INTRODUCTION TO

SERVICES

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WHY STUDY SERVICES?

!!Services, with a share of 48.4 percent of total GDP, contributed 3.3 percentage points to the total GDP with a growth of 8.3 percent from 3.8 percent. Major contributors to the sectors growth were Trade, Private Services and Finance.

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HISTORICAL VIEW
!!18th and 19th Century
!!Adam Smiths Wealth of Nations Dierent from goods because they are perishable !!Productive created goods and unproductive labor- created services

!!Consumption cannot be separated from production, services are intangible (Say 1803)

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HISTORICAL VIEW
!!Today
!!Production and consumption are inseparable

!!Not all services are perishable

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NEW PERSPECTIVES
!! Marketing tasks for services dier from those involved in selling goods and transferring ownership !! Benets without transfer of ownership

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5 CATEGORIES

NONOWNERSHIP
1. Rented goods services
!! Enable customers to obtain temporary right to exclusive use of a physical good that they prefer not to own !! Example: bangka rental to Bora, Gowns for Rent

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5 CATEGORIES

NONOWNERSHIP
2. Dened space and place rentals
!! Use of dened portion of a larger space in a building, vehicle, or other area. !! Sharing use with other customers !! End itself or means to an end

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5 CATEGORIES

NONOWNERSHIP
3. Labor and expertise rental
!! Hire other people to work that they do not want to perform or unable to do !! Ex: Lawyer, Accountant

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5 CATEGORIES

NONOWNERSHIP
4. Access to shared physical environments
!! Indoor or outdoor

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5 CATEGORIES

NONOWNERSHIP
5. Systems and Networks: Access and Usage
!! Rent the right to participate in a specied network !! Providers create a menu of terms for access and use in response to varying customer needs and abilities to pay

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IMPLICATIONS
!!Markets exist for renting durable goods rather than selling them !!Renting portions of larger physical entity (e.g., oce space, apartment) can form basis for service !!Customers more closely engaged with service suppliers !!Time plays central role in most services !!Customer choice criteria may dier between rentals and outright purchases !!Services oer opportunities for resource sharing

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WHAT ARE SERVICES?

!!Are economic activities oered by one party to another
!!Most commonly employ time-based performances to bring about desired results in:
!! recipients themselves !! objects or other assets for which purchasers have responsibility

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WHAT ARE SERVICES?

!!In exchange for their money, time, and eort, service customers expect to obtain value from
!!Access to goods, labor, facilities, environments, professional skills, networks, and systems !!But they do not normally take ownership of any of the physical elements involved

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WHAT ARE SERVICES?

!!deeds, processes or performances !!All economic activities whose output is not a physical product or construction !!Generally consumed at the time it is produced and provides added values in forms(convenience, amusement , timeliness, comfort, or health) that are generally intangible concerns of its purchaser.
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SERVICE PRODUCTS VS. CS VS. ASS

!!A rms market oerings are divided into core product elements and supplementary service elements !!Is everyone in service? Need to distinguish between: !!Supplementary services
!!installation, consultation, nance, shipping, maintenance, upgrades and others
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!! Marketing of services !! Marketing goods through added-value service

SERVICE PRODUCTS VS. CS VS. ASS

!!Good service increases the value of a core physical good !!After-sales service is as important as presales service for many physical goods !!Manufacturing rms are reformulating and enhancing existing added-value services to market them as stand-alone core products

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CHALLENGES POSTED BY SERVICES

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8 DIFFERENCES
1.! Most service products cannot be inventoried
!! Transitory and perishable

2.! Intangible elements usually dominate value creation

!! Physical and intangible elements

3.! Services are often dicult to visualize and understand

!! Dicult to think in advance

4.! Customers may be involved in co-production

!! Cooperate with service personnel (fastfood, salon, ATM)
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8 DIFFERENCES
5.! People may be part of the service experience
!! Employees other customers may aect

6.! Operational inputs and outputs tend to vary more widely

!! Simultaneous production and consumption

7.! The time factor often assumes great importance

!! Time-sensitive customes

8.! Distribution may take place through nonphysical channel

!! Example: bank
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Dierence !! Most service product cannot be inventoried

Implications !! Customers may be turned away !! Harder to evaluate service and distinguish from competitors !! Greater risk and uncertainty perceived !! Interaction between customer and provider; but poor task execution could aect satisfaction

