Chapter 1 Services Mkt

Welcome to Services Marketing

Chapter 1Foundations of Services MarketingChapter 1: Introduction to Services MarketingWhat are services?Why services marketing?Characteristics of Services Compared to GoodsServices Marketing MixTest your knowledgeDefinitionServices 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 serviceService industry, service economyConsumer servicesCustomer service

Examples of Service IndustriesHealth Carehospital, medical practice, dentistry, eye careProfessional Servicesaccounting, legal, architecturalFinancial Servicesbanking, investment advising, insuranceHospitalityrestaurant, hotel/motel, bed & breakfast ski resort, raftingTravelairline, travel agency, theme parkOthershair styling, pest control, plumbing, lawn maintenance, counseling services, health club, interior design

Examples of Customer ServiceFree car wash with fill-upCalling the customer by nameEasy return policyUpdated map of the area or GPS in rental carsOn-time deliveryCourtesyEnthusiasmSuggesting a less expensive optionPackage carry outFigure 1.1Contributions of Service Industries toU.S. Gross Domestic Product

Source: Inside Sams $100 Billion Growth Machine, by David Kirkpatrick, Fortune, June 14, 2004, p 86.01020304050607080194819591967197719871999Percent of GDPYearSource: 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 & AgricultureFigure 1.4Percent of U.S. Gross Domestic Product by Industry01020304050607080192919481969197719841999Percent of U.S. Labor ForceSource: 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 & AgricultureFigure 1.3Percent of U.S. Labor Force by Industry8Why the changeWhy 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 GoodsIntangibilityPerishabilitySimultaneousProductionandConsumption (Inseparability)Heterogeneity

Tangibility SpectrumTangibleDominantIntangibleDominantSaltSoft DrinksDetergentsAutomobilesCosmeticsAdvertisingAgenciesAirlinesInvestmentManagementConsultingTeachingFast-foodOutletsFast-foodOutletsCharacteristics of Services Compared to GoodsIntangibility and InseparabilityFirst discussed by French economist Jean-Baptiste Say(1803), using the example of a physician who visits apatient, prescribes a remedy, and then leaves withoutdepositing 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 weresimultaneous. This is what I call an immaterial productImplications of IntangibilityServices cannot be inventoried

Services cannot be easily patented

Services cannot be readily displayed or communicated

Pricing is difficultImplications of Simultaneous Production and ConsumptionCustomers participate in and affect the transaction

Customers affect each other

Employees affect the service outcome

Decentralization may be essential

Mass production is difficultHeterogeneityThree separate meanings in the literature: differentiation,variability, and diversity.

A professor may be perceived completely different at the same type by different studentsA 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 promotedPerishabilityFirst 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 ofsaleable goods that could subsequently be exchanged for other items of value, and unproductive labor such as that of government officials, the armedforces, 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 PerishabilityIt is difficult to synchronize supply and demand with services

Services cannot be returned or resoldChallenges for ServicesDefining and improving qualityDesigning and testing new servicesCommunicating and maintaining a consistent imageAccommodating fluctuating demandMotivating and sustaining employee commitmentCoordinating marketing, operations, and human resource effortsSetting pricesFinding a balance between standardization versus personalizationEnsuring the delivery of consistent qualityTraditional Marketing MixAll 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 PromotionExpanded Mix for Services --The 7 PsProductPricePlacePromotionPeopleAll 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 EvidenceThe 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.ProcessThe actual procedures, mechanisms, and flow of activities by which the service is deliveredthe service delivery and operating systems.Table 1.3Expanded 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 exclusiveService can be provided directly or indirectly through tangible goodsGoods are appliances used in service provisionNature of ownershipHow customers perceive and consume timeReverse channels for return of rented goodsDecisions on own vs. rent, D-I-Y vs. outsourceDistinction between value-creating elements and valueneutral/negative elements of service deliveryNew contexts for studying pricing, developing pricing strategiesTest your knowledgeIn 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 knowledgeThe 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 knowledgeThe 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 knowledgeIn 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 knowledgeWhen 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 knowledgeExtron 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