MC6061

The Fundamentals of Services

Marketing

Week 2
Reasons for studying services (Previous lecture)

Service sector dominates economy in most nations

Most new jobs are generated by services
Powerful forces—government policies, social changes, business
trends, IT advances, and globalisation—are transforming service
markets
What is Service ?
Industrial Economic Activities

Primary Secondary Territory

Agriculture Manufacturing Services

Fishing Processing Distribution etc.
Forestry Construction etc.
Mining etc.
 Defining services (1)

 The historical view

 Smith (1776): Services are different from goods because they are
perishable
 Say (1803): As services are immaterial, consumption cannot be separated
from production

‘A service is any activity or benefit that one party can offer to another which
is essentially intangible and does not result in the ownership of anything’
(Kotler, Armstrong, Wong and Saunders, 2008)
 Defining services (2)
‘Service benefits are delivered through an interactive experience
involving the consumer to a greater or lesser extent’ (Bateson, 1999)
Service Sector
Insurance Banking
Tourism
Transportation
Education
Legal service
Employment
Communication
Healthcare
Accounting

Hospitality Information Services

Service Sector

Non-Profit Basis Commercial Basis

education hotels,
and professional
healthcare consultants,
etc. solicitors etc.
 Characteristics of Service
The users have
only an access
to services.
They cannot Services cannot
move through
own the channels of
The quality of service. distribution and
services cannot Ownership cannot be delivered
be standardized . to the potential
customers and user.

Heterogeneity
Simultaneity
Service Services and
their providers
Services cannot are associated
ne stored
Perishable Inseparable closely and thus,
not separable.

Services are Quality A service sector

Intangible requires another tool
intangible we
cannot touch
measurement for measurement.
We can measure it in
terms of service
them are not level. It is very
physical objects. difficult to rate or
quantify total
purchase.
 Basic characteristics of services:
The 5 I’s (1)
Intangibility
Inseparability
Inconsistency
Inventory
Inability to own
 Basic characteristics (2)
Intangibility  Categories of service mix
Service is an experience  - Pure tangible good

Enhanced perceived risk when a  -Tangible good with

customer buys a service accompanying services
Services such as banking insurance and education  Hybrid
cannot be physically possessed like a tangible
goods.  Major service with accompanying
Intangible services are more difficult for consumer
minor goods and services
to evaluate than tangible goods.
 Pure service
For example it is more difficult to evaluate the
services provided by a physician than to evaluate
an automobile
Basic characteristics (3)
Pure service?
Major service accompanying
goods and service

Hybrid

Tangible good with accompanying

service

Tangible good with accompanying

service

Pure tangible good?

Marketing implications: provision of tangible evidence and brand building
- use of appropriate communication
symbols, messages, uniforms

McDonald’s arches readily accepted worldwide - standardised

approach
Thai Airlines’ uniforms are traditional conveying a Thai experience
 Basic characteristics (4) - Inseparability
Production and consumption occurs simultaneously
Consumer participation required in production of service
(In most cases) service production can begin in presence of customer
Role performance in service delivery
Visible
to customer

Invisible
to
customer
Basic characteristics (4) – Inseparability
Cont.
• Services like education are generally produced and consumed at the
same time.
• Due to this nature, the service provider plays a very important role in
delivery of services.
• For example a dentist is the actual service provider and must be
physically present along with the consumer when the service is
produced and consumed.
• In many cases the service provider is the part of service.
 Marketing implications

Recruitment, training and remuneration becomes a significant

activity and large part of the budget
Staff are part of the visible evidence of the company brand
 Basic characteristics (5) –
Inconsistency/variability/heterogeneity
Match service to customer requirements
Standardisation of service is a challenge
- Balance employee control and customer’s perceived needs
- Time spent on service delivery will vary
- Adaptation of service blueprint

Need for applying quality control systems

e.g. using a standardised franchising package
 Basic characteristics (6) – Inventory
(Degree of perishability)
Lower opportunity to store service  What strategies could organisations
adopt to manage perishability?
Manage fluctuations in demand
What ensures consumer
satisfaction?
Increase efficiency (reduce
costs/increase sales) • Here the element of time assumes a significant position.
• If we do not use it today, it labor if ever.
• If labor stops working, it is a complete waste.
• It cannot be stored.
• Utilized or unutilized services are an economic waste.
• An unoccupied building, an unemployed person, credit
unutilized, etc. are economic waste.
• Services have a high level of perish ability
 Programmes to
Compensate for Uneven Demand
 Industry Programme

