues into a business; all other functions are cost centres
The “8Ps” of services marketing are needed to create strategies for meeting customer needs profitably in a competitive marketplace
Traditional – product elements, place and time, price and other user outlays, promotion and educations
Extended by service delivery – physical environment, processes, people, productivity and quality
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
Expanded Marketing Mix
The 8 Ps of Services Marketing
Product Elements (Chapter 3)
Price and Other User Outlays (Chapter 5)
Promotion and Education (Chapter 6)
Process (Chapter 8)
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
The 8Ps of Services Marketing:
(1) Product Elements
Core product responds to customer’s primary need
Help customers use core product through array of supplementary service elements
Creates a service concept that offers value to customers and satisfies better than competitors
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
The 8Ps of Services Marketing:
(2) Place and Time
Geographic locations served
The 8Ps of Services Marketing:
(3) Price and Other User Outlays
Traditional pricing tasks:
Credit terms
Service marketers must recognize that customer outlays involve more than price paid to seller
Identify and minimize other costs incurred by users:
Costs associated with service usage (e.g., travel to service location, parking, phone, babysitting, etc.)
Time expenditures, especially waiting
Negative sensory experiences
The 8Ps of Services Marketing:
(4) Promotion and Education
Marketing communication tools
Personal selling, customer service
The 8Ps of Services Marketing:
(5) Process
How firm does things may be as important as what it does
Customers often 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
Nature of customer involvement
Role of contact personnel
Badly designed processes waste time, create poor experiences, and disappoint customers
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
The 8Ps of Services Marketing:
(6) Physical Environment
Create and maintain physical appearances
Buildings/landscaping
Other tangibles
Manage physical cues carefully— can have profound impact on customer impressions
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
The 8Ps of Services Marketing:
(7) People
Need the right customer-contact employees, performing tasks well
Job design
Contribute positively to experience of other customers
Possess—or can be trained to have— needed skills (co-production)
Can shape customer roles and manage customer behaviour
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
The 8Ps of Services Marketing:
(8) Productivity and Quality
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 simultaneously—technology often the key
Technology-based innovations have potential to create high payoffs
But, must be user friendly and deliver valued customer benefits
Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 1- *
Summary – Chapter 1
Rental and non-ownership of goods
Time based exchange of economic activity performed in exchange for money, time and effort
Services are transforming markets and experiencing rapid growth
The differences between services and goods marketing focus on intangibility, people and time
8Ps of services marketing
2. Place and Time 6. Physical Environment
3. Price and Other User Outlays 7. People
4. Promotion and Education 8. Productivity and Quality