AMB340 Services Marketing

Introduction to Services Marketing

Agenda

What is a service?
Why study services marketing?
How do goods and services differ?
How are services classified?
What comprises the services marketing mix?
Fundamentals of AMB340
What is marketing?

Marketing is the activity, set of institutions, and

processes for creating, communicating, delivering, and
exchanging offerings that have value for customers,
clients, partners, and society at large.

(American Marketing Association, 2007)

What is a service?

 A deed, a performance, an effort that is exchanged for some

other unit of value between two or more parties (Fisk et al., 2007)
 “Activities, benefits and satisfactions, which are offered for
sale or are provided in connection with the sale of goods”
(American Marketing Association)

 “Services are economic activities offered by one party to

another” (Wirtz et al., 2012)
 Bring out desired results to recipients
 Can involve physical objects
What is a service? (2)

Services create value

“(Service is) the application of knowledge and skills to resources
to support someone's value creation” (Gronroos & Gummerus,
2014:213)

“Service is support by an organisation to a customer's (or any

other beneficiary's) everyday practices with an aim to facilitate
value creation (value formation, value emergence) in this
customer's life or business” (Gronroos, 2015)
What is a service? (3)

Services involve a form of rental

Five broad categories of services within non-ownership
framework:
1. Rented goods services
2. Defined space and place rentals
3. Labor and expertise rentals
4. Access to shared physical environments
5. Systems and networks: access and usage
Why study services?

 Services dominate economy in most developed nations

Australian Industry Report 2016

https://industry.gov.au/Office-of-the-Chief-Economist/Publications/AustralianIndustryReport/assets/Australian-
Industry-Report-2016.pdf
Characteristics of services
4 Characteristics 8 Common Differences between Services
of Services and Goods
Intangibility • Intangible elements usually dominate value
creation
• Services are often difficult to visualise and
understand
• Distribution may take place through nonphysical
channels
Perishability • Most service products cannot be inventoried
• The time factor often assumes great importance

Simultaneity/ • Customers may be involved in co-production

Inseparability • People may be part of the service experience

Heterogeneity • Operational inputs and outputs tend to vary

more widely
Intangibility: Shostack’s Continuum
 Intangibility
Problems
 Cannot be stored; demand difficult to
manage
 Not protected by patents; easy for
competitors to copy (e.g., Samsung vs Apple/
Suncorp vs ANZ)
 Not easy to display or communicate; quality
difficult to assess
 Pricing is difficult

Solutions
 Tangible cues; physical evidence
 Personal sources of information (e.g.
testimonials - http://www.harbourdayspa.com.au/content/testimonials)
 Create a strong organisational image /
reputation (e.g., Shine Lawyers -
http://www.youtube.com/watch?v=K1S4Syt_29k)
Perishability

Problems
 Services cannot be inventoried
 Managing supply and demand is a challenge
 Service recovery is more difficult than with physical
goods

Solutions
 Keeping customers ‘in stock’ (e.g. airplane overbooking,
restaurant waiting area)
 Development of service recovery strategies
 Creative management of supply and demand
 Level demand (e.g., pricing, create off-peak demand)
 Manage capacity (e.g., casual staff, increasing
customer participation)
Simultaneity/Inseparability
Problems
 Mass production of services is difficult, if possible at
all
 Service provider is involved in the production process
 Customers are involved in the production process
 Other customers may be involved in the production
process
 Service quality depends on what happens in real
time

Solutions
 Careful selection and rigorous training of
service personnel
 Strategies to manage consumers
 Heterogeneity
Problems
 Difficulty in measuring and controlling service quality
 People do not operate like machines…

Solutions
 Customisation…can lead to increased profits
 Standardisation...faster, cheaper, more consistent
 Staff need to be trained in service recovery

Friday
afternoon

Monday
morning
Limitations
Intangibility
Most scholars focus on pre-purchase phase, ignoring:
– Customer experience in-process (often tangible)
– Repeated use of the service nullifies the effect of intangibility
– Nature of output (often an observable physical change)

Heterogeneity
What about self-service technology? (e.g., ATMs, Internet)

Inseparability
In practice, there are many separable services (e.g., repair, maintenance, cleaning,
insurance) where production precedes consumption

Perishability
Important exception: Many information-based services can be recorded, stored in
electronic media, and reproduced on demand
How can services be classified?

