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Chapter 1 - introduction to services
- 1. Introduction to Services… Stanley S. Rodrick 1
- 2. What are Services??? Services are a combination of deeds, processes, and performances which may or may not produce final tangible outcome and do not result to any transfer of ownership. 2
- 3. Introduction to Services??? Services are deeds, processes and performance Intangible, but may have a tangible component Generally produced and consumed at the same time 3
- 4. Challenges to Services… Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image Motivating and sustaining employee commitment Coordinating marketing, operations and human resource efforts Setting prices Standardization versus personalization 4
- 5. Examples of Service Industries Health Care hospital, medical practice, dentistry, eye care Professional Services accounting, legal, architectural Financial Services banking, investment advising, insurance Hospitality restaurant, hotel/motel, bed & breakfast, ski resort, rafting Travel airlines, travel agencies, theme park Others: hair styling, pest control, plumbing, lawn maintenance, counseling services, health club 5
- 6. Tangibility Spectrum All tangible goods have some intangible services, while all services include some tangible goods. Hence some products are tangible dominant, while some are intangible dominant and there are some products which fall in the middle. 6
- 7. Tangibility Spectrum Salt Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets Intangible Dominant Tangible Dominant Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching 7
- 8. Percent of U.S. Labor Force by Industry 80 70 60 Percent of GDP 50 40 30 20 10 0 Services 1929 1948 1969 1977 1984 1996 Manufacturing Mining & Agriculture Year Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39. 8
- 9. Percent of U.S. Labor Force by Industry 80 Percent of GDP 70 60 50 40 30 20 10 0 Services 1948 1959 1967 1977 1987 1996 Manufacturing Year Mining & Agriculture 9
- 10. Industries in Bangladesh 10
- 11. Why Services Marketing??? The growth of the services industries across the world. Services marketing is different. Because of the nature of the services, it requires special focus. Shift in the paradigm of marketing studies is required due to the very nature of the services concerns. 11
- 12. Differences in Goods & Services… Intangibility: Because services are performances, or actions rather than objects, they cannot be seen, felt, tasted or touched in the same manner that we can sense tangible goods. Resulting marketing implications: Intangibility presents several marketing challenges: a) Services cannot be inventoried therefore difficult to manage fluctuation of demand, b) Services cannot be easily patented and new service concepts can easily be copied c) Services cannot be easily displayed or communicated to the customers, therefore the quality of the services is difficult to demonstrate. d) Pricing is difficult. 12
- 13. Differences in Goods & Services… • Heterogeneity: Because services are performances, frequently produced by humans, no two services will be precisely alike. Again, no two customers are precisely alike. Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted 13
- 14. Differences in Goods & Services… Simultaneous Production and Consumption : whereas most goods are produced first and then sold and consumed, most services are sold first and then produced and consumed simultaneously. Because of the simultaneous production and consumption service producers find themselves playing a role of the product itself and as an essential ingredient in the service experience for the consumers. Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult 14
- 15. Differences in Goods & Services… • Perishability: Refers to the fact that services cannot be saved, stored, resold, or returned. It is difficult to synchronize supply and demand with services Services cannot be returned or resold 15
- 16. The Services Marketing Triangle Company (Management) Internal External Marketing Marketing “enabling the promise” “setting the promise” Employees Interactive Marketing Customers “delivering the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler 16
- 17. Services Marketing Mix: 7 Ps of Marketing Traditional Marketing Mix Expanded Mix for Services: 7 Ps Building Customer Relationships Through People , Processes , and Physical Evidence Ways to Use the 7 Ps 17
- 18. Expanded Mix for Services -- the 7 Ps Product Price Place Promotion People Process Physical Evidence 18
- 19. Expanded Marketing Mix for Services People: All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely the firm’s personnel, the customers and other customers in the service environment. Process: The actual procedures, mechanisms, and flow of activities by which the service is delivered – the service delivery and operating systems. 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. 19
- 20. Expanded Marketing Mix for Services PRODUCT PLACE PROMOTION PRICE Physical good Channel type Promotion Flexibility features blend Quality level Exposure Salespeople Price level Accessories Intermediaries Advertising Terms Packaging Outlet location Sales Differentiation promotion Warranties Transportation Publicity Allowances Product lines Storage Branding 20
- 21. Expanded Marketing Mix for Services PEOPLE PHYSICAL PROCESS EVIDENCE Employees Facility design Flow of activities Customers Equipment Number of steps Communicating Signage Level of customer culture and values involvement Employee research Employee dress Other tangibles 21
- 22. Expanded Marketing Mix for Services 22
- 23. Ways to use the 7Ps Overall Strategic Specific Service Assessment Implementation How effective is a firm’s Who is the customer? services marketing mix? What is the service? Is the mix well-aligned with How effectively does the overall vision and strategy? services marketing mix for a What are the strengths and service communicate its benefits and quality? weaknesses in terms of the What changes/ 7 Ps? improvements are needed? 23
- 24. The Beginning of the Chapters… 24