Topic 1

Introduction to services

Prepared by:
Dr Lusianus Kusdibyo

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Industries classified within the service sector
Finance, insurance, & real estate
Other services
Transportation Hotels & other lodging
Railroad transportation Personal services
Trucking & warehousing Business services
Water transportation Auto repair, services, parking
Health services
Air transportation
Legal services
Communication Educational services
Telephone & telegraph Social services
Radio & TV broadcasting etc.
Wholesale trade
Retail trade
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Four categories of services

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 What is a service?
In General:

• Goods  Objects, Devices, Things

• Services  Deeds, Efforts, Performances

• Product  Goods and services

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 Definition of service
1. Service can be defined as deeds, efforts, or
performance (Zeithaml et al. 2013).
2. A service is an activity or benefit that one party
can offer to another that is essentially intangible &
does not result in the ownership of anything. Its
production may or may not be tied to a physical
product (Kotler & Armstrong, 1991).
3. The production of an essentially intangible
benefit, either in its own right or as a significant
element of a tangible product, which through
some form of exchange satisfies an identified
consumer need (Palmer, 1994)
4. ….there is no such thing as service industries.
There are only industries where service
components are greater or less than those of
other industries (Levitt, 1972).
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 What is a service?

The Distinction is Unclear:

The Scale of Market Entities

&
The Molecular Model

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 A. Scales of market entities
The scale that displays a range of product along a
continuum based on their tangibility ranging
from tangible dominant to intangible dominant.
• Tangible dominant: goods that possess physical
properties that can be felt, tasted, and seen prior
to the consumer’s purchase decision.
• Intangible dominant : services that lack the
physical properties that can be sensed by
consumers prior to the purchase decision.
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The scales of market entities

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 Two important lessons of TSME
1. There is no such thing as pure good or pure
service. Products seemingly are a bundle of
tangible and intangible elements that
combine to varying degree.
2. The tangible aspects of an intangible
dominant product and the intangible aspects
of a tangible dominant product are an
important source of product differentiation
and new revenue stream.

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 Service marketing myopia
Condition of firms that produce tangible
products and overlook the service aspects of
their products

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 B. Molecular model
A conceptual model of the relationship between
the tangible and intangible components of a
firm’s operations.
• One important benefits obtained from
developing this model is that it is a
management tool that offers the opportunity
to visualize the firm’s entire bundle of
benefits that its product offers customers.

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The molecular model

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Airline experience
• Long-term and short-term
parking (ie)
• Shuttle services (ie)
• Rental car availability (ie)
• Flight attendants (te)
• Gate attendants (te)
• Baggage handlers (te)
ie: intangible elements
te: tangible elements
Automobiles
• Salespersons on the
showroom floor (te)
• Financing arrangements (ie)
• Finance manager (te)
• Maintenance and repair
services (ie)
• Mechanics and service
representatives (te)
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 Services versus Customer Service
Services……encompass a wide range of industries.

Customer service is…

the service provided in support of a company’s core
products

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Framing the service experience:
The Servuction Model

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 The benefit concept

• Encapsulation of benefits in the consumers

mind
– Tide
• Cleanliness
• Whiteness
• Motherhood

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 The benefit concept

• Services deliver the bundle of benefits

through the experience that is created for
the consumer

• The servuction model provides a framework

for understanding the consumer’s
experience

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 The Servuction Model

Suatu model yang digunakan untuk menggambarkan

empat faktor yang mempengaruhi pengalaman
jasa/layanan (service experience) konsumen,
termasuk faktor-faktor yang terlihat maupun yang
tidak terlihat oleh konsumen

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The Servuction Model

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 The Servuction Model

Inanimate Customer A
Environment
Invisible
organization Contact
and systems Personnel
Or
Service Customer B
Provider

Invisible Visible
Bundle of service
benefits received
by Customer A

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• Servicescpe: the use of physical evidence to
design service environment.
• Contact personnel: employees other than the
primary service provider who briefly interact with
the customer.
• Service providers: the primary providers of core
service, such as teacher, dentist, etc.
• Other customers: customers that share the
primary customer’s service experience.
• Invisible org & system: that part of a firm that
reflects the rules, regulations, and process upon
which the org is based.
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 Why study services?
• the growth of the global service economy in
terms of contributions to Gross Domestic
Products (GDP).
• the growth of the global service workforce.
• the emergence of technologically based e-
services that have transformed many service
industries.
• the importance of developing sustainable
services marketing business practices
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 The Growth of the Global Service
Economy
FIG-1.4 Worldwide Gross Domestic Product:
Composition by Service Sector

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 The Growth of the Global Service
Labor Force
FIG-1.5 Worldwide Gross Domestic Product:
Composition by Service Labor Force

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FIG-1.6 U.S. Gross Domestic Product
Composition by Industry Sector

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Global Feature: Services represent a significant percentage
of the GDP and labor force in countries around the world

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 The Emergence of E-Service(s)
• An electronic service available via the net that
completes tasks, solves problems, or conducts
transactions.
• Self-service technologies (SST): Technologically
based services that help customers help
themselves.