 Airlines Group and tour fares, family discounts, advance purchase super-savers, 24-
hour round-trip discounts, and low-season fares
 Hotels Off-season and group rates, theme weekends, Valentine
 getaway, sports packages, family and senior citizens discounts
 Telephone Evening and weekend rates
 Barber shops Evening appointments and family rates
 Automobile repair Specials – tyre balancing, tune-ups and lubrication
 Dentists Call-back reminders and family discounts
 Education Weekend classes and adult education programmes
 Entertainment Matinee specials and midnight ShowTime specials
 (Movies)
 Recreation Midday specials, family night and teen night rates
 (Bowling)
 Recreation Off-season specials, group and senior citizens rates, (Parks) family rates and advance purchase
discounts
 Basic characteristics (7)
Inability to own
Does not result in transfer of title
- A package tour?
- A services marketing lecture?
- Renting a car
• The users have only an access to services.
• They cannot own the service.
• For e.g. a consumer can use personal care services or medical services or can use a hotel room
or swimming pool, however the ownership remains with the providers.
• According to Philip Kotler, “A service is an activity or benefit that one party can offer to another
that is essentially intangible and does not result in the ownership of anything.
• “From this it is clear that the ownership is not affected in the process of selling the services.
 Criteria for classifying services (1)
Strategic in nature
 Intangibility continuum
e.g., Information boxes in
tourist areas, after
sales service
 Profit vs not for profit: who
sets the price or who
regulates the service
offering?
 Markets and industries: use of
Standard Industry Codes
(SICs) to define service at
an industry level such as
gas, electricity and water
supply
 Service delivery process: tailor-made
vs. standardised delivery, level
of customer participation
 External and internal markets
Operational in nature
 Customer’s buying behaviour
- speciality or convenience
services
 Relationship between service provider and
customer
- subscription-based services
- membership-based services
 Service provider’s knowledge/skills &
capacity
- Assets and capabilities
- standardised or customised
- knowledge-based services,
facilitating services, etc.
 Physical site of service delivery
- attending a class at university
- home visit by a doctor
Classifying services (2)

Doctors, accountants Five star resorts, private jets

low budget Pizza Hut

airlines
Marketing services
 Marketing services – External market
(Customers)
Managing differentiation
 Offering
 Primary service package
 Secondary service features
 Faster and Better Delivery
Reliability
Resilience/flexibility
Innovativeness
 Image
Managing Service Quality
Perceived service – management perceptions of customer expectations
Expected service – functions of customer's past experience, personal needs and word of mouth
communication by consumers
 Managing services – External
market (customers)
Five gaps that cause unsuccessful delivery: Suggest possible
 Gap between consumer expectation and solutions to overcome
management perception these issues
 Gap between management perception
and service-quality specification
 Gap between service-quality
specification and service delivery
 Gap between service delivery and
external communications
 Gap between perceived service and
expected service
Marketing services – Internal Marketing (Employees)
Employees are seen as customers
- the best possible people need to be employed and retained
 Satisfied employees a vehicle for staff acquisition, motivation and
retention
 Satisfied employees a vehicle for promotion of customer-oriented
behaviour
 Empowerment of employees –
Interactive marketing
Service Production Menu Service
Line
e.g. public transport, e.g. personal banking,
Low fast food, cinema satellite TV

Level of Performance
Provider Professional Service
Service e.g. legal advice,
Discretion e.g. Large scale consultancy,
education, theatre specialist jobs
High performance, health
care
Low High

Degree of Customisation
 Task: In groups of 3-4
 Identify two companies; one that you consider delivers excellent
service quality and another that you consider very poor services
quality.
 a) Describe the excellent service, detailing why you consider the
services to be excellent.

 b) Describe the poor service detailing why you consider the service
to be poor.

 c) What are the main differences between the two companies?

 Summary
Key characteristics  Next Week
of services (5I’s) - Creating and
Classifying different delivering the
services service
Marketing service experience
to key stakeholders - Read Starbucks
case-study for
seminar
discussion