1

Introduction to Services
(Chapter 1)

What are services?

Why study services marketing?
Goods vs. Services
Characteristics of Services
Services Marketing Mix

- Dwayne D. Gremler

Marketing Definition

Marketing is the process of planning and

executing the conception, pricing, promotion, and
distribution of ideas, goods, and services to
create exchanges that satisfy individual and
organizational objectives.
--American Marketing Association

- Dwayne D. Gremler

Examples of Service Industries

Health Care
hospital, medical practice,
dentistry, eye care

Professional Services
accounting, legal,
architectural

Financial Services
banking, investment
advising, insurance

Travel
airlines, travel agencies,
theme park

Others:
hair styling, pest control,
plumbing, lawn
maintenance, counseling
services, health club

Hospitality
restaurant, hotel/motel, bed
& breakfast,
ski resort, rafting

- Dwayne D. Gremler

Goods and Services

In General:
Goods are

Services are

- Dwayne D. Gremler

What are services?

Long Definition:

Services include all economic activities whose

output is not a physical product or production,
is generally consumed at the time it is produced,
and provides added value in forms (such as
convenience, amusement, timeliness, comfort,
or health) that are essentially
intangible concerns of its first purchaser.

- Dwayne D. Gremler

Tangibility Spectrum

Salt

Soft Drinks
Detergents
Automobiles
CosmeticsFast-food
Outlets

Tangible
Dominant

Intangible
Dominant

Figure 1.2

Fast-food
Outlets
Advertising
AgenciesAirlines
Investment
Management
Consulting
Teaching

Competing Strategically through Service

Four Strategic approaches (competitive Advantage):
OUT-OF-THE box customer service:
Innovative, Cutting Edge Services:
being the First and Best / on the forefront of
innovation, technology
(not necessarily totally new invention but a new service
approach)
Value Added, Revenue producing service:
Applicable for mostly nonservice industries, when cant
compete with manufactured products. (IBM) HARLEY
Club)
A service culture that Differentiates: Employer of choice &
Provider of Choice.

- Dwayne D. Gremler

Percent of U.S. Labor Force by Industry

Figure 1.3

- Dwayne D. Gremler

Percent of U.S. Gross Domestic Product by

Industry

Figure 1.4

- Dwayne D. Gremler

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Contributions of Service Industries to

U.S. Gross Domestic Product (in 2003)

Figure 1.1
Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.

- Dwayne D. Gremler

11

Goods vs. Services

Goods
Production separate

Services
S

from consumption

Standardized

Tangible

Nonperishable

- Dwayne D. Gremler

12

Goods vs. Services

Table 1.2

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, Problems and Strategies in Services Marketing,
Journal of Marketing 49 (Spring 1985): 33-46.

- Dwayne D. Gremler

13

Intangibility
Services cannot be inventoried
Services cannot be patented
Services cannot be readily displayed
Pricing is difficult

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Heterogeneity

Service delivery and customer satisfaction depend on

employee actions
Service quality depends on many uncontrollable
factors

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Simultaneous Production and

Consumption
Customers participate in and affect the
transaction
Customers affect each other
Employees affect the service outcome
Decentralization may be essential
Mass production is difficult

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Implications of Perishability

Services cannot be returned or resold

It is difficult to synchronize supply and
demand with services
Demand forecasting is required

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Services Marketing Mix

traditional marketing mix:

Product
Place
Promotion
Price

expanded mix for services:

P
P
P

- Dwayne D. Gremler

18

People

are the firm in the customers eye

may be involved in production

can facilitate or inhibit service performance

can impact service encounters via their attitude,

behavior.

- Dwayne D. Gremler

19

Process
the actual procedures, mechanisms, and flow of
activities by which the service is delivered
includes:

Examples:

- Dwayne D. Gremler

20

Physical Evidence

Tangible cues/facilitating goods that facilitate performance or

communication of the service
examples:

bank statements, brochures, business cards

- Dwayne D. Gremler

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Expanded Marketing Mix for Services

Table 1.3 (Continued)

- Dwayne D. Gremler