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FIG-1.7 Worldwide Internet Users by World
Regions

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 Serving it Up Green: Sustainability
Comes to Services
• Sustainability: The ability to meet current needs
without hindering the ability to meet the needs of
future generations in terms of economic,
environmental, and social challenges.
• Pursuing sustainable business practices allows
companies to find not only areas of improvement, but
also a source of competitive advantage.
• There are four areas in which a company can achieve
such aims: eco-efficiency, environmental cost
leadership, beyond compliance leadership, and eco-
branding.

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• Eco-efficiency focuses on the concept of the
“double dividend.” Companies that attempt to
reduce wastes and inefficiencies within the
system see positive results both financially
and environmentally.
• Environmental cost leadership involves
developing a radical innovation that will allow
the company to be more environmentally
friendly while maintaining cost
competitiveness.

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• Beyond compliance leadership involves
companies wanting to increase their
sustainability efforts, but also wanting these
efforts to be acknowledged by the public.
These companies often spend money on
environmental certifications, such as LEEDS
building certifications. The first-movers in an
industry in this case have the greatest
advantage. Those who take the first initiative
are seen as innovative, while the rest of the
companies within the industry are forced to
follow suit.
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• Eco-branding strategies focus on the use of
marketing differentiation based on the
environmental attributes (e.g., organic, vegan,
or fair-trade status) of products. There are
three basic prerequisites that often exist for
firms to successfully execute this approach

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 The Service Triangle

The framework that support the market-

focused management model by depicting the
relationships among the system, the service
strategy, and the people, with the customer in
the center of the triangle, interacting with
each group.

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 The Service Triangle
The •The organization
•The company service exists to serve the needs of
exists to serve strategy the people who serve the
the customer customer

The
customer

The
systems The
people

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Hoffman & Bateson, 1997
 The service triangle
1. Communicate the service strategy to the
customer
2. Customer/employee interaction:
– greatest opportunity for gains and losses
– moments-of-truth
– critical incidents
3. Customer/procedures & physical hardware
– A.T.M. machines
– cramped airline seats

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 The service triangle

4. Organizational systems may prevent

employees from giving good service
5. Physical and administrative systems
should flow logically from the service
strategy
6. Good service starts at the top
*MGT. should “Walk What They Talk” and provide:
-sense of focus
-clarity
-priorities

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 The Services Marketing Triangle

Company
(management)

External marketing
Internal marketing
“setting the promise”
“enabling the promise”

Providers Customers
Interactive marketing
“delivering the promise”

Kotler (1994) 37
 Technology and the Services Marketing Triangle

Company

Technology

Providers Customers

Parasuraman (1996) 38
 THE SERVICES MARKETING MIX
PHYSICAL
PRODUCT PLACE PROMOTION PRICE PEOPLE EVIDENCE PROCESS

Physical good Channel type Flow of

Promotion blend Flexibility Employees Facility design
features Exposure activities
Salespeople Price Level Recruiting Aesthetics
Quality level Intermediaries Standardized
Number Terms Training Functionality
Accessories Outlet locations Customized
Selection Differentiation Motivation Ambient con-
Packaging Transportation Number of
Training Discounts Rewards ditions
Warranties Storage steps
Incentives Allowances Teamwork Equipment
Product lines Managing Simple
Advertising Customers Signage
Branding channels Complex
Targets Education Employee dress
Media Types Training Other tangibles Level of cus-
Types of ads Communicating Reports tomer involve-
Copy thrust cultures & Business cards ment
Sales promotion value Statements
Publicity Employee re- Guarantees
search

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• People
All human actors who play a part in service delivery and thus
influence the buyer’s perceptions; namely, the firm’s
personnel, the customer, and other customers in the
service environment.
• 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.
• Process:
The actual procedures, mechanism, and flow of activities by
which the service is delivered–the service delivery and
operating system.

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 THE SERVICE-PROFIT CHAIN
OPERATING STRATEGY & SERVICE DELIVERY SYSTEM

Employee Revenue
retention growth
Internal External
service Employee Customer Customer
satisfaction service
quality value satisfaction loyalty
Employee Profit
productivity ability
• Retention
• Repeat business
• Workplace design • Service concept: • Referral
• Job Design results for customer • WOM postitive
• Employee selection & • Immune to competitor
development • Service designed
• Employee rewards & and delivered to meet
recognition targeted customers’
• Tools for serving needs
customers

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Thank you

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