1. Degree of tangibility/intangibility of service

processes
2. Who or what is the direct recipient of service
processes
3. The place of service delivery
4. Customisation versus standardisation
5. Relationship with customers
6. Discrete versus continuous services
7. High contact versus low contact
 Four Categories of Services

Lovelock’s Four Categories of Service Provision

People Processing

People Processing
Customers must:
 physically enter the service
factory
 co-operate actively with the
service operation

Managers should think about

process and output from
customer’s perspective
 to identify benefits created and
non-financial costs:
- Time, mental, physical effort
Possession Processing

Possession Processing
 Customers are less physically
involved compared to people
processing services
 Involvement is limited
 Production and consumption are
separable
Mental Stimulus Processing

Mental Stimulus Processing

●Ethical standards required
when customers who depend
on such services can potentially
be manipulated by suppliers
●Physical presence of
recipients not required
●Core content of services is
information-based
Can be ‘inventoried’
Information Processing

Information Processing
Information is the most
intangible form of service
output
But may be transformed into
enduring forms of service
output
Line between information
processing and mental
stimulus processing may be
blurred.
7 Ps of Services Marketing
The 7Ps of services marketing are needed to create
viable strategies for meeting customer needs profitably
in a competitive marketplace
Key Points
 Services are acts, performances, processes and experiences

 Services are different to goods

Intangible, simultaneously produced and consumed,
heterogenous (variable), and perishable

 Services can be classified according to the underlying process:

Intangible acts on people – mental processing
Tangible acts on people – people processing
Tangible acts on things – possession processing
Intangible acts on things – information processing

 The Services Marketing Mix has 3 extra Ps:

People
Physical evidence
Process
Fundamentals of AMB340: Unit map
PART 1: Lecture 1, 2 & 3
Understanding service customers
• Introduction to services marketing
• Consumer behaviour in services
• Evaluating services: Satisfaction & service quality

PART 2:
Lectures 4, 5, 6, 8, 9 & 10
Creating value using the 7 Ps
• Developing and positioning service products
• Crafting the service environment and distributing services
• Managing people
• Pricing, productive capacity, and demand
• Promoting services and educating customers

PART 3: Lectures 11 & 12

Managing services
• Complaint handling and service recovery
• Managing relationships and building loyalty
Fundamentals of AMB340: Staffing

Dr Amanda Beatson

Unit Coordinator & Lecturer

Room Z1024
Email a.beatson@qut.edu.au
Phone 3138 1241

Consult Tuesday 10-11am

Please email for an appointment.

Fundamentals of AMB340: Assessment

Assessment Weighting
Assessment 1: 30 %
Pitch

Assessment 2: 30%
Mid-semester exam

Assessment 3: 40%
Service audit

Total 100%
Fundamentals of AMB340: Assessment

Assessment 1: Pitch

Title Pitch
Due: Week 4 to 12 (as per tutorial schedule)
Duration: Four minutes max
Group or Individual: Individual

Description: Students will identify a real service organisation that

has a problem with one of the 7Ps or its evaluation, and then pitch
a solution to that problem.
Fundamentals of AMB340: Assessment

Assessment 2: Mid-semester exam

Title Mid-semester exam

Due: Week 7 (in lecture time)
Duration: 1.5 hours (plus 10 mins perusal)
Group or Individual: Individual

Description: The mid-semester examination will be held in the

lecture during Week 7 of the teaching semester and will consist of
short answer questions based on the material covered in Weeks 1 –
6 inclusive.

(No tutorials in Week 7)

Fundamentals of AMB340: Assessment

Assessment 3: Service audit

Title: Service audit
Due: Friday 29th May by 11.59pm through
Blackboard
Length: 2000 words
Group or Individual: Group

Description:
Students are required to audit a service. Guidelines for the analysis
and assessment criteria will be provided on Blackboard.
Next Week
Tutorials start next week (Week 2)

• Please take your textbook to tutorials

• Please watch Blackboard for extra materials you need
to take to tutorials

If you are not yet enrolled, please enrol in a tutorial

Read Chapter 1 of your text this week