SERVICE MARKETING

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OVERVIEW OF SERVICES
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LECTURE NOTES

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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

Why Services Marketing is important Concept of & Classification of services Characteristics of services and strategies
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MARKETING ORIENTATION

Production, Product, Selling, Marketing, Societal marketing Concepts Marketing concept takes an outside-in perspective. It starts with a well defined market, focuses on customer needs, coordinates all the marketing activities affecting customers, and makes profits by creating long-term customer relationships based on customer value and satisfaction.
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CUSTOMER SATISFACTION

Satisfaction a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance to his/her expectations Result - satisfied, dissatisfied, or delighted customer
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Satisfied Customers

CUSTOMER VALUE

Customer perceived value the difference between customers evaluation of all the benefits and all the costs of an offering relative to those of competing offers
Total customer value the perceived monetary value of the benefits (economic, functional, psychological) customers expect
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CUSTOMER VALUE

Total customer cost the bundle of costs (money, effort, time) customers expect to incur in evaluating, obtaining, using and disposing of an offering
Customer Value Marketing a principle of enlightened marketing that holds that a company should put most of its resources into customer value-building marketing investments eg. product quality improvement vs one-shot sales promotion
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THE SEVEN MARKETS

Service Marketing Managers face a number of decisions which vary in importance in different marketplaces:
1. 2. 3. 4. 5. 6.

7.

CONSUMER FMCG/ mass consumer goods BUSINESS larger buyers of goods & services, depend on sales force effectiveness RESELLER retailers / wholesalers / brokers & agents GLOBAL diverse customers, cultures & nationalities NOT-FOR-PROFIT limited purchasing power e.g. charities, foundations INSTITUTIONAL provide goods & services to people in their care with limited purchasing autonomy e.g. hospitals, prisons, schools GOVERNMENTAL largest buyer of products/services, contractual arrangements, lengthy approval process
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BROAD CONCEPT OF PRODUCT

anything a firm offers to customers to satisfy their needs. Includes 10 types of products: 1. EXPERIENCES 2. EVENTS 3. PERSONS 4. PLACES 5. PROPERTIES 6. ORGANIZATIONS 7. INFORMATION 8. IDEAS/ISSUES 9. SERVICES 10. PHYSICAL,TANGIBLE GOODS

EVEN TV NETWORKS REFER TO THEIR SHOWS AS PRODUCT

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What is a Service?

Services activities, benefits, or

satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. Its production may or may not be tied to a physical product. (Kotler)

Services are acts or performances that

create benefits for customers by bringing about a desired change in or on behalf of the recipient (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 material possession, takes place in an interactive process aimed at creating customer satisfaction (Kasper, Gabbott, Helsdingen)

Services are deeds, efforts or

performances (Hoffman & Bateson)

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What are Services?

Service Sector the portion of a nations economy represented by services of all kinds, including those offered by public and non-profit organisations Service Industries and companies include those industries and companies typically classified within the service sector whose core product is a service. Eg. Air Jamaica (transportation), The Hilton (lodging), UHWI (health care), Capital & Credit (financial)
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What are Services?

Services as Products represent a wide range of intangible product offerings that customer value and pay for in the marketplace. Service products are sold by service companies and non service companies such as manufacturers and technology companies. Eg. Pharmacies providing consultancy and prescription delivery services; Hewlett Packard providing 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 of a companys core products. It can be offered on-site, via telephone or via the internet. Some companies operate customer service 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 derived from physical goods is really the service provided by the good, not the good itself. Eg. Pharmaceutical provides medical services, a razor provides barbering services and computers provide information and data manipulation services
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Service Continuum

The Scale of Market Entities this concept

provides another way of looking at the differences between goods & services. The scale displays a range of products along a continuum 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 the middle of the continuum.
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Products, Services, and Experiences

Pure Tangible Good

Tangible Good With Accompanying Services

Hybrid Offer

Service With Accompanying Minor Goods

Pure Service

Soap

Auto With Airline Trip Accompanying Restaurant With Doctors Repair Accompanying Exam Services Snacks

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Tangibility Spectrum
Salt

Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets

Fast-food Outlets

Intangible Dominant

Tangible Dominant

Advertising Agencies Airlines Investment Management Consulting

Teaching 19

The SERVUCTION MODEL

A Model used to illustrate the factors that influence the service experience, including elements that are visible to the Customer and those that are invisible. The visible part consists of 3 parts
1. 2. 3.