Marketing-Related Tasks !! Use pricing, promotion, and reservations to smooth demand; work with ops to manage capacity !! Emphasize physical clues, employ metaphors and vivid images in advertising !! Sales personnel, educate customers on making good choices; oer guarantees !! Develop user-friendly equipment, facilities, and systems; train customers, provide good support

!! Intangible elements usually dominate value creation !! Services are often dicult to visualize and understand !! Customers may be involved in coproduction

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Dierence
!! People may be part of service experience

Implications

Marketing-Related Tasks

!! Behavior of service !! Recruit, train employees to personnel and customers reinforce service concept can aect satisfaction !! Shape customer behavior

!! Operational inputs and !! Hard to maintain quality, !! Redesign for simplicity and consistency, reliability outputs tend to vary failure proong more widely !! Dicult to shield !! Institute good service customers from failures recovery procedures !! Time factor often assumes great importance !! Distribution may take place through nonphysical channels !! Time is money; customers want service at convenient times !! Find ways to compete on speed of delivery; oer extended hours

!! Electronic channels or !! Create user-friendly, voice telecommunications secure websites and free access by telephone

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TANGIBILITY SPECTRUM
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EXPANDED MARKETING MIX FOR SERVICES

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!!Marketing can be viewed as:

!!A strategic and competitive thrust pursued by top management !!A set of functional activities performed by line managers !!A customer-driven orientation for the entire organization

!!The 8Ps of services marketing are needed to create viable strategies for meeting customer needs protably in a competitive marketplace
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8PS OF SERVICES
!!4Ps

+
!!Process !!Physical Environment !!People !!Productivity and Quality
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P1 - PRODUCT ELEMENTS
!!Embrace all aspects of service performance that create value !!Core product responds to customers primary need !!Array of supplementary service elements
!!Help customer use core product eectively !!Add value through useful enhancements

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P1 - PRODUCT ELEMENTS
!!Planning marketing mix begins with creating a service concept that:
!!Will oer value to target customers !!Satisfy their needs better than competing alternatives

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P2 PLACE AND TIME

!!Delivery decisions: Where, When, How !!Geographic locations served !!Service schedules !!Physical channels !!Electronic channels !!Customer control and convenience !!Channel partners/intermediaries
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P3 PRICE AND OUTLAYS

!!Marketers must recognize that customer outlays involve more than price paid to seller !!Traditional pricing tasks:
!!Selling price, discounts, premiums !!Margins for intermediaries (if any) !!Credit terms

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P4 PROMOTION AND EDUCATION

!!Informing, educating, persuading, reminding customers !!Marketing communication tools
!!Media elements (print, broadcast, outdoor, retail, the Internet, etc.) !!Personal selling, customer service !!Sales promotion !!Publicity/PR
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P4 PROMOTION AND EDUCATION

!!Imagery and recognition
!!Branding !!Corporate design

!!Content
!!Information, advice !!Persuasive messages !!Customer education/training

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P5 PROCESS
!!How rm does things may be as important as what it does !!Customers often actively involved in processes, especially when acting as coproducers of service

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P5 PROCESS

!!Process involves choices of method and sequence in service creation and delivery
!!Design of activity ows !!Number and sequence of actions for customers !!Nature of customer involvement !!Role of contact personnel !!Role of technology, degree of automation

!!Badly designed processes waste time, create poor experiences, and disappoint customers
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P6 PHYSICAL EVIDENCE
!!Design servicescape and provide tangible evidence of service performances !!Create and maintain physical appearances
!!Buildings/landscaping !!Interior design/furnishings !!Vehicles/equipment !!Sta grooming/clothing !!Sounds and smells !!Other tangibles
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P6 PHYSICAL EVIDENCE
!!Manage physical cues carefully can have profound impact on customer impressions

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P7 PEOPLE
!!Interactions between customers and contact personnel strongly inuence customer perceptions of service quality !!The right customer-contact employees performing tasks well
!!Job design !!Recruiting !!Training !!Motivation

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P7 PEOPLE
!!The right customers for rms mission
!!Contribute positively to experience of other customers !!Possessor can be trained to have needed skills (co-production) !!Can shape customer roles and manage customer behavior

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P8 PRODUCTIVITY AND QUALITY

!!Productivity and quality must work hand in hand !!Improving productivity key to reducing costs !!Improving and maintaining quality essential for building customer satisfaction and loyalty
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P8 PRODUCTIVITY AND QUALITY

!!Ideally, strategies should be sought to improve both productivity and quality simultaneouslytechnology often the key
!!Technology-based innovations have potential to create high payos !!But, must be user friendly and deliver valued customer benets
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THANK YOU

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