service marketing - overview of services

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    SERVICE

    MARKETING

    MODULE COORDINATOR:

    MS PETULA WHITE

    OFFICE: Building 5C

    E-MAIL: [email protected]

    OVERVIEW OF SERVICES

    mailto:[email protected]:[email protected]
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    Specific Objectives: At the end of the lesson students should be

    able to explain the :

    Basic Marketing Concepts & Philosophy Customer Satisfaction/Value

    Reason why Services Marketing is important

    Concept of & Classification of services

    Basic differences between goods andservices and the resulting challenges andstrategies for service businesses

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    MARKETING ORIENTATION

    Production, Product, Selling, Marketing,Societal marketing Concepts

    Marketing concept takes an outside-inperspective.

    It starts with a well defined market,focuses on customer needs, coordinates

    all the marketing activities affectingcustomers, and makes profits by creatinglong-term customer relationships basedon customer value and satisfaction.

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    CUSTOMER SATISFACTION Satisfaction a

    persons feelings ofpleasure or

    disappointmentresulting fromcomparing a productsperceived performanceto his/her expectations

    Result - satisfied,dissatisfied, ordelighted customer

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    CUSTOMER VALUE Customer perceived

    value the differencebetween customers

    evaluation of all thebenefits and all thecosts of an offeringrelative to those ofcompeting offers

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    CUSTOMER VALUE Total customer cost the

    bundle of costs (money, effort,time) customers expect to incur

    in evaluating, obtaining, usingand disposing of an offering

    Total customer value theperceived monetary value ofthe benefits (economic,functional, psychological)customers expect

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    Customer Satisfaction/

    Customer Value Customer Value

    Marketing a principle of

    enlightened marketing thatholds that a companyshould put most of itsresources into customervalue-building marketing

    investments eg. productquality improvement vsone-shot sales promotion

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    What is a Service? Servicesactivities, benefits, or

    satisfactions offered for sale that are

    essentially intangible and do not result in theownership of anything. Its production may ormay not be tied to a physical product. (Kotler)

    Servicesare acts or performances thatcreate benefits for customers by bringingabout a desired change in or on behalf of therecipient (Lovelock & Wright)

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    What is a Service? Services- are originally intangible and

    relatively quickly perishable activities whose

    buying, which does not lead to materialpossession, takes place in an interactiveprocess aimed at creating customersatisfaction (Kasper, Gabbott, Helsdingen)

    Servicesare deeds, efforts orperformances (Hoffman & Bateson)

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    What are Services? Service Sectorthe portion of a nations

    economy represented by services of all

    kinds, including those offered by public andnon-profit organisations

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    Classification of Services(Fisk & Tansuhaj, 1985)

    Financial Services

    Health Care Services

    Professional Services Hospitality, Travel &

    Tourism Services

    Sports, Arts and

    Entertainment Services Telecommunication

    Services

    Educational & ResearchServices

    Channel, PhysicalDistribution, Rental &Leasing Services

    Personal, Repair &Maintenance Services

    Governmental, Quasi-Governmental &Nonprofit services

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    What are Services? Service Industries and companies

    include those industries and companies

    typically classified within the service sectorwhose core product is a service. Eg. AirJamaica (transportation), The Jamaica

    Pegasus (lodging), UHWI (health care),Mayberry Investments (financial)

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    What are Services? Services as Products represent a wide range

    ofintangible product offerings that customer

    value and pay for in the marketplace. Serviceproducts are sold by service companies and nonservice companies such as manufacturers andtechnology companies.

    Eg. Pharmacies providing consultancy andprescription delivery services; Hewlett Packardproviding business consultancy

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    What are Services? Customer Service is a critical aspect of

    what we mean by service. Customer

    service is the service provided in support ofa companys core products. It can beoffered on-site, via telephone or via the

    internet. Some companies operate customerservice call centers.

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    What are Services? Derived Service it is a view that all products

    and physical goods are valued for the services

    they provide. It suggests that the value derivedfrom physical goods is really the serviceprovided by the good, not the good itself.

