1
A Note on the
              PowerPoint Slides...




 The lecture slides are not intended to provide
  full outlines or c...
Chapter 1
        Introduction to Services
 What are services?
 Why services marketing?
 Service and Technology
 Chara...
Objectives for Chapter 1:
             Introduction to Services
•   Explain what services are and identify important trend...
Examples of Service Industries

• Health Care
 • hospital, medical practice, dentistry,
   eye care
• Professional Service...
Examples of Service Industries
•   Hospitality
     •   restaurant, hotel/motel, bed & breakfast
     •   ski resort, raft...
Contributions of Service Industries to
   U.S. Gross Domestic Product




                 7
Tangibility Spectrum




         8
Overview:
    Why Services Matter
•   Services dominate U.S. and worldwide
    economies
•   Services are growing dramatic...
Percent of U.S. Labor Force by Industry




                  10
Percent of U.S. Gross Domestic
     Product by Industry




              11
Eight Central Paradoxes of Technological Products




                       12
Comparing Goods and Services




             13
Why do firms focus on Services?

  •   Services can provide higher profit margins
      and growth potential than products
 ...
Why study Services Marketing?
•   Service-based economies
•   Service as a business imperative in manufacturing
    and IT...
What is Service? The Old View


 •   Service is a technical after-sale function that is
     provided by the service depar...
What is Service? The New View
 •   Service includes every interaction between any
     customer and anyone representing th...
Service Can Mean all of These


•   Service as a product
•   Customer service
•   Services as value add for goods
•   Serv...
Characteristics of Services
  Compared to Goods

  Intangibility        Heterogeneity




 Simultaneous
  Production      ...
Implications of Intangibility

•   Services cannot be inventoried
•   Services cannot be easily patented
•   Services cann...
Implications of Heterogeneity

•   Service delivery and customer satisfaction depend
    on employee and customer actions
...
Implications of Simultaneous
Production and Consumption

•   Customers participate in and affect the
    transaction
•   C...
Implications of Perishability

•   It is difficult to synchronize supply and
    demand with services
•   Services cannot b...
Challenges for Services
•   Defining and improving quality
•   Ensuring the delivery of consistent quality
•   Designing an...
Examples of Goods Companies that are
       Expanding into Services



 Boeing                       Kodak




           ...
Where the Money in Manufacturing Is: Services
                            Personal Computers                      Locomoti...
Traditional Marketing Mix
 All elements within the control of the firm that
  communicate the firm’s capabilities and image...
Expanded Mix for Services –The 7 Ps
 Product
 Price
 Place
 Promotion
 People
    All human actors who play a part i...
Expanded Marketing Mix for Services




                 29
Ways to Use the 7 Ps
Overall Strategic                   Specific Service
 Assessment                           Implementat...
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Chp1.Service Mkting,Gumporn.2010

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  • Jerome
    The are 3 main reasons why our program is focusing on services.
    It provides a higher profit margin than tangible products,
    Increases satisfaction and retention,
    Provides a competitive advantage over others.

    I am going to use two examples to illustrate these points.

    The automotive industry has typically been perceived as a manufacturing industry. However,
    after-sale services and parts account for nearly 80% of all revenue opportunities, and more than 50% of the average automobile dealer’s profits
    It is by far the largest creator of shareholder value on a percentage basis. A GM study revealed that $9 billion in after sale revenue produced $2 billion in profits (22% margin). Profits from $150 billion car sales were much lower.
    JD Power and Associates published a report showing a strong correlation between customer satisfaction with after-sale services and customer intent to repurchase the same brand (Lexus and Saturn cars)
    Hyundai’s success is due largely to its differentiation strategy of offering 10 year - 100,000 mile guarantee. The service offering is changing customer’s perception of the brand

    The same can be said about the personal computer industry.
    With the advancement of technology, personal computers are now becoming more and more of a commodity. While 25% of revenue opportunities are in the initial sale, most revenue opportunities are from after-sale.
    Company responsiveness to customer calls is the biggest driver customer satisfaction with its product.
    Dell revolutionized the industry by being the first to offer mass customization of personal computers.

    -------------------------
    Across manufacturing companies, after-sale services and parts contributes about 25% of total revenue, and 40%-50% of all profits
    Services related revenue exceeds first-time product sales by 500% - 2000%
    Retail industry derive largest margins from sale of extended warranties
    It is a program that is designed in response to a business environment that is increasingly moving away from a product orientation to a service-focus
    GE, IBM other good examples.
  • Chp1.Service Mkting,Gumporn.2010

