Foundations of Services Marketing

Chapter 1
Chapter 1:
Introduction to Services Marketing
What are services?
Why services marketing?
Characteristics of Services Compared to
Goods
Services Marketing Mix
Test your knowledge
Definition
Services are deeds, performances, efforts.
Is a glass of cola a service?
Is a DVD a service?
Is a ride in a taxicab a service?

Other terms that includes the word service

Service industry, service economy
Consumer services
Customer service
Examples of Service Industries
Health Care
hospital, medical practice, dentistry, eye care
Professional Services
accounting, legal, architectural
Financial Services
banking, investment advising, insurance
Hospitality
restaurant, hotel/motel, bed & breakfast
ski resort, rafting
Travel
airline, travel agency, theme park
Others
hair styling, pest control, plumbing, lawn maintenance, counseling services, health
club, interior design
Examples of Customer Service
Free car wash with fill-up
Calling the customer by name
Easy return policy
Updated map of the area or GPS in rental cars
On-time delivery
Courtesy
Enthusiasm
Suggesting a less expensive option
Package carry out
Figure 1.1

Contributions of Service Industries to

U.S. Gross Domestic Product

Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.
Figure 1.4

Percent of U.S. Gross Domestic

Product by Industry

80
70
60
Percent of GDP

50
40
30
20
10
0 Services
1948 1959 1967 1977 1987 1999 Manufacturing
Year Mining & Agriculture

Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta,
The Service Sector of the U.S. Economy, Scientific American, 244,3 (1981): 31-39.
Figure 1.3

Percent of U.S. Labor Force by Industry

Percent of U.S. Labor Force 80
70
60
50
40
30
20
10
0 Services
1929 1948 1969 1977 1984 1999 Manufacturing
Year Mining & Agriculture

Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli
Ginzberg and George J. Vojta, The Service Sector of the U.S. Economy, Scientific American, 244,3 (1981): 31-39.
Why study Services Marketing?
Service-based economies

Service as a business imperative in manufacturing and IT

Deregulated industries and professional service needs

Service equals profits

Services marketing is different

 Characteristics of
Services Compared to Goods

Intangibility Heterogeneity

Simultaneous
Production
and Perishability
Consumption
(Inseparability)
Characteristics of Services Compared to Goods

Tangibility Spectrum
Salt
Soft Drinks
Detergents
Automobiles
CosmeticsFast-food
Outlets
Intangible
Dominant

Tangible

Dominant Fast-food
Outlets
Advertising
Agencies

Airlines

Investment
Management

Consulting
Teaching
Intangibility and Inseparability
First discussed by French economist Jean-Baptiste Say
(1803), using the example of a physician who visits a
patient, prescribes a remedy, and then leaves without
depositing any product:

[T]he physicians advice has been exchanged for his fee.

The act of giving was its production,
of hearing [by the invalid] its consumption,
and the production and consumption were
simultaneous.
This is what I call an immaterial product
Implications of Intangibility
Services cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficult
Implications of 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

Heterogeneity
Three separate meanings in the literature:
differentiation,
variability,
and diversity.

A professor may be perceived completely different at the

same type by different students
A professor may deliver the same lecture in different ways
over the time
Implications of Heterogeneity
Service delivery and customer satisfaction depend on
employee and customer actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered

matches what was planned and promoted
Perishability
First articulated by British economist Adam Smith (1776)
Smith, concerned with creation of wealth, distinguished between the output
of
productive labor, whose value could be stored in inventories of
saleable goods that could subsequently be exchanged for other items of value,
and
unproductive labor such as that of government officials, the armed
forces, clergy, lawyers, physicians, men of letters, musicians,
singers, buffoons, or menial servants which, however honorable, useful, or
necessary produces nothing for which an equal quantity of service can afterwards be
procured.[This type of work] perishes in the very instant of its production.
Implications of Perishability
It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

Challenges for Services
Defining and improving quality
Designing and testing new services
Communicating and maintaining a consistent image
Accommodating fluctuating demand
Motivating and sustaining employee commitment
Coordinating marketing, operations, and human resource
efforts
Setting prices
Finding a balance between standardization versus
personalization
Ensuring the delivery of consistent quality
Traditional Marketing Mix
All elements within the control of the firm that communicate
the firms capabilities and image to customers or that
influence customer satisfaction with the firms product and
services:
Product
Price
Place
Promotion
Expanded Mix for Services --
The 7 Ps
Product
Price
Place
Promotion
People
All human actors who play a part in service delivery and thus influence the buyers
perceptions: namely, the firms 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, mechanisms, and flow of activities by which the service is
deliveredthe service delivery and operating systems.
Table 1.3