    Eg. Pharmaceutical provides medical services, a

    razor provides barbering services andcomputers provide information and datamanipulation services

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    Service Continuum The Scale of Market Entities this concept

    provides another way of looking at the differencesbetween goods & services.

    The scale displays a range of products along acontinuum based on their degree of tangibility

    Pure goods are tangible dominant

    Pure services are intangible dominant Businesses e.g. fast foods or airlines, which contain

    both goods & services components fall in themiddle of the continuum.

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    Products/Services Continuum

    PureTangible

    Good

    PureService

    Soap

    Tangible GoodWith

    Accompanying

    Services

    Auto WithAccompanying

    RepairServices

    HybridOffer

    Restaurant

    ServiceWith

    Accompanying

    Minor Goods

    Airline TripWith

    AccompanyingSnacks

    Doctors

    Exam

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    Tangibility Spectrum

    TangibleDominant

    Intangible

    Dominant

    SaltSoft Drinks

    Detergents

    Automobiles

    Cosmetics

    AdvertisingAgencies

    AirlinesInvestment

    Management

    ConsultingTeaching

    Fast-foodOutlets

    Fast-foodOutlets

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    WHY STUDY SERVICES?1. Growth of global service economy

    (profit & nonprofit) are now dominating global

    economies contributing to GDP a change in perspective from the industrial

    management model (location, sales promotion &advertising drives sales revenue) to a market-focused model (where the focus is to serve thecustomer & to support the front-line employees).

    Increased competitiveness of service industries sincethe 1980s is forcing many service industries to becompetitive adopt commercial principles

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    WHY STUDY SERVICES?2. Growth of global service labour force

    contributing to employment

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    WHY STUDY SERVICES?

    Source: World Fact Book 2009

    Country GDP (%) Employment (%)

    USA 76.9 76.8

    UK 75.0 80.4Canada 69.6 79.0

    Bahamas 90.0 90.0

    Jamaica 64.7 64.0

    Cuba 74.8 60.6

    China 40.5 33.2

    India 62.5 34.0

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    WHY STUDY SERVICES?

    3. Emerging service sectors e-service(s)

    4. Importance of developing sustainable

    services marketing business practices eco-efficiency, environmental cost leadership,

    beyond compliance leadership, eco-branding

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    EVOLVING SERVICE ENVIRONMENT/

    TRENDS IN THE SERVICE SECTOR Government policies

    Less regulated markets increased competition

    eg. Banking, telecommunications, universities Privatization Utility companies

    New agreements on Trade in Services (GATS)

    Movement of services across geographicborders are now being facilitated throughseveral global and regional tradeagreements (NAFTA, EU, CSM)

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    EVOLVING SERVICE ENVIRONMENT/

    TRENDS IN THE SERVICE SECTOR

    Social changes

    More people short of time childcare,

    house cleaning, laundry, food preparation Increased desire to buy experiences vs

    things more disposable income (vacation,travel, wellness

    Rising ownership of computers/mobiledevices access services across the world

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    EVOLVING SERVICE

    ENVIRONMENT Business trends

    Marketing emphasis on nonprofits Hewlett Packard, Xerox, Ford, GE, uses what was

    once supplementary services as profit-seekingservices for eg. Consultation, maintenance &repair, delivery & installation, training

    Relaxation of professional association

    standards relax/remove ban on advertising/promotional

    activities eg. Lawyers, doctors, accountants,architects

    Growth in franchising

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    EVOLVING SERVICE

    ENVIRONMENT Advances in information technology

    Convergence of computers and

    telecommunications Miniaturization creates more compact mobile

    equipment

    Wireless networking

    Growth of the internet

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    EVOLVING SERVICE

    ENVIRONMENT Internationalisation/globalisation

    More services are being delivered throughnational and global chains

    Domestic airlines have extended intoforeign route networks, hotels (ritz), foodchains (TGIF), body shop etc

    Increased international travel

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    CLASSIFICATION OF SERVICES

    InstrumentalService

    Service is performedby others to achievegoals without directinvolvement of theconsumer in thetask. e.g. hiring agardener

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    CLASSIFICATION OF SERVICES Consummatory