The inanimate environment (physical evidence) Contact personnel/service providers Other Customers

The invisible part consists of the back office & the firms systems e.g. processes, rules, policies
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WHY STUDY SERVICES?

Growth in service sector employment e.g. Jamaica Emerging service sectors (profit & nonprofit) are now dominating global economies contributing to GDP The services revolution 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 the customer & to support the front-line employees).

Increased competitiveness of service industries since the 1980s is forcing many service industries to be competitive adopt commercial principles
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WHY STUDY SERVICES?

Country USA UK Canada Jamaica Cuba China India Employment (%) GDP (%) 76.6 79.4 79.5 72.6 77 68.6 60 56.2 51 67.6 28 32.3 23 48.9
Source: World Fact Book 2005 22

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 geographic borders are now being facilitated through several global and regional trade agreements (NAFTA, EU, CSME)
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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/mobile devices 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-seeking services 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

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Growth in franchising

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 through national and global chains Domestic airlines have extended into foreign route networks, hotels (ritz), food chains (TGIF), body shop etc Increased international travel

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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 & Research Services Channel, Physical Distribution, Rental & Leasing Services Personal, Repair & Maintenance Services Governmental, QuasiGovernmental & Nonprofit services
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CLASSIFICATION OF SERVICES

Instrumental Service

Service is performed by others to achieve goals without direct involvement of the consumer in the task. e.g. hiring a

gardener

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CLASSIFICATION OF SERVICES

Consummatory Service

The consumer is directly involved and is immediately gratified by service performed. e.g.

going to the movies or 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 physical goods 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 of Intangibility: Use of tangible clues Use of personal sources of information (testimonials) Creation of a strong organizational image
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INSEPARABILITY

(contd)

Inseparability/Simultaneity services cannot be separated from their providers whether a person/device - they are produced and consumed 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 Mass production of Services offering services to a geographically widespread target market
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INSEPARABILITY

(contd)

Challenge Involvement of customer and other customers in the production process requires other considerations Design environment to accommodate the customer Difficulty in maintaining fixed schedules which can affect level of efficiency Effect of customer behaviour on service outcome (controlling negative behaviour) 37

INSEPARABILITY (contd)

Solutions to the challenges of Inseparability Proper selection & training of service providers Consumer management Use of Multi-site locations
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VARIABILITY
3.

Heterogeneity/Variability variation in quality from one service transaction to the next. Service may vary depending on the who, where, when and how of the service

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VARIABILITY
Challenges: 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 40

VARIABILITY

(contd)

Solutions to the challenges of Variability Strategy of Standardization

Requires careful selection of personnel and extensive training Automation of services where possible
Flowcharts and Service blueprints, Control charts and Cause & Effect charts
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Utilize quality monitoring tools

VARIABILITY

(contd)

Solutions to the challenges of

Variability

Strategy of Customization

Requires modifying service for each individual (customising) However, customers may be unwilling to pay extra for customisation (it may take extra time for service delivery)
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PERISHABILITY

Perishability services cannot be stored or their unused capacity cannot be reserved, inventoried for future use. Services are time sensitive.

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PERISHABILITY
Challenges: Difficulty matching supply & demand Long waiting periods when demand 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 of Perishability: Demand Strategy

Creative pricing Reservation systems Developing complementary services and nonpeak demand

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PERISHABILITY (contd)

Solutions to the challenges of Perishability (contd): Supply Strategy Utilise part-time employees, Capacity sharing, Utilise third parties, Increase customer participation, Planned expansion
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WHATS NEXT?

SERVICE STRATEGY & POSITIONING

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