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SERVICES MARKETING

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SERVICES

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What Are Services?

The historical view Goes back over 200 years to Adam Smith and Jean-

Baptiste Say

Different from goods because they are perishable (Smith1776)

fresh perspective: Services involve a form of rental,offering benefits without transfer of ownership

Include rental of goods

Marketing tasks for services differ from those involved inselling goods and transferring ownership

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The Traditional View

Service is a technical after-sale function that is

provided by the service department.

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The Modern View

Dealers

Salespeople

Receptionists

Managementand Executives

ServiceEmployees

Billing and

AccountingPersonnel

Web site andany e-channel

Interaction

Service includes every interaction between any customer andanyone representing the company, including:

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Services Pose Distinctive

Marketing Challenges

Marketing management tasks in the service sector differfrom 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 marketing implications?

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Differences, Implications, and

Marketing-Related Tasks

Difference

Most service products

cannot be inventoried

Intangible elements

usually dominate

value creation

Services are often

difficult to visualize

and understand

Customers may be

involved in co-

production

Implications

Customers may be

turned away

Harder to evaluate

service and distinguish

from competitors

Greater risk and

uncertainty perceived

Interaction between

customer and provider;

but poor task execution

could affect satisfaction


Use pricing, promotion, andreservations to smoothdemand; work with ops tomanage capacity

Emphasize physical clues,employ metaphors and vividimages in advertising

Educate customers on

making good choices; offer

guarantees

Develop user-friendly

equipment, facilities, and

systems; train customers,

provide good support

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Implications

Behavior of service

personnel and customers

can affect satisfaction

Hard to maintain quality,consistency, reliability

Difficult to shieldcustomers from failures

Time is money;

customers want serviceat convenient times

Electronic channels or

voice telecommunications

Difference

People may be part of

service experience

Operational inputs and

outputs tend to vary

more widely

Time factor often

assumes greatimportance

Distribution may take

place through

nonphysical channels


Recruit, train employees toreinforce service concept

Shape customer behavior

Redesign for simplicity andfailure proofing

Institute good servicerecovery procedures

Find ways to compete on

speed of delivery; offerextended hours

Create user-friendly,secure websites and freeaccess by telephone

Differences, Implications, and


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Examples of Service Industries

Health Care

hospital, medical practice, dentistry, eye

care Professional Services

accounting, legal, architectural

Financial Services banking, investment advising, insurance

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Cont.

Hospitality

restaurant, hotel/motel, bed & breakfast

Travel airline, travel agency, theme park

Others

hair styling, pest control, plumbing, lawn

maintenance, counseling services, health club,interior design

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Changing Structure of Employment as

Economic Development Evolves

Industry

Services

Agriculture

Time, per Capita Income

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Powerful forces are transforming service markets

Government policies, social changes, business trends,

advances in IT, internationalization

These forces are reshaping Demand

Supply

The competitive landscape Customerschoices, power, and decision making

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Transformation of the Service

Economy

Government

Policies

Business

Trends

SocialChanges

Advances inIT

Globalization

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on:

Understanding customers and competitors

Viable business models

Creation of value for customers and firm

New markets and product categories

Increase in demand for services More intense competition

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Factors Stimulating Transformation

of the Service Economy

Government

Policies

Business

Trends

SocialChanges

Advances inIT

Globalization

Changes in regulations

Privatization

New rules to protect customers, employees,

and the environment

New agreement on trade in services

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Government

Policies

Business

Trends

SocialChanges

Advances inIT

Globalization

Rising consumer expectations

More people short of time

Increased desire for buying experiences versusthings

Rising consumer ownership of high tech

equipment

Easier access to information

Immigration

Growing but aging population

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Government

Policies

Business

Trends

SocialChanges

Advances inIT

Globalization

Push to increase shareholder value

Emphasis on productivity and cost savings

Manufacturers add value through service and sell

services

More strategic alliances and outsourcing

Focus on quality and customer satisfaction

Growth of franchising

Marketing emphasis by nonprofits

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Government

Policies

Business

Trends

SocialChanges

Advances inIT

Globalization

Growth of the Internet

Greater bandwidth

Compact mobile equipment

Wireless networking

Faster, more powerful software

Digitization of text, graphics, audio, video

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Government

Policies

BusinessTrends

SocialChanges

Advances inIT

Globalization

More companies operating on transnational basis

Increased international travel

International mergers and alliances

Offshoringof customer service

Foreign competitors invade domestic markets

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What customers expect?

In exchange for

money, time, and

effort, service

customers expect

value from access to

goods, labor,professional skills,

facilities.

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Tangibility Spectrum

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Value Added by Physical, Intangible Elements Helps Distinguish

Goods and Services

PhysicalElements

High

Low Intangible Elements High

Salt

Detergents

CD PlayerWine

Golf Clubs

New Car

Tailored clothing

Fast-Food RestaurantPlumbing Repair

Health Club

Airline FlightLandscape Maintenance

Consulting

Life Insurance

Internet Banking

Source; Adapted from Lynn Shostack

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GDP services sector composition

World 63.2%

European Union 73.1%

United States 76.8%

Japan 73%

Germany 73.3%

France 79.5%

United Kingdom 77.5%

Canada 71.5%

Source : en.wikipedia.org/wiki/Service

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Services sector in Pakistan

Source : State Bank Of Pakistan

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Why Services Matter

Dominate Pakistan and worldwide economies

Leads to customer retention and loyalty

Leads to profits

Help manufacturing companies differentiate

themselves

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Why study Services Marketing?

Service-based economies

Deregulated industries and professional serviceneeds

Services marketing is different

Service equals profits

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Characteristics of Services

Compared to Goods

Intangibility

Perishability

Simultaneous

ProductionandConsumption

Heterogeneity

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Expanded Mix for Services

The 7 Ps

Product

Price

Place

Promotion

People

Physical Evidence

Process

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Four Categories Of Services

Information processing

(services directed at

intangible assets):

Accounting

Banking

Nature of the Service Act People Possessions

Tangible Actions People processing


peoples bodies):

Barbers

Health care

Who or What Is the Direct Recipient of the Service?

Possession processing


physical possessions):

Refueling

Disposal/recycling

Mental stimulus processing


peoples minds):

Education

Advertising/PR

Intangible Actions

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People Processing

Customers must:

Physically enter the service factory

Co-operate actively with the service

operation

Managers should think about

process and output from

customers perspective

To identify benefits created and

non-financial costs:

Time, mental, physical effort

Four Categories Of Services

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Possession Processing

Possession Processing

Customers are less physicallyinvolved compared to peopleprocessing services

Involvement is limited

Production and consumptionare separable

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Mental Stimulus Processing

Mental Stimulus Processing

Ethical standards required whencustomers who depend on suchservices can potentially bemanipulated by suppliers

Physical presence of recipientsnot required

Core content of services is

information-based

Can be inventoried

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Information Processing

Information Processing

Information is the mostintangible form of serviceoutput

But may be transformed intoenduring forms of serviceoutput

Line between information

processing and mental stimulusprocessing may be blurred.

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Challenges for Services

Improving and consistency in quality

New services

Fluctuating demand

Employee commitment

Setting prices

Balance between standardization versus

customization

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