    Service

    The consumer isdirectly involved andis immediatelygratified by serviceperformed. e.g.going to the moviesor on a cruise

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    SERVICE CHARACTERISTICS INTANGIBILITY

    VARIABILITY

    INSEPARABILITY

    PERISHABILITY

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    INTANGIBILITY Intangibility a service

    cannot be touched or sensed in

    the same manner as physicalgoods can

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    INTANGIBILITY Challenges

    Lack of service inventories,

    Lack of patent protection, Difficulty in displaying, communicating

    services

    Difficulty in pricing services

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    INTANGIBILITY(contd)

    Solutions to the challenges ofIntangibility:

    Use of tangible clues Use of personal information, sources,references, word-of-mouth

    (testimonials) Creation of a strong organizationalimage (service brand)

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    INSEPARABILITY(contd)

    Inseparability/Simultaneityservices cannot be separated

    from their providers whether aperson/device

    - they are produced andconsumed at the same time

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    INSEPARABILITY(contd)

    Challenge

    Requires physical connection of

    service provider to the service Employees affect the service

    outcome

    Special challenges in Massproduction of Services offeringservices to a geographicallywidespread target market

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    INSEPARABILITY(contd)Challenge

    Involvement of customer and othercustomers in the production process

    requires other considerations Design environment to accommodate

    the customer

    Difficulty in maintaining fixed scheduleswhich can affect level of efficiency

    Effect of customer behaviour on serviceoutcome (controlling negative

    behaviour)

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    INSEPARABILITY(contd)

    Solutions to the challenges ofInseparability

    Proper selection & training of serviceproviders

    Consumer management

    Use of Multi-sitelocations/enhancethrough technology

    Effective Service recovery strategies

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    VARIABILITY3. Heterogeneity/Variability

    variation in quality from one

    service transaction to the next.Service may vary depending onthe who, where, when and howof the service

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    VARIABILITYChallenges: Service delivery and customer satisfaction

    depend on employee actions It is very difficult to standardize services

    Service quality depends on manyuncontrollable factors

    There is no sure knowledge that theservice delivered matches what wasplanned and promoted

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    VARIABILITY(contd)

    Solutions to the challenges ofVariability

    Strategy of Standardization Requires careful selection of personnel and

    extensive training

    Automation of services where possible

    Utilize quality monitoring tools Flowcharts and Service blueprints, Control

    charts and Cause & Effect charts

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    VARIABILITY(contd)

    Solutions to the challenges ofVariability

    Strategy of Customization

    Requires modifying service for eachindividual (customising)

    However, customers may be unwillingto pay extra for customisation (it maytake extra time for service delivery)

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    PERISHABILITY 4. Perishability services

    cannot be stored or their

    unused capacity cannot bereserved, inventoried for futureuse. Services are timesensitive.

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    PERISHABILITYChallenges: Difficulty matching supply & demand

    Long waiting periods whendemand is high

    Idle service in times of low

    demand Services cannot be returned or resold

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    PERISHABILITY(contd)

    Solutions to the challenges ofPerishability:

    Demand Strategy Creative pricing

    Reservation systems

    Developing complementary servicesand nonpeak demand

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    PERISHABILITY(contd)

    Solutions to the challenges ofPerishability(contd):

    Supply Strategy Utilise part-time employees,

    Capacity sharing,

    Utilise third parties, Increase customer participation,

    Planned expansion

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    Services are Different

    Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing,

    Journal of Marketing49 (Spring 1985): 33-46.

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    The SERVUCTION MODEL A Model used to illustrate the factors that

    influence the service experience, including

    elements that are visible to the Customer andthose that are invisible.

    Thevisible part consists of 3 parts1. The inanimate environment (physical evidence)

    2. Contact personnel/service providers3. Other Customers

    Theinvisible part consists of the back office &the firms systems e.g. processes, rules, policies

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    The Services Marketing Triangle

    InternalMarketing

    Interactive Marketing

    ExternalMarketing

    Company(Management)

    CustomersEmployees

    enabling thepromise

    delivering the promise

    setting thepromise

    Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

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    WHATS NEXT? SERVICE MIX STRATEGY &

    POSITIONING