Chapter Goals

To gain an understanding of:

The nature and importance of services
Characteristics of services and their
marketing implications
Issues related to the planning and
marketing of services
The four Rs of services marketing
The relationship marketing approach
The impact of technology in providing
services

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The Nature of Services
regardless of the “product”, there is
a services component to the offerings
of all firms
in some cases, a service is the
principal purpose of the transaction,
as in the rental of a car, a haircut, or
legal services -- we refer to this as the
core service
in others, service is performed in
support of the sale of a tangible
product -- these are referred to as
supplementary services
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 Goods and Services
Continuum
There are two classes of services.
Services that are the main purpose of a
transaction —renting a truck to move.
Services that supplement the sale of a
tangible good — for example, an
information hotline for computer
software.
The focus here is primarily on identifiable,
intangible services that are the main
object of a transaction designed to provide
want-satisfaction to customers;
supplementary services growing in
importance, however. 12 - 4
 The Goods-Services
Continuum

Canned Ready- Auto- Draperies, Rest- Repairs: Air Insurance,

foods made mobiles Carpets aurant auto, house, travel Consulting,
clothes meals landscaping Teaching

MOSTLY GOODS MOSTLY SERVICES

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Importance of
Services
Three-fourths of the Canadian
labour force is employed in
service industries.
Over 70% of the nation’s gross
national product is produced by
services.
From 1986 to 2000, virtually all
new jobs will be in the service
industries.
Huge growth in personal services
as well as business services.
Copyright © 1998 by The McGraw-Hill Companies, Inc.
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Characteristics of
Services
intangibility:
intangibility difficult to sample and to
evaluate
inseparability: difficult to separate
services from the service provider;
mainly direct sales; staff are essential to
the delivery of quality services
heterogeneity:
heterogeneity virtually every service
is different; very difficult to standardize
quality
perishability: those not sold can not be
stored
fluctuating demand: demand for some
services fluctuates by season, or even by
time of day 12 - 7
Strategic Services
Management
intangibility generally makes the
marketing of services a challenge
understanding how people buy
services and the segments that exist
is just as important
knowing more about the value of
customer segments is important --
some are more valuable than others
knowing what they value so that
service levels can be tailored is also
important
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Strategic Product
Implications
service organizations have to plan the
introduction of new services and the
management of the life cycle
the core service can be enhanced
through the addition of supplementary
services, thereby creating added value
the life cycle of services has to be
managed
the branding of a service can be
difficult as the customer often has
nothing tangible to show
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Managing Service Quality
Quality is hard to define, measure, control,
and communicate
Quality is defined by the consumer
It’s important to measure customer
satisfaction with an organization’s service
quality.
Customers see five important components:
Core service must measure up.
Quality of service,
service meeting expectations.
Technical aspects of delivery.
Interaction with people who deliver
service.
Affective dimensions: How customers
feel. 12 - 10
Pricing Services
The characteristics of perishability,
inability to store, and fluctuating
demand for services create pricing
challenges.
• Pricing Strategies include:
• Discount strategies: Cheaper by the week.
• A variable pricing strategy: Kids eat free,
movies cheaper on Tuesdays.
• Price competition.

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Distribution of Services
because most services are tied
directly to a specific service provider,
most have been distributed directly to
customers
with advancing technology, many
firms are now delivering services
through machines
channels of distribution are
necessarily short; some firms use one
agent intermediary, such as insurance,
real estate, and travel agents
some firms use franchises to 12 - 12
 Promotion of Services
customer contact personnel
represent the main channel of
customer communication
service providers must ensure that
each service encounter is a
positive one if customers are to
develop a positive image
many professional service firms are
now permitted to advertise
other elements of the promotional
mix are used, including publicity and
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Four Rs of Service Marketing

 Retention
 Referrals
 Relationships
 Recovery

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The Changing Environment
for Services
The boom in the service economy, reduced
regulation has created an increase in
competition.
Major focus on increased productivity,
efficiency
Work on people aspects of business:
 Education, training programs
Change technology:
 Computer-based technologies used.
Restructure jobs.
 Bottom line: People are key to success!
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Other Considerations in
Marketing Services
Impact of Technology:
Remember, not everyone likes impersonal
technology
Performance Measurement:
Larger firms can use market share, etc.
Customer perceptions are essential.
Prospects for Growth:
It is very likely that services will continue
to take an increasing share of the
consumer dollar.
The use of marketing programs in all
services is expected to increase
considerably. 12 - 16
Future Service
Profitability
Impacted by:
1. Focusing on the right priorities
2. Increasing service quality
3. Investing in problem solving
4. Being fair to customers
5. Investing in leadership development

12 - 17