    1. 1. 1
    2. 2. A Note on the PowerPoint Slides...  The lecture slides are not intended to provide full outlines or complete lectures for the chapters, but rather may be used selectively to enhance class sessions. 2
    3. 3. Chapter 1 Introduction to Services  What are services?  Why services marketing?  Service and Technology  Characteristics of Services Compared to Goods  Services Marketing Mix  Staying Focused on the Customer 3
    4. 4. Objectives for Chapter 1: Introduction to Services • Explain what services are and identify important trends in services. • Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating. • Explore the profound impact of technology on service. • Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses. • Introduce the expanded marketing mix for services and the philosophy of customer focus as powerful frameworks and themes that are fundamental to the rest of the text. 4
    5. 5. Examples of Service Industries • Health Care • hospital, medical practice, dentistry, eye care • Professional Services • accounting, legal, architectural • Financial Services • banking, investment advising, insurance 5
    6. 6. Examples of Service Industries • Hospitality • restaurant, hotel/motel, bed & breakfast • ski resort, rafting • Travel • airline, travel agency, theme park • Others • hair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design 6
    7. 7. Contributions of Service Industries to U.S. Gross Domestic Product 7
    8. 8. Tangibility Spectrum 8
    9. 9. Overview: Why Services Matter • Services dominate U.S. and worldwide economies • Services are growing dramatically • Service leads to customer retention and loyalty • Service leads to profits • Services help manufacturing companies differentiate themselves 9
    10. 10. Percent of U.S. Labor Force by Industry 10
    11. 11. Percent of U.S. Gross Domestic Product by Industry 11
    12. 12. Eight Central Paradoxes of Technological Products 12
    13. 13. Comparing Goods and Services 13
    14. 14. Why do firms focus on Services? • Services can provide higher profit margins and growth potential than products • Customer satisfaction and loyalty are driven by service excellence • Services can be used as a differentiation strategy in competitive markets 14
    15. 15. Why study Services Marketing? • Service-based economies • Service as a business imperative in manufacturing and IT • Deregulated industries and professional service needs • Services marketing is different • Service equals profits 15
    16. 16. What is Service? The Old View • Service is a technical after-sale function that is provided by the service department. Old view of service = Customer Service Center Old: Service = wrench time 16
    17. 17. What is Service? The New View • Service includes every interaction between any customer and anyone representing the company, including: Customer 17
    18. 18. Service Can Mean all of These • Service as a product • Customer service • Services as value add for goods • Service embedded in a tangible product 18
    19. 19. Characteristics of Services Compared to Goods Intangibility Heterogeneity Simultaneous Production Perishability and Consumption 19
    20. 20. Implications of Intangibility • Services cannot be inventoried • Services cannot be easily patented • Services cannot be readily displayed or communicated • Pricing is difficult. 20
    21. 21. Implications of Heterogeneity • 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 delivered matches what was planned and promoted 21
    22. 22. Implications of Simultaneous Production and Consumption • Customers participate in and affect the transaction • Customers affect each other • Employees affect the service outcome • Decentralization may be essential • Mass production is difficult 22
    23. 23. Implications of Perishability • It is difficult to synchronize supply and demand with services • Services cannot be returned or resold 23
    24. 24. Challenges for Services • Defining and improving quality • Ensuring the delivery of consistent quality • Designing and testing new services • Communicating and maintaining a consistent image • Accommodating fluctuating demand • Motivating and sustaining employee commitment • Coordinating marketing, operations, and human resource efforts • Setting prices • Finding a balance between standardization versus customization 24
    25. 25. Examples of Goods Companies that are Expanding into Services Boeing Kodak 25
    26. 26. Where the Money in Manufacturing Is: Services Personal Computers Locomotives Automobiles annual cost of total annual cost of rail average annual household PC use: $6,259 operations: $29 billion expenditure: $6,064 The sale of a product accounts 100% network administration other for only a small network yard operations, railroad administration, other finance portion of overall technical support 80% revenues. repair network equipment Providing services insurance 60% nonproductive operations to customers is train operations where the real by end user (downtime, file management, etc.) gas money is. 40% Infrastructure administration freight car services used car purchase 20% technical support locomotive services desktop hardware new car purchase 0% locomotives total expenditure: total expenditure: total expenditure: 5X product costs 21X product costs 5X product costs Source: GartnerGroup, Association of American Railroads, Federal Highway Administration Office of Highway Information Management. (Railroad expenditures are for Class 1 railroads.) 26
    27. 27. Traditional Marketing Mix  All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:  Product  Price  Place  Promotion 27
    28. 28. Expanded Mix for Services –The 7 Ps  Product  Price  Place  Promotion  People  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  The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service.  Process  The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems. 28
    29. 29. Expanded Marketing Mix for Services 29
    30. 30. Ways to Use the 7 Ps Overall Strategic Specific Service Assessment Implementation  Who is the customer?  How effective is a firm’s services marketing mix?  What is the service?  How effectively does the  Is the mix well-aligned with services marketing mix for a overall vision and strategy? service communicate its  What are the strengths and benefits and quality? weaknesses in terms of the  What changes/ improvements 7 Ps? are needed? 30

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