SERVICES

MARKETING

CHAPTER 1

INTRODUCTION

HIGHLIGHTS

1. Definition of services Marketing

2. Characteristics of services

3. 8Ps of Services Marketing

4. Servuction Model (Service Experience)

OUTCOME

• Be able to illustrate, in detail, the principle variables

that differentiate marketing services with that of

product marketing

• Realise that the consumer’s contact of service

marketing is very much different from that of product

marketing

• Understand the unique challenges of doing marketing

for services

CONSIDER THIS….

• Services account for more than 60 percent of world’s

GDP

• Almost all economies have a substantial service sector

• Most new employment is provided by services

• Strongest growth area for marketing

DEFINITION OF SERVICES

MARKETING

• Are economic activities offered by one party to another in order

to exchange value

In exchange for their money, time, and effort, service customers expect to

obtain value from:

o Access to goods, labor, facilities, environments, professional

skills, networks, and systems

o But they do not normally take ownership of any of the physical

elements involved

DIFFERENCES BETWEEN SERVICES

MARKETING & PRODUCT MARKETING

• Marketing management tasks in the service sector differ from those in the manufacturing sector

• The eight common differences are:

1. Most service products cannot be inventoried

2. Intangible elements usually dominate value creation

3. Services are often difficult to visualize and understand

4. Customers may be involved in co-production

5. People may be part of the service experience

6. Operational inputs and outputs tend to vary more widely

7. The time factor often assumes great importance

8. Distribution may take place through nonphysical channels

• What are the implications?

DIFFERENCES, IMPLICATIONS &

MARKETING TASKS

DIFFERENCES, IMPLICATIONS &

MARKETING TASKS

WHAT WE’VE LEARNT SO

FAR….

• Services are an integral part of business & marketing

• Requires a different approach than product-based

marketing

• Have unique implications on marketing management

END OF PART ONE

CHARACTERISTICS OF

SERVICES• Four characteristics:

1. Intangibility

2. Perishability

3. Inseparability

4. Variability/Heterogeneity

• Requires unique strategies to overcome these

shortcomings

CHARACTERISTICS OF

SERVICES Intangibility

o Lack of tangible assets which can be seen, touched, smelled,

heard or tasted prior to purchase

o However, there are tangible items used to perform the service

o Ex: college education-there are physical structure such as

classrooms

STRATEGIES

i) Stressing tangible cues

ii) Using personal sources of information

iii) Stimulating word of mouth communication

iv) Creating a strong corporate image

v) Encouraging employees to communicate with customers

CHARACTERISTICS OF

SERVICES Perishability

o The service cannot be inventoried or stored

o Ex: to maximize revenue, airlines wants to fill every seat in an airplane. The same is true for sporting events and concerts

STRATEGIES

i) Simultaneous adjustments in demand, supply and capacity (demand equal supply will equal capacity)

Ex: cinema/movie-adjusting demand is to move some of the demand from the high peak showings to nonpeak

Or reducing the price in the nonpeak showings

Or multiple showings of the popular movies during high peak

Or to increase capacity, show popular movie in more mini theaters at the same time

CHARACTERISTICS OF

SERVICES Inseparability

o The simultaneous production and consumption of services

o Goods can be produced and then sold at a later time, services cannot

Ex: getting medical services involves a doctor or a dentist performing an examination or procedure while the customer is present

o Quality of the service is highly dependent on:

The ability of the service provider

The quality of interaction between the service provider and the customer

STRATEGIES

i) Look for ways to automate their service through use of

machines and computers

Ex: Cash deposit, Maybank2U

ii) Emphasize selection and training of its employees and

service provider

iii) Should have a process to manage their customers

iv) Open multiple sites

CHARACTERISTICS OF

SERVICES

Variability/Heterogeneity

o Refers to unwanted or random levels of service quality customers receive when they patronize a service

o The outcome will differ if the firm uses different employees each time a business is serviced

o Because of the variability characteristics of services, standardization and quality control are more difficult

STRATEGIES

i) Industrialize their operations

ii) Mass producing product in advance, more customers can

be served during peak demand

iii) Employees are also trained to follow a specific procedure

END OF PART TWO

SERVICES REQUIRES AN

EXPANDED MARKETING MIX

• Marketing can be viewed as:

