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Page 1: McGraw-Hill © 2000 The McGraw-Hill Companies 1 S M McGraw-Hill © 2000 The McGraw-Hill Companies

McGraw-Hill © 2000 The McGraw-Hill Companies

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SM

McGraw-Hill © 2000 The McGraw-Hill Companies

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SMSM

McGraw-Hill © 2000 The McGraw-Hill Companies

Chapter 1

INTRODUCTION

TO

SERVICES

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SMA note on the A note on the

PowerPoint Slides...PowerPoint Slides...

These PowerPoint slides contain selected exhibits, figures and tables from the chapters as well as objectives for the chapters. For many chapters, we include extra lecture slides and in-class exercises that we have compiled and used in our classes. The lecture slides are not intended to provide full outlines or complete lectures for the chapters, but rather may be used selectively to enhance class sessions.

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SMObjectives for Chapter 1:Objectives for Chapter 1:Introduction to ServicesIntroduction to Services

• Explain what services are and identify service trends• Explain the need for special services marketing

concepts and practices• Outline the basic differences between goods and

services and the resulting challenges for service businesses

• Introduce the service marketing triangle• Introduce the expanded services marketing mix• Introduce the gaps model of service quality

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SM Challenges for ServicesChallenges for Services

• Defining and improving quality

• Communicating and testing new services

• Communicating and maintaining a consistent image

• Motivating and sustaining employee commitment

• Coordinating marketing, operations and human resource efforts

• Setting prices

• Standardization versus personalization

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SMExamples of Service Examples of Service

IndustriesIndustries

• 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– airlines, travel agencies, theme park

• Others:– hair styling, pest control, plumbing, lawn maintenance, counseling

services, health club

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SMFigure 1-1Figure 1-1

Tangibility SpectrumTangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

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SMFigure 1-2 Figure 1-2

Percent of Percent of U.S. Labor Force by IndustryU.S. Labor Force by Industry

0

10

20

30

40

50

60

70

80

1929 1948 1969 1977 1984 1996

Per

cent

of

GD

P

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.

Year

Services Manufacturing Mining & Agriculture

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0

10

20

30

40

50

60

70

80

1948 1959 1967 1977 1987 1996

Figure 1-3 Figure 1-3

Percent of U.S. Gross Domestic Percent of U.S. Gross Domestic Product by IndustryProduct by Industry

Perc

ent o

f G

DP

Year

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.

Services Manufacturing Mining & Agriculture

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SMDifferences BetweenDifferences Between Goods and Services Goods and Services

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity

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SM Implications of IntangibilityImplications of Intangibility

Services cannot be inventoried Services cannot be patented Services cannot be readily displayed

or communicated Pricing is difficult

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SM Implications of HeterogeneityImplications of Heterogeneity

Service delivery and customer satisfaction depend on employee actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted

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SMImplications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and Consumption

Customers participate in and affect the transaction

Customers affect each otherEmployees affect the service outcomeDecentralization may be essentialMass production is difficult

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SM Implications of PerishabilityImplications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold

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SM Table 1-2 Table 1-2

Services are DifferentServices are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

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

Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

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.

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SMFigure 1-5Figure 1-5

The Services Marketing TriangleThe Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“enabling thepromise”

“delivering the promise”

“setting thepromise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

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SMServices Marketing Triangle Services Marketing Triangle

Applications ExerciseApplications Exercise

• Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle?

• How is each type of marketing being carried out currently?

• Are the three sides of the triangle well aligned?• Are there specific challenges or barriers in any of

the three areas?

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SMWays to Use the Ways to Use the

Services Marketing TriangleServices Marketing Triangle

Overall Strategic Assessment

• How is the service organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Specific Service Implementation

• What is being promoted and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?

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SM

Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology

Figure 1-6 Figure 1-6

The Services Triangle The Services Triangle and Technologyand Technology

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SMServices Marketing Mix:Services Marketing Mix:

7 Ps for Services7 Ps for Services

• Traditional Marketing Mix

• Expanded Mix for Services: 7 Ps

• Building Customer Relationships Through People, Processes, and Physical Evidence

• Ways to Use the 7 Ps

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SM Traditional Marketing MixTraditional Marketing Mix

• All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:

Product

Price

Place

Promotion

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SM Expanded Mix for Services --Expanded Mix for Services --the 7 Psthe 7 Ps

• Product• Price• Place• Promotion

• People• Process• Physical Evidence

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SMTable 1-3Table 1-3

Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices

PRODUCT PLACE PROMOTION PRICE

Physical goodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding

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PEOPLE PHYSICALEVIDENCE

PROCESS

Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicatingculture and values

Signage Level of customerinvolvement

Employee research Employee dress

Other tangibles

Table 1-3 (Continued)Table 1-3 (Continued)

Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices

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SM Ways to Use the 7 PsWays to Use the 7 Ps

Overall Strategic Assessment

• How effective is a firm’s services marketing mix?

• Is the mix well-aligned with overall vision and strategy?

• What are the strengths and weaknesses in terms of the 7 Ps?

Specific Service Implementation

• Who is the customer?

• What is the service?

• How effectively does the services marketing mix for a service communicate its benefits and quality?

• What changes/improvements are needed?