Expanded Marketing Mix for Services

Ummthat is what we know now!
But we want to be one step ahead of everybody else, right?
New thinking in the field: goods and services not mutually
exclusive
Service can be provided directly or indirectly through tangible goods
Goods are appliances used in service provision
Nature of ownership
How customers perceive and consume time
Reverse channels for return of rented goods
Decisions on own vs. rent, D-I-Y vs. outsource
Distinction between value-creating elements and valueneutral/
negative elements of service delivery
New contexts for studying pricing, developing pricing strategies
Test your knowledge
In India weddings are timed to occur when Venus is in the ascendant
and Jupiter is strong. This day is deemed lucky. In 2005, almost 15,
000 couples in New Delhi had their wedding on December 25, the
day astrologers announced would be the best day for a wedding. The
service provided by the astrologers is an excellent illustration of the
_____ of services.
A) intangibility
B) comparability
C) divisibility
D) perishability
E) compatibility
Answer:
Test your knowledge
The first time Terry brought his car to Auto Lube to have the oil changed he was
very satisfied with the service. The service manager consulted him several
times while his car was being serviced, asked him if there were any problems
with the car, recommended when additional services should be performed, and
answered questions directly and politely. However, when Terry went back to
Auto Lube after three months to have his oil changed again, he was not satisfied
with the service. The manager spoke to him only when he arrived and when he
paid his bill. In addition, the manager was impatient and unfriendly during the
interaction. Terry's experience at Auto Lube illustrates the _____ of services.
A) intangibility
B) heterogeneity
C) simultaneous production and consumption
D) perishability
E) divisibility
Answer:
Test your knowledge
The Offshore Sailing School in Jersey City, New Jersey offers a
basic sailing course, which takes place in three days over two
weekends, for $495. Students enrolled in the course attend
classroom sessions that cover the theory and technology of sailing and
receive hands-on sailing instructions in the water that introduces
them to all fundamental sailing skills. Student participation in the
Offshore Sailing School's classroom sessions and hands-on sailing
instructions illustrates the_____ characteristic of services.
A) versatility
B) heterogeneity
C) simultaneous production and consumption
D) perishability
E) intangibility
Answer:
Test your knowledge
In India weddings are timed to occur when the stars and
planets are in certain positions, which are deemed lucky. In 2005,
almost 15, 000 couples in New Delhi had their wedding on
December 25, the day astrologers announced would be the best day
for a wedding. Wedding planners had to prepare all year for this one
date instead of planning lots of weddings throughout the year. The
service provided by the Indian wedding planners illustrates the
_____ characteristic of services.
A) versatility
B) heterogeneity
C) simultaneous production and consumption
D) perishability
E) intangibility
Answer:
Test your knowledge
When Alicia and Jordan dined at Formia Ristorante, a contemporary Italian
restaurant in New Jersey, they both enjoyed Formia's coy, smart, and embracing
atmosphere. Formia creates this atmosphere with a single large dining room
that measures 20 by 60 feet and contains 14 roomy tables. Ceiling fans slowly
swirl as candlelight dances across the tables that are attentively cared for by
servers. Vertical pink and white florid patterns emerge from old wainscoting.
Finally, Formia's two-page menu offers guests a range of pasta, chicken, veal,
and seafood entrees, in addition to nightly specials that are handwritten and
presented on large index cards. Alicia and Jordan experienced the _____
element of Formia Ristorante's services marketing mix.
A) product
B) production
C) process
D) place
E) physical evidence
Answer:
Test your knowledge
Extron Electronics makes coaxial cables for connecting computers to all types of peripheral
devices like printers, modems, and fax machines. For the benefit of its customers, Extron
provides a laminated card with pictures of all the possible cable connections that a customer
could need. With this card, a customer can order from one to any number of connectors with
as many feet of cable as is needed. Orders can be placed using a toll-free number, a fax
number, or an e-mail address. Company reps are also available 24-hours a day in case the
customer is not sure which drawing on the card matches his or her needs. Orders are shipped
within 48-hours of receipt. If a customer is not completely satisfied with his or her order,
Extron has a 100 percent satisfaction guaranteed return policy. Which of the following trends
that has influenced the development of services marketing concepts and strategies as
illustrated by Extron's focus on customer service?
A) the increasing importance of service industries to the U.S. and world
economies
B) the increase of government regulation of service industries
C) the growth in information-based technology
D) increased competition in professional services
E) manufacturing firms are placing increased emphasis on providing services
Answer: E