• A strategic and competitive thrust pursued by top management

• A set of functional activities performed by line managers

• A customer-driven orientation for the entire organization

• Marketing is the only function to bring operating revenues into a

business; all other functions are cost centers

• The “8Ps” of services marketing are needed to create viable

strategies for meeting customer needs profitably in a competitive

marketplace

THE 8Ps OF SERVICES

MARKETING

1. Product

2. Place

3. Price

4. Promotion and Education

5. Process

6. Physical Environment

7. People

8. Productivity and Quality

PRODUCT

• Embrace all aspects of service performance that create value

• Core product responds to customer’s primary need

• Array of supplementary service elements

Help customer use core product effectively

Add value through useful enhancements

• Planning marketing mix begins with creating a service concept that:

Will offer value to target customers

Satisfy their needs better than competing alternatives

PLACE

• Delivery decisions: Where, When, How

• Geographic locations served

• Service schedules

• Physical channels

• Electronic channels

• Customer control and convenience

• Channel partners/intermediaries

PRICE

• Marketers must recognize that customer outlays involve more than price paid to seller

• Identify and minimize other costs incurred by users:Additional monetary costs associated with service usage

(Ex: travel to service location, parking, phone, babysitting, etc.)

Time expenditures, especially waiting

Negative sensory experiences

PROMOTION & EDUCATION

• Informing, educating, persuading, reminding customers

• Marketing communication tools

• Imagery and recognition

• Content

PROCESS

• How firm does things may be as important as what it does

• Customers often actively involved in processes, especially when acting as co-producers of service

• Process involves choices of method and sequence in service creation and delivery

• Badly designed processes waste time, create poor experiences, and disappoint customers

PHYSICAL ENVIRONMENT

• Design servicescape and provide tangible evidence of service performances

• Create and maintain physical appearances

• Manage physical cues carefully— can have profound impact on customer impressions

PEOPLE

• Interactions between customers and contact personnel strongly influence customer perceptions of service quality

• The right customer-contact

• The right customers for firm’s mission

• Contribute positively to experience of other customers

• Possess—or can be trained to have— needed skills (co-production)

• Can shape customer roles and manage customer behavior

PRODUCTIVITY & QUALITY

• Productivity and quality must work hand in hand

• Improving productivity key to reducing costs

• Improving and maintaining quality essential for building customer satisfaction and loyalty

• Technology often the keyTechnology-based innovations have potential to create

high payoffs

END OF PART THREE

TUTORIAL QUESTIONS1. Give an example of a service that offers labor and expertise

rental

2. Give an example of a service that offers access to physical environments as a form of rental

3. Describe the eight Ps of service that would be involved in a banking service.

• Product:

• Place:

• Price:

• Promotion:

• Process:

• Physical Environment:

• People:

• Productivity & Quality:

MEETING THE CHALLENGES OF

SERVICES MARKETING

1. Framing the service experience (Servuction

Model)

2. Role of Marketing in services

3. The Services Revolution: Changing the

perspective of Marketing

THE SERVUCTION MODEL

• Model used to illustrate factors that influence service

experience, including those that are visible and

invisible to consumer

• Invisible component consists of invisible organizations

and systems

THE SERVUCTION MODEL

• Visible part consists of 3 parts: inanimate environment,

contact personnel/service providers, and other

consumers

Inanimate environment: All nonliving features present

during service encounter

Contact personnel: :Employees other than primary

providers that interact with consumer

THE SERVUCTION MODEL

• Service Provider: Primary provider of core service, such

as dentist, physician or instructor

• Other Customers

Customer A : Recipient of bundle of benefits created

through service experience

Customer B : Other customers who are part of Customers

A’s experience

THE SERVUCTION MODEL

CUSTOMER INVOLVEMENT IN

THE SERVICE EXPERIENCE

• Servuction model demonstrates consumers are an

integral part of service process

• Participation may be active or passive, but always there

• Managers must understand interactive nature of

services and customer involvement in production

process

ROLE OF MARKETING IN

SERVICES

• The core element in the exchange between firms and

customers is service provision

• Consumers acquire products to obtain the services

that they provide

• Information technology drives services

• Marketing helps firm to leverage technological

advancement and customer engagement

THE SERVICES

REVOLUTION

• Having a “service logic” approach to Marketing

• Customer is the value creator

• In a service-centric world, marketing is reinvented as a

customer centric, multi-functional and relational

customer management process

CONCLUSION

• Services marketing has fundamental differences with

goods marketing

• Need to expand the marketing mix (from 4Ps to 8Ps)

• Services marketing is influenced by the inherent

characteristics of services

• A service-centric world had created a paradigm change

in Marketing

